Exhibit 10.2
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SENIOR SECURED CREDIT AGREEMENT
BY AND AMONG
CRAY INC.
AND
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS BORROWERS,
AND
▇▇▇▇▇ FARGO FOOTHILL, INC.
AS LENDER
DATED AS OF MAY 31, 2005
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION...................................................................................... 1
1.1 Definitions............................................................................................. 1
1.2 Accounting Terms........................................................................................ 1
1.3 Code.................................................................................................... 1
1.4 Construction............................................................................................ 1
1.5 Schedules and Exhibits.................................................................................. 2
2. LOAN AND TERMS OF PAYMENT......................................................................................... 2
2.1 Revolver Advances....................................................................................... 2
2.2 Intentionally Omitted................................................................................... 2
2.3 Borrowing Procedures and Settlements.................................................................... 2
2.4 Payments................................................................................................ 3
2.5 Overadvances............................................................................................ 4
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations............................. 4
2.7 Cash Management......................................................................................... 5
2.8 Crediting Payments; Clearance Charge.................................................................... 6
2.9 Designated Account...................................................................................... 6
2.10 Maintenance of Loan Account; Statements of Obligations.................................................. 6
2.11 Fees.................................................................................................... 7
2.12 Letters of Credit....................................................................................... 7
2.13 LIBOR Option............................................................................................ 9
2.14 Capital Requirements.................................................................................... 11
2.15 Joint and Several Liability of Borrowers................................................................ 11
3. CONDITIONS; TERM OF AGREEMENT..................................................................................... 13
3.1 Conditions Precedent to the Initial Extension of Credit; Conditions Subsequent.......................... 13
3.2 Conditions Precedent to all Extensions of Credit........................................................ 13
3.3 Term.................................................................................................... 14
3.4 Effect of Termination................................................................................... 14
3.5 Early Termination by Borrowers.......................................................................... 14
4. REPRESENTATIONS AND WARRANTIES.................................................................................... 14
4.1 No Encumbrances......................................................................................... 15
4.2 Eligible Accounts and Recurring Revenues................................................................ 15
4.3 Inventory............................................................................................... 15
4.4 Equipment............................................................................................... 15
4.5 Location of Inventory and Equipment..................................................................... 15
4.6 Inventory Records....................................................................................... 15
4.7 State of Incorporation; Location of Chief Executive Office; Organizational Identification Number;
Commercial Tort Claims.................................................................................. 15
4.8 Due Organization and Qualification; Subsidiaries........................................................ 16
4.9 Due Authorization; No Conflict.......................................................................... 16
4.10 Litigation.............................................................................................. 17
4.11 No Material Adverse Change.............................................................................. 17
4.12 Fraudulent Transfer..................................................................................... 17
4.13 Employee Benefits....................................................................................... 18
4.14 Environmental Condition................................................................................. 18
4.15 Intellectual Property................................................................................... 18
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TABLE OF CONTENTS
(continued)
PAGE
4.16 Leases.................................................................................................. 18
4.17 Deposit Accounts and Securities Accounts................................................................ 18
4.18 Complete Disclosure..................................................................................... 18
4.19 Indebtedness............................................................................................ 19
4.20 Designated Senior Debt.................................................................................. 19
4.21 Quarterly Results....................................................................................... 19
5. AFFIRMATIVE COVENANTS............................................................................................. 19
5.1 Accounting System....................................................................................... 19
5.2 Collateral Reporting.................................................................................... 19
5.3 Financial Statements, Reports, Certificates............................................................. 19
5.4 Guarantor Reports....................................................................................... 19
5.5 Inspection.............................................................................................. 20
5.6 Returns................................................................................................. 20
5.7 Maintenance of Properties............................................................................... 20
5.8 Taxes................................................................................................... 20
5.9 Insurance............................................................................................... 20
5.10 Location of Inventory and Equipment..................................................................... 21
5.11 Compliance with Laws.................................................................................... 21
5.12 Leases.................................................................................................. 21
5.13 Existence............................................................................................... 21
5.14 Environmental........................................................................................... 21
5.15 Disclosure Updates...................................................................................... 22
5.16 Control Agreements...................................................................................... 22
5.17 Formation of Subsidiaries............................................................................... 22
5.18 Valuations.............................................................................................. 22
5.19 Compliance with Conditions Subsequent................................................................... 22
5.20 Delisting of Parent's Stock............................................................................. 22
6. NEGATIVE COVENANTS................................................................................................ 23
6.1 Indebtedness............................................................................................ 23
6.2 Liens................................................................................................... 23
6.3 Restrictions on Fundamental Changes..................................................................... 24
6.4 Disposal of Assets...................................................................................... 24
6.5 Change Name............................................................................................. 24
6.6 Nature of Business...................................................................................... 24
6.7 Prepayments and Amendments.............................................................................. 24
6.8 Change of Control....................................................................................... 24
6.9 Consignments............................................................................................ 24
6.10 Distributions........................................................................................... 25
6.11 Accounting Methods...................................................................................... 25
6.12 Investments............................................................................................. 25
6.13 Transactions with Affiliates............................................................................ 25
6.14 Use of Proceeds......................................................................................... 25
6.15 Inventory and Equipment with Bailees.................................................................... 25
6.16 Financial Covenants..................................................................................... 25
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TABLE OF CONTENTS
(continued)
PAGE
7. EVENTS OF DEFAULT................................................................................................. 26
8. THE LENDER'S RIGHTS AND REMEDIES.................................................................................. 28
8.1 Rights and Remedies..................................................................................... 28
8.2 Remedies Cumulative..................................................................................... 29
8.3 Bank Product Providers.................................................................................. 29
9. TAXES AND EXPENSES................................................................................................ 29
10. WAIVERS; INDEMNIFICATION.......................................................................................... 29
10.1 Demand; Protest......................................................................................... 29
10.2 Lender's Liability for Collateral....................................................................... 29
10.3 Indemnification......................................................................................... 29
11. NOTICES........................................................................................................... 30
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................................................................ 31
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS........................................................................ 32
13.1 Assignments and Participations.......................................................................... 32
13.2 Successors.............................................................................................. 33
14. AMENDMENTS; WAIVERS............................................................................................... 33
14.1 Amendments and Waivers.................................................................................. 33
14.2 No Waivers; Cumulative Remedies......................................................................... 34
15. GENERAL PROVISIONS................................................................................................ 34
15.1 Effectiveness........................................................................................... 34
15.2 Section Headings........................................................................................ 34
15.3 Interpretation.......................................................................................... 34
15.4 Severability of Provisions.............................................................................. 34
15.5 Withholding Taxes....................................................................................... 34
15.6 Counterparts; Electronic Execution...................................................................... 34
15.7 Revival and Reinstatement of Obligations................................................................ 35
15.8 Confidentiality......................................................................................... 35
15.9 Integration............................................................................................. 35
15.10 Parent as Agent for Borrowers........................................................................... 35
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TABLE OF CONTENTS
(continued)
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule D-1 Designated Account
Schedule L-1 Lender's Account
Schedule P-1 Permitted Holders
Schedule P-2 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 1.1 Definitions
Schedule 2.7(a) Cash Management Banks
Schedule 2.12 Existing Letters of Credit
Schedule 3.1 Conditions Precedent
Schedule 4.5 Locations of Inventory and Equipment
Schedule 4.7(a) States of Organization
Schedule 4.7(b) Chief Executive Offices
Schedule 4.7(c) Organizational Identification Numbers
Schedule 4.7(d) Commercial Tort Claims
Schedule 4.8(b) Capitalization of Borrowers
Schedule 4.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 4.10 Litigation
Schedule 4.14 Environmental Matters
Schedule 4.15 Intellectual Property
Schedule 4.17 Deposit Accounts and Securities Accounts
Schedule 4.19 Permitted Indebtedness
Schedule 5.2 Collateral Reporting
Schedule 5.3 Financial Statements, Reports, Certificates
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SENIOR SECURED CREDIT AGREEMENT
THIS SENIOR SECURED CREDIT AGREEMENT (this "Agreement"), is entered into
as of May 31, 2005, by and among, on the one hand, ▇▇▇▇▇ FARGO FOOTHILL, INC., a
California corporation ("Lender"), and on the other hand, CRAY INC., a
Washington corporation ("Parent"), and each of Parent's Subsidiaries identified
on the signature pages hereof (such Subsidiaries, together with Parent, are
referred to hereinafter each individually as a "Borrower", and individually and
collectively, jointly and severally, as the "Borrowers").
WITNESSETH
WHEREAS, Parent has entered into that certain Subordinated Note Indenture
and the Subordinated Note Documents; and
WHEREAS, the Obligations evidenced by this Agreement shall constitute
Senior Debt and Designated Senior Debt under the Subordinated Note Documents,
and all such Obligations are entitled to the benefits of the subordination
created by the subordination provisions in, the Subordinated Note Indenture.
NOW THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have the
meanings specified therefor on Schedule 1.1.
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 "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Borrowers and
their Subsidiaries or Parent and its Subsidiaries, as applicable, on a
consolidated basis unless the context clearly requires otherwise.
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, provided, however, that to the extent that the Code is used to define
any term herein and such term is defined differently in different Articles of
the Code, the definition of such term contained in Article 9 shall govern.
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 terms "includes"
and "including" are 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 other Loan
Documents to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to the
satisfaction or repayment in full of the Obligations shall mean the repayment in
full in cash (or cash collateralization in accordance with the terms hereof) of
all Obligations other than contingent indemnification Obligations and other than
any Bank Product Obligations that, at such time, are allowed by the
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applicable Bank Product Provider to remain outstanding and are not required to
be repaid or cash collateralized pursuant to the provisions of this Agreement.
Any reference herein to any Person shall be construed to include such Person's
successors and assigns. Any requirement of a writing contained herein or in the
other Loan Documents shall be satisfied by the transmission of a Record and any
Record transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein.
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, Lender agrees to make advances ("Advances")
to Borrowers in an amount at any one time outstanding not to exceed an amount
equal to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the Borrowing Base less the Letter of Credit Usage.
(b) Anything to the contrary in this Section 2.1 notwithstanding,
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves (i)
with respect to (A) sums that Borrowers are required to pay by any Section of
this Agreement or any other Loan Document (such as taxes, assessments, insurance
premiums, or, in the case of leased assets, rents or other amounts payable under
such leases) and have failed to pay, and (B) amounts owing by Parent and its
Subsidiaries to any Person to the extent secured by a Lien on, or trust over,
any of the Collateral (other than a Permitted Lien), which Lien or trust, in the
Permitted Discretion of Lender likely would have a priority superior to the
Lender's Liens (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for
ad valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral, and (ii) after the occurrence and
during the continuance of an Event of Default, with respect to such other
matters, as Lender in its Permitted Discretion shall deem necessary or
appropriate.
(c) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 INTENTIONALLY OMITTED.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Lender. Such
notice must be received by Lender no later than 10:00 a.m. (California time) on
the Business Day that is the requested Funding Date specifying (i) the amount of
such Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day. At Lender's election, in lieu of delivering the above-described written
request, any Authorized Person may give Lender telephonic notice of such request
by the required time. In such circumstances, Borrowers agree that any such
telephonic notice will be confirmed in writing within 24 hours of the giving of
such telephonic notice, but the failure to provide such written confirmation
shall not affect the validity of the request.
(b) MAKING OF ADVANCES. If Lender has received a timely request
for a Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein, Lender
shall make the proceeds of such Advance available to Borrowers on the applicable
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Funding Date by transferring available funds equal to such proceeds to
Administrative Borrower's Designated Account.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWERS. Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Lender's Account for the
account of Lender and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the date specified herein. Any payment
received by Lender later than 11:00 a.m. (California time), 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.
(b) APPORTIONMENT AND APPLICATION.
(i) All payments shall be remitted to Lender and all such
payments and all proceeds of Collateral received by Lender, shall be applied as
follows:
(1) first, to pay any Lender Expenses then due to Lender
under the Loan Documents, until paid in full,
(2) second, to pay any fees or premiums then due to
Lender under the Loan Documents until paid in full,
(3) third, to pay interest due in respect of Advances
until paid in full,
(4) fourth, so long as no Event of Default has occurred
and is continuing, and at Lender's election, to pay amounts then due and owing
by Administrative Borrower or its Subsidiaries in respect of Bank Products,
until paid in full,
(5) fifth, so long as no Event of Default has occurred
and is continuing, to pay the principal of all Advances until paid in full,
(6) sixth, if an Event of Default has occurred and is
continuing, ratably (i) to pay the principal of all Advances until paid in full,
(ii) to Lender, to be held by Lender as cash collateral in an amount up to 105%
of the Letter of Credit Usage until paid in full, and (iii) to Lender, to be
held by Lender, for the benefit of the Bank Product Providers, as cash
collateral in an amount up to the amount of the Bank Product Reserve established
prior to the occurrence of, and not in contemplation of, the subject Event of
Default until Borrowers' and their Subsidiaries' obligations in respect of Bank
Products have been paid in full or the cash collateral amount has been
exhausted,
(7) seventh, if an Event of Default has occurred and is
continuing, to pay any other Obligations (including the provision of amounts to
Lender, to be held by Lender, for the benefit of the Bank Product Providers, as
cash collateral in an amount up to the amount determined by Lender in its
Permitted Discretion as the amount necessary to secure Borrowers' and their
Subsidiaries' obligations in respect of Bank Products), and,
(8) eighth, to Borrowers (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law.
(ii) In each instance, so long as no Default or Event of
Default has occurred and is continuing, this Section 2.4(b) shall not apply to
any payment made by Borrowers to Lender and specified
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by Borrowers to be for the payment of specific Obligations then due and payable
(or prepayable) under any provision of this Agreement.
(iii) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any Insolvency
Proceeding), default interest, interest on interest, and expense reimbursements,
whether or not any of the foregoing would be or is allowed or disallowed in
whole or in part in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained in any other Loan
Document, 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 2.4 shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Lender pursuant to Section 2.1 or Section 2.12
is greater than any of the limitations set forth in Section 2.1 or Section 2.12,
as applicable (an "Overadvance"), Borrowers immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full as and when
due and payable under the terms of this Agreement and the other Loan Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows (i) if the
relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR
Rate plus the Applicable Margin for LIBOR Rate Loans, and (ii) otherwise, at a
per annum rate equal to the Base Rate plus the Applicable Margin for Base Rate
Loans.
The foregoing notwithstanding, at no time shall any portion of the
Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per annum rate less than 6.0%. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
(b) LETTER OF CREDIT FEE. Borrowers shall pay Lender a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(d)) which shall accrue at the Applicable Rate times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the continuation
of an Event of Default (and at the election of Lender),
(i) all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) 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 2 percentage points above the per annum
rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 2 percentage points above the per annum rate otherwise applicable
hereunder.
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(d) PAYMENT. Except as provided to the contrary in Section 2.11 or
Section 2.13(a), interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that any Obligations are outstanding or at any time that Lender has
an obligation to extend credit hereunder. Borrowers hereby authorize Lender,
from time to time, without prior notice to Borrowers, to charge all interest and
fees (when due and payable), all Lender Expenses (as and when incurred), all
charges, commissions, fees, and costs provided for in Section 2.12(e) (as and
when accrued or incurred), all fees and costs provided for in Section 2.11 (as
and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to the
Bank Product Providers in respect of Bank Products up to the amount of the Bank
Product Reserve) to Borrowers' Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans 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. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(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. Borrowers and Lender, 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, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
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.
2.7 CASH MANAGEMENT.
(a) Borrowers shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Lender at one or more of the
banks set forth on Schedule 2.7(a) (each a "Cash Management Bank"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of their Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof, all of their Collections (including those sent directly to Borrowers by
Account Debtors of Borrowers or their Subsidiaries) into a bank account in
Lender's name (a "Cash Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrowers, in form and substance
acceptable to Lender. Each such Cash Management Agreement shall provide, among
other things, that (i) the Cash Management Bank will comply with any
instructions originated by Lender directing the disposition of the funds in such
Cash Management Account without further consent by Borrowers, (ii) the Cash
Management Bank has no rights of setoff or recoupment or any other claim against
the applicable Cash Management Account other than for payment of its service
fees and other charges directly related to the administration of such Cash
Management Account and for returned checks or other items of payment, and (iii)
the Cash Management Bank will forward, by daily sweep, all amounts in the
applicable Cash Management Account to the Lender's Account.
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(c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.7(a) to add or replace
a Cash Management Bank or Cash Management Account; provided, however, that (i)
such prospective Cash Management Bank shall be reasonably satisfactory to
Lender, and (ii) prior to the time of the opening of such Cash Management
Account, a Borrower and such prospective Cash Management Bank shall have
executed and delivered to Lender a Cash Management Agreement. Borrowers shall
close any of their Cash Management Accounts (and establish replacement cash
management accounts in accordance with the foregoing sentence) promptly and in
any event within 30 days of notice from Lender that the creditworthiness of any
Cash Management Bank is no longer acceptable in Lender's reasonable judgment, or
as promptly as practicable and in any event within 60 days of notice from Lender
that the operating performance, funds transfer, or availability procedures or
performance of the Cash Management Bank with respect to Cash Management Accounts
or Lender's liability under any Cash Management Agreement with such Cash
Management Bank is no longer acceptable in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral accounts
subject to Control Agreements.
(e) Parent's Subsidiaries located in the United States and Canada
shall enter into Control Agreements with respect to their Deposit Accounts and
Securities Accounts.
2.8 CREDITING PAYMENTS; CLEARANCE CHARGE. The receipt of any payment
item by Lender (whether from transfers to Lender by the Cash Management Banks
pursuant to the Cash Management Agreements or otherwise) shall not be considered
a payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrowers 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 Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is
received into the Lender's 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
Lender as of the opening of business on the immediately following Business Day.
From and after the Closing Date, Lender shall be entitled to charge Borrowers
the Applicable Number of Days of "clearance" at the rate then applicable under
Section 2.6 to Advances that are Base Rate Loans on all Collections that are
received by Borrowers and their Subsidiaries (regardless of whether forwarded by
the Cash Management Banks to Lender). This across-the-board clearance charge
based on the Applicable Number of Days on all Collections of Borrowers and their
Subsidiaries is acknowledged by the parties to constitute an integral aspect of
the pricing of the financing of Borrowers and shall apply irrespective of
whether or not there are any outstanding monetary Obligations; the effect of
such clearance charge being the equivalent of charging interest on such
Collections through the completion of a period ending the Applicable Number of
Days after the receipt thereof.
2.9 DESIGNATED ACCOUNT. Lender is authorized to make the Advances, and
Lender is authorized to issue the 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 2.6(d).
Administrative 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 Borrowers and made by Lender hereunder. Unless
otherwise agreed by Lender and Administrative Borrower, any Advance requested by
Borrowers and made by Lender hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender shall
maintain an account on its books in the name of Borrowers (the "Loan Account")
on which Borrowers will be charged with all Advances made by Lender to Borrowers
or for Borrowers' account, the Letters of Credit issued by Lender for Borrowers'
account, and with all other payment Obligations hereunder or under the other
Loan Documents
6
(except for Bank Product Obligations), including, accrued interest, fees and
expenses, and Lender Expenses. In accordance with Section 2.8, the Loan Account
will be credited with all payments received by Lender from Borrowers or for
Borrowers' account, including all amounts received in the Lender's Account from
any Cash Management Bank. Lender shall render statements regarding the Loan
Account to Administrative Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements, absent manifest error, shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and Lender unless, within 30 days after receipt thereof
by Administrative Borrower, Administrative Borrower shall deliver to Lender
written objection thereto describing the error or errors contained in any such
statements.
2.11 FEES. Borrowers shall pay to Lender, as and when due and payable
under the terms of the Fee Letter, the fees set forth in the Fee Letter.
2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Lender
agrees to issue letters of credit for the account of Borrowers (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 Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of
Borrowers. Each request for the issuance of a Letter of Credit or the amendment,
renewal, or extension of any outstanding Letter of Credit shall be made in
writing by an Authorized Person and delivered to Lender via hand delivery,
telefacsimile, or other electronic method of transmission reasonably in advance
of the requested date of issuance, amendment, renewal, or extension. Each such
request shall be in form and substance satisfactory to Lender in its Permitted
Discretion and shall specify (i) the amount of such Letter of Credit, (ii) the
date of issuance, amendment, renewal, or extension of such Letter of Credit,
(iii) the expiration date of such Letter of Credit, (iv) the name and address of
the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit,
as applicable), and (v) such other information (including, in the case of an
amendment, renewal, or extension, identification of the outstanding Letter of
Credit to be so amended, renewed, or extended) as shall be necessary to prepare,
amend, renew, or extend such Letter of Credit. If requested by Lender, Borrowers
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking. Lender shall
have no obligation to issue a Letter of Credit if any of the following would
result after giving effect to the issuance of such requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing
Base less the outstanding amount of Advances, or
(ii) the Letter of Credit Usage would exceed $15,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the outstanding amount of Advances.
Borrowers and Lender acknowledge and agree that certain Underlying Letters
of Credit may be issued to support letters of credit that already are
outstanding as of the Closing Date. Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to Lender
(in the exercise of its Permitted Discretion), including the requirement that
the amounts payable thereunder must be payable in Dollars. If Lender is
obligated to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such L/C Disbursement to Lender by paying to Lender an amount equal to
such L/C Disbursement not later than 11:00 a.m., California time, on the date
that such L/C Disbursement is made, if Administrative Borrower shall have
received written or telephonic notice of such L/C Disbursement prior to 10:00
a.m., California time, on such date, or, if such notice has not been received by
Administrative Borrower prior to such time on such date, then not later than
11:00 a.m., California time, on the Business Day that
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Administrative Borrower receives such notice, if such notice is received prior
to 10:00 a.m., California time, on the date of receipt, and, in the absence of
such reimbursement, the L/C Disbursement immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances that are Base Rate Loans under Section 2.6. To
the extent an L/C Disbursement is deemed to be an Advance hereunder, Borrowers'
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Advance.
(b) Each Borrower hereby agrees to indemnify, save, defend, and
hold Lender harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability to the extent
that it is caused by the gross negligence or willful misconduct of Lender. Each
Borrower agrees to be bound by the Underlying Issuer's regulations and
interpretations of any Underlying Letter of Credit or by Lender's
interpretations of any L/C issued by Lender to or for such Borrower's account,
even though this interpretation may be different from such Borrower's own, and
each Borrower understands and agrees that Lender shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Lender to indemnify the Underlying Issuer
for certain costs or liabilities arising out of claims by Borrowers against such
Underlying Issuer. Each Borrower hereby agrees to indemnify, save, defend, and
hold Lender harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by Lender under any L/C
Undertaking as a result of Lender's indemnification of any Underlying Issuer;
provided, however, that no Borrower shall be obligated hereunder to indemnify
for any loss, cost, expense, or liability to the extent that it is caused by the
gross negligence or willful misconduct of Lender. Each Borrower hereby
acknowledges and agrees that Lender shall not be responsible for delays, errors,
or omissions resulting from the malfunction of equipment in connection with any
Letter of Credit.
(c) Each Borrower hereby authorizes and directs any Underlying
Issuer to deliver to Lender all instruments, documents, and other writings and
property received by such Underlying Issuer pursuant to such Underlying Letter
of Credit and to accept and rely upon Lender's instructions with respect to all
matters arising in connection with such Underlying Letter of Credit and the
related application.
(d) Any and all issuance charges, commissions, fees, and costs
incurred by Lender relating to Underlying Letters of Credit shall be Lender
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrowers to Lender for the account of Lender; it being acknowledged and agreed
by each Borrower that, as of the Closing Date, the issuance charge imposed by
the prospective Underlying Issuer is .325% per annum times the face amount of
each Underlying Letter of Credit, that such issuance charge may be changed from
time to time, and that the Underlying Issuer also imposes a schedule of charges
for amendments, extensions, drawings, and renewals.
(e) If by reason of (i) any change after the Closing Date 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 the
Underlying Issuer or Lender 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):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letter of Credit issued hereunder, or
(ii) there shall be imposed on the Underlying Issuer or
Lender any other condition regarding any Underlying Letter of Credit or any
Letter of Credit issued pursuant hereto;
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and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrowers shall pay on demand such amounts as
Lender may specify to be necessary to compensate Lender 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 Base Rate
Loans hereunder. The determination by Lender 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.
(f) Lender and Borrowers acknowledge that the letters of credit
identified on Schedule 2.12 (the "Existing Letters of Credit") have been
previously issued by ▇▇▇▇▇ Fargo and shall remain outstanding after the Closing
Date. The Existing Letters of Credit shall constitute Letters of Credit
hereunder.
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrowers shall have the
option (the "LIBOR Option") to have interest on all or a portion of the Advances
be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto, (ii) the occurrence of an Event of Default in
consequence of which Lender has elected to accelerate the maturity of all or any
portion of the Obligations, or (iii) termination of this Agreement pursuant to
the terms hereof. On the last day of each applicable Interest Period, unless
Administrative Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically
shall convert to the rate of interest then applicable to Base Rate Loans of the
same type hereunder. At any time that an Event of Default has occurred and is
continuing, Borrowers no longer shall have the option to request that Advances
bear interest at a rate based upon the LIBOR Rate and Lender shall have the
right to convert the interest rate on all outstanding LIBOR Rate Loans to the
rate then applicable to Base Rate Loans hereunder.
(b) LIBOR ELECTION.
(i) Administrative Borrower may, at any time and from time
to time, so long as no Event of Default has occurred and is continuing, elect to
exercise the LIBOR Option by notifying Lender prior to 11:00 a.m. (California
time) at least 3 Business Days prior to the commencement of the proposed
Interest Period (the "LIBOR Deadline"). Notice of Administrative Borrower's
election of the LIBOR Option for a permitted portion of the Advances and an
Interest Period pursuant to this Section shall be made by delivery to Lender of
a LIBOR Notice received by Lender before the LIBOR Deadline, or by telephonic
notice received by Lender before the LIBOR Deadline (to be confirmed by delivery
to Lender of a LIBOR Notice received by Lender prior to 5:00 p.m. (California
time) on the same day).
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall
indemnify, defend, and hold Lender harmless against any loss, cost, or expense
incurred by Lender as a result of (a) the payment of any principal of any LIBOR
Rate Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of any LIBOR
Rate Loan other than on the last day of the Interest Period applicable thereto,
or (c) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on
the date specified in any LIBOR Notice delivered pursuant hereto (such losses,
costs, and expenses, collectively, "Funding Losses"). Funding Losses shall be
deemed to equal the amount determined by Lender to be the excess, if any, of (i)
the amount of interest that would have accrued on the principal amount of such
LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have
been applicable thereto, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of
9
a failure to borrow, convert or continue, for the period that would have been
the Interest Period therefor), minus (ii) the amount of interest that would
accrue on such principal amount for such period at the interest rate which
Lender would be offered were it to be offered, at the commencement of such
period, Dollar deposits of a comparable amount and period in the London
interbank market. A certificate of Lender delivered to Administrative Borrower
setting forth any amount or amounts that Lender is entitled to receive pursuant
to this Section 2.13 shall be conclusive absent manifest error.
(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in
effect at any given time. Borrowers only may exercise the LIBOR Option for LIBOR
Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess
thereof.
(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Lender of proceeds of Borrowers' and their Subsidiaries'
Collections in accordance with Section 2.4(b) or for any other reason, including
early termination of the term of this Agreement or acceleration of all or any
portion of the Obligations pursuant to the terms hereof, each Borrower shall
indemnify, defend, and hold Lender and its Participants harmless against any and
all Funding Losses in accordance with clause (b)(ii) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Lender on a
prospective basis to take into account any additional or increased costs to
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), excluding the Reserve Percentage,
which additional or increased costs would increase the cost of funding loans
bearing interest at the LIBOR Rate. In any such event, Lender shall give
Administrative Borrower notice of such a determination and adjustment and, upon
its receipt of the notice from Lender, Administrative Borrower may, by notice to
Lender (y) require Lender to furnish to Administrative Borrower a statement
setting forth the basis for adjusting such LIBOR Rate and the method for
determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans
with respect to which such adjustment is made (together with any amounts due
under clause (b)(ii) above).
(ii) In the event that any change in market conditions or any
law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date hereof,
in the reasonable opinion of Lender, make it unlawful or impractical for Lender
to fund or maintain LIBOR Advances or to continue such funding or maintaining,
or to determine or charge interest rates at the LIBOR Rate, Lender shall give
notice of such changed circumstances to Administrative Borrower and (y) in the
case of any LIBOR Rate Loans that are outstanding, the date specified in
Lender's notice shall be deemed to be the last day of the Interest Period of
such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of Lender
thereafter shall accrue interest at the rate then applicable to Base Rate Loans,
and (z) Borrowers shall not be entitled to elect the LIBOR Option until Lender
determines that it would no longer be unlawful or impractical to do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the contrary
contained herein notwithstanding, neither Lender, nor any of its Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section shall apply as if Lender or its Participants had
match funded any Obligation as to which interest is accruing at the LIBOR Rate
by acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.
10
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by Lender
or its parent bank holding company with any guideline, request or directive of
any such entity regarding capital adequacy (whether or not having the force of
law), has the effect of reducing the return on Lender's or such holding
company's capital as a consequence of Lender's obligations hereunder to a level
below that which Lender or such holding company could have achieved but for such
adoption, change, or compliance (taking into consideration Lender's or such
holding company's then existing policies with respect to capital adequacy and
assuming the full utilization of such entity's capital) by any amount deemed by
Lender to be material, then Lender may notify Administrative Borrower thereof.
Following receipt of such notice, Borrowers agree to pay Lender on demand the
amount of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by Lender of a statement
in the amount and setting forth in reasonable detail Lender's calculation
thereof and the assumptions upon which such calculation was based (which
statement shall be deemed true and correct absent manifest error). In
determining such amount, Lender may use any reasonable averaging and attribution
methods.
2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS.
(a) Each Borrower is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by Lender under this Agreement, for the mutual
benefit, directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Borrower without preferences or distinction among them.
(c) If and to the extent that any Borrower shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrowers will make such payment with respect to, or perform, such
Obligation.
(d) The Obligations of each Borrower under the provisions of this
Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Borrower enforceable against each such Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of any Advances or Letters of Credit issued under or pursuant to this
Agreement, notice of the occurrence of any Default, Event of Default, or of any
demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Lender under or in respect of any of the Obligations, any
requirement of diligence or to mitigate damages and, generally, to the extent
permitted by applicable law, all demands, notices and other formalities of every
kind in connection with this Agreement (except as otherwise provided in this
Agreement). Each Borrower hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Lender at any time or times in respect of any default by any Borrower in the
performance or satisfaction of any term, covenant, condition or provision of
this Agreement, any and all other indulgences whatsoever by Lender in respect of
any of the Obligations, and
11
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower. Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of Lender with respect to the
failure by any Borrower to comply with any of its respective Obligations,
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this Section 2.15
afford grounds for terminating, discharging or relieving any Borrower, in whole
or in part, from any of its Obligations under this Section 2.15, it being the
intention of each Borrower that, so long as any of the Obligations hereunder
remain unsatisfied, the Obligations of each Borrower under this Section 2.15
shall not be discharged except by performance and then only to the extent of
such performance. The Obligations of each Borrower under this Section 2.15 shall
not be diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Borrower or Lender.
(f) Each Borrower represents and warrants to Lender that such
Borrower is currently informed of the financial condition of Borrowers and of
all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower further represents
and warrants to Lender that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrowers' financial condition, the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the Obligations.
(g) Each Borrower waives all rights and defenses arising out of an
election of remedies by Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed Lender's rights of subrogation and reimbursement against such
Borrower by the operation of Section 580(d) of the California Code of Civil
Procedure or otherwise.
(h) Each Borrower waives all rights and defenses that such
Borrower may have because the Obligations are secured by Real Property. This
means, among other things:
(i) Lender may collect from such Borrower without first
foreclosing on any Real or Personal Property Collateral pledged by Borrowers.
(ii) If Lender forecloses on any Real Property Collateral
pledged by Borrowers:
(A) The amount of the Obligations may be reduced only by
the price for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(B) Lender may collect from such Borrower even if
Lender, by foreclosing on the Real Property Collateral, has destroyed any right
such Borrower may have to collect from the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.
(i) The provisions of this Section 2.15 are made for the benefit
of Lender and its successors and assigns, and may be enforced by it or them from
time to time against any or all Borrowers as often as occasion therefor may
arise and without requirement on the part of Lender, successor, or assign first
to marshal any of its or their claims or to exercise any of its or their rights
against any Borrower or to exhaust any remedies available to it or them against
any Borrower or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy. The provisions of
this Section 2.15
12
shall remain in effect until all of the Obligations shall have been paid in full
or otherwise fully satisfied. If at any time, any payment, or any part thereof,
made in respect of any of the Obligations, is rescinded or must otherwise be
restored or returned by Lender upon the insolvency, bankruptcy or reorganization
of any Borrower, or otherwise, the provisions of this Section 2.15 will
forthwith be reinstated in effect, as though such payment had not been made.
(j) Each Borrower hereby agrees that it will not enforce any of
its rights of contribution or subrogation against any other Borrower with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to Lender with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.
(k) Each Borrower hereby agrees that, after the occurrence and
during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the indebtedness owing by any Borrower to any other
Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations. Each Borrower hereby agrees that after the occurrence and during
the continuance of any Default or Event of Default, such Borrower will not
demand, ▇▇▇ for or otherwise attempt to collect any indebtedness of any other
Borrower owing to such Borrower until the Obligations shall have been paid in
full in cash. If, notwithstanding the foregoing sentence, such Borrower shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by such Borrower as trustee
for the Lender, and such Borrower shall deliver any such amounts to Lender for
application to the Obligations in accordance with Section 2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT; CONDITIONS
SUBSEQUENT. The obligation of Lender to make the initial extension of credit
provided for hereunder is subject to the fulfillment, to the satisfaction of
Lender of each of the conditions precedent set forth on Schedule 3.1 (the making
of such initial extension of credit by Lender being conclusively deemed to be
its satisfaction or waiver of such conditions precedent). Schedule 3.1 also sets
forth the conditions subsequent to the initial extensions of credit hereunder.
If the conditions subsequent are not satisfied within the applicable time
periods then an Event of Default shall be deemed to have occurred.
3.2 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
Lender to make any Advances hereunder at any time (or to extend any other credit
hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this Agreement
or in 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 either result from
the making thereof;
13
(c) no injunction, writ, restraining order, or other order of any
nature restricting or prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against any Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.3 TERM. The Agreement shall continue in full force and effect for a
term ending on May 31, 2007 (the "Maturity Date"). The foregoing
notwithstanding, Lender shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.4 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to outstanding Letters of Credit and including all Bank Product
Obligations) immediately shall become due and payable without notice or demand
(including (a) either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to Lender, and (b) providing cash collateral
(in an amount determined by Lender as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Lender for the benefit of the Bank
Product Providers with respect to the Bank Product Obligations). No termination
of this Agreement, however, shall relieve or discharge Borrowers or their
Subsidiaries of their duties, Obligations, or covenants hereunder or under any
other Loan Document and the Lender's Liens in the Collateral shall remain in
effect until all Obligations have been paid in full and Lender's obligations to
provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been paid in full and
Lender's obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, Lender will, at Borrowers' sole expense, execute
and deliver any 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 reasonably necessary to release, as of record, the Lender's Liens and all
notices of security interests and liens previously filed by Lender with respect
to the Obligations.
3.5 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at any
time upon 45 days prior written notice by Administrative Borrower to Lender, to
terminate this Agreement by paying to Lender, in cash, the Obligations
(including (a) either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to Lender, and (b) providing cash collateral
(in an amount determined by Lender as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Lender for the benefit of the Bank
Product Providers with respect to the Bank Product Obligations), in full. If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then Lender's obligations to extend credit hereunder
shall terminate and Borrowers shall be obligated to repay the Obligations
(including (a) either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to Lender, and (b) providing cash collateral
(in an amount determined by Lender as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Lender for the benefit of the Bank
Product Providers with respect to the Bank Product Obligations), in full, on the
date set forth as the date of termination of this Agreement in such notice.
4. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each Borrower
makes the following representations and warranties to Lender 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 material 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
14
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
4.1 NO ENCUMBRANCES. Each Borrower and its Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, their personal property
assets and good and marketable title to, or a valid leasehold interest in, their
Real Property, in each case, free and clear of Liens except for Permitted Liens.
4.2 ELIGIBLE ACCOUNTS AND RECURRING REVENUES.
(a) As to each Account that is identified by a Borrower as an
Eligible Account in a borrowing base report submitted to Lender, such Account is
(a) a bona fide existing payment obligation of the applicable Account Debtor
created by the sale and delivery of Inventory to such Account Debtor in the
ordinary course of Borrowers' business, (b) owed to Borrowers without any known
defenses, disputes, offsets, counterclaims, or rights of return or cancellation,
and (c) not excluded as ineligible by virtue of one or more of the excluding
criteria set forth in the definition of Eligible Accounts.
(b) The Recurring Revenues (a) arise out of bona fide maintenance
contracts with customers of Borrowers, (b) were paid on account of maintenance
services actually performed on behalf of such customers, and (c) do not
constitute a deposit on account of or a prepayment of amounts due in connection
with future services to be rendered under any such maintenance contracts.
4.3 INVENTORY. The Inventory is, in all material respects, of good and
merchantable quality, free from known defects.
4.4 EQUIPMENT. Each material item of Equipment of Borrowers and their
Subsidiaries is used or held for use in their business and is in good working
order and fit for such purposes.
4.5 LOCATION OF INVENTORY AND EQUIPMENT. Except as set forth on Schedule
4.5, the Inventory and Equipment of Borrowers and their Subsidiaries are not
stored with a bailee, warehouseman, or similar party and are located only at the
locations identified on Schedule 4.5 (as such Schedule may be updated pursuant
to Section 5.10).
4.6 INVENTORY RECORDS. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its and its
Subsidiaries' Inventory and the book value thereof.
4.7 STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE OFFICE;
ORGANIZATIONAL IDENTIFICATION NUMBER; COMMERCIAL TORT CLAIMS.
(a) The jurisdiction of organization of each Borrower and each of
its Subsidiaries is set forth on Schedule 4.7(a).
(b) The chief executive office of each Borrower and each of its
Subsidiaries is located at the address indicated on Schedule 4.7 (b) (as such
Schedule may be updated pursuant to Section 5.10).
(c) Each Borrower's and each of its Subsidiaries' organizational
identification number, if any, is identified on Schedule 4.7(c).
(d) As of the Closing Date, Borrowers and their Subsidiaries do
not hold any commercial tort claims, except as set forth on Schedule 4.7(d).
15
4.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each 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 any state where the failure to be so qualified reasonably could
be expected to result in a Material Adverse Change.
(b) Set forth on Schedule 4.8(b), is a complete and accurate
description of the authorized capital Stock of each 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. Other than as described on Schedule 4.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Borrower's capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument. No Borrower is 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.
(c) Set forth on Schedule 4.8(c), is a complete and accurate list
of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization, (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 applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on Schedule 4.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
4.9 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the other 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 any Borrower, the Governing Documents of any
Borrower, or any order, judgment, or decree of any court or other Governmental
Authority binding on any 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 any Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or (iv) require any approval
of any Borrower's interestholders or any approval or consent of any Person under
any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements and the
recordation of the Mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the other Loan Documents to which such 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, other than consents or approvals that have been obtained and that are
still in force and effect.
(d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered
16
by such Borrower will be the legally valid and binding obligations of such
Borrower, enforceable against such Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor of
the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of such Guarantor.
(g) The execution, delivery, and performance by each Guarantor of
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 such
Guarantor, the Governing Documents of such Guarantor, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Guarantor,
(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
such Guarantor, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such Guarantor,
other than Permitted Liens, or (iv) require any approval of such Guarantor's
interestholders or any approval or consent of any Person under any material
contractual obligation of such Guarantor, other than consents or approvals that
have been obtained and that are still in force and effect.
(h) Other than the filing of financing statements, the execution,
delivery, and performance by each Guarantor of the Loan Documents to which such
Guarantor 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, other than consents or approvals that have been obtained and that are
still in force and effect.
(i) The Loan Documents to which each Guarantor is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Guarantor will be the legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
4.10 LITIGATION. Other than those matters disclosed on Schedule 4.10 and
other than matters arising after the Closing Date that reasonably could not be
expected to result in a Material Adverse Change, there are no actions, suits, or
proceedings pending or, to the best knowledge of each Borrower, threatened
against any Borrower or any of its Subsidiaries.
4.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrowers and their Subsidiaries or the Guarantors that have been delivered by
Borrowers to Lender have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and present fairly in all material
respects, Borrowers' and their Subsidiaries' (or any Guarantor's, as applicable)
financial condition as of the date thereof and results of operations for the
period then ended. There has not been a Material Adverse Change with respect to
Borrowers and their Subsidiaries (or any Guarantor's, as applicable) since the
date of the latest financial statements submitted to Lender on or before the
Closing Date.
4.12 FRAUDULENT TRANSFER.
(a) Each Borrower and each Subsidiary of a Borrower is Solvent.
17
(b) No transfer of property is being made by any Borrower or any
Subsidiary of a Borrower and no obligation is being incurred by any Borrower or
any Subsidiary of a 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 Borrowers or their Subsidiaries.
4.13 EMPLOYEE BENEFITS. None of Borrowers, any of their Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
4.14 ENVIRONMENTAL CONDITION. Except as set forth on Schedule 4.14, (a)
to Borrowers' knowledge, none of Borrowers' or their Subsidiaries' properties or
assets has ever been used by Borrowers, their Subsidiaries, or by previous
owners or operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials, where such use, production,
storage, handling, treatment, release or transport was in violation, in any
material respect, of any applicable Environmental Law, (b) to Borrowers'
knowledge, none of Borrowers' nor their Subsidiaries' properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) none of Borrowers
nor any of their Subsidiaries have received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property owned or
operated by Borrowers or their Subsidiaries, and (d) none of Borrowers nor any
of their Subsidiaries have received a summons, citation, notice, or directive
from the United States Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by any Borrower or
any Subsidiary of a Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
4.15 INTELLECTUAL PROPERTY. Each Borrower and each Subsidiary of a
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, and attached hereto as Schedule 4.15 (as
updated from time to time) is a true, correct, and complete listing of all
material patents, patent applications, trademarks, trademark applications,
copyrights, and copyright registrations as to which each Borrower or one of its
Subsidiaries is the owner or is an exclusive licensee.
4.16 LEASES. Borrowers and their Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
they are parties or under which they are operating and all of such material
leases are valid and subsisting and no material default by Borrowers or their
Subsidiaries exists under any of them.
4.17 DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Set forth on Schedule 4.17
is a listing of all of Borrowers' and their Subsidiaries' Deposit Accounts and
Securities Accounts, including, with respect to each bank or securities
intermediary (a) the name and address of such Person, and (b) the account
numbers of the Deposit Accounts or Securities Accounts maintained with such
Person.
4.18 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrowers or their Subsidiaries in writing to
Lender (including all information contained in the Schedules hereto or in the
other Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein or therein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of Borrowers or their Subsidiaries in writing to Lender will be, true
and accurate, in all material respects, on the date as of which such information
is dated or certified and not incomplete by omitting to state any fact necessary
to make such information (taken as a whole) not misleading in any material
respect at such time in light of the circumstances under which such information
was provided. On the Closing Date, the Closing Date Projections represent, and
as of the date on which any other Projections are delivered to Lender, such
additional Projections represent Borrowers' good faith estimate of their and
their Subsidiaries' future performance for the periods covered thereby.
18
4.19 INDEBTEDNESS. Set forth on Schedule 4.19 is a true and complete list
of all Indebtedness of each Borrower and each Subsidiary of a Borrower
outstanding immediately prior to the Closing Date that is to remain outstanding
after the Closing Date and such Schedule accurately reflects the aggregate
principal amount of such Indebtedness and describes the principal terms thereof.
4.20 DESIGNATED SENIOR DEBT. The subordination provisions set forth in
the Subordinated Note Indenture are enforceable against the Indenture Trustee
and the holders of the Subordinated Notes by Lender. All Obligations, including
those to pay principal of and interest (including post-petition interest) on the
Advances and fees and expenses in connection therewith, constitute Senior Debt
and Designated Senior Debt under, and all such Obligations are entitled to the
benefits of the subordination created by the subordination provisions in, the
Subordinated Note Indenture. Borrowers acknowledge that Lender is entering into
this Agreement in reliance upon the subordination provisions set forth in the
Subordinated Note Indenture as represented in this Section 4.20.
4.21 QUARTERLY RESULTS. Borrowers' quarterly operating results may
fluctuate significantly from projections. Borrowers' operating results are
subject to significant fluctuations due to many factors, which make forecasting
revenue and earnings for any period very difficult. One or a few system sales
may account for a substantial percentage of Borrowers' quarterly revenue, and
thus revenue, net income or loss and cash flow are likely to fluctuate
significantly from quarter to quarter and within a quarter. This is due to the
high average sales prices and limited number of sales of Borrowers' larger
systems per quarter, the timing of purchase orders and product delivery, and
Borrowers' general policy of not recognizing product revenue until customers
accept Borrowers' products and other contractual provisions have been fulfilled
and the uncertain timing of payments for product sales, maintenance services,
government research and development funding and inventory. A delay in an
acceptance of a system at the end of a quarter or year or other factors
affecting revenue recognition could move the associated revenue into a
subsequent quarter or year and have a significant impact on revenue, earnings
and cash receipts.
5. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the payment in full of the Obligations, Borrowers
shall and shall cause each of their respective Subsidiaries to do all of the
following:
5.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrowers 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 Lender. Borrowers also shall keep a
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their Subsidiaries' sales.
5.2 COLLATERAL REPORTING. Provide Lender with each of the reports set
forth on Schedule 5.2 at the time specified therein. In addition, each Borrower
agrees to cooperate fully with Lender to facilitate and implement a system of
electronic collateral reporting in order to provide electronic reporting of each
of the items set forth above.
5.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Lender, each
of the financial statements, reports, or other items set forth on Schedule 5.3
at the times specified therein. In addition, Parent agrees that no Subsidiary of
Parent will have a fiscal year different from that of Parent.
5.4 GUARANTOR REPORTS. Cause each Guarantor to deliver its annual
financial statements at the time when Parent provides its audited financial
statements to Lender, but only to the extent such Guarantor's financial
statements are not consolidated with Parent's financial statements.
19
5.5 INSPECTION. Permit Lender and its duly authorized representatives or
agents to visit any of its properties and inspect any of its assets or books and
records, to examine and make copies of its books and records, and to discuss its
affairs, finances, and accounts with, and to be advised as to the same by, its
officers and employees at such reasonable times and intervals as Lender may
designate and, so long as no Default or Event of Default exists, with reasonable
prior notice to Borrower.
5.6 RETURNS. Cause returns and allowances as between Borrowers and their
Account Debtors to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to any
Borrower, the applicable Borrower promptly shall determine the reason for such
return and, if the applicable Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Lender) 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 any Borrower, the
applicable Borrower promptly shall determine the reason for such return and, if
Lender consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Lender) in the appropriate amount
to such Account Debtor.
5.7 MAINTENANCE OF PROPERTIES. Maintain and preserve all of their
properties which are necessary or useful in the proper conduct to their business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee,
so as to prevent any loss or forfeiture thereof or thereunder.
5.8 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers,
their Subsidiaries, or any of their respective assets 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. Borrowers will, and will cause their Subsidiaries to, make
timely payment or deposit of all tax payments and withholding taxes required of
them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will, upon
request, furnish Lender with proof satisfactory to Lender indicating that the
applicable Borrower or Subsidiary of a Borrower has made such payments or
deposits. Borrowers shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which any Borrower is required to pay any
such excise tax.
5.9 INSURANCE.
(a) At Borrowers' expense, maintain insurance respecting their and
their Subsidiaries' assets wherever located, 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. Borrowers
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
Lender. Borrowers shall deliver copies of all such policies to Lender with an
endorsement naming Lender as the sole loss payee (under a satisfactory lender's
loss payable endorsement) 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 Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Administrative Borrower shall give Lender prompt notice of any
loss exceeding $250,000 covered by such insurance. So long as no Event of
Default has occurred and is continuing, Administrative Borrower shall have the
exclusive right to adjust any losses payable under any such insurance policies
which are less than $250,000. Following the occurrence and during the
continuation of an Event of Default, or in the case of any losses payable under
such insurance exceeding $250,000, Lender shall have the exclusive right to
adjust any losses payable under any such insurance policies, without any
liability to
20
Borrowers 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 Lender to be
applied at the option of Lender either to the prepayment of the Obligations or
shall be disbursed to Administrative Borrower under staged payment terms
reasonably satisfactory to Lender for application to the cost of repairs,
replacements, or restorations; provided, however, that, with respect to any such
monies in an aggregate amount during any 12 consecutive month period not in
excess of $250,000, so long as (A) no Default or Event of Default shall have
occurred and is continuing, (B) Borrowers' Excess Availability is greater than
$5,000,000, (C) Administrative Borrower shall have given Lender prior written
notice of the Borrowers or their respective Subsidiaries' intention to apply
such monies to the costs of repairs, replacement, or restoration of the property
which is the subject of the loss, destruction, or taking by condemnation, (D)
the monies are held in a cash collateral account in which Lender has a perfected
first-priority security interest, and (E) Borrowers or their Subsidiaries
complete such repairs, replacements, or restoration within 180 days after the
initial receipt of such monies, Borrowers shall have the option to apply such
monies to the costs of repairs, replacement, or restoration of the property
which is the subject of the loss, destruction, or taking by condemnation unless
and to the extent that such applicable period shall have expired without such
repairs, replacements, or restoration being made, in which case, any amounts
remaining in the cash collateral account shall be paid to Lender and applied as
set forth above.
(c) Borrowers shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 5.9, unless Lender is included thereon as named insured with
the loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Lender whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Lender.
5.10 LOCATION OF INVENTORY AND EQUIPMENT. Keep Borrowers' and their
Subsidiaries' Inventory and Equipment only at the locations identified on
Schedule 4.5 and their chief executive offices only at the locations identified
on Schedule 4.7(b); provided, however, that Administrative Borrower may amend
Schedule 4.5 or Schedule 4.7 so long as such amendment occurs by written notice
to Lender not less than 30 days prior to the date on which such Inventory or
Equipment is moved to such new location or such chief executive office is
relocated, so long as such new location is within the continental United States,
and so long as, at the time of such written notification, the applicable
Borrower provides to Lender a Collateral Access Agreement with respect thereto.
5.11 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not result in and could not reasonably be expected to
result in a Material Adverse Change.
5.12 LEASES. Pay when due all rents and other amounts payable under any
leases to which any Borrower or any Subsidiary of a Borrower is a party or by
which any Borrower's or any of its Subsidiaries' properties and assets are
bound, unless such payments are the subject of a Permitted Protest.
5.13 EXISTENCE. At all times preserve and keep in full force and effect
each Borrower's and each of its Subsidiaries' valid existence and good standing
and any rights and franchises material to their businesses.
5.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by any Borrower or
any Subsidiary of a Borrower free of any Environmental Liens or post bonds or
other financial assurances sufficient to satisfy the
21
obligations or liability evidenced by such Environmental Liens, (b) comply, in
all material respects, with Environmental Laws and provide to Lender
documentation of such compliance which Lender reasonably requests, (c) promptly
notify Lender of any release of a Hazardous Material in any reportable quantity
from or onto property owned or operated by any Borrower or any Subsidiary of a
Borrower and take any Remedial Actions required to ▇▇▇▇▇ said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly, but in any event within 5 days of its receipt thereof, provide Lender
with written notice of any of the following: (i) notice that an Environmental
Lien has been filed against any of the real or personal property of any Borrower
or any Subsidiary of a Borrower, (ii) commencement of any Environmental Action
or notice that an Environmental Action will be filed against any Borrower or any
Subsidiary of a Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
5.15 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, notify Lender if any written
information, exhibit, or report furnished to Lender contained, at the time it
was furnished, 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. The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect of
amending or, modifying this Agreement or any of the Schedules hereto.
5.16 CONTROL AGREEMENTS. Take all reasonable steps in order for Lender to
obtain control in accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107
of the Code with respect to (subject to the proviso contained in Section 6.12)
all of its Securities Accounts, Deposit Accounts, electronic chattel paper,
investment property, and letter of credit rights.
5.17 FORMATION OF SUBSIDIARIES. At the time that any Borrower or any
Guarantor forms any direct or indirect Subsidiary or acquires any direct or
indirect Subsidiary after the Closing Date, such Borrower or such Guarantor
shall (a) cause such new Subsidiary to provide to Lender a joinder to the
Guaranty and the Security Agreement, together with such other security documents
(including Mortgages with respect to any Real Property of such new Subsidiary),
as well as appropriate financing statements (and with respect to all property
subject to a Mortgage, fixture filings), all in form and substance satisfactory
to Lender (including being sufficient to grant Lender a first priority Lien
(subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary), (b) provide to Lender a pledge agreement and appropriate
certificates and powers or financing statements, hypothecating all of the direct
or beneficial ownership interest in such new Subsidiary, in form and substance
satisfactory to Lender, and (c) provide to Lender all other documentation,
including one or more opinions of counsel satisfactory to Lender, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all property subject to a
Mortgage). Any document, agreement, or instrument executed or issued pursuant to
this Section 5.17 shall be a Loan Document.
5.18 VALUATIONS. Subject to the terms set forth in the Fee Letter,
valuations of Borrowers' business or Recurring Revenues may be conduced by
Lender from time to time with Borrowers' assistance.
5.19 COMPLIANCE WITH CONDITIONS SUBSEQUENT. Parent shall comply and shall
cause its Subsidiaries to comply with the conditions subsequent set forth in
Schedule 3.1 within the applicable time periods.
5.20 DELISTING OF PARENT'S STOCK. In connection with the pending
proceedings (existing as of the Closing Date) involving the possible delisting
of Parent's Stock from the Nasdaq National Market, Parent hereby confirms that
it has filed an appeal in such delisting proceedings, which appeal is pending.
Parent hereby agrees to promptly notify Lender of: (a) any developments
concerning such delisting proceedings
22
including the status of the pending appeal and any final determination rendered
in connection with such appeal; and (b) in the event Parent's Stock is delisted
from the Nasdaq National Market, any determination made by Parent that a
Fundamental Change Event shall not have occurred, and the reason for such
determination.
6. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the payment in full of the Obligations, Borrowers
will not and will not permit any of their respective Subsidiaries to do any of
the following:
6.1 INDEBTEDNESS. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,
(b) Indebtedness set forth on Schedule 4.19,
(c) Permitted Purchase Money Indebtedness,
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 6.1 (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, in Lender's
judgment, materially impair the prospects of repayment of the Obligations by
Borrowers or materially impair Borrowers' creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended or add one or more Borrowers as liable with
respect thereto if such additional Borrowers were not liable with respect to the
original Indebtedness, (iii) such refinancings, renewals, or extensions do not
result in a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, nor are they on terms or conditions, that,
taken as a whole, are materially more burdensome or restrictive to the
applicable Borrower, (iv) if the Indebtedness that is refinanced, renewed, or
extended was subordinated in right of payment to the Obligations, then the terms
and conditions of the refinancing, renewal, or extension Indebtedness must
include subordination terms and conditions that are at least as favorable to
Lender as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and (v) the Indebtedness that is refinanced, renewed, or extended
is not recourse to any Person that is liable on account of the Obligations other
than those Persons which were obligated with respect to the Indebtedness that
was refinanced, renewed, or extended,
(e) the Subordinated Notes,
(f) endorsement of instruments or other payment items for deposit,
and
(g) Indebtedness composing Permitted Investments.
6.2 LIENS. Create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its 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, renewed, or
extended under Section 6.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
23
6.3 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) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets, or
(d) Suspend or go out of a substantial portion of their business.
6.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of the assets of
any Borrower or any Subsidiary of a Borrower.
6.5 CHANGE NAME. Change any Borrower's or any of its Subsidiaries' name,
organizational identification number, state of organization, organizational
structure or organizational identity; provided, however, that a Borrower or a
Subsidiary of a Borrower may change its name upon at least 30 days prior written
notice by Administrative Borrower to Lender of such change and so long as, at
the time of such written notification, such Borrower or such Subsidiary provides
any financing statements necessary to perfect and continue perfected Lender's
Liens.
6.6 NATURE OF BUSINESS. Make any change in the principal nature of their
business.
6.7 PREPAYMENTS AND AMENDMENTS. Except in connection with a refinancing
permitted by Section 6.1(d),
(a) optionally prepay, redeem, defease, purchase, or otherwise
acquire any Indebtedness (including the Subordinated Notes) of any Borrower or
any Subsidiary of a Borrower, other than the Obligations in accordance with this
Agreement,
(b) make any payment on account of Indebtedness (including the
Subordinated Notes) that has been contractually subordinated in right of payment
if such payment is not permitted at such time under the subordination terms and
conditions (provided, that (to the extent permitted by the Subordinated Note
Indenture) regularly scheduled semi-annual payments of interest only, but no
payments of principal, shall be allowed on the Subordinated Notes),
(c) repurchasing any Subordinated Note (in whole or in part), or
making any payments to the Paying Agent or any other Person in furtherance of
such repurchase, including, without limitation, as a result of the exercise by
any holder thereof of its put rights following a Fundamental Change Event
pursuant to the terms of the Subordinated Note Indenture, without the prior
written consent of Lender; or
(d) 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 Section 6.1(b), (c), or (e).
6.8 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
6.9 CONSIGNMENTS. Consign any of their Inventory or sell any of their
Inventory on ▇▇▇▇ and hold, sale or return, sale on approval, or other
conditional terms of sale.
24
6.10 DISTRIBUTIONS. Other than distributions or declaration and payment
of dividends by a Borrower to another Borrower, make any distribution or declare
or pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of any Borrower's Stock, of any class,
whether now or hereafter outstanding.
6.11 ACCOUNTING METHODS. Modify or change their fiscal year or their
method of accounting (other than as may be required to conform to GAAP) 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 Borrowers' or their Subsidiaries' accounting
records without said accounting firm or service bureau agreeing to provide
Lender information regarding Borrowers' and their Subsidiaries' Collateral or
financial condition.
6.12 INVESTMENTS. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrowers and their Subsidiaries shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts
maintained in the United States or Securities Accounts maintained in the United
States in an aggregate amount in excess of $10,000 at any one time unless the
applicable Borrower or its Subsidiary and the applicable securities intermediary
or bank have entered into Control Agreements governing such Permitted
Investments in order to perfect (and further establish) the Lender's Liens in
such Permitted Investments. Subject to the foregoing proviso, Borrowers shall
not permit their Subsidiaries located in Canada to establish or maintain any
Deposit Account or Securities Account unless Lender shall have received a
Control Agreement in respect of such Deposit Account or Securities Account.
6.13 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of any Borrower except for
transactions that (a) are in the ordinary course of Borrowers' business, (b) are
upon fair and reasonable terms, (c) are fully disclosed to Lender, and (d) are
no less favorable to Borrowers or their respective Subsidiaries, as applicable,
than would be obtained in an arm's length transaction with a non-Affiliate.
6.14 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay, in full, the outstanding
principal, accrued interest, and accrued fees and expenses owing to Existing
Lender, and (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes.
6.15 INVENTORY AND EQUIPMENT WITH BAILEES. Store the Inventory or
Equipment of Borrowers or their Subsidiaries at any time now or hereafter with a
bailee, warehouseman, or similar party.
