EXHIBIT 10.29
================================================================================
LOAN AND SECURITY AGREEMENT
by and between
BRIO SOFTWARE, INC.
as Borrower,
and
FOOTHILL CAPITAL CORPORATION
as Lender
Dated as of December 14, 2001
================================================================================
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION..........................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting Terms...............................................................................20
1.3 Code...........................................................................................20
1.4 Construction...................................................................................20
1.5 Schedules and Exhibits.........................................................................21
2. LOAN AND TERMS OF PAYMENT............................................................................21
2.1 Revolver Advances..............................................................................21
2.2 Term Loan......................................................................................22
2.3 Borrowing Procedures and Settlements...........................................................22
2.4 Payments.......................................................................................23
2.5 Overadvances...................................................................................25
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations....................25
2.7 Cash Management................................................................................26
2.8 Crediting Payments; Float Charge...............................................................27
2.9 Designated Account.............................................................................28
2.10 Maintenance of Loan Account; Statements of Obligations.........................................28
2.11 Fees...........................................................................................28
2.12 Letters of Credit..............................................................................29
2.13 [Intentionally omitted]........................................................................31
2.14 Capital Requirements...........................................................................31
3. CONDITIONS; TERM OF AGREEMENT........................................................................32
3.1 Conditions Precedent to the Initial Extension of Credit........................................32
3.2 Conditions Subsequent to the Initial Extension of Credit.......................................34
3.3 Conditions Precedent to all Extensions of Credit...............................................35
3.4 Term...........................................................................................35
3.5 Effect of Termination..........................................................................36
3.6 Early Termination by Borrower..................................................................36
4. CREATION OF SECURITY INTEREST........................................................................37
4.1 Grant of Security Interest.....................................................................37
4.2 Negotiable Collateral..........................................................................37
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................37
4.4 Delivery of Additional Documentation Required..................................................37
4.5 Power of Attorney..............................................................................38
4.6 Right to Inspect...............................................................................38
4.7 Control Agreements.............................................................................39
5. REPRESENTATIONS AND WARRANTIES.......................................................................39
-i-
5.1 No Encumbrances................................................................................39
5.2 Eligible Accounts..............................................................................39
5.3 [Intentionally omitted]........................................................................40
5.4 Equipment......................................................................................40
5.5 Location of Inventory and Equipment............................................................40
5.6 Inventory Records..............................................................................40
5.7 Location of Chief Executive Office; FEIN.......................................................40
5.8 Due Organization and Qualification; Subsidiaries...............................................40
5.9 Due Authorization; No Conflict.................................................................41
5.10 Litigation.....................................................................................42
5.11 No Material Adverse Change.....................................................................42
5.12 Fraudulent Transfer............................................................................42
5.13 Employee Benefits..............................................................................42
5.14 Environmental Condition........................................................................42
5.15 Brokerage Fees.................................................................................43
5.16 Intellectual Property..........................................................................43
5.17 Leases.........................................................................................43
5.18 DDAs...........................................................................................43
5.19 Complete Disclosure............................................................................43
5.20 Indebtedness...................................................................................43
6. AFFIRMATIVE COVENANTS................................................................................43
6.1 Accounting System..............................................................................44
6.2 Collateral Reporting...........................................................................44
6.3 Financial Statements, Reports, Certificates....................................................45
6.4 [Intentionally omitted]........................................................................47
6.5 Return.........................................................................................47
6.6 Maintenance of Properties......................................................................47
6.7 Taxes..........................................................................................47
6.8 Insurance......................................................................................48
6.9 Location of Inventory and Equipment............................................................48
6.10 Compliance with Laws...........................................................................49
6.11 Leases.........................................................................................49
6.12 [Intentionally omitted]........................................................................49
6.13 Existence......................................................................................49
6.14 Environmental..................................................................................49
6.15 Disclosure Updates.............................................................................49
6.16 Copyright Registrations........................................................................49
7. NEGATIVE COVENANTS...................................................................................50
7.1 Indebtedness...................................................................................50
7.2 Liens..........................................................................................51
7.3 Restrictions on Fundamental Changes............................................................51
7.4 Disposal of Assets.............................................................................51
7.5 Change Name....................................................................................51
-ii-
7.6 Guarantee......................................................................................51
7.7 Nature of Business.............................................................................51
7.8 Prepayments and Amendments.....................................................................52
7.9 Consignments...................................................................................52
7.10 Distributions..................................................................................52
7.11 Accounting Methods.............................................................................52
7.12 Investments....................................................................................52
7.13 Transactions with Affiliates...................................................................52
7.14 Suspension.....................................................................................52
7.15 Customer Contracting...........................................................................52
7.16 Use of Proceeds................................................................................53
7.17 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.............53
7.18 Securities Accounts............................................................................53
7.19 Financial Covenants............................................................................53
8. EVENTS OF DEFAULT....................................................................................54
9. LENDER'S RIGHTS AND REMEDIES.........................................................................56
9.1 Rights and Remedies............................................................................56
9.2 Remedies Cumulative............................................................................59
10. TAXES AND EXPENSES...................................................................................59
11. WAIVERS; INDEMNIFICATION.............................................................................59
11.1 Demand; Protest................................................................................59
11.2 Lender's Liability for Collateral..............................................................59
11.3 Indemnification................................................................................59
12. NOTICES..............................................................................................60
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...........................................................61
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...........................................................62
14.1 Assignments and Participations.................................................................62
14.2 Successors.....................................................................................64
15. AMENDMENTS; WAIVERS..................................................................................64
15.1 Amendments and Waivers.........................................................................64
15.2 No Waivers; Cumulative Remedies................................................................64
16. GENERAL PROVISIONS...................................................................................64
16.1 Effectiveness..................................................................................64
16.2 Section Headings...............................................................................65
16.3 Interpretation.................................................................................65
16.4 Severability of Provisions.....................................................................65
-iii-
16.5 Withholding Taxes..............................................................................65
16.6 Amendments in Writing..........................................................................65
16.7 Counterparts; Telefacsimile Execution..........................................................65
16.8 Revival and Reinstatement of Obligations.......................................................66
16.9 Integration....................................................................................66
-iv-
EXHIBITS AND SCHEDULES
Exhibit C-1 Form of Compliance Certificate
Schedule D-1 Designated Account
Schedule D-2 Designated Account Bank
Schedule L-1 Lender's Account
Schedule M-1 Material Contracts
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.8(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrower
Schedule 5.8(c) Capitalization of Borrower's Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
-v-
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
December 14, 2001 between FOOTHILL CAPITAL CORPORATION, a California corporation
("Lender") and BRIO SOFTWARE, INC., formerly known as Brio Technology, Inc., a
Delaware corporation ("Borrower").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"Accounts" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof.
"ACH Transactions" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by ▇▇▇▇▇ Fargo or
its Affiliates for the account of Borrower or its Subsidiaries.
"Additional Documents" has the meaning set forth in Section 4.4.
"Advance Closing Date" means the date upon which the conditions
precedent set forth in Section 3.1(a) have been fulfilled or waived by Lender
and the conditions subsequent set forth in Section 3.2(a) and Section 3.2(b)
have been fulfilled or waived by Lender.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities 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 to
control such Person, (b) each director (or comparable manager) of a
-1-
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 to be an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 3% times the Maximum Revolver Amount,
(b) during the period of time from and including the date that is the first
anniversary of the Closing Date up to the date that is the second anniversary of
the Closing Date, 2% times the Maximum Revolver Amount, and (c) during the
period of time from and including the date that is the second anniversary of the
Closing Date up to the Maturity Date, 1% times the Maximum Revolver Amount.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Advances under Section 2.1 (after
giving effect to all then outstanding Obligations (other than Bank Product
Obligations), and all sublimits and reserves applicable hereunder).
"Bank Product Agreements" means those certain cash management service
agreements entered into from time to time by Borrower or its Subsidiaries in
connection with any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to ▇▇▇▇▇ Fargo or its Affiliates 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 Borrower
is obligated to reimburse to Lender as a result of Lender purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to Borrower or its Subsidiaries pursuant
to the Bank Product Agreements.
"Bank Products" means any service or facility extended to Borrower or
its Subsidiaries by ▇▇▇▇▇ Fargo or any Affiliate of ▇▇▇▇▇ Fargo 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) Hedge Agreements.
-2-
"Bank Product Reserves" means, as of any date of determination, the
amount of reserves that Lender has established (based upon ▇▇▇▇▇ Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.
"Bankruptcy Code" means the United States Bankruptcy Code, as in
effect from time to time.
"Base Rate" means, the rate of interest announced 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 publication or publications as ▇▇▇▇▇ Fargo may designate.
"Base Rate Loan" means each portion of an Advance or the Term Loan
that bears interest at a rate determined by reference to the Base Rate.
"Base Rate Margin" means 1 percentage point.
"Base Rate Term Loan Margin" means 3 percentage points.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Board of Directors" means the board of directors (or comparable
managers) of Borrower or any committee thereof duly authorized to act on behalf
of the board.
"Books" means Borrower's now owned or hereafter acquired books and
records (including all of its Records indicating, summarizing, or evidencing its
assets (including the Collateral) or liabilities, all of its Records relating to
its business operations or financial condition, and all of its goods or General
Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrowing" means a borrowing hereunder of an Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
-3-
"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations issued 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 the highest rating obtainable from either S&P or ▇▇▇▇▇'▇,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or ▇▇▇▇▇'▇, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
▇▇▇▇▇'▇, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Account" has the meaning set forth in Section 2.7(a).
"Cash Management Agreements" means those certain cash management
service agreements, in form and substance satisfactory to Lender, each of which
is among Borrower, Lender, and one of the Cash Management Banks.
"Cash Management Bank" has the meaning set forth in Section 2.7(a).
"Change of Control" means (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 35%, or more, of the Stock of Borrower
having the right to vote for the election of members of the Board of Directors,
or (b) a majority of the members of the Board of Directors do not constitute
Continuing Directors, or (c) Borrower ceases to directly or indirectly own and
control 100% of the outstanding capital Stock other than Subsidiary Exempted
Shares of each of its Subsidiaries extant as of the Closing Date.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder.
"Closing Date Business Plan" means the set of Projections of Borrower
for the 1 year period following the Closing Date (on a quarterly by quarterly
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Lender.
"Code" means the California Uniform Commercial Code, as in effect from
time to time.
-4-
"Collateral" means all of Borrower's now owned or hereafter acquired right,
title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) money or other assets of Borrower that now or hereafter come into
the possession, custody, or control of Lender, and
(i) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, money, deposit accounts,
or other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the 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) of Borrower.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of Borrower to Lender.
"Continuing Director" means (a) any member of the Board of Directors who
was a director (or comparable manager) of Borrower 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
-5-
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) 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 Borrower, 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
executed and delivered by Borrower and Lender, the form and substance of which
is satisfactory to Lender.
"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by
Borrower.
"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.
"Designated Account" means the DDA of Borrower identified on Schedule D-1
attached hereto.
"Designated Account Bank" means the bank named on Schedule D-2 attached
hereto.
"Dilution" means, as of any date of determination, a percentage, based upon
the experience of the immediately prior 90 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 the Accounts during
such period, by (b) Borrower's Collections with respect to Accounts during such
period (excluding extraordinary items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of
10%.
"Disbursement Letter" means an instructional letter executed and delivered
by Borrower to Lender regarding the extensions of credit to be made on the
Closing Date, the form and substance of which is satisfactory to Lender.
"Dollars" or "$" means United States dollars.
"Domestic Accounts" means Accounts of Borrower with respect to which the
Account Debtor: (a) maintains its chief executive office in the United States
and is organized under the laws of the United States or any State thereof, (b)
is the United States or any
-6-
department, agency or instrumentality of the United States, or (c) is any State
of the United States or any department, agency, instrumentality, municipality or
political subdivision thereof.
"Due Diligence Letter" means the due diligence letter sent by Lender's
counsel to Borrower, together with Borrower's completed responses to the
inquiries set forth therein, the form and substance of such responses to be
satisfactory to Lender.
"EBITDA" means, with respect to any fiscal period, Borrower's and its
Subsidiaries consolidated net earnings (or loss), plus extraordinary non-cash
losses occurring on or prior to June 30, 2002 and in an aggregate amount up to
$500,000 minus extraordinary gains, plus interest expense, income taxes, and
depreciation and amortization for such period, as determined in accordance with
GAAP.
"Eligible Accounts" means those Accounts created by Borrower in the
ordinary course of its business, that arise out of Borrower's sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrower in the Loan Documents,
and that are not excluded as ineligible by virtue of one or more of the criteria
set forth below; provided, however, that such criteria may be fixed and revised
from time to time by Lender in Lender's Permitted Discretion to the extent
necessary 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
remitted to Borrower. 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 60 days,
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an employee,
Affiliate, or agent of Borrower,
(d) 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,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i) does
not maintain its chief executive office in the United States, (ii) is not
organized under the laws of the United States or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political
-7-
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (x) 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, (y) the Account is covered by credit insurance in form,
substance, and amount, and by an insurer, satisfactory to Lender, or (z) the
Account is owed by an Account Debtor with a credit rating of BBB or better as
reported by Standard & Poor's (the aggregate amount of all Accounts included
under this clause (z) not to exceed $1,000,000, or such other amount as may be
determined from time to time by Lender in its sole discretion),
(g) 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 Borrower has
complied, to the reasonable satisfaction of Lender, with the Assignment of
Claims Act, 31 USC ss. 3727), or (ii) any state of the United States (exclusive,
however, of (y) Accounts owed by any state that does not have a statutory
counterpart to the Assignment of Claims Act, or (z) Accounts owed by any state
that does have a statutory counterpart to the Assignment of Claims Act as to
which Borrower has complied to Lender's satisfaction),
(h) Accounts with respect to which the Account Debtor is a creditor
of Borrower, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to its obligation to pay the Account, to the
extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed 15% of all Eligible Accounts, to the extent
of the obligations owing by such Account Debtor in excess of such percentage,
(j) 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 Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(k) Accounts, the collection of which, Lender, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(l) Accounts that are not subject to a valid and perfected first
priority Lender's Lien,
(m) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or
(n) Accounts that represent the right to receive progress payments or
other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by
Borrower of the subject contract for goods or services.
-8-
"Eligible Non-maintenance Domestic Accounts" means those Domestic Accounts
created by Borrower in the ordinary course of business, that meet each of the
criteria applicable to Eligible Accounts and do not arise from maintenance
contracts between Borrower and the Account Debtors.
"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 Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by Borrower or any predecessor 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, to the extent binding on Borrower, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USCss.1251
et seq; the Toxic Substances Control Act, 15 USC,ss. 2601 et seq; the Clean Air
Act, 42 USCss.7401 et seq.; the Safe Drinking Water Act, 42 USC.ss.3803 et seq.;
the Oil Pollution Act of 1990, 33 ▇▇▇.▇▇. 2701 et seq.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 ▇▇▇.▇▇. 11001 et seq.; the
Hazardous Material Transportation Act, 49 USCss. 1801 et seq.; and the
Occupational Safety and Health Act, 29 USC.ss.651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, 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 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 and Costs.
"Equipment" means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
-9-
"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 Borrower under IRC
Section 414(b), (b) any trade or business subject to ERISA whose employees are
treated as employed by the same employer as the employees of Borrower under IRC
Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412
of the IRC, any organization subject to ERISA that is a member of an affiliated
service group of which Borrower is a member under IRC Section 414(m), or (d)
solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
Person subject to ERISA that is a party to an arrangement with Borrower and
whose employees are aggregated with the employees of Borrower under IRC Section
414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any determination
thereof is to be made, equal to Availability minus the aggregate amount, if any,
of all trade payables of Borrower aged in excess of historical levels with
respect thereto and all book overdrafts in excess of 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.
"Exempt Copyright" means any Incipient Copyright or any Obsolete Copyright.
"Existing Lender" means Silicon Valley Bank.
"Family Member" means, with respect to any individual, any other individual
having a relationship by blood (to the second degree of consanguinity),
marriage, or adoption to such individual.
"Family Trusts" means, with respect to any individual, trusts or other
estate planning vehicles established for the benefit of Family Members of such
individual and in respect of which such individual serves as trustee or in a
similar capacity.
"Fee Letter" means that certain fee letter, dated as of even date herewith,
between Borrower and Lender, in form and substance satisfactory to Lender.
"FEIN" means Federal Employer Identification Number.
"Foreign Subsidiaries" means Brio Technology Limited, Brio Technology
France SARL, Brio Technologies Gmbh, Brio Technology Pty. Ltd., Brio Technology
-10-
(China) Limited, Brio China Limited, Brio (China) Technology Limited, Brio
Technology Japan KK, and Brio Software Asia Pte. Ltd.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"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, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"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 transactions, agreements, or documents
now existing or hereafter entered into between Borrower or its Subsidiaries and
▇▇▇▇▇ Fargo or its Affiliates, which 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 Borrower's or its Subsidiaries' exposure to
-11-
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices.
"Incipient Copyright" means any copyright that (a) is under development
(whether in the form of a new product, a new version of a pre-existing product,
an upgrade, add-on, or modification to a pre-existing product, or otherwise) and
that has not yet become a completed product, version, upgrade, add-on, or
modification which is ready to be marketed by or on behalf of such Person, or
(b) is not the subject of licenses or other dispositions giving rise to
accounts, general intangibles, or other forms of obligations.
"Indebtedness" means (a) all obligations of Borrower for borrowed money,
(b) all obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of Borrower in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of Borrower under Capital Leases, (d)
all obligations or liabilities of others secured by a Lien on any asset of
Borrower, irrespective of whether such obligation or liability is assumed, (e)
all obligations of Borrower for the deferred purchase price of assets (other
than trade debt incurred in the ordinary course of Borrower's business and
repayable in accordance with customary trade practices), and (f) any obligation
of Borrower guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to
Borrower) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"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.
"Intangible Assets" means, with respect to any Person, that portion of the
book value of all of such Person's assets that would be treated as intangibles
under GAAP.
"Intercompany Advances" means loans or advances from Borrower or one of its
Foreign Subsidiaries to one of Borrower's Foreign Subsidiaries.
"Intercompany Subordination Agreement" means a subordination agreement
executed and delivered by Borrower, Brio Technologies GMBH, Brio Technology
Japan KK, and Lender, the form and substance of which is satisfactory to Lender.
"Inventory" means all Borrower's now owned or hereafter acquired right,
title, and interest with respect to inventory, including goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by
Borrower as lessor, goods that
-12-
are furnished by Borrower under a contract of service, and raw materials, work
in process, or materials used or consumed in Borrower's business.
"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 from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time to
time.
"L/C" has the meaning set forth 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 set forth in Section 2.12(a).
"Lender" has the meaning set forth in the preamble to this Agreement.
"Lender Expenses" means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by Lender, (b) fees or charges paid or
incurred by Lender in connection with Lender's transactions with Borrower,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), (c) costs and
expenses incurred by Lender in the disbursement of funds to Borrower (by wire
transfer or otherwise), (d) out-of-pocket 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 audit examinations
of the Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses of
third party
-13-
claims or any other suit paid or incurred by Lender in enforcing or defending
the Loan Documents or in connection with the transactions contemplated by the
Loan Documents or Lender's relationship with Borrower or any guarantor of the
Obligations, (h) Lender's reasonable fees and expenses (including attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Lender's reasonable fees and expenses
(including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning 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.
"Lender's Account" means the account of Lender identified on Schedule L-1
attached hereto.
"Lender's Liens" means the Liens granted by Borrower to Lender under this
Agreement or the other Loan Documents.
"Lender-Related Person" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"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 plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"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, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, conditional sale or trust
receipt, or from a lease, consignment, or bailment for security purposes and
also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Bank Product Agreements, the
Cash Management Agreements, the Control Agreements, the Copyright Security
Agreement, the Disbursement Letter, the Due Diligence Letter, the Fee Letter,
the Letters of Credit, the Officers' Certificate, the Patent Security Agreement,
the Stock Pledge Agreement, the Trademark Security Agreement, any note or notes
executed by Borrower in connection with
-14-
this Agreement and payable to Lender, and any other agreement entered into, now
or in the future, by Borrower and Lender in connection with this Agreement.
"Maintenance Contracts" means the domestic maintenance contracts identified
on Schedule M-1 attached hereto.
"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 Borrower, (b) a material impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is 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 Borrower.
"Material Contracts" means the contracts identified on Schedule M-2
attached hereto.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $15,000,000.
"Negotiable Collateral" means all of Borrower's now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"Obligations" means (a) all loans (including the Term Loan), Advances,
debts, principal, interest (including any interest that, but for the provisions
of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrower's Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrower
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 Borrower
is required to pay or reimburse by the Loan Documents, by law, or otherwise, and
(b) all Bank Product Obligations. Any reference in this Agreement or in the Loan
Documents to the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.
"Obsolete Copyright" means any copyright of a Person that, in such Person's
good faith determination (a) is no longer sold or marketed by such Person, (b)
is not
-15-
generating any material amount of revenues of such Person, or (c) does not have
a material fair market value.
"Officers' Certificate" means the representations and warranties of
officers form submitted by Lender to Borrower, together with Borrower's
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Lender.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" has the meaning set forth in Section 14.1(d).
"Patent Security Agreement" means a patent security agreement executed and
delivered by Borrower and Lender, the form and substance of which is
satisfactory to Lender.
"Pay-Off Letter" means a letter, in form and substance satisfactory to
Lender, from Existing Lender to Lender respecting the amount necessary to repay
in full all of the obligations of Borrower owing to Existing Lender and obtain a
release of all of the Liens existing in favor of Existing Lender in and to the
assets of Borrower.
"Permitted Discretion" means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
"Permitted Dispositions" means (a) sales or other dispositions by Borrower
of Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of Borrower's business, (b) sales by Borrower of Inventory to buyers in
the ordinary course of business, (c) the use or transfer of money or Cash
Equivalents by Borrower in a manner that is not prohibited by the terms of this
Agreement or the other Loan Documents, (d) the licensing by Borrower, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of Borrower's business and (e) the
licensing for fair market value by Borrower on an exclusive basis of patents,
trademarks, copyrights, and other intellectual property rights so long as no
Event of Default has occurred and is continuing at the time of the execution and
delivery of the subject license; provided, however, that if any such license is
for use within the United States or in any territory or possession thereof, then
(i) the term of such license shall not exceed 3 years and (ii) after giving
effect to such license, Borrower must retain sufficient rights to use the
subject intellectual property as to enable Borrower to continue to conduct its
business in the ordinary course.
"Permitted Holder" means ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, their Family
Members, and their Family Trusts.
"Permitted Intercompany Advances" means Intercompany Advances so long as
(a) no Default or Event of Default exists at the time of the making of any
Intercompany
-16-
Advance or would exist after giving effect thereto, (b) after giving effect to
the making of such Intercompany Advance, the Person that is acting as the lender
with respect thereto is Solvent, and (c) after giving effect to the making of
such Intercompany Advance, the Person that is acting as the borrower with
respect thereto is Solvent.
"Permitted Investments" means (a) investments in 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, and (d) Permitted Intercompany Advances.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens for unpaid
taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) the interests of lessors under operating leases, (e)
purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as 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 business of Borrower 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
arising from deposits made in connection with obtaining worker's compensation or
other unemployment insurance, (h) Liens or deposits to secure performance of
bids, tenders, or leases incurred in the ordinary course of business of Borrower
and not in connection with the borrowing of money, (i) Liens granted as security
for surety or appeal bonds in connection with obtaining such bonds in the
ordinary course of business of Borrower, (j) Liens resulting from any judgment
or award that is not an Event of Default hereunder, and (k) 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 by Borrower.
"Permitted Protest" means the right of Borrower to protest any Lien (other
than any such 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 in such amount as is required under GAAP and (b) any
such protest is instituted promptly and prosecuted diligently by Borrower in
good faith.
"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
$5,000,000.
"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.
-17-
"Personal Property Collateral" means all Collateral other than Real
Property.
"Post-Closing Intercompany Advances" means, with respect to any Subsidiary
of Borrower, Intercompany Advances owed by such Subsidiary to Borrower that
first arose from and after the Closing Date.
"Projections" means Borrower's forecasted (a) balance sheets, (b) profit
and loss statements, and (c) cash flow statements, all prepared on a basis
consistent with Borrower'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 45 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by Borrower and the improvements thereto.
"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 Maintenance Revenues" means, with respect to any period, the
domestic revenues of Borrower (exclusive of its Subsidiaries) for such period
that are derived from contractual provisions providing for an agreed upon
periodic payment (as opposed to an episodic payment) for the provision of
maintenance services and ongoing support by Borrower as reflected on a report
prepared in accordance with Borrower's historic practices.
"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) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Required Availability" means Excess Availability and unrestricted cash and
Cash Equivalents in an amount of not less than $10,000,000.
"Required Library" means, as of any date of determination, those copyrights
of Borrower that generated not less than 95% of the aggregate amount of current
revenues arising from the licensing of Borrower's software for the six month
period immediately preceding the date of determination.
-18-
"Revolver Usage" means, as of any date of determination, the sum of (a) the
then extant amount of outstanding Advances, plus (b) the then extant amount of
the Letter of Credit Usage.
"Sale" means (a) any sale, assignment, transfer or other disposition of all
or substantially all of the assets of Borrower, (b) any merger or consolidation
which results in the voting securities of Borrower outstanding immediately prior
thereto representing immediately thereafter less than 50% of the combined voting
power of the voting securities of Borrower, or (c) the acquisition by any Person
of beneficial ownership of any Stock of Borrower if, after such acquisition,
such Person beneficially owns more than 50% of the combined voting power of the
then outstanding voting Stock of Borrower entitled to vote generally in the
election of directors.
"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.
"Significant Subsidiary" means a Subsidiary that, as of any date of
determination, (a) represents more than 5% of Borrower's revenue in any quarter
or (b) has more than $500,000 in outstanding Post-Closing Intercompany Advances.
"Solvent" means, with respect to any Person on a particular date, that such
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"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).
"Stock Pledge Agreement" means a stock pledge agreement, in form and
substance satisfactory to Lender, executed and delivered by Borrower to Lender
with respect to 66% of the Stock of each of the Foreign Subsidiaries.
"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.
"Subsidiary Exempted Shares" of a subsidiary means shares of Stock of a
Subsidiary that are (a) director qualifying shares or (b) held by a resident of
the jurisdiction in which such Subsidiary is organized in order to comply with
local law.
-19-
"Taxes" has the meaning set forth in Section 16.5.
"Term Loan" has the meaning set forth in Section 2.2.
"Term Loan Amount" means $5,000,000.
"Term Loan Balance" means, as of any date of determination, the then
extant balance of the Term Loan.
"Trademark Security Agreement" means a trademark security agreement
executed and delivered by Borrower and Lender, the form and substance of which
is satisfactory to Lender.
"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 Borrower.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 16.8.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association, a national
banking association.
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 "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries 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.
1.4 Construction. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements,
-20-
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 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, after
the Advance Closing Date and through the term of this Agreement, Lender agrees
to make advances ("Advances") to Borrower in an amount at any one time
outstanding not to exceed an amount equal to the lesser of (i) (A) the Maximum
Revolver Amount less (B) the sum of (I) the Letter of Credit Usage and (II) the
Term Loan Balance, or (ii) (A) the Borrowing Base less (B) the Letter of Credit
Usage. For purposes of this Agreement, "Borrowing Base," as of any date of
determination, shall mean the result of:
(x) the lesser of
(i) 80% of the amount of Eligible
Non-maintenance Domestic Accounts, less the amount, if
any, of the Dilution Reserve, and
(ii) an amount equal to Borrower's Collections
with respect to Accounts for the immediately preceding
45 day period, minus
(y) 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).
(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 with respect to (i) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrower to any Person to the extent secured by a Lien on, or trust over, any of
the Collateral (other than any existing Permitted Lien set forth on Schedule P-1
which is specifically identified thereon as entitled
-21-
to have priority over the Lender's Liens), 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.
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Term Loan. Subject to the terms and conditions of this Agreement, on
the Closing Date Lender agrees to make a term loan (the "Term Loan") to Borrower
in an amount equal to the Term Loan Amount. The outstanding principal balance of
the Term Loan shall be repaid (a) in 36 equal monthly payments in the amount of
$138,888.89 each; provided, however, that the Dollar amount of such payments may
be increased, together with the number of such installments decreased, from time
to time by Lender in its Permitted Discretion to an amount not to exceed
$250,000.00 based on its review of Borrower's Recurring Maintenance Revenues,
and (b) a final installment equal to the remaining balance of the Term Loan;
such installments to be due and payable on the first day of each month
commencing on the first day of the first month immediately following the Closing
Date. All unpaid principal and all accrued and unpaid interest under the Term
Loan shall be due and payable on the date of termination of this Agreement,
whether by its terms, by prepayment, or by acceleration. All amounts outstanding
under the Term Loan shall constitute Obligations.
2.3 Borrowing Procedures and Settlements
(a) Procedure for Borrowing. Each Borrowing shall be made by a
request by an Authorized Person delivered to Lender (which 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 request in
writing, any Authorized Person may give Lender telephonic notice of such request
by the required time, with such telephonic notice to be confirmed in writing
within 24 hours of the giving of such notice.
-22-
(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 Borrower on the applicable
Funding Date by transferring immediately available funds equal to such proceeds
to Borrower's Designated Account.
2.4 Payments.
(a) Payments by Borrower.
(i) Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Lender's Account 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) Application and Reversal of Payments.
(i) All payments shall be remitted to Lender and all
such payments (other than payments received while no Default or Event
of Default has occurred and is continuing and which relate to the
payment of principal or interest of specific Obligations or which
relate to the payment of specific fees), and all proceeds of Accounts
or other Collateral received by Lender, shall be applied as follows:
(A) first, to pay any Lender Expenses then due
to Lender under the Loan Documents, until paid in full,
(B) second, to pay any fees then due to Lender under
the Loan Documents until paid in full,
(C) third, ratably to pay interest due in respect of
the Advances and the Term Loan until paid in full,
(D) 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 Borrower or its Subsidiaries
in respect of Bank Products, until paid in full,
(E) fifth, ratably to pay all principal amounts then
due and payable (other than as a result of an acceleration
thereof) with respect to the Term Loan until paid in full,
(F) sixth, to pay the principal of all Advances until
paid in full,
-23-
(G) seventh, if an Event of Default has occurred and
is continuing, ratably (i) to pay the principal of all
Advances until paid in full, and (ii) to Lender, to be held
by Lender for the benefit of ▇▇▇▇▇ Fargo or its Affiliates,
as applicable, 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 Borrower's and its Subsidiaries'
obligations in respect of the then extant Bank Products have
been paid in full or the cash collateral amount has been
exhausted,
(H) eighth, if an Event of Default has occurred and is
continuing, to pay the outstanding principal balance of the
Term Loan (in the inverse order of the maturity of the
installments due thereunder) until the Term Loan is paid in
full,
(I) ninth, if an Event of Default has occurred and is
continuing, to be held by Lender as cash collateral in an
amount up to 105% of the then extant Letter of Credit Usage
until paid in full,
(J) tenth, to pay any other Obligations until paid in
full, and
(K) eleventh, to Borrower (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, Section 2.4(b) shall not be
deemed to apply to any payment by Borrower specified by Borrower 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 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 the same 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.
-24-
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations (other than Bank Product Obligations) owed by Borrower to Lender
pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or
percentage limitations set forth in Sections 2.1 or 2.12 (an "Overadvance"),
Borrower 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, Borrower hereby
promises to pay the Obligations (including principal, interest, fees, costs, and
expenses) in Dollars in full to Lender 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 portion of the Term Loan that is a Base Rate Loan, at a
per annum rate equal to the Base Rate plus the Base Rate Term Loan Margin, and
(ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate
Margin.
The foregoing notwithstanding, at no time shall any portion of the
Obligations bear interest on the Daily Balance thereof at a per annum rate less
than 7%. 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. Borrower shall pay Lender a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 1.75% per annum 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,
(i) all Obligations (except for undrawn Letters of Credit)
that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per
annum rate equal to 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.
-25-
(d) Payment. 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 Obligations or obligation to extend credit hereunder are
outstanding. Borrower hereby authorizes Lender, from time to time without prior
notice to Borrower, to charge such interest and fees, all Lender Expenses (as
and when incurred), the charges, commissions, fees, and costs provided for in
Section 2.12(e) (as and when accrued or incurred), the fees 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 the installments due
and payable with respect to the Term Loan and any amounts due and payable to
▇▇▇▇▇ Fargo or its Affiliates in respect of Bank Products up to the amount of
the then extant Bank Product Reserve) to Borrower's 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 Borrower's 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. Borrower 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, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied in accordance
with Section 2.4.
2.7 Cash Management.
(a) Borrower 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 its 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 Collections (including those sent directly by Account Debtors to a
Cash Management Bank) into a bank account in Lender's name (a "Cash Management
Account") at one of the Cash Management Banks.
-26-
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrower, in form and substance acceptable
to Lender. Each such Cash Management Agreement shall provide, among other
things, that (i) all items of payment deposited in such Cash Management Account
and proceeds thereof are held by such Cash Management Bank as agent or
bailee-in-possession for Lender, (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) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Lender's
Account.
(c) So long as no Default or Event of Default has occurred and is
continuing, 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 satisfactory to Lender and Lender
shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrower and such
prospective Cash Management Bank shall have executed and delivered to Lender a
Cash Management Agreement. Borrower shall close any of its 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,
with all cash, checks and similar items of payment in such accounts securing
payment of the Obligations, and in which Borrower is hereby deemed to have
granted a Lien to Lender.
2.8 Crediting Payments; Float 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 Borrower shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by 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,
-27-
Lender shall be entitled to charge Borrower for 1 Business Day of "clearance" or
"float" at the rate applicable to Base Rate Loans under Section 2.6 on all
Collections that are received by Borrower (regardless of whether forwarded by
the Cash Management Banks to Lender). This across-the-board 1 Business Day
clearance or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of the financing of Borrower and
shall apply irrespective of whether or not there are any outstanding monetary
Obligations; the effect of such clearance or float charge being the equivalent
of charging 1 Business Day of interest on such Collections.
2.9 Designated Account. Lender is authorized to make the Advances and the
Term Loan, 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). Borrower agrees to establish and maintain the Designated Account
with the Designated Account Bank for the purpose of receiving the proceeds of
the Advances requested by Borrower and made by Lender hereunder; provided that
Borrower may change the Designated Account and Designated Account Bank from time
to time upon 30 days' prior written notice to Lender. Unless otherwise agreed by
Lender and Borrower, any Advance requested by Borrower 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 Borrower (the "Loan Account") on
which Borrower will be charged with the Term Loan, all Advances made by Lender
to Borrower or for Borrower's account, the Letters of Credit issued by Lender
for Borrower's account, and with all other payment Obligations hereunder or
under the other Loan Documents (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 Borrower or for Borrower's account, including all amounts received
in the Lender's Account from any Cash Management Bank. Lender shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Lender unless, within 60 days after receipt thereof by Borrower,
Borrower shall deliver to Lender written objection thereto describing the error
or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Lender the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter):
(a) Unused Line Fee. On the first day of each month during the term of
this Agreement, an unused line fee in an amount equal to 0.5% per annum times
the result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the
average Daily Balance of Advances and Term Loans that were outstanding during
the immediately preceding month,
-28-
plus (ii) the average Daily Balance of the Letter of Credit Usage during the
immediately preceding month,
(b) Fee Letter Fees. As and when due and payable under the terms of
the Fee Letter, Borrower shall pay to Lender the fees set forth in the Fee
Letter, and
(c) Audit, Appraisal, and Valuation Charges. Audit, appraisal, and
valuation fees and charges as follows (i) a fee of $850 per day, per auditor,
plus out-of-pocket expenses for each financial audit of Borrower performed by
personnel employed by Lender, (ii) if implemented, a one time charge of $3,000
plus out-of-pocket expenses for expenses for the establishment of electronic
collateral reporting systems, and (iii) the actual charges paid or incurred by
Lender if it elects to employ the services of one or more third Persons to
perform financial audits of Borrower, to appraise the Collateral, or any portion
thereof, or to assess Borrower's business valuation. The foregoing
notwithstanding, so long as no Event of Default has occurred, Borrower shall not
be required to pay the fees and charges of more than 4 audits per fiscal year.
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 Borrower (each, an "L/C")
or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C Undertaking") with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, such
issuing bank to be ▇▇▇▇▇ Fargo) for the account of Borrower. To request the
issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or
extension of an outstanding L/C or L/C Undertaking), Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by Lender) to Lender and Lender (reasonably in advance of
the requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by Lender,
Borrower 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 requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing Base
less the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $1,500,000, or
-29-
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the then extant amount of outstanding Advances.
Borrower 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 have an expiry date no later than 30 days
prior to the Maturity Date and all such Letters 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, Borrower 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 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 Borrower prior to such
time on such date, then not later than 11:00 a.m., California time, on the
Business Day that 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, Borrower's obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance.
(b) 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 Borrower shall not be obligated hereunder to
indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of Lender. 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
Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that Lender shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrower's instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto. 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 Borrower against such
Underlying Issuer. 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 Borrower shall not be obligated hereunder to indemnify for any loss, cost,
expense, or liability that is caused by the gross negligence or willful
misconduct of Lender.
-30-
(c) 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 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 Borrower to
Lender for the account of Lender; it being acknowledged and agreed by Borrower
that, as of the Closing Date, the issuance charge imposed by the prospective
Underlying Issuer is .825% 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 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,
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 Borrower,
and Borrower 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.
2.13 [Intentionally omitted]
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
-31-
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), 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 Borrower thereof. Following receipt of such
notice, Borrower agrees 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.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The obligation
of Lender to make the initial Advance (or otherwise to extend any credit
provided for hereunder), is subject to the fulfillment, to the satisfaction of
Lender, of each of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before December 21, 2001;
(b) Lender shall have received all financing statements required by
Lender, duly executed by Borrower, and Lender shall have received searches
reflecting the filing of all such financing statements;
(c) 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 Copyright Security Agreement,
(ii) the Disbursement Letter,
(iii) the Intercompany Subordination Agreement,
(iv) the Due Diligence Letter,
(v) the Fee Letter,
(vi) the Officers' Certificate,
(vii) the Patent Security Agreement,
-32-
(viii) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank,
(ix) the Trademark Security Agreement, and
(x) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by
Existing Lender of its Liens in and to the properties and assets of
Borrower;
(d) Lender shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(e) Lender shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Lender shall have received a certificate of status with respect
to Borrower, dated within 15 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Lender shall have received certificates of status with respect to
Borrower, each dated within 35 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;
(h) Lender shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Lender;
(i) ender shall have received Collateral Access Agreements with
respect to the following location: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇;
(j) Lender shall have received an opinion of Borrower's counsel in
form and substance satisfactory to Lender;
(k) Lender shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
-33-
(l) Borrower shall have the Required Availability after giving effect
to the initial extensions of credit hereunder; provided, that Borrower's trade
payables are at a level and are aged consistent with Borrower's historical
practices;
(m) Lender shall have received satisfactory evidence that not less
than the Required Library of all existing copyrights of Borrower (other than
Exempt Copyrights) have been registered with the United States Copyright Office,
and that all such copyrights (other than Exempt Copyrights) and any proceeds
thereof are specifically encumbered by the Copyright Security Agreement;
(n) Lender shall have completed its business, legal, and collateral
due diligence, including (i) a collateral audit and review of Borrower's books
and records and verification of Borrower's representations and warranties to
Lender, the results of which shall be satisfactory to Lender, (ii) a review of
the projected proceeds from the exercise of common stock options, (iii) a review
of Borrower's Material Contracts, and (iv) an inspection of each of the
locations where Inventory is located, the results of which shall be satisfactory
to Lender;
(o) Lender shall have received completed reference checks with respect
to Borrower's senior management, the results of which are satisfactory to Lender
in its sole discretion;
(p) Lender shall have received Borrower's Closing Date Business Plan;
(q) Borrower shall pay all Lender Expenses incurred in connection with
the transactions evidenced by this Agreement;
(r) Lender shall have received copies of each of the Material
Contracts, the form and substance of which shall be reasonably satisfactory to
Lender, together with a certificate of the General Counsel of Borrower
certifying each such document as being a true, correct, and complete copy
thereof;
(s) Borrower shall have received all licenses, approvals or evidence
of other actions required by any Governmental Authority in connection with the
execution and delivery by Borrower of this Agreement or any other Loan Document
or with the consummation of the transactions contemplated hereby and thereby;
(t) the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ payable issue shall have been resolved to
Lender's satisfaction; 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.
3.2 Conditions Subsequent to the Initial Extension of Credit. The
obligation of Lender to continue to make Advances (or otherwise extend credit
hereunder) is subject to the
-34-
fulfillment, on or before the date applicable thereto, of each of the conditions
subsequent set forth below (the failure by Borrower to so perform or cause to be
performed constituting an Event of Default):
(a) within 10 Business Days of the Closing Date, deliver to Lender the
Control Agreements,
(b) within 10 Business Days of the Closing Date, deliver to Lender the
Cash Management Agreements,
(c) within 30 days of the Closing Date, deliver to Lender certified
copies of the policies of insurance, together with the endorsements thereto, as
are required by Section 6.8, the form and substance of which shall be
satisfactory to Lender and its counsel; and
(d) within 45 days of the Closing Date, deliver to Lender reporting
regarding segregation of maintenance and license revenue and the resulting
accounts receivable, the results of which shall be satisfactory to Lender in its
Permitted Discretion.
3.3 Conditions Precedent to all Extensions of Credit. The obligation of
Lender to make all Advances (or to extend any other credit hereunder) shall be
subject to the following conditions precedent:
(a) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the date of such extension of credit, as though made on and as of such
date (except to the extent that such representations and warranties relate
solely to an earlier date),
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof,
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, Lender, or any of their Affiliates, and
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and Lender and shall continue in full force and
effect for a term ending on December 14, 2004 (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.
-35-
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrower 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 then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender, and (b) providing cash
collateral to be held by Lender for the benefit of ▇▇▇▇▇ Fargo or its Affiliates
with respect to then extant Bank Product Obligations). No termination of this
Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and the Lender's Liens in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged 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 fully and finally discharged and Lender's obligations to
provide additional credit under the Loan Documents have been terminated
irrevocably, Lender will, at Borrower's sole expense, execute and deliver any
UCC 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.
3.6 Early Termination by Borrower. Borrower has the option, at any time
upon 30 days prior written notice 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 then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to Lender and (b) providing cash collateral to be held by Lender for
the benefit of ▇▇▇▇▇ Fargo or its Affiliates with respect to then extant Bank
Product Obligations), in full, together with the Applicable Prepayment Premium.
If 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 Borrower 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 then extant Letter of Credit Usage, or (ii) causing the original Letters of
Credit to be returned to Lender and (b) providing cash collateral to be held by
Lender for the benefit of ▇▇▇▇▇ Fargo or its Affiliates with respect to then
extant Bank Product Obligations), in full, together with the Applicable
Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice. In the event of the termination of this Agreement and
repayment of the Obligations at any time prior to the Maturity Date, for any
other reason, including (a) termination upon the election of Lender to terminate
after the occurrence of an Event of Default, (b) foreclosure and sale of
Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or (iv)
restructure, reorganization, or compromise of the Obligations by the
confirmation of a plan of reorganization or any other plan of compromise,
restructure, or arrangement in any Insolvency Proceeding, then, in view of the
impracticability and extreme difficulty of ascertaining the actual amount of
damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation
-36-
and calculation of the lost profits or damages of Lender, Borrower shall pay the
Applicable Prepayment Premium to Lender, measured as of the date of such
termination. The foregoing notwithstanding, (x) if between the Closing Date and
the date that is 18 months after the Closing Date a Sale occurs and the
Obligations are prepaid concurrent with and as a result of such Sale, the
Applicable Prepayment Premium shall be reduced by 50%, and (y) Borrower shall
not be required to pay the Applicable Prepayment Premium if a ▇▇▇▇▇ Fargo
Commercial Banking Unit refinances Borrower as of the date of termination of
this Agreement.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Lender a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents. The Lender's
Liens in and to the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Lender or Borrower.
Anything contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrower has no authority,
express or implied, to dispose of any item or portion of the Collateral. If
Borrower consummates a Permitted Disposition, the subject Collateral shall be
disposed of free and clear of Lender's Liens other than its Liens in and to the
proceeds resulting from such disposition.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection of priority of Lender's security interest is
dependent on or enhanced by possession, Borrower, immediately upon the request
of Lender, shall endorse and deliver physical possession of such Negotiable
Collateral to Lender.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors of
Borrower that the Accounts, chattel paper, or General Intangibles have been
assigned to Lender or that Lender has a security interest therein, or (b)
collect the Accounts, chattel paper, or General Intangibles directly and charge
the collection costs and expenses to the Loan Account. Borrower agrees that it
will hold in trust for Lender, as Lender's trustee, any Collections that it
receives and immediately will deliver said Collections to Lender or a Cash
Management Bank in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Lender, Borrower shall execute and deliver to Lender, any and all
financing statements, original financing statements in lieu of continuation
statements, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the "Additional Documents") that
Lender may request in its Permitted Discretion, in form and substance reasonably
satisfactory to Lender, to perfect and continue
-37-
perfected or better perfect the Lender's Liens in the Collateral (whether now
owned or hereafter arising or acquired), and in order to fully consummate all of
the transactions contemplated hereby and under the other Loan Documents. To the
maximum extent permitted by applicable law, Borrower authorizes Lender to
execute any such Additional Documents in Borrower's name and authorizes Lender
to file such executed Additional Documents in any appropriate filing office. In
addition, on such periodic basis as Lender shall require, Borrower shall (a)
provide Lender with a report of all new patentable, copyrightable, or
trademarkable materials acquired or generated by Borrower during the prior
period, (b) cause all patents, copyrights, and trademarks acquired or generated
by Borrower that are not already the subject of a registration with the
appropriate filing office (or an application therefor diligently prosecuted) to
be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of Borrower's ownership thereof, and (c) cause to be
prepared, executed, and delivered to Lender supplemental schedules to the
applicable Loan Documents to identify such patents, copyrights, and trademarks
as being subject to the security interests created thereunder.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Lender (and any of Lender's officers, employees, or agents designated
by Lender) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or ▇▇▇▇ of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts and, absent the
occurrence and continuation of an Event of Default, such requests will be made
in a manner designed to avoid disruption of Borrower's customer relationships or
any adverse reflection on Borrower's creditworthiness; provided, that Lender
shall not be liable for any such disruption or adverse reflection unless such
disruption or adverse reflection resulted from the gross negligence or willful
misconduct of Lender, (d) at any time after an Event of Default has occurred and
is continuing, endorse Borrower's name on any Collection item that may come into
Lender's possession, (e) at any time that an Event of Default has occurred and
is continuing, make, settle, and adjust all claims under Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Lender determines to be reasonable, and Lender
may cause to be executed and delivered any documents and releases that Lender
determines to be necessary. The appointment of Lender as Borrower's attorney,
and each and every one of its rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and Lender's obligations to extend credit hereunder are
terminated.
4.6 Right to Inspect. Lender and its officers, employees, or agents shall
have the right, from time to time hereafter to inspect the Books and to check,
test, and appraise the
-38-
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 Control Agreements. Borrower agrees that it will not transfer assets
out of any Securities Accounts other than as permitted under Section 7.19 and,
if to another securities intermediary, unless each of Borrower, Lender, and the
substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other Investment Property shall be modified by Borrower
without the prior written consent of Lender. Upon the occurrence and during the
continuance of a Default or Event of Default, Lender may notify any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof to
the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, 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 representations
and warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrower's business, owed to Borrower without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. As to each Eligible
Account, such Account is not:
(a) owed by an employee, Affiliate, or agent of Borrower,
(b) on account of a transaction wherein goods were placed on
consignment or were sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a ▇▇▇▇ and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a right of
setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account,
-39-
(e) owed by an Account Debtor that is subject to any Insolvency
Proceeding or is not Solvent or as to which Borrower has received notice of an
imminent Insolvency Proceeding or a material impairment of the financial
condition of such Account Debtor,
(f) on account of a transaction as to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor or the
services giving rise to such Account have not been performed,
(g) a right to receive progress payments or other advance ▇▇▇▇▇▇▇▇
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services, and
(h) an Account that has not been billed to the customer.
5.3 [Intentionally omitted].
5.4 Equipment. All of the Equipment is used or held for use in Borrower's
business and is fit for such purposes.
5.5 Location of Inventory and Equipment. Except as set forth on Schedule
5.5, the Inventory and Equipment are not stored with a bailee, warehouseman, or
similar party and are located only at the locations identified on Schedule 5.5.
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 Location of Chief Executive Office; FEIN. The chief executive office
of Borrower is located at the address indicated in Schedule 5.7 and Borrower's
FEIN is identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is (i) duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and (ii) qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b) (as such Schedule may be
supplemented from time to time by Borrower), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on Schedule 5.8(b) (as such
Schedule may be supplemented from time to time by Borrower), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Borrower is not subject to any
obligation
-40-
(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 5.8(c) (as such Schedule may be
supplemented from time to time by Borrower), is a complete and accurate list of
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 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 5.8(c) (as such Schedule may be
supplemented from time to time by Borrower), there are no subscriptions,
options, warrants, or calls relating to any shares of Borrower's Subsidiaries'
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrowers' Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by 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 Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower except
to the extent that such action would not cause a Material Adverse Change, (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 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 Borrower's interestholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of financing statements, the execution,
delivery, and performance by Borrower of this Agreement and the Loan Documents
to which Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents to which Borrower is
a party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as
-41-
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.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there
are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower, or any of its Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrower, or any of its Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrower that have been delivered by Borrower 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, Borrower's 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 Borrower since the date of
the latest financial statements submitted to Lender on or before the Closing
Date.
5.12 Fraudulent Transfer.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no
obligation is being incurred by 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 Borrower.
5.13 Employee Benefits . None of Borrower, any of its Subsidiaries, or any
of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
Borrower's knowledge, none of Borrower's assets has ever been used by Borrower
or by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of applicable Environmental Law, (b) to Borrower's
knowledge, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) Borrower has not received notice that a
Lien arising under any Environmental Law has attached to any revenues or to any
Real Property owned or operated by Borrower, and (d) Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
-42-
5.15 Brokerage Fees. Borrower has not utilized the services of any broker
or finder in connection with Borrower's obtaining financing from Lender under
this Agreement and no brokerage commission or finders fee is payable by Borrower
in connection herewith.
5.16 Intellectual Property. 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. Attached
hereto as Schedule 5.16 (which schedule may be updated by Borrower 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 Borrower is the owner or is an exclusive licensee.
5.17 Leases. Borrower enjoys peaceful and undisturbed possession under all
leases material to the business of Borrower and to which it is a party or under
which it is operating. All of such leases are valid and subsisting and no
material default by Borrower exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 (which schedule may be updated by
Borrower from time to time) are all of Borrower's DDAs, including, with respect
to each depository (i) the name and address of such depository, and (ii) the
account numbers of the accounts maintained with such depository.
5.19 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrower 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 Borrower
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
Borrower's good faith best estimate of its future performance for the periods
covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list
of all Indebtedness of 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 the
principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall and shall cause each of its Subsidiaries to do all of the following:
-43-
6.1 Accounting System. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. Borrower also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Lender with the following documents at
the following times in form satisfactory to Lender:
================================================================================
Daily (a) at any time that that there are Advances outstanding, a daily
bookings report, collection journal, and credit register for
Borrower since the last such schedule and an abbreviated
calculation of the Borrowing Base as of such date, and
(b) at any time that there are Advances outstanding, notice of
all returns, disputes, or claims for Borrower.
--------------------------------------------------------------------------------
Monthly (not (c) at any time that there are not Advances outstanding, a daily
later than bookings report, collection journal, and credit register for
the 10th day Borrower since the last such schedule,
of each
month) (d) a detailed calculation of the Borrowing Base (including
detail regarding those Accounts that are not Eligible Accounts),
(e) a detailed aging, by total, of the Accounts, together with a
reconciliation to the detailed calculation of the Borrowing Base
previously provided to Lender,
(f) a summary aging, by vendor, of Borrower's accounts payable
and any book overdraft, and
(g) a calculation of Dilution for the prior month.
-------------------------------------------------------------------------------
Quarterly (g) a detailed list of Borrower's customers,
(h) a report regarding Borrower's accrued, but unpaid, ad valorem
taxes, and
(i) a report detailing the Dollar amount of (i) new maintenance
contracts executed during the prior quarter and (ii) existing
maintenance contracts not renewed during the prior quarter.
--------------------------------------------------------------------------------
Upon request (j) copies of invoices in connection with the Accounts, credit
by Lender memos, remittance advices, deposit slips, shipping and delivery
documents in connection with the Accounts and, for Inventory and
Equipment acquired
================================================================================
-44-
================================================================================
by Borrower, purchase orders and invoices, and
(k) such other reports as to the Collateral, or the financial
condition of Borrower, as Lender may request.
================================================================================
In addition, 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.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within 30 days (45 days in
the case of a month that is the end of one of the first 3 fiscal quarters in a
fiscal year) after the end of each month during each of Borrower's fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and its
Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder have been
prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects the financial condition
of Borrower and its Subsidiaries,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in Section
7.20, and
-45-
(b) as soon as available, but in any event within 90 days after the
end of each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries for
each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Lender and certified, without any
qualifications, by such accountants to have been prepared in
accordance with GAAP (such audited financial statements to include a
balance sheet, income statement, and statement of cash flow and, if
prepared, such accountants' letter to management),
(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence
of any Default or Event of Default under Section 7.20,
(c) as soon as available, but in any event within 30 days prior
to the start of each of Borrower's fiscal years,
(i) copies of Borrower's Projections, in form and substance
(including as to scope and underlying assumptions) reasonably
satisfactory to Lender, in its sole discretion, for the forthcoming
fiscal year, quarter by quarter, certified by the chief financial
officer of Borrower as being such officer's good faith best estimate
of the financial performance of Borrower during the period covered
thereby,
(d) if and when filed by Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Borrower to its
shareholders generally,
(e) if and when filed by Borrower and as requested by Lender,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) Borrower conducts business or is required to pay any
such excise tax, (ii) where Borrower's failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of Borrower, or (iii)
where Borrower's failure to pay any such applicable excise tax reasonably could
be expected to result in a Material Adverse Change,
-46-
(f) as soon as Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof and a statement of
the curative action that Borrower proposes to take with respect thereto, and
(g) upon the request of Lender, any other report reasonably requested
relating to the financial condition of Borrower.
In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis and agrees that no Subsidiary of Borrower will have a fiscal
year different from that of Borrower. Borrower agrees that its independent
certified public accountants are authorized to communicate with Lender and to
release to Lender whatever financial information concerning Borrower Lender
reasonably may request. Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Lender pursuant to or in accordance
with this Agreement, and agrees that Lender may contact directly any such
accounting firm or service bureau in order to obtain such information.
6.4 [Intentionally omitted].
6.5 Return. Cause returns and allowances, as between Borrower and its
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of 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 Borrower,
Borrower promptly shall determine the reason for such return and, if 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 Borrower, 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.
6.6 Maintenance of Properties. Maintain and preserve all of its properties
which are necessary or useful in the proper conduct to its 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.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its 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. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that Borrower has made such payments
-47-
or deposits. Borrower shall deliver satisfactory evidence of payment of
applicable excise taxes in each jurisdictions in which Borrower is required to
pay any such excise tax.
6.8 Insurance
(a) At Borrower's expense, maintain insurance respecting its 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. Borrower also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such
policies of insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to Lender. Borrower shall deliver copies of all
such policies to Lender with a satisfactory lender's loss payable endorsement
naming Lender as sole loss payee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Borrower shall give Lender prompt notice of any loss covered by
such insurance. Lender shall have the exclusive right to adjust any losses
payable under any such insurance policies in excess of $50,000, without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Lender to be applied at the option of Lender either to the prepayment of the
Obligations or shall be disbursed to Borrower under staged payment terms
reasonably satisfactory to Lender for application to the cost of repairs,
replacements, or restorations. Any such repairs, replacements, or restorations
shall be effected with reasonable promptness and shall be of a value at least
equal to the value of the items of property destroyed prior to such damage or
destruction.
(c) Borrower will not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 6.8, unless Lender is included thereon as named insured with the
loss payable to Lender under a lender's loss payable endorsement or its
equivalent. 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.
6.9 Location of Inventory and Equipment. Keep the Inventory and Equipment
only at the locations identified on Schedule 5.5; provided, however, that
Borrower may amend Schedule 5.5 so long as such amendment occurs by written
notice to Lender not less than 30 days prior to the date on which Inventory or
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, Borrower provides any financing statements
-48-
necessary to perfect and continue perfected the Lender's Liens on such assets
and also provides to Lender a Collateral Access Agreement.
6.10 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest.
6.12 [Intentionally omitted].
6.13 Existence . At all times preserve and keep in full force and effect
Borrower's valid existence and good standing and any rights and franchises
material to Borrower's businesses.
6.14 Environmental
(a) Keep any property either owned or operated by Borrower free of
any Environmental Liens or post bonds or other financial assurances sufficient
to satisfy the 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 Borrower and take any
Remedial Actions required to ▇▇▇▇▇ said release or otherwise to come into
compliance with applicable Environmental Law, and (d) promptly provide Lender
with written notice within 10 days of the receipt of any of the following: (i)
notice that an Environmental Lien has been filed against any of the real or
personal property of Borrower, (ii) commencement of any Environmental Action or
notice that an Environmental Action will be filed against Borrower, and (iii)
notice of a violation, citation, or other administrative order which reasonably
could be expected to result in a Material Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.16 Copyright Registrations. Maintain in accordance with this Section,
valid registered, or applied for, copyrights with the United States Copyright
Office constituting the Required Library. Within 30 days of the Closing Date,
and thereafter, as and when required
-49-
to maintain registrations with respect to the Required Library, Borrower shall
(a) cause all copyrights generated by Borrower (other than Exempt Copyrights)
that are, in any way, related to goods or services and that are not already the
subject of a registration with the United States Copyright Office (or an
application therefor diligently prosecuted) to be registered with the United
States Copyright Office in a manner sufficient to impart constructive notice of
Borrower's ownership thereof, and (b) cause to be prepared, executed, and
delivered to Lender, with sufficient time to permit Lender to record no later
than the last Business Day within 10 days following the date that such
copyrights have been registered or an application for registration has been
filed, a Copyright Security Agreement or supplemental schedules to the Copyright
Security Agreement reflecting the security interest of Lender in such new
copyrights (other than Exempt Copyrights, which, although subject to the
security interest of Lender, shall not be required to be registered until 60
days after such time, if any, as they cease to be Incipient Copyrights), which
supplemental schedules shall be in form and content suitable for registration
with the United States Copyright Office so as to give constructive notice, when
so registered, of the transfer by Borrower to Lender of a security interest in
such copyrights. Borrower shall also maintain copies of all source and object
code for all software utilized in its business operations at safe and secure
offsite locations reasonably acceptable to Lender, and shall, at the request of
Lender, advise the operators of such locations of Lender's security interest in
such software, shall keep Lender fully informed of each such location, and shall
maintain the currency of all such software stored offsite.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not and will not permit any of its Subsidiaries to do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement 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 5.20,
(c) Permitted Purchase Money Indebtedness,
(d) Permitted Intercompany Advances,
(e) unsecured Indebtedness in an aggregate amount up to $250,000, and
(f) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b), (c), and (e) of this Section 7.1 (and continuance or renewal
of any Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such
-50-
refinancings, renewals, or extensions do not, in Lender's good faith judgment,
materially impair the prospects of repayment of the Obligations by Borrower or
materially impair Borrower's 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, (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 Borrower, and (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.
7.2 Liens. Create, incur, assume, or permit 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 7.1(f) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution).
(c) 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.
7.4 Disposal of Assets . Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of Borrower's
assets.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure, or
identity, or add any new fictitious name; provided, however, that Borrower may
change its name upon at least 30 days prior written notice to Lender of such
change and so long as, at the time of such written notification, Borrower
provides any financing statements necessary to perfect and continue perfected
the Lender's Liens.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except Indebtedness otherwise
permitted to be incurred hereunder.
7.7 Nature of Business. Make any change in the principal nature of its
business.
-51-
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(f), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Borrower, other than the Obligations in accordance with this Agreement, and
(b) Except (i) in connection with a refinancing permitted by Section
7.1(f), or (ii) to the extent not adversely affecting Lender directly or
indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement, instrument, document, indenture, or other writing
evidencing or concerning Indebtedness permitted under Sections 7.1(b) or (c).
7.9 Consignments. Consign any Inventory or sell any Inventory on ▇▇▇▇ and
hold, sale or return, sale on approval, or other conditional terms of sale.
7.10 Distributions. 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 Borrower's Stock, of any class, whether now or
hereafter outstanding.
7.11 Accounting Methods. Modify or change its 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
Borrower's accounting records without said accounting firm or service bureau
agreeing to provide Lender information regarding the Collateral or Borrower's
financial condition.
7.12 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
Borrower shall not have Permitted Investments (other than in the Cash Management
Accounts) in excess of $2,000,000 outstanding at any one time unless Borrower
and the applicable securities intermediary or bank have entered into Control
Agreements governing such Permitted Investments, as Lender shall determine in
its Permitted Discretion, to perfect (and further establish) the Lender's Liens
in such Permitted Investments.
7.13 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of Borrower except for
transactions with its Subsidiaries or transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Lender, and that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-Affiliate.
7.14 Suspension. Suspend or go out of a substantial portion of its
business.
7.15 Customer Contracting. Amend its existing customer contracts for the
provision of maintenance and ongoing support or its standard form of customer
contract for the provision of maintenance and ongoing support to restrict
Borrower or any of its
-52-
Subsidiaries, as applicable, from being able to assign its rights and delegate
its duties thereunder to any third party.
7.16 Use of Proceeds. Use the proceeds of the Advances and the Term Loan
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
including working capital and capital expenditures. Borrower hereby agrees not
to purchase or carry margin stock with the proceeds of the Advances and the Term
Loans in violation of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
7.17 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Lender and so long as,
at the time of such written notification, Borrower provides any financing
statements necessary to perfect and continue perfected the Lender's Liens and
also provides to Lender a Collateral Access Agreement with respect to such new
location. The Inventory and Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party without Lender's prior
written consent.
7.18 Securities Accounts. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Borrower shall not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrower may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.19 Financial Covenants.
(a) EBITDA. Fail to maintain (i) EBITDA greater than or equal to
($750,000) for the quarter ending December 31, 2001; and (ii) EBITDA
measured on a fiscal quarter-end basis, of not less than the required
amount set forth in the following table for the applicable period set forth
opposite thereto;
---------------------------------------------------------------------------
Applicable Amount Applicable Period
---------------------------------------------------------------------------
$750,000 For the 3 month period
ending March 31, 2002
---------------------------------------------------------------------------
$1,700,000 For the 3 month period
ending June 30, 2002
---------------------------------------------------------------------------
$2,000,000 For the 3 month period
ending September 30, 2002
-53-
---------------------------------------------------------------------------
$1,800,000 For the 3 month period
ended as of the last day of
each fiscal quarter thereafter
---------------------------------------------------------------------------
(b) Minimum Recurring Maintenance Revenues. Fail to have Recurring
Maintenance Revenues, measured (first commencing with December 31, 2001) on each
March 31st, June 30th, September 30th and December 31st for the fiscal quarter
then ended, of $6,750,000 or more.
(c) Minimum Excess Availability. Fail to maintain Excess Availability
plus cash and Cash Equivalents that are the subject of a first priority security
interest in favor of Lender perfected by means of a control agreement (in form
and substance satisfactory to Lender) of at least $4,000,000 at any time.
(d) Maximum Capital Expenditures. Make Capital Expenditures, measured
(commencing with December 31, 2001) on each March 31st, June 30th, September
30th and December 31st for the fiscal quarter then ended, of more than $750,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable, or when declared due
and payable, all or any portion of the Obligations (other than Bank Product
Obligations) (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due Lender, reimbursement of Lender Expenses, or other amounts
constituting Obligations);
8.2 (a) If Borrower fails or neglects to perform, keep, or observe, in any
material respect, any term, provision, condition, covenant, or agreement
contained in Sections 6.2 (Collateral Reporting), 6.3 (Financial Statements,
Reports, Certificates), 6.9 (Location of Inventory and Equipment), 6.10
(Compliance with Laws), or 6.11 (Leases) of this Agreement and such failure
continues for a period of 5 days; (b) If Borrower fails or neglects to perform,
keep, or observe, in any material respect, any term, provision, condition,
covenant, or agreement contained in Sections 6.1 (Accounting System), 6.5
(Returns), 6.6 (Maintenance of Properties), 6.7 (Taxes), 6.14 (Environmental),
6.15 (Disclosure Updates) or 6.16 (Copyright Registrations) of this Agreement
and such failure continues for a period of 15 days; or (c) If Borrower fails or
neglects to perform, keep, or observe any other term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the other Loan
Documents (giving effect to any grace periods, if any, expressly provided for in
such Loan Documents); in each case, other than any such term, provision,
condition, covenant, or
-54-
agreement that is the subject of another provision of this Section 8, in which
event such other provision of this Section 8 shall govern); provided that,
during any period of time that any such failure or neglect of Borrower referred
to in this paragraph exists, even if such failure or neglect is not yet an Event
of Default by virtue of the existence of a grace period, Lender shall not
required during such period to make Advances to Borrower;
8.3 If any material portion of Borrower's or any of its Subsidiaries'
assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any of its
Significant Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower, or any of
its Significant Subsidiaries, and any of the following events occur: (a)
Borrower or the Significant 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 obligations 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, Borrower or any of its Significant Subsidiaries, or
(e) an order for relief shall have been entered therein;
8.6 If Borrower or any of its Significant Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.7 (a) If a notice of Lien is filed of record with respect to any of
Borrower's or any of its Subsidiaries' assets by the United States, or any
department, agency, or instrumentality thereof (a "Federal Lien"), or by any
state, county, municipal, or governmental agency and such state, county,
municipal, or governmental agency Lien has priority over the Liens of Lender in
and to the Collateral or any portion thereof (a "Non-Federal Priority Lien");
(b) If a notice of Lien is filed of record with respect to Borrower's
or any of its Subsidiaries' assets by any state, county, municipal, or
governmental agency that is not a Non-Federal Priority Lien (a "Non-Federal
Non-Priority Lien"); provided, however, that, if the aggregate amount claimed
with respect to any such Non-Federal Non-Priority Liens, or the combination
thereof, is less than $250,000, an Event of Default shall not occur under this
subsection if the claims that are the subject of such Liens are the subject of
Permitted Protests and if the Liens are released, discharged, or bonded against
within 30 days of each such Lien first being filed of record or, if earlier, at
least 5 days prior to the date on which assets that are subject to such Liens
are subject to being sold or forfeited and, in any such case, Lender shall have
the absolute right to establish and maintain a reserve against the Borrowing
Base and the Maximum Revolver Amount in an amount equal to the aggregate
-55-
amount of the underlying claims (determined by Lender, in its Permitted
Discretion, and irrespective of any Permitted Protests with respect thereto and
including any penalties or interest that are estimated by Lender, in its
Permitted Discretion, to arise in connection therewith);
8.8 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of Borrower's or any of its Subsidiaries' assets and such
judgment or claim is not removed or released or stayed within 15 days of the
entry of such judgment;
8.9 If there is a default in any material agreement to which Borrower or
any of its Significant Subsidiaries 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 Borrower's or its Significant Subsidiaries' obligations thereunder,
to terminate such agreement, or to refuse to renew such agreement pursuant to an
automatic renewal right therein;
8.10 If Borrower or any of its Subsidiaries makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of the subordination provisions applicable to such Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Borrower, its Subsidiaries, or any officer, employee, agent, or director of
Borrower or any of its Subsidiaries;
8.12 If this 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;
8.13 If 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 Borrower, or a proceeding shall be commenced by Borrower, or by
any Governmental Authority having jurisdiction over Borrower, seeking to
establish the invalidity or unenforceability thereof, or Borrower shall deny
that Borrower has any liability or obligation purported to be created under any
Loan Document; or
8.14 If Borrower causes, permits, or suffers, directly or indirectly, any
Change of Control.
9. LENDER'S RIGHTS AND REMEDIES.
9.1 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 Borrower:
-56-
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower 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;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit Borrower's Loan Account with only the net amounts
received by Lender in payment of such disputed Accounts after deducting all
Lender Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon Borrower, make such payments and
do such acts as Lender considers necessary or reasonable to protect its security
interests in the Collateral. Borrower agrees to assemble the Personal Property
Collateral if Lender so requires, and to make the Personal Property Collateral
available to Lender at a place that Lender may designate which is reasonably
convenient to both parties. Borrower authorizes Lender to enter the premises
where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to pay,
purchase, contest, or compromise any Lien that in Lender's determination appears
to conflict with the Lender's Liens and to pay all expenses incurred in
connection therewith and to charge Borrower's Loan Account therefor. With
respect to any of Borrower's owned or leased premises, Borrower hereby grants
Lender a license to enter into possession of such premises and to occupy the
same, without charge, in order to exercise any of Lender's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Lender, and any amounts received in the Cash Management
Accounts, to secure the full and final repayment of all of the Obligations;
-57-
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Borrower hereby grants to Lender a license or
other right to use, without charge, (i) Borrower's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit;
(j) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Lender shall give Borrower a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the
Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 10 days
before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of
the Personal Property Collateral that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a
recognized market;
(l) Lender may credit bid and purchase at any public sale;
(m) Lender may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to operate same and, to
the maximum extent permitted by law, may seek the appointment of such a receiver
without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available at law
or in equity or pursuant to any other Loan Document; and
(o) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Lender to Borrower.
-58-
9.2 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.
10. TAXES AND EXPENSES.
If 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 Borrower, may do any or all of the following: (a)
make payment of the same or any part thereof, (b) set up such reserves in
Borrower's Loan Account as 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 6.8 hereof, obtain and maintain insurance policies of the type
described in Section 6.8 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.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest. 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
Borrower may in any way be liable.
11.2 Lender's Liability for Collateral. 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 Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold the
Lender-Related Persons, each Participant, and each of their respective officers,
directors, employees, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and
-59-
disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of them
(a) in connection with or as a result of or related to the execution, delivery,
enforcement, performance, or administration of this Agreement, any of the other
Loan Documents, or the transactions contemplated hereby or thereby, 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, Borrower shall have no obligation to
any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION,
THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrower 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 Borrower or Lender, as applicable, may designate to each
other in accordance herewith), or telefacsimile to Borrower or Lender, as the
case may be, at its address set forth below:
If to Borrower: BRIO SOFTWARE, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: BRIO SOFTWARE, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
-60-
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: FOOTHILL CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ Hilson, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
Lender and Borrower 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 12,
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. 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.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS 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 THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
-61-
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. BORROWER 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 13(b).
(c) BORROWER 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. BORROWER 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 THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Lender may assign and delegate to one or more assignees (each an
"Assignee") 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; provided, however, that Borrower 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 Borrower by Lender and the Assignee, and (ii)
Lender and its Assignee have delivered to Borrower an appropriate
assignment and acceptance agreement; and provided further, that Borrower
shall not be obligated to pay any expenses (including expenses of any
Assignee and any expenses in respect of Collateral filings required in
connection with such assignment) in respect of such assignment unless (i)
an Event of Default has occurred or (ii) the credit available under this
Agreement has been increased to at least $25,000,000.
(b) From and after the date that Lender provides Borrower with such
written notice and executed assignment and acceptance agreement, (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 agreement, shall have the assigned and delegated 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 and delegated by it pursuant to such assignment and
-62-
acceptance agreement, relinquish its rights (except with respect to Section 11.3
hereof) and be released from its obligations under this Agreement (and in the
case of an assignment and acceptance covering all or the remaining portion of
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 affect a novation between Borrower and the Assignee.
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, 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.
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of such Lender (a
"Participant") participating interests in the Obligations and the other rights
and interests of 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 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) Borrower 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 a material portion 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 Borrower 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
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 Borrower, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by Lender. Borrower shall not be obligated to pay any expenses
(including expenses of any Assignee and any expenses in respect of
-63-
Collateral filings required in connection with such assignment) in respect of
such assignment unless (i) an Event of Default has occurred or (ii) the credit
available under this Agreement has been increased to at least $25,000,000.
(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(f) 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 ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower 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
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 14.1 hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by Borrower is required in connection with any
such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Borrower and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
15.2 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 Borrower 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.
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrower and Lender.
-64-
16.2 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.
16.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
16.4 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.
16.5 Withholding Taxes. All payments made by Borrower hereunder or under
any note will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of Lender, or (ii) to the extent that
such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, 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 or under any note,
including any amount paid pursuant to this Section 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Borrower shall not be required to
increase any such amounts payable to Lender if the increase in such amount
payable results from Lender's own willful misconduct or gross negligence.
Borrower will furnish to Lender as promptly as possible after the date the
payment of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by Borrower.
16.6 Amendments in Writing. This Agreement only can be amended by a writing
signed by Lender and Borrower.
16.7 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which,
-65-
when taken together, shall constitute but one and the same Agreement. Delivery
of an executed counterpart of this Agreement by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement. The foregoing
shall apply to each other Loan Document mutatis mutandis.
16.8 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Obligations by Borrower 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 Borrower automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
16.9 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[Signature page to follow.]
-66-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
BRIO SOFTWARE, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Title: Corporate Counsel
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Title: Vice President
-67-
SCHEDULE D-1
Designated Account
Account number _________ of Borrower maintained with Borrower's
Designated Account Bank, or such other deposit account of Borrower (located
within the United States) that has been designed as such, in writing, by
Borrower to Lender.
-1-
SCHEDULE D-2
Designated Account Bank
____________, whose office is located at _____________ and whose ABA
number is ___________.
-1-
SCHEDULE L-1
Lender's Account
An account at a bank designated by Lender from time to time as
the account into which Borrower shall make all payments to Lender under this
Agreement and the other Loan Documents; unless and until Lender notifies
Borrower to the contrary, Lender's Account shall be that certain deposit account
bearing account number 323-266193 and maintained by Lender with The Chase
Manhattan Bank, ▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ABA
#▇▇▇▇▇▇▇▇▇.
-1-