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LOAN AND SECURITY AGREEMENT
by and between
COMPUTRON SOFTWARE, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of March 31, 1998
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION..........................................1
1.1 Definitions....................................................1
1.2 Accounting Terms...............................................15
1.3 Code...........................................................15
1.4 Construction...................................................15
1.5 Schedules and Exhibits.........................................16
2. LOAN AND TERMS OF PAYMENT.............................................16
2.1 Revolving Advances.............................................16
2.2 Letters of Credit..............................................17
2.3 Term Loan......................................................19
2.4 RESERVED.......................................................20
2.5 Overadvances...................................................20
2.6 Interest and Letter of Credit Fees: Rates, Payments,
and Calculations...............................................21
2.7 Collection of Accounts.........................................23
2.8 Crediting Payments; Application of Collections.................23
2.9 Designated Account.............................................24
2.10 Maintenance of Loan Account; Statements of
Obligations....................................................24
2.11 Fees...........................................................24
2.12 Eurodollar Rate Loans..........................................25
2.13 Illegality.....................................................26
2.14 Requirements of Law............................................27
2.15 Indemnity......................................................28
2.16 Repayments.....................................................29
3. CONDITIONS; TERM OF AGREEMENT.........................................29
3.1 Conditions Precedent to the Initial Term Loan..................29
3.2 Conditions Precedent to all Advances and all Letters
of Credit and the Term Loans...................................31
3.3 Conditions Subsequent..........................................31
3.4 Term; Automatic Renewal........................................32
3.5 Effect of Termination..........................................33
3.6 Early Termination by Borrower; Term Loan Prepayment............33
3.7 Termination Upon Event of Default..............................33
4. CREATION OF SECURITY INTEREST.........................................34
4.1 Grant of Security Interest.....................................34
4.2 Negotiable Collateral..........................................34
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4.3 Collection of Accounts, General Intangibles, and
Negotiable Collateral..........................................34
4.4 Delivery of Additional Documentation Required..................34
4.5 Power of Attorney..............................................34
4.6 Right to Inspect...............................................35
5. REPRESENTATIONS AND WARRANTIES........................................35
5.1 No Encumbrances................................................35
5.2 Eligible Accounts..............................................35
5.3 RESERVED.......................................................36
5.4 Equipment......................................................36
5.5 Location of Equipment..........................................36
5.6 RESERVED.......................................................36
5.7 Location of Chief Executive Office; FEIN.......................36
5.8 Due Organization and Qualification; Subsidiaries...............36
5.9 Due Authorization; No Conflict.................................37
5.10 Litigation.....................................................37
5.11 No Material Adverse Change.....................................37
5.12 Solvency.......................................................38
5.13 Employee Benefits..............................................38
5.14 Environmental Condition........................................38
5.15 Intellectual Property..........................................38
5.16 Year 2000 Compliance...........................................39
5.17 Copyrights.....................................................39
6. AFFIRMATIVE COVENANTS.................................................39
6.1 Accounting System..............................................39
6.2 Collateral Reporting...........................................39
6.3 Financial Statements, Reports, Certificates....................40
6.4 Tax Returns....................................................41
6.5 Guarantor Reports..............................................41
6.6 Returns........................................................41
6.7 Title to Equipment.............................................42
6.8 Maintenance of Equipment.......................................42
6.9 Taxes..........................................................42
6.10 Insurance......................................................42
6.11 No Setoffs or Counterclaims....................................43
6.12 Location of Equipment..........................................43
6.13 Compliance with Laws...........................................44
6.14 Employee Benefits..............................................44
6.15 Leases.........................................................44
6.16 Preservation of Existence, Etc.................................45
6.17 Keeping of Records and Books of Account........................45
6.18 Maintenance of Properties, Etc.................................45
6.19 Copyright Registrations........................................45
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6.20 Further Assurances.............................................45
7. NEGATIVE COVENANTS....................................................46
7.1 Indebtedness...................................................46
7.2 Liens..........................................................46
7.3 Restrictions on Fundamental Changes............................47
7.4 Disposal of Assets.............................................47
7.5 Change Name....................................................47
7.6 Guarantee......................................................47
7.7 Nature of Business.............................................47
7.8 Prepayments and Amendments.....................................47
7.9 Change of Control..............................................47
7.10 RESERVED.......................................................48
7.11 Distributions..................................................48
7.12 Accounting Methods.............................................48
7.13 Investments....................................................48
7.14 Transactions with Affiliates...................................48
7.15 Suspension.....................................................48
7.16 Compensation...................................................48
7.17 Use of Proceeds................................................48
7.18 Change in Location of Chief Executive Office;
Equipment with Bailees.........................................49
7.19 No Prohibited Transactions Under ERISA.........................49
7.20 Financial Covenants............................................50