6.16 FINANCIAL COVENANTS.
(a) Fail to maintain or achieve:
(i) MINIMUM EBITDA. EBITDA, measured as of the end of each
fiscal quarter of Parent, of at least the required amount set forth in the
following table for the applicable period set forth opposite thereto:
Applicable Amount Applicable Period
----------------- -----------------
$ 1,000,000 For the 6 month period ending December 31, 2005
$ 1,000,000 For the 9 month period ending on March 31, 2006
25
$ 6,500,000 For the 12 month period ending June 30, 2006
$ 7,000,000 For the 12 month period ending September 30, 2006
$12,000,000 For the 12 month period ending December 31, 2006
and as of the end of each fiscal quarter thereafter
(ii) MINIMUM RECURRING REVENUES. Minimum Recurring Revenues,
measured as of the end of each fiscal quarter of Parent, of at least the
required amount set forth in the following table for the applicable period set
forth opposite thereto:
Minimum Amount Applicable Period
-------------- -----------------
$18,500,000 For the 6 month period ending June 30, 2005
$29,000,000 For the 9 month period ending September 30, 2005
$38,000,000 For the 12 month period ending December 31, 2005
$39,000,000 For the 12 month period ending March 31, 2006
$39,000,000 For the 12 month period ending June 30, 2006
$39,000,000 For the 12 month period ending September 30, 2006
$40,000,000 For the 12 month period ending December 31, 2006
and as of the end of each fiscal quarter thereafter
(b) Make:
(i) CAPITAL EXPENDITURES. Capital Expenditures in any fiscal
year in excess of the amount set forth in the following table for the applicable
period:
For the First 6 Months of
Fiscal Year 2005 Fiscal Year 2006 Fiscal Year 2007
---------------- ---------------- -------------------------
$8,000,000 $16,000,000 $8,000,000
7. 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:
7.1 If Borrowers fail to pay when due and payable, or when declared due
and payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due Lender, reimbursement of Lender Expenses, or other amounts
(other than any portion thereof constituting principal) constituting Obligations
(including any portion thereof that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in any such Insolvency Proceeding), and such failure continues
for a period of 3 Business Days, or (b) all or any portion of the principal of
the Obligations);
7.2 (a) If any Borrower or any of its Subsidiaries fails or neglects to
perform, keep, or observe any covenant or other provision contained in Sections
5.1, 5.8, or 5.12 and such failure or neglect is not cured within 10 days after
the date on which such failure or neglect first occurs, or (b) if any Borrower
or any of its
26
Subsidiaries fails or neglects to perform, keep or observe any other covenant or
other provision contained in any Section of this Agreement (other than a Section
that is expressly dealt with elsewhere in this Section 7) or the other Loan
Documents (other than a Section of such other Loan Document dealt with elsewhere
in this Section 7); provided that, during the pendency of any such period,
Lender shall be relieved of its obligation to extend credit hereunder;
7.3 If any material portion of any Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person;
7.4 If an Insolvency Proceeding is commenced by any Borrower or any
Subsidiary of a Borrower;
7.5 If an Insolvency Proceeding is commenced against any Borrower or any
Subsidiary of a Borrower, and any of the following events occur: (a) the
applicable Borrower or such Subsidiary consents to the institution of such
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that during the pendency of such period,
Lender shall be relieved of its obligation to extend credit hereunder, (d) an
interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Borrower or any Subsidiary of a Borrower, or (e)
an order for relief shall have been issued or entered therein;
7.6 If any Borrower or any Subsidiary of a 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;
7.7 If one or more judgments, orders, or awards involving an aggregate
amount of $100,000 or more (except to the extent fully covered by insurance
pursuant to which the insurer has accepted liability therefor in writing) shall
be entered or filed against any Borrower or any Subsidiary of any Borrower or
with respect to any of their respective assets, and the same is not released,
discharged, bonded against, or stayed pending appeal before the earlier of 30
days after the date it first arises or 5 days prior to the date on which such
asset is subject to being forfeited by the applicable Borrower or the applicable
Subsidiary;
7.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any Borrower's assets (or any portion thereof) by the United States,
or any department, agency, or instrumentality thereof, or by any state, 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, whether ▇▇▇▇▇▇ or
otherwise, upon any Borrower's assets (or any portion thereof) and the same is
not paid before such payment is delinquent;
7.9 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of any Borrower's assets;
7.10 If there is a default in any material agreement to which any
Borrower is a party and such default (a) occurs at the final maturity of the
obligations thereunder, or (b) results in a right by the other party thereto,
irrespective of whether exercised, to accelerate the maturity of the applicable
Borrower's obligations thereunder, to terminate such agreement, or to refuse to
renew such agreement pursuant to an automatic renewal right therein;
7.11 If any material misstatement or material misrepresentation exists
now or hereafter in any warranty, representation, statement, or Record made to
Lender by any Borrower, its Subsidiaries, or any officer, employee, agent, or
director of any Borrower or any of its Subsidiaries;;
7.12 If the obligation of any Guarantor under the Guaranty is limited or
terminated by operation of law or by such Guarantor; or any such Guarantor
becomes the subject of an Insolvency Proceeding;
27
7.13 If the Security Agreement or any other Loan Document that purports
to create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby;
7.14 Any provision of any Loan Document shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower or any Subsidiary of a Borrower, or a proceeding
shall be commenced by any Borrower or any Subsidiary of a Borrower, or by any
Governmental Authority having jurisdiction over any Borrower or any Subsidiary
of a Borrower, seeking to establish the invalidity or unenforceability thereof,
or any Borrower or any Subsidiary of a Borrower shall deny that it has any
liability or obligation purported to be created under any Loan Document; or
7.15 If (a) there shall occur a Default or Event of Default (or
comparable terms) under, and as defined in any Subordinated Note Document, (b)
there shall occur a Fundamental Change Event which results in any holder of the
Subordinated Notes delivering a Fundamental Change Purchase Notice (as defined
in the Subordinated Note Indenture) to the Paying Agent, (c) any of the
Obligations for any reason shall cease to be Senior Debt or Designated Senior
Debt (or any comparable terms) under the Subordinated Note Indenture, (d) any
Indebtedness other than the Obligations shall constitute Designated Senior
Indebtedness (or any comparable term) under the Subordinated Note Indenture, (e)
the Indenture Trustee or any holder of any Subordinated Note shall fail to
perform or comply with any of the subordination provisions of the Subordinated
Note Indenture, or (f) the subordination provisions of the Subordinated Note
Indenture shall, in whole or in part, terminate, cease to be effective or cease
to be legally, valid, binding and enforceable against any holder of a
Subordinated Note.
8. THE LENDER'S RIGHTS AND REMEDIES.
8.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, Lender (at its election but without notice
of its election and without demand) may do any one or more of the following, all
of which are authorized by Borrowers:
(a) Declare all or any portion of the 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 Borrowers under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrowers and Lender;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations; and
(d) Lender shall have all other rights and remedies available at
law or in equity or pursuant to any other Loan Document.
The foregoing to the contrary notwithstanding, upon the occurrence of any
Event of Default described in Section 7.4 or Section 7.5, in addition to the
remedies set forth above, without any notice to Borrowers or any other Person or
any act by the Lender, Lender's obligation to extent credit hereunder shall
terminate and the Obligations then outstanding, together with all accrued and
unpaid interest thereon, and all fees and all other amounts due under this
Agreement and the other Loan Documents, shall automatically and immediately
become due and payable, without presentment, demand, protest, or notice of any
kind, all of which are expressly waived by Borrowers.
28
8.2 REMEDIES CUMULATIVE. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
8.3 BANK PRODUCT PROVIDERS. Each Bank Product Provider shall be deemed a
party hereto for purposes of any reference in any Loan Document with respect to
the Bank Product Providers or the Bank Product Obligations; it being understood
and agreed that the rights and benefits of such Bank Product Provider under the
Loan Documents consist exclusively of such Bank Provider's right to share in
payments and collections out of the Collateral as more fully set forth herein.
In connection with any such distribution of payments and collections, Lender
shall be entitled to assume no amounts are due to any Bank Product Provider
unless such Bank Product Provider has notified Lender in writing of the amount
of any such liability owed to it prior to such distribution.
9. TAXES AND EXPENSES.
If any 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, Lender, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves
against the Borrowing Base or the Maximum Revolver Amount as Lender deems
necessary to protect Lender from the exposure created by such failure, or (c) in
the case of the failure to comply with Section 5.9 hereof, obtain and maintain
insurance policies of the type described in Section 5.9 and take any action with
respect to such policies as Lender deems prudent. Any such amounts paid by
Lender shall constitute Lender Expenses and any such payments shall not
constitute an agreement by Lender to make similar payments in the future or a
waiver by Lender of any Event of Default under this Agreement. Lender 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.
10. WAIVERS; INDEMNIFICATION.
10.1 DEMAND; PROTEST. Each Borrower 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 documents, instruments, chattel paper, and guarantees at any time held by
Lender on which any such Borrower may in any way be liable.
10.2 LENDER'S LIABILITY FOR COLLATERAL. Each Borrower hereby agrees that:
(a) so long as Lender complies with its obligations, if any, under the Code,
Lender shall not in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.
10.3 INDEMNIFICATION. Each Borrower shall pay, indemnify, defend, and
hold the Lender-Related Persons and each Participant (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 or in connection with the
enforcement of this indemnification (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 (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or
29
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Borrowers' and their
Subsidiaries' compliance with the terms of the Loan Documents, and (b) 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
foregoing to the contrary notwithstanding, Borrowers shall have no obligation to
any Indemnified Person under this Section 10.3 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 as to which
Borrowers were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR
ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY
OTHER PERSON.
11. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Lender to the other 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, electronic mail (at such
email addresses as Administrative Borrower or Lender, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Lender, as the case may be, at its
address set forth below:
If to Administrative Borrower: Cray Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: Stoel Rives LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: ▇▇▇▇▇ Fargo Foothill, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
30
with copies to: Buchalter, Nemer, Fields & Younger
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Lender and Borrowers may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 11, other
than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THE AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER 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 CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THE AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND LENDER 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 12(b).
BORROWERS AND 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. BORROWERS AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THE
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
31
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
13.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Lender may assign and delegate to one or more assignees (each
an "Assignee") that are Eligible Transferees all, or any ratable part of all, of
the Obligations and the other rights and obligations of Lender hereunder and
under the other Loan Documents, in a minimum amount of $5,000,000; provided,
however, that Borrowers may continue to deal solely and directly with 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, have been given to Administrative
Borrower by Lender and the Assignee, and (ii) Lender and its Assignee have
delivered to Administrative Borrower an Assignment and Acceptance. Anything
contained herein to the contrary notwithstanding, the Assignee need not be an
Eligible Transferee 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 the assigning Lender.
(b) From and after the date that Lender provides Administrative
Borrower with such written notice and an executed Assignment and Acceptance, (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 Lender under the Loan
Documents, and (ii) 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 10.3 hereof) and be released from any future 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, Lender shall cease to be a party hereto
and thereto), and such assignment shall effect a novation between Borrowers and
the Assignee; provided, however, that nothing contained herein shall release
Lender from obligations that survive the termination of this Agreement,
including such assigning Lender's obligations under Section 15.7 of this
Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty 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 thereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any 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 such assigning Lender, an 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, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon Borrower's receipt of the 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 rights and duties of Lender arising
therefrom.
(e) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons (a "Participant") participating
interests in Obligations and the other rights and interests of
32
Lender hereunder and under the other Loan Documents; provided, however, that (i)
Lender shall remain the "Lender" for all purposes of this Agreement and the
other Loan Documents and the Participant receiving the participating interest in
the Obligations and the other rights and interests of Lender hereunder shall not
constitute a "Lender" hereunder or under the other Loan Documents and Lender's
obligations under this Agreement shall remain unchanged, (ii) Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrowers and Lender shall continue to deal solely and directly with each other
in connection with Lender's rights and obligations under this Agreement and the
other Loan Documents, (iv) Lender shall not 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
substantially all of the Collateral or 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 payable to such
Participant through Lender, or (E) change the amount or due dates of scheduled
principal repayments or prepayments or premiums, and (v) all amounts payable by
Borrowers hereunder shall be determined as if 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 only shall be derivative through Lender
and no Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to Borrowers, the Collections of Borrowers or
their Subsidiaries, the Collateral, or otherwise in respect of the Obligations.
No Participant shall have the right to participate directly in the making of
decisions by Lender.
(f) In connection with any such assignment or participation or
proposed assignment or participation, Lender may, subject to the provisions of
Section 15.8, disclose all documents and information which it now or hereafter
may have relating to Borrowers and their Subsidiaries and their respective
businesses.
(g) Any other provision in this Agreement notwithstanding, 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 Section 203.24, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
13.2 SUCCESSORS. The Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release any
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 13.1 hereof and, except as expressly required pursuant to Section 13.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.
14. AMENDMENTS; WAIVERS.
14.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document (other than Bank Product Agreements),
and no consent with respect to any departure by Borrowers therefrom, shall be
effective unless the same shall be in writing and signed by Lender and
33
Administrative Borrower (on behalf of all Borrowers) and then any such waiver or
consent shall be effective, but only in the specific instance and for the
specific purpose for which given.
14.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Lender to exercise
any right, remedy, or option under this Agreement or, any other Loan Document,
or delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by Borrowers
of any provision of this Agreement. Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. The Agreement shall be binding and deemed effective
when executed by Borrowers and Lender.
15.2 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.
15.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrowers, 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 accomplish fairly the purposes and
intentions of all parties hereto.
15.4 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.
15.5 WITHHOLDING TAXES. All payments made by any Borrower hereunder or
under any note or other Loan Document will be made without setoff, counterclaim,
or other defense. In addition, all such payments will be made free and clear of,
and without deduction or withholding for, any present or future Taxes, and in
the event any deduction or withholding of Taxes is required, each Borrower shall
comply with the penultimate sentence of this Section 15.5. "Taxes" shall mean,
any taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein measured by or based on the
net income or net profits of Lender) and all interest, penalties or similar
liabilities with respect thereto. If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional amounts
as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 15.5 after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein; provided, however, that
Borrowers shall not be required to increase any such amounts if the increase in
such amount payable results from Lender's own willful misconduct or gross
negligence (as finally determined by a court of competent jurisdiction). Each
Borrower will furnish to Lender as promptly as possible after the date the
payment of any Tax is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by any Borrower.
15.6 COUNTERPARTS; ELECTRONIC EXECUTION. The 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, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method
34
of transmission 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 or other electronic method of
transmission 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.
15.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by any Borrower or Guarantor or the transfer to
Lender of any property 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 relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender 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 Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrowers and Guarantors automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.8 CONFIDENTIALITY. Lender agrees that material, non-public information
regarding Borrowers and their Subsidiaries, their operations, assets, and
existing and contemplated business plans shall be treated by Lender in a
confidential manner, and shall not be disclosed by Lender to Persons who are not
parties to this Agreement, except: (a) to attorneys for and other advisors,
accountants, auditors, and consultants to Lender, (b) to Subsidiaries and
Affiliates of Lender (including the Bank Product Providers), provided that any
such Subsidiary or Affiliate shall have agreed to receive such information
hereunder subject to the terms of this Section 15.8, (c) as may be required by
statute, decision, or judicial or administrative order, rule, or regulation, (d)
as may be agreed to in advance by Administrative Borrower or its Subsidiaries or
as requested or required by any Governmental Authority pursuant to any subpoena
or other legal process, (e) as to any such information that is or becomes
generally available to the public (other than as a result of prohibited
disclosure by Lender), (f) in connection with any assignment, prospective
assignment, sale, prospective sale, participation or prospective participations,
or pledge or prospective pledge of Lender's interest under this Agreement,
provided that any such assignee, prospective assignee, purchaser, prospective
purchaser, participant, prospective participant, pledgee, or prospective pledgee
shall have agreed in writing to receive such information hereunder subject to
the terms of this Section, and (g) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents. The provisions of this Section 15.8
shall survive for 2 years after the payment in full of the Obligations.
15.9 INTEGRATION. The 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.
15.10 PARENT AS AGENT FOR BORROWERS. Each Borrower hereby irrevocably
appoints Parent as the borrowing agent and attorney-in-fact for all Borrowers
(the "Administrative Borrower") which appointment shall remain in full force and
effect unless and until Lender shall have received prior written notice signed
by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Lender with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that
35
Lender shall not incur liability to any Borrower as a result hereof. Each
Borrower expects to derive benefit, directly or indirectly, from the handling of
the Loan Account and the Collateral in a combined fashion since the successful
operation of each Borrower is dependent on the continued successful performance
of the integrated group. To induce Lender to do so, and in consideration
thereof, each Borrower hereby jointly and severally agrees to indemnify Lender
harmless against any and all liability, expense, loss or claim of damage or
injury, made against Lender by any Borrower or by any third party whosoever,
arising from or incurred by reason of (a) the handling of the Loan Account and
Collateral of Borrowers as herein provided, (b) Lender's relying on any
instructions of the Administrative Borrower, or (c) any other action taken by
Lender hereunder or under the other Loan Documents, except that Borrowers will
have no liability to any Lender-Related Person under this Section 15.10 with
respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Lender-Related Person.
[SIGNATURE PAGES TO FOLLOW.]
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
CRAY INC.,
a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
CRAY FEDERAL INC.,
a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Title: President
▇▇▇▇▇ FARGO FOOTHILL, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President
Senior Secured Credit Agreement
S-1
SCHEDULE 1.1
As used in the Agreement, the following terms shall have the following
definitions:
"Account" means an account (as that term is defined in the Code).
"Account Debtor" means any Person who is obligated on an Account, chattel
paper, or a general intangible.
"ACH Transactions" means any cash management or related services
(including the Automated Clearing House processing of electronic fund transfers
through the direct Federal Reserve Fedline system) provided by a Bank Product
Provider for the account of Administrative Borrower or its Subsidiaries.
"Administrative Borrower" has the meaning specified therefor in Section
15.10.
"Advances" has the meaning specified therefor in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
controls, is controlled by, or is under common control with, such Person. For
purposes of this definition, "control" means the possession, directly or
indirectly through one or more intermediaries, of the power to direct the
management and policies of a Person, whether through the ownership of Stock, by
contract, or otherwise; provided, however, that, for purposes of the definition
of Eligible Accounts and Section 6.13 hereof: (a) any Person which owns directly
or indirectly 10% or more of the Stock having ordinary voting power for the
election of directors or other members of the governing body of a Person or 10%
or more of the partnership or other ownership interests of a Person (other than
as a limited partner of such Person) shall be deemed an Affiliate of such
Person, (b) each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person, and (c) each partnership or joint venture in
which a Person is a partner or joint venturer shall be deemed an Affiliate of
such Person.
"Agreement" means the Senior Secured Credit Agreement to which this
Schedule 1.1 is attached.
"Applicable Margin" means, with respect to Base Rate Loans or LIBOR Rate
Loans, as the case may be, as of any date of determination, the margins set
forth in the following table that correspond to the Average Monthly Excess
Availability plus Qualified Cash (as of such date of determination); provided,
however, that the Applicable Margins prior to January 1, 2006 shall be the
margins in the row styled "Level III" below:
Average Monthly Excess
Availability plus
Level Qualified Cash Margin above Base Rate Margin above LIBOR Rate
----- ----------------------------------------- ---------------------- -----------------------
I greater than $50,000,000 1.00% 3.00%
II greater than $25,000,000 but less than or 2.50% 4.50%
equal to $50,000,000
III less than or equal to $25,000,000 3.75% 5.75%
The Applicable Margins shall be adjusted on the last day of each calendar month
of Parent commencing January 31, 2006, and shall be based upon the Average
Monthly Excess Availability for the most recently completed
2
calendar month of Parent plus Qualified Cash as of the last day of the most
recently completed calendar month of Parent, which shall be calculated by Lender
using its internal records and the Borrowing Base and Qualified Cash reports
delivered by Borrowers pursuant to Section 5.2; provided, however, that if
Borrowers fail to provide such reports when due, the Applicable Margin shall be
the margin in the row styled "Level III" as of day immediately following the
date on which such reports were required to be delivered until the last day of
the month following the date on which such reports are again timely delivered
(on which date (but not retroactively), without constituting a waiver of any
Default or Event of Default caused by the failure to timely deliver such
reports, the Applicable Margin shall be set at a margin based upon the Average
Monthly Excess Availability and Qualified Cash calculation set forth therein).
"Applicable Number of Days" means, with respect to the clearance charge
under Section 2.8, as of any date of determination, the Number of Business Days
set forth in the following table that correspond to the Average Monthly Excess
Availability plus Qualified Cash (as of such date of determination); provided,
however, that the Applicable Number of Days prior to January 1, 2006 shall be
the number of Business Days in the row styled "Level III" below:
Average Monthly Excess
Availability plus
Level Qualified Cash Number of Business Days
----- ----------------------------------------- -----------------------
I greater than $50,000,000 1
II greater than $25,000,000 but less than or
equal to $50,000,000 2
III less than or equal to $25,000,000 3
The Applicable Number of Days shall be adjusted on the last day of each calendar
month of Parent commencing January 31, 2006, and shall be based upon the Average
Monthly Excess Availability for the most recently completed calendar month of
Parent plus Qualified Cash as of the last day of the most recently completed
calendar month of Parent, which shall be calculated by Lender using its internal
records and the Borrowing Base and Qualified Cash reports delivered by Borrowers
pursuant to Section 5.2; provided, however, that if Borrowers fail to provide
such reports when due, the Applicable Number of Days shall be the number of
Business Days in the row styled "Level III" as of the day immediately following
the date on which such reports were required to be delivered until the last day
of the month following the date on which such reports are again timely delivered
(on which date (but not retroactively), without constituting a waiver of any
Default or Event of Default caused by the failure to timely deliver such
reports, the Applicable Number of Days shall be set at a margin based upon the
Average Monthly Excess Availability and Qualified Cash calculation set forth
therein).
"Applicable Rate" means, with respect to the Letter of Credit Fee, as of
any date of determination, the per annum rate set forth in the following table
that corresponds to the Average Monthly Excess Availability plus Qualified Cash
(as of such date of determination); provided, however, that the Applicable Rate
prior to January 31, 2006 shall be the rate in the row styled "Level III" below:
3
Average Monthly Excess Availability plus
Level Qualified Cash Applicable Rate for Letter of Credit Fee
----- ----------------------------------------- ----------------------------------------
I greater than $50,000,000 3.00%
II greater than $25,000,000 but less than or
equal to $50,000,000 4.50%
III less than or equal to $25,000,000 5.75%
The Applicable Rate shall be adjusted on the last day of each calendar month of
Parent commencing January 31, 2006, and shall be based upon the Average Monthly
Excess Availability for the most recently completed calendar month of Parent
plus Qualified Cash as of the last day of the most recently completed calendar
month of Parent, which shall be calculated by Lender using its internal records
and the Borrowing Base and Qualified Cash reports delivered by Borrowers
pursuant to Section 5.2; provided, however, that if Borrowers fail to provide
such reports when due, the Applicable Rate shall be the margin in the row styled
"Level III" as of the day immediately following the date on which such reports
were required to be delivered until the last day of the month following the date
on which such reports are again timely delivered (on which date (but not
retroactively), without constituting a waiver of any Default or Event of Default
caused by the failure to timely deliver such reports, the Applicable Rate shall
be set at the rate based upon the Average Monthly Excess Availability and
Qualified Cash calculation set forth therein).
"Assignee" has the meaning specified therefor in Section 13.1(a).
"Assignment and Acceptance" means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1.
"Authorized Person" means any officer or employee of Administrative
Borrower.
"Availability" means, as of any date of determination, the amount that
Borrowers are entitled to borrow as Advances hereunder (after giving effect to
all then outstanding Obligations (other than Bank Product Obligations) and all
sublimits and reserves then applicable hereunder).
"Average Monthly Excess Availability" means, as of any date of
determination, the average amount of Excess Availability during the prior
calendar month of Parent (tested on a weekly basis); provided, that with respect
to any date of determination less than one month after the Closing Date, such
determination shall be made for the actual number of days from and including the
Closing Date through such date of determination.
"Bank Product" means any financial accommodation extended to
Administrative Borrower or its Subsidiaries by a Bank Product Provider (other
than pursuant to the Agreement) including: (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions,
(f) cash management, including controlled disbursement, accounts or services, or
(g) transactions under Hedge Agreements.
"Bank Product Agreements" means those agreements entered into from time to
time by Administrative Borrower or its Subsidiaries with a Bank Product Provider
in connection with the obtaining of any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Administrative Borrower
or its Subsidiaries to any Bank Product Provider
4
pursuant to or evidenced by the Bank Product Agreements and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all such amounts that Administrative Borrower or its Subsidiaries are
obligated to reimburse to Lender as a result of Lender purchasing participations
from, or executing indemnities or reimbursement obligations to, a Bank Product
Provider with respect to the Bank Products provided by such Bank Product
Provider to Administrative Borrower or its Subsidiaries.
"Bank Product Provider" means ▇▇▇▇▇ Fargo or any of its Affiliates.
"Bank Product Reserve" means, as of any date of determination, the amount
of reserves that Lender has established (based upon the Bank Product Providers'
reasonable determination of the credit exposure of Administrative Borrower and
its Subsidiaries in respect of Bank Products) in respect of Bank Products then
provided or outstanding.
"Bankruptcy Code" means title 11 of the United States Code, as in effect
from time to time.
"Base LIBOR Rate" means the rate per annum, determined by Lender in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/100%), to be the rate at which Dollar deposits (for delivery on the
first day of the requested Interest Period) are offered to major banks in the
London interbank market 2 Business Days prior to the commencement of the
requested Interest Period, for a term and in an amount comparable to the
Interest Period and the amount of the LIBOR Rate Loan requested (whether as an
initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a
conversion of a Base Rate Loan to a LIBOR Rate Loan) by Administrative Borrower
in accordance with the Agreement, which determination shall be conclusive in the
absence of manifest error.
"Base Rate" means, the rate of interest announced, from time to time,
within ▇▇▇▇▇ Fargo at its principal office in San Francisco as its "prime rate",
with the understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base rates
(not necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publications as ▇▇▇▇▇ Fargo may designate.
"Base Rate Loan" means the portion of the Advances that bears interest at
a rate determined by reference to the Base Rate.
"Benefit Plan" means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Board of Directors" means the board of directors (or comparable managers)
of Parent or any committee thereof duly authorized to act on behalf of the board
of directors (or comparable managers).
"Borrower" and "Borrowers" have the respective meanings specified therefor
in the preamble to the Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances made on the
same day by Lender.
"Borrowing Base" means, as of any date of determination, the result of:
i. the lesser of
1. $10,000,000, and
5
2. 85% of the amount of Eligible Accounts, minus the amount, if
any, of the Dilution Reserve, plus
ii. the lesser of
1. $20,000,000, and
2. 100% of TSM Recurring Revenues, minus
iii. the sum of (i) the Bank Product Reserve, and (ii) the aggregate
amount of reserves, if any, established by Lender under Section
2.1(b), minus
iv. the amount of the Line Block.
"Borrowing Base Certificate" means a certificate an example of which is
attached hereto as of Exhibit B-1.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which banks are authorized or required to close in the state of California,
except that, if a determination of a Business Day shall relate to a LIBOR Rate
Loan, the term "Business Day" also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.
"Capital Expenditures" means, with respect to any Person for any period,
the aggregate of all expenditures by such Person and its Subsidiaries during
such period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.
"Capitalized Lease Obligation" means that portion of the obligations under
a Capital Lease that is required to be capitalized in accordance with GAAP.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Cash Equivalents" means (a) marketable direct obligations issued by or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group ("S&P") or ▇▇▇▇▇'▇ Investors Service, Inc.
("Moody's"), (c) commercial paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's, (d) certificates of deposit or
bankers' acceptances maturing within 1 year from the date of acquisition thereof
issued by any bank organized under the laws of the United States or any state
thereof having at the date of acquisition thereof combined capital and surplus
of not less than $250,000,000, (e) Deposit Accounts maintained with (i) any bank
that satisfies the criteria described in clause (d) above, or (ii) any other
bank organized under the laws of the United States or any state thereof so long
as the amount maintained with any such other bank is less than or equal to
$100,000 and is insured by the Federal Deposit Insurance Corporation, and (f)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (e) above.
"Cash Management Account" has the meaning specified therefor in Section
2.7(a).
6
"Cash Management Agreements" means those certain cash management
agreements, in form and substance satisfactory to Lender, each of which is among
Administrative Borrower or one of its Subsidiaries, Lender, and one of the Cash
Management Banks.
"Cash Management Bank" has the meaning specified therefor in Section
2.7(a).
"Change of Control" means that (a) any "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 25%, or more, of the Stock of Parent
having the right to vote for the election of members of the Board of Directors,
or (b) 66 2/3% of the members of the Board of Directors do not constitute
Continuing Directors.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder.
"Code" means the California Uniform Commercial Code, as in effect from
time to time.
"Collateral" means all assets and interests in assets and proceeds thereof
now owned or hereafter acquired by Administrative Borrower or its Subsidiaries
in or upon which a Lien is granted under any of the Loan Documents.
"Collateral Access Agreement" means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in Administrative Borrower's or its Subsidiaries' books and records, Equipment
or Inventory, in each case, in form and substance satisfactory to Lender.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of Parent to Lender.
"Continuing Director" means (a) any member of the Board of Directors who
was a director (or comparable manager) of Parent on the Closing Date, and (b)
any individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent and whose initial assumption of office resulted from such contest or the
settlement thereof.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by Administrative Borrower or one
of its Subsidiaries, Lender, and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account).
"Copyright Security Agreement" means a copyright security agreement, in
form and substance satisfactory to Lender, executed and delivered by
Administrative Borrower or its Subsidiaries to Lender.
"Cray Canada" means Cray Canada, Inc., a Canadian corporation.
"Daily Balance" means, as of any date of determination and with respect to
any Obligation, the amount of such Obligation owed at the end of such day.
7
"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.
"Deposit Account" means any deposit account (as that term is defined in
the Code).
"Designated Account" means the Deposit Account of Administrative Borrower
identified on Schedule D-1.
"Designated Account Bank" has the meaning specified therefor in Schedule
D-1.
"Designated Senior Debt" has the meaning specified therefor in the
Subordinated Note Indenture.
"Dilution" means, as of any date of determination, a percentage, based
upon the experience of the immediately prior 90 consecutive days, that is the
result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to
Borrowers' Accounts during such period, by (b) Borrowers' ▇▇▇▇▇▇▇▇ with respect
to Accounts during such period.
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by 1 percentage
point for each percentage point by which Dilution is in excess of 5%.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Parent's and its
Subsidiaries': (a) consolidated net earnings (or loss), plus (b) without
duplication, the sum of the following amounts for such period, to the extent
deducted in determining consolidated net earnings (or loss) of Parent and its
Subsidiaries for such period: (i) interest expense, plus (ii) income tax
expense, plus (iii) depreciation and amortization, plus (iv) extraordinary
losses, plus (v) restructuring charges and non-recurring charges incurred in
calendar year 2005 up to an aggregate amount of not more than $14,000,000 and
which are recorded as an expense on the books of the applicable Borrower or
Subsidiary by no later the March 31, 2006, minus (c) without duplication, the
sum of the following amounts for such period, to the extent included in
determining consolidated net earnings (or loss) of Parent and its Subsidiaries
for such period: (i) extraordinary gains, plus (ii) interest income, as all of
the foregoing are determined in accordance with GAAP.
"Eligible Accounts" means those Accounts created by a Borrower in the
ordinary course of its business, that arise out of its sale of goods (and not
out of the rendition of services), that are not related to Recurring Revenues,
that comply with each of the representations and warranties respecting Eligible
Accounts made in the Loan Documents, and that are not excluded as ineligible by
virtue of one or more of the excluding criteria set forth below; provided,
however, that such criteria may be revised from time to time by Lender in
Lender's Permitted Discretion to address the results of any audit performed by
Lender from time to time after the Closing Date. In determining the amount to be
included, Eligible Accounts shall be calculated net of customer deposits and
unapplied cash. Eligible Accounts shall not include the following:
a) Accounts that the Account Debtor has failed to pay within 90 days
of original invoice date or Accounts with selling terms of more than 45
days,
Accounts owed by an Account Debtor (or its Affiliates, but with respect to an
agency of the United States, only with respect to such agency) where 50% or more
of all Accounts owed by that Account Debtor (or its Affiliates or the applicable
United States agency) are deemed ineligible under clause (a) above,
Accounts with respect to which the Account Debtor is an Affiliate of any
Borrower or an employee or agent of any Borrower or any Affiliate of any
Borrower,
8
Accounts arising in a transaction wherein goods are placed on consignment or are
sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a ▇▇▇▇
and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional,
Accounts that are not payable in Dollars and in the United States,
Accounts with respect to which the Account Debtor either (i) does not maintain
its chief executive office in the United States or Canada, or (ii) is not
organized under the laws of the United States or any state thereof or Canada, or
(iii) is the government of any foreign country or sovereign state other than
Canada, or of any state, province, municipality, or other political subdivision
thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Lender (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Lender and is directly
drawable by Lender, or (z) the Account is covered by credit insurance in form,
substance, and amount, and by an insurer, satisfactory to Lender,
subject to the provisions contained in the final paragraph of this definition,
Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which the applicable Borrower
has complied, to the reasonable satisfaction of Lender, with the Assignment of
Claims Act, 31 USC Section 3727), or (ii) any state of the United States,
Accounts with respect to which the Account Debtor is a creditor of any Borrower,
has or has asserted a right of setoff, or has disputed its obligation to pay all
or any portion of the Account, to the extent of such claim, right of setoff, or
dispute,
Accounts with respect to which the Account Debtor is subject to an Insolvency
Proceeding, is not Solvent, has gone out of business, or as to which a Borrower
has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor,
Accounts with respect to which the Account Debtor is located in a state or
jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that requires, as
a condition to access to the courts of such jurisdiction, that a creditor
qualify to transact business, file a business activities report or other report
or form, or take one or more other actions, unless the applicable Borrower has
so qualified, filed such reports or forms, or taken such actions (and, in each
case, paid any required fees or other charges), except to the extent that the
applicable Borrower may qualify subsequently as a foreign entity authorized to
transact business in such state or jurisdiction and gain access to such courts,
without incurring any cost or penalty viewed by Lender to be significant in
amount, and such later qualification cures any access to such courts to enforce
payment of such Account,
Accounts, the collection of which, Lender, in its Permitted Discretion, believes
to be doubtful by reason of the Account Debtor's financial condition,
Accounts that are not subject to a valid and perfected first priority Lender's
Lien,
Accounts with respect to which the goods giving rise to such Accounts have not
been shipped and billed to the Account Debtor; provided, however, that to the
extent an Account Debtor has agreed in writing to be contractually obligated to
make payment of the amounts invoiced to such Account Debtor with respect to
goods that have not been shipped to the Account Debtor, then the Accounts
evidenced by such invoices shall not be deemed ineligible as a result of this
clause (m), and
Accounts with respect to an Account Debtor whose total obligations owing to
Borrowers exceed 10% (or, 30% with respect to each of those Account Debtors who,
as of any date of determination, constitute the 3 largest Account Debtor
obligors of Borrowers, provided that the combined percentages for such 3 largest
Account
9
Debtor obligors shall not exceed 50% in the aggregate) of all Eligible Accounts
(with all such percentages, as applied to a particular Account Debtor, being
subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates), to the extent of the
obligations owing by such Account Debtor in excess of such percentage; provided,
however, that, in each case, the amount of Eligible Accounts that are excluded
because they exceed the foregoing percentage shall be determined by Agent based
on all of the otherwise Eligible Accounts prior to giving effect to any
eliminations based upon the foregoing concentration limit. The provisions of
this clause (n) shall not apply to Accounts with respect to which the Account
Debtor is either (i) the United States or any department, agency, or
instrumentality of the United States, or (ii) any state of the United States.
Notwithstanding anything to the contrary contained herein, Lender shall
determine, in its sole discretion, on an Account-by-Account basis, each Account
which shall constitute an Eligible Account, and Lender's determination shall be
conclusive. In this connection, Accounts that arise as a result of the sale of
domestic goods or the performance of research and development services for an
Account Debtor that is either (i) the United States or any department, agency,
or instrumentality of the United States, or (ii) any state of the United States
may be deemed Eligible Accounts in the sole discretion of Lender notwithstanding
the provisions of clause (g) above. Lender shall have the right, at any time and
in its sole discretion, to require compliance with the Assignment of Claims Act
(31 USC Section 3727) as a condition for deeming an Account where the Account
Debtor is the United States or any department, agency, or instrumentality of the
United States an Eligible Account.
"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 Lender, (e) so long
as no Event of Default has occurred and is continuing, any other Person approved
by Administrative Borrower (which approval of Administrative Borrower shall not
be unreasonably withheld, delayed, or conditioned), and (f) during the
continuation of an Event of Default, any other Person approved by Lender.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Borrower, any Subsidiary of a Borrower, or any of their predecessors in
interest, (b) from adjoining properties or businesses, or (c) from or onto any
facilities which received Hazardous Materials generated by any Borrower, any
Subsidiary of a Borrower, or any of their predecessors in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on any
Borrower or any Subsidiary of a Borrower, relating to the environment, the
effect of the environment on employee health, or Hazardous Materials, in each
case as amended from time to time.
"Environmental Liabilities" means all liabilities, monetary obligations,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of
counsel, experts, or consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurred as a result of any
claim or demand, or Remedial
10
Action required, by any Governmental Authority or any third party, and which
relate to any Environmental Action.
"Environmental Lien" means any Lien in favor of any Governmental Authority
for Environmental Liabilities.
"Equipment" means equipment (as that term is defined in the Code).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose employees
are treated as employed by the same employer as the employees of a Borrower or a
Subsidiary of a 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 a Borrower or a Subsidiary of a 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 a Borrower or a Subsidiary of a 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 Person subject to ERISA that is a party to an arrangement
with a Borrower or a Subsidiary of a Borrower and whose employees are aggregated
with the employees of a Borrower or a Subsidiary of a Borrower under IRC Section
414(o).
"Event of Default" has the meaning specified therefor in Section 7.
"Excess Availability" means, as of any date of determination, the amount
equal to Availability minus the aggregate amount, if any, of all trade payables
of Parent and its Subsidiaries aged in excess of their historical levels with
respect thereto and all book overdrafts of Borrowers and their Subsidiaries in
excess of their historical practices with respect thereto, in each case as
determined by Lender in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect
from time to time.
"Existing Lender" means ▇▇▇▇▇ Fargo.
"Fee Letter" means that certain fee letter between Borrowers and Lender,
in form and substance satisfactory to Lender.
"Fundamental Change Event" means a Fundamental Change as that term is
defined in the Subordinated Note Indenture.
"Funding Date" means the date on which a Borrowing occurs.
"Funding Losses" has the meaning specified therefor in Section
2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"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 federal, state, local, or other
governmental or administrative body, instrumentality, board, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
11
"Guarantors" means those Subsidiaries of Parent that own Stock or other
equity ownership interests of other Subsidiaries.
"Guaranty" means that certain continuing guaranty executed by the
Guarantors with respect to the Obligations of Borrower to Landlord.
"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.
"Hedge Agreement" means any and all agreements, or documents now existing
or hereafter entered into by Administrative Borrower or any of its Subsidiaries
that provide for an interest rate, credit, commodity or equity swap, cap, floor,
collar, forward foreign exchange transaction, currency swap, cross currency rate
swap, currency option, or any combination of, or option with respect to, these
or similar transactions, for the purpose of hedging Administrative Borrower's or
any of its Subsidiaries' exposure to fluctuations in interest or exchange rates,
loan, credit exchange, security or currency valuations or commodity prices.
"Indebtedness" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations as a lessee under Capital Leases, (d) all obligations or liabilities
of others secured by a Lien on any asset of a Person or its Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations to pay the deferred purchase price of assets (other than trade
payables incurred in the ordinary course of business and repayable in accordance
with customary trade practices), (f) all obligations owing under Hedge
Agreements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (f) above.
"Indemnified Liabilities" has the meaning specified therefor in Section
10.3.
"Indemnified Person" has the meaning specified therefor in Section 10.3.
"Indenture Trustee" means the Bank of New York Trust Company, N.A., as
trustee under the Subordinated Note Indenture, and any successor, in such
capacity, thereunder.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal 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.
"Intercompany Subordination Agreement" means a subordination agreement
executed and delivered by Borrowers and each of their Subsidiaries and Lender,
the form and substance of which is satisfactory to Lender.
"Interest Expense" means, for any period, the aggregate of the interest
expense of Parent and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
12
"Interest Period" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; provided, however,
that (a) if any Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.
"Inventory" means inventory (as that term is defined in the Code).
"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 arising in the
ordinary course of business consistent with past practice), purchases or other
acquisitions of Indebtedness, Stock, or all or substantially all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"IRC" means the Internal Revenue Code of 1986, as in effect from time to
time.
"L/C" has the meaning specified therefor in Section 2.12(a).
"L/C Disbursement" means a payment made by Lender pursuant to a Letter of
Credit.
"L/C Undertaking" has the meaning specified therefor in Section 2.12(a).
"Lender" has the meaning specified therefor in the preamble to the
Agreement, and shall include any other Person made a party to the Agreement in
accordance with the provisions of Section 13.1.
"Lender Expenses" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower or its Subsidiaries under
any of the Loan Documents that are paid, advanced, or incurred by Lender, (b)
fees or charges paid or incurred by Lender in connection with Lender's
transactions with Borrowers or their Subsidiaries, 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 collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) contained in
the Agreement, real estate surveys, real estate title policies and endorsements,
and environmental audits, (c) costs and expenses incurred by Lender in the
disbursement of funds to or for the account of Borrowers (by wire transfer or
otherwise), (d) charges paid or incurred by Lender resulting from the dishonor
of checks, (e) reasonable costs and expenses paid or incurred by Lender 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) audit fees
and expenses of Lender related to any inspections or audits to the extent of the
fees and charges (and up to the amount of any limitation) contained in the
Agreement, (g) reasonable costs and expenses of third party claims or any other
suit paid or incurred by Lender in enforcing or defending the Loan
13
Documents or in connection with the transactions contemplated by the Loan
Documents or Lender's relationship with any Borrower or any Subsidiary of a
Borrower, (h) Lender's reasonable costs and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering,
syndicating, or amending the Loan Documents, and (i) Lender's reasonable costs
and expenses (including attorneys, accountants, consultants, and other advisors
fees and expenses) incurred in terminating, enforcing (including attorneys,
accountants, consultants, and other advisors fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Borrower or any Subsidiary of a Borrower or in exercising rights
or remedies under the Loan Documents), or defending the Loan Documents,
irrespective of whether suit is brought, or in taking any Remedial Action
concerning the Collateral, and any legal fees and expenses incurred on appeal.
"Lender-Related Person" means Lender, together with its Affiliates,
officers, directors, employees, attorneys, and agents.
"Lender's Account" means the account identified in Schedule L-1.
"Lender's Liens" means the Liens granted by Borrowers or their
Subsidiaries to Lender under the Agreement or the other Loan Documents.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
requires.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit.
"LIBOR Deadline" has the meaning specified therefor in Section 2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
"LIBOR Option" has the meaning specified therefor in Section 2.13(a).
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by Lender (rounded upwards, if necessary, to the next
1/100%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b)
100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means each portion of an Advance that bears interest at
a rate determined by reference to the LIBOR Rate.
"Lien" means any interest in an asset securing an obligation owed to, or a
claim by, any Person other than the owner of the asset, irrespective of whether
(a) such interest is based on the common law, statute, or contract, (b) such
interest is recorded or perfected, and (c) such interest is contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security interest arising from a mortgage,
deed of trust, encumbrance, notice of Lien, levy or assessment, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Line Block" means (i) from the Closing Date to the Line Block Release
Date, $5,000,000, and (ii) commencing on the Line Block Release Date, zero
Dollars ($0.00).
"Line Block Release Date" means as of the last day of September, 2005, or
the last day of any subsequent calendar month thereafter on which both of the
following conditions shall have been satisfied as
14
determined by Lender in its Permitted Discretion: (i) no Event of Default shall
have occurred and be continuing, and (ii) the average Qualified Cash plus the
average Excess Availability for the immediately preceding three month period,
based on the Qualified Cash and Excess Availability determined by Lender each
week during such three month period, shall be not less than $15,000,000.
"Loan Account" has the meaning specified therefor in Section 2.10.
"Loan Documents" means the Agreement, the Bank Product Agreements, the
Cash Management Agreements, the Control Agreements, the Fee Letter, the
Guaranty, the Intercompany Subordination Agreement, the Letters of Credit, the
Mortgages, the Security Agreement, the Stock Pledge Agreement, the Copyright
Security Agreement, the Patent Security Agreement, the Trademark Security
Agreement, any note or notes executed by a Borrower in connection with the
Agreement and payable to Lender, and any other agreement entered into, now or in
the future, by any Borrower and Lender in connection with the Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers and their Subsidiaries, taken as
a whole, (b) a material impairment of Borrowers' and their Subsidiaries'
ability, taken as a whole, to perform their respective obligations under the
Loan Documents to which they are a party or of Lender's ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Lender's Liens with respect to the Collateral
as a result of an action or failure to act on the part of a Borrower or a
Subsidiary of a Borrower.
"Maturity Date" has the meaning specified therefor in Section 3.3.
"Maximum Revolver Amount" means $30,000,000.
"Mortgage Policy" has the meaning specified therefor in Schedule 3.1(v).
"Mortgages" means, individually and collectively, one or more mortgages,
deeds of trust, or deeds to secure debt, executed and delivered by a Borrower or
a Subsidiary of a Borrower in favor of Lender, in form and substance
satisfactory to Lender, that encumber the Real Property Collateral.
"Obligations" means (a) all loans, Advances, debts, principal, interest
(including any interest that accrues after the commencement of an Insolvency
Proceeding, regardless of whether allowed or allowable in whole or in part as a
claim in any such Insolvency Proceeding, contingent reimbursement obligations
with respect to outstanding Letters of Credit, premiums, liabilities (including
all amounts charged to Borrowers' Loan Account pursuant hereto), obligations
(including indemnification obligations), fees (including the fees provided for
in the Fee Letter), charges, costs, Lender Expenses (including any fees or
expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding, lease payments, guaranties, covenants, and duties of
any kind and description owing by Borrowers to Lender pursuant to or evidenced
by the Loan Documents and irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all interest not paid when due and
all Lender Expenses that Borrowers are required to pay or reimburse by the Loan
Documents, by law, or otherwise, and (b) all Bank Product Obligations. Any
reference in the Agreement or in the Loan Documents to the Obligations shall
include all or any portion thereof and any extensions, modifications, renewals,
or alterations thereof, both prior and subsequent to any Insolvency Proceeding.
"Obligor" means any Person who is a Borrower or Guarantor.
"Overadvance" has the meaning specified therefor in Section 2.5.
15
"Patent Security Agreement" means a patent security agreement, in form and
substance satisfactory to Lender, executed and delivered by Administrative
Borrower or its Subsidiaries to Lender.
"Parent" has the meaning specified therefor in the preamble to the
Agreement.
"Participant" has the meaning specified therefor in Section 13.1(e).
"Paying Agent" has the meaning set forth in the Subordinated Note
Indenture.
"Permitted Discretion" means a determination made in the exercise of
reasonable (from the perspective of a secured asset-based lender) business
judgment.
"Permitted Dispositions" means (a) sales or other dispositions of
Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of business, (b) sales or leases of Inventory to buyers in the ordinary
course of business; provided, however, that in order for a lease of Inventory to
be a Permitted Disposition, all of the conditions contained in either (i) or
(ii) must be satisfied as determined by Lender in its Permitted Discretion: (i)
if the lease provides for a payment of all or substantially all of the lease
payments within 30 Business Days following delivery of such Inventory to the
lessee or if Borrower promptly sells the lease to a third party for a price
equal to the fair market value of such lease and payment of such amount is
received substantially concurrently with such sale, the proceeds received by
Borrower are immediately transferred to Lender's Account, and (ii) with respect
to any other lease, (x) a legend shall be inscribed or affixed to the front of
the lease by the applicable Borrower reflecting that the lease has been
collaterally assigned to Lender, (y) the applicable Borrower shall have filed an
appropriate UCC-1 in the correct jurisdiction based on where the lessee is
deemed located, and (z) an assignment of the UCC-1 in favor of Lender shall be
executed and filed by the applicable Borrower, (c) the use or transfer of money
or Cash Equivalents in a manner that is not prohibited by the terms of the
Agreement or the other Loan Documents, and (d) the licensing, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business.
"Permitted Holder" means the Person identified on Schedule P-1.
"Permitted Investments" means (a) Investments in cash and Cash
Equivalents, (b) Investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, (d) advances to Cray Canada to fund the ordinary course
operating expenses of Cray Canada consistent with the historical business
operations of Cray Canada as reported to Lender in writing on or before the
Closing Date, (e) advances to one or more Parent's Subsidiaries not located in
the United States or Canada, so long as all of the following conditions are
satisfied as of the time such advance is to be made: (i) the aggregate amount of
cash (Dollars or other currencies deemed acceptable to Lender in its sole
discretion) and Cash Equivalents maintained by the Subsidiaries, including
advances maintained in Deposit Accounts and Securities Accounts not subject to
control agreements in favor of Lender, shall not exceed after the planned
advance $7,000,000 (as measured in Dollars), (ii) Lender is provided written
notice of such advance not less than one Business Day prior to the planned
advance, (iii) no Event of Default shall have occurred and be continuing as of
the date the planned advance is to be made, (iv) if the planned advance is to be
made on or before September 15, 2005, the Qualified Cash plus Availability
immediately following the planned advance shall not be less than $2,000,000, and
if the planned advance is to be made on or after September 16, 2005, the
Qualified Cash plus Availability immediately following the planned advance shall
not be less than $5,000,000, and (v) the aggregate amount of advances that may
be made under this clause (e) during each calendar quarter shall not exceed
$6,000,000, even if less than $6,000,000 was advanced under this clause (e)
during a prior calendar quarter; provided, however, in the event Parent desires
to make advances in excess of $6,000,000 during a calendar quarter, Parent may
deliver to Lender, with reasonable prior notice, a written request for Lender's
consent to exceed $6,000,000 in advances during such calendar quarter, together
with a written explanation as to business purpose for such excess advances,
applicable supporting documentation, if any, and the expected benefit to Parent
and its Subsidiaries, taken as a whole, from such
16
advances, and Lender shall promptly decide, in its sole and absolute discretion,
whether to give its consent for such excess advances (Parent acknowledges and
agrees that any consent given by Lender shall not constitute an agreement by
Lender to consent to any other future requests by Parent for additional excess
advances), and (f) Investments received in settlement of amounts due to a
Borrower or any Subsidiary of a Borrower effected in the ordinary course of
business or owing to a Borrower or any Subsidiary of a Borrower as a result of
Insolvency Proceedings involving an Account Debtor or upon the foreclosure or
enforcement of any Lien in favor of a Borrower or any Subsidiary of a Borrower.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens for unpaid
taxes, assessments, or other governmental charges or levies that either (i) are
not yet delinquent, or (ii) do not have priority over the Lender's Liens and the
underlying taxes, assessments, or charges or levies are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-2, (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 such 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 Borrowers' business
and not in connection with the borrowing of money, and which Liens either (i)
are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,
(g) Liens on amounts deposited in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens on amounts deposited in
connection with the making or entering into of bids, tenders, or leases in the
ordinary course of business and not in connection with the borrowing of money,
(i) Liens on amounts deposited as security for surety or appeal bonds in
connection with obtaining such bonds in the ordinary course of business, and (j)
with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof.
"Permitted Protest" means the right of Administrative Borrower or any of
its Subsidiaries to protest any Lien (other than any Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of a
United States federal tax lien), or rental payment, provided that (a) a reserve
with respect to such obligation is established on the books and records of any
Borrower or any Subsidiary of any Borrower in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted diligently by
Administrative Borrower or any of its Subsidiaries, as applicable, in good
faith, and (c) Lender is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$3,000,000.
"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.
"Projections" means Parent's forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a basis
consistent with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"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.
"Qualified Cash" means, as of any date of determination, the amount of
unrestricted cash and Cash Equivalents of Borrowers that is in Deposit Accounts
or in Securities Accounts, or any combination thereof,
17
and which such Deposit Account or Securities Account is the subject of a Control
Agreement and is maintained by a branch office of the bank or securities
intermediary located within the United States.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by any Borrower or a Subsidiary of any Borrower and the
improvements thereto.
"Real Property Collateral" means the Real Property identified on Schedule
R-1 and any Real Property hereafter acquired by a Borrower or any Subsidiary of
a Borrower.
"Record" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.
"Recurring Revenues" means, with respect to any period, the revenue of
Borrowers' for such period that is derived from providing maintenance service to
their customers pursuant to written maintenance contracts (acceptable to Lender
in its Permitted Discretion), all as reflected on monthly reports provided to
Lender pursuant to Schedule 5.2, which reports are prepared in accordance with
Parent's and its Subsidiaries' historic practices and which reports are to be
otherwise satisfactory to Lender in its Permitted Discretion.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to Hazardous Materials authorized by Environmental Laws.
"Reserve Percentage" means, on any day, for Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as "eurocurrency liabilities") of that Lender, but so long as Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the sum of (a)
the amount of outstanding Advances, plus (b) the amount of the Letter of Credit
Usage.
"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 the Code).
"Security Agreement" means a security agreement, in form and substance
satisfactory to Lender, executed and delivered by Parent and each of its
Subsidiaries that is a Borrower or Guarantor, to Lender.
"Senior Debt" has the meaning specified therefor in the Subordinated Note
Indenture.
"Solvent" means, with respect to any Person on a particular date, that, at
fair valuations, the sum of such Person's assets is greater than all of such
Person's debts.
"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).
18
"Stock Pledge Agreement" means a stock pledge agreement, in form and
substance satisfactory to Lender, executed and delivered by Administrative
Borrower or its Subsidiaries to Lender.
"Subordinated Note Indenture" means that certain Indenture, dated as of
December 6, 2004, among Indenture Trustee and Parent.
"Subordinated Notes" means the 3.0% Convertible Senior Subordinated Notes
due 2024.
"Subordinated Note Documents" means, collectively, the Subordinated Note
Indenture, the Subordinated Notes, and all agreements, instruments and other
documents executed and delivered pursuant thereto.
"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.
"Taxes" has the meaning specified therefor in Section 15.5.
"Trademark Security Agreement" means a trademark security agreement, in
form and substance satisfactory to Lender, executed and delivered by
Administrative Borrower or its Subsidiaries to Lender.
"TSM Recurring Revenues" means, as of any date of determination, Recurring
Revenues, as calculated on the last day of the most recently completed calendar
month (which may be such date of determination), on a trailing 6 month basis.
"Underlying Issuer" means a third Person which is the beneficiary of an
L/C Undertaking and which has issued a letter of credit at the request of Lender
for the benefit of Borrowers.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"United States" means the United States of America.
"Voidable Transfer" has the meaning specified therefor in Section 15.7.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association, a national
banking association.
19
SCHEDULE 3.1
CONDITIONS PRECEDENT. The obligation of Lender to make its initial
extension of credit provided for in the Agreement is subject to the fulfillment,
to the satisfaction of Lender (the making of such initial extension of credit by
Lender being conclusively deemed to be its satisfaction or waiver of the
following), of each of the following conditions precedent:
a) the Closing Date shall occur on or before June 1, 2005;
b) Lender shall have received a letter duly executed by each Borrower and
each Guarantor authorizing Lender to file appropriate financing statements in
such office or offices as may be necessary or, in the opinion of Lender,
desirable to perfect the security interests to be created by the Loan Documents;
c) Lender shall have received evidence that appropriate financing
statements have been duly filed in such office or offices as may be necessary
or, in the opinion of Lender, desirable to perfect the Lender's Liens in and to
the Collateral, and Lender shall have received searches reflecting the filing of
all such financing statements;
d) Lender shall have received each of the following documents, in form and
substance satisfactory to Lender, duly executed, and each such document shall be
in full force and effect:
i. the Cash Management Agreements,
ii. the Control Agreements,
iii. a disbursement letter executed and delivered by Borrowers to
Lender regarding the extensions of credit to be made on the
Closing Date, the form and substance of which is satisfactory to
Lender,
iv. the Fee Letter,
v. the Intercompany Subordination Agreement,
vi. the Mortgages,
vii. the Patent Security Agreement,
viii. the Security Agreement,
ix. the Trademark Security Agreement;
e) Lender shall have received a certificate from the Secretary of each
Borrower (i) 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, (ii) authorizing
specific officers of such Borrower to execute the same, and (iii) attesting to
the incumbency and signatures of such specific officers of such Borrower;
f) Lender shall have received copies of each Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
1
g) Lender shall have received a certificate of status with respect to each
Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Borrower, which certificate shall indicate that such Borrower is in good
standing in such jurisdiction;
h) Lender shall have received certificates of status with respect to each
Borrower, each dated within 30 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
i) Lender shall have received from Empire Valuations a valuation of
Borrowers' recurring maintenance revenue stream satisfactory to Lender, in its
sole discretion;
j) Lender shall have received a certificate of insurance, together with
the endorsements thereto, as are required by Section 5.8, the form and substance
of which shall be satisfactory to Lender;
k) Lender shall have received an opinion of Borrowers' counsel in form and
substance satisfactory to Lender;
l) On the Closing Date under this Agreement, Borrowers shall have
Availability, plus Qualified Cash, of not less than $20,000,000;
m) Lender shall have completed its business, legal, and collateral due
diligence, including but not limited to (i) a collateral audit and review of
Borrowers' and their Subsidiaries' books and records and verification of
Borrowers' representations and warranties to Lender, the results of which shall
be satisfactory to Lender, (ii) an inspection of each of the locations where
Borrowers' and their Subsidiaries' Inventory is located, the results of which
shall be satisfactory to Lender, (iii) receipt and review of the terms of
Subordinated Note Documents with the results of such review to be satisfactory
to Lender (including, without limitation, with respect to economic and
subordination terms); (iv) receipt and review of Parent's and its Subsidiaries'
material contracts (as determined by Lender), with the results of such review to
be satisfactory to Lender, and (v) receipt of UCC, tax lien, litigation and
intellectual property searches with respect to Administrative Borrower and its
Subsidiaries, the results of which shall be satisfactory to Lender and its
counsel;
n) Lender shall have received completed reference checks with respect to
Borrowers' senior management, the results of which are satisfactory to Lender in
its sole discretion;
o) Lender shall have received a set of Projections for Parent and
Subsidiaries for 2005 and 2006 on a quarter by quarter basis in form and
substance reasonably satisfactory to Lender, which projections shall: (i)
incorporate Parent's and its Subsidiaries' actual results (consistent in amount
with 10Q filings) through the period ending March 31, 2005; and (ii) be
materially consistent in form with projections previously provided to Lender.
Lender shall have received a Cash Flow Forecast for domestic cash balances
through August 2005 on a week by week basis in form and substance reasonably
satisfactory to Lender.
p) Borrowers shall have paid all Lender Expenses incurred in connection
with the transactions evidenced by this Agreement;
q) Lender shall have received mortgagee title insurance policies (or
marked commitments to issue the same) for the Real Property Collateral issued by
a title insurance company satisfactory to Lender (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Lender
assuring Lender that the Mortgages on such Real Property Collateral are valid
and enforceable first priority
2
mortgage Liens on such Real Property Collateral free and clear of all defects
and encumbrances except Permitted Liens, and the Mortgage Policies otherwise
shall be in form and substance satisfactory to Lender;
r) Lender shall have received final credit approval from ▇▇▇▇▇ Fargo to
proceed with the transactions contemplated by the Agreement;
s) Borrowers and each of their Subsidiaries shall have received all
licenses, approvals or evidence of other actions required by any Governmental
Authority in connection with the execution and delivery by Borrowers or their
Subsidiaries of the Loan Documents or with the consummation of the transactions
contemplated thereby;
t) Lender shall have received copies of each of the Subordinated Note
Documents, together with a certificate of the Secretary of Parent certifying
each such document as being a true, correct and complete copy thereof in full
force and effect; and
u) 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 Lender.
CONDITIONS SUBSEQUENT. The following are conditions subsequent to
effectiveness of this Agreement. Failure to satisfy the following conditions
within the indicated time period shall constitute an Event of Default.
a) within 10 days following the Closing Date, Borrower shall deliver to
Lender an executed Collateral Access Agreements with respect to the following
location: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
b) within 30 days following the Closing Date, Borrowers shall deliver to
Lender a fully executed collateral access agreement and/or warehouse agreement
with Benchmark containing terms and conditions acceptable to Lender;
c) within 60 days following the Closing Date, Parent shall issue to Lender
warrants to purchase two hundred thousand (200,000) shares of Parent's Common
Stock with the terms set forth in the attached Exhibit 3.1(a);
d) within 60 days following the Closing Date, Parent shall deliver to
Lender all certificates representing the shares of Stock pledged to Lender under
the Security Agreement (and Parent agrees to promptly deliver to Lender all such
certificates as they are located by Parent), as well as Stock powers with
respect thereto endorsed in blank,
e) within 60 days following the Closing Date, Lender shall have received
all of the following:
i. the Guaranties of each Subsidiary of Parent that owns the Stock
of a Subsidiary of Parent,
ii. Lender shall have received a certificate from the Secretary of
each Guarantor (i) attesting to the resolutions of such Guarantor's
Board of Directors authorizing its execution, delivery, and
performance of the Loan Documents to which such Guarantor is a
party, (ii) authorizing specific officers of such Guarantor to
execute the same and (iii) attesting to the incumbency and
signatures of such specific officers of Guarantor;
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iii. Lender shall have received copies of each Guarantor's Governing
Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of such Guarantor;
iv. Lender shall have received a certificate of status with respect
to each Guarantor, dated within 10 days of the date of delivery of
its Guaranty, such certificate to be issued by the appropriate
officer of the jurisdiction of organization of such Guarantor, which
certificate shall indicate that such Guarantor is in good standing
in such jurisdiction;
v. Lender shall have received certificates of status with respect to
each Guarantor, each dated within 30 days of the date of delivery of
its Guaranty, such certificates to be issued by the appropriate
officer of the jurisdictions (other than the jurisdiction of
organization of such Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that such Guarantor is in good
standing in such jurisdictions;
vi. the stock pledge agreements from each Guarantor, together with
all certificates representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto endorsed in
blank; and
vii. all other documents reasonably required to perfect or protect
Lender's security interests in the Stock pledged to Lender by the
Guarantors.
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