7.21 Capital Expenditures...........................................51
7.22 Existing Letters of Credit.....................................51
8. EVENTS OF DEFAULT.....................................................51
9. FOOTHILL'S RIGHTS AND REMEDIES........................................53
9.1 Rights and Remedies............................................53
9.2 Remedies Cumulative............................................55
10. TAXES AND EXPENSES....................................................55
11. WAIVERS; INDEMNIFICATION..............................................56
11.1 Demand; Protest; etc...........................................56
11.2 Foothill's Liability for Collateral............................56
11.3 Indemnification................................................56
12. NOTICES...............................................................56
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................57
14. DESTRUCTION OF BORROWER'S DOCUMENTS...................................58
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15. GENERAL PROVISIONS....................................................58
15.1 Effectiveness..................................................58
15.2 Successors and Assigns.........................................58
15.3 Section Headings...............................................59
15.4 Interpretation.................................................59
15.5 Severability of Provisions.....................................59
15.6 Amendments in Writing..........................................59
15.7 Counterparts; Telefacsimile Execution..........................59
15.8 Revival and Reinstatement of Obligations.......................59
15.9 Integration....................................................60
15.10 Brokers Fees...................................................60
15.11 Article 2B Opt-Out.............................................60
15.12 Confidentiality................................................60
SCHEDULES AND EXHIBITS
Schedule P-1 Permitted Liens
Schedule 3.2(g) Financing Statements to be Terminated
Schedule 5.8 Capitalization; Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.17 Copyrights
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Exhibit P-1 Form of Pledge Agreement (Stock)
Exhibit C-1 Form of Compliance Certificate
Exhibit C-2 Form of Copyright Security Agreement
Exhibit C-3 Form of Trademark Security Agreement
Exhibit C-4 Form of Source Code Escrow Agreement
Exhibit C-5 Form of Cash Collateral Agreement
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
March 31, 1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and COMPUTRON SOFTWARE, INC., a
Delaware corporation ("Borrower"), with its chief executive office located at
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
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.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale, lease or license of goods or intangibles or the
rendition of services by Borrower, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"Adjusted Eurodollar Rate" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next 1/16%) determined by dividing (a) the
Eurodollar Rate for such Interest Period by (b) a percentage equal to (i) 100%
minus (ii) the Reserve Percentage. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled by, is under common control
with or is a director or officer of such Person and with respect to any natural
Person, any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law (including, in each case, adoptive
relationships). For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to vote 10% or more of the securities
having ordinary voting power for the election of directors or the direct or
indirect power to direct the management and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
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"Authorized Person" means any officer or other employee of
Borrower identified by Borrower to Foothill in writing on the date hereof (which
list may be amended by Borrower upon written notice by any Authorized Person to
Foothill).
"Average Unused Portion of Maximum Amount" means, as of any
date of determination, (a) the Maximum Amount, less (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the undrawn Letters of
Credit that were outstanding during the immediately preceding month; plus (iii)
the average Daily Balance of the Term Loan that were outstanding during the
immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Cash Collateral Agreement" means that certain Cash Collateral
Agreement of even date herewith between Borrower and Foothill in the form of
Exhibit C-5 hereto securing the Obligations, as the same may be amended or
otherwise modified from time to time.
"Change of Control" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Vendome and their Affiliates, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 46% of the total voting power of all
classes of stock then outstanding of Borrower entitled to vote in the election
of directors.
"Closing Date" means the date of the funding of the initial
Term Loan.
"Code" means the New York Uniform Commercial Code.
"Collateral" means each of the following:
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(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) all Securities Accounts,
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Foothill, 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 Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, Securities Accounts, 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,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, 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 Foothill.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Foothill.
"copyright" shall have the meaning given to such item in the
United States Copyright Act of 1997, as amended, and includes unregistered
copyrights.
"Copyright Security Agreement" means, collectively, one or
more Copyright Security Agreements, each in the form of Exhibit C-2 hereto,
between the Borrower and Foothill, securing the Obligations, as the same may be
amended or otherwise modified from time to time.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
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"deems itself insecure" means that the Person, acting in a
commercially reasonably manner, deems itself insecure in accordance with the
provisions of Section 1-208 of the Code.
"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 account number 9402 206096 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Fleet National Bank whose
office is located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA
number is ▇▇▇-▇▇▇-▇▇▇.
"Dilution" means, in each case based upon the experience of
the immediately prior twelve (12) months, the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to the Accounts, by (b) Borrower's
Collections (excluding extraordinary items) plus the Dollar amount of clause
(a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce Foothill's advance rate against Eligible Accounts by
one percentage point for each percentage point by which Dilution is in excess of
4%.
"Disbursement Letter" means an instructional letter executed
and delivered by Borrower to Foothill regarding the extensions of credit to be
made on the Closing Date, the form and substance of which shall be satisfactory
to Foothill.
"Dollars or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period of the
Borrower, an amount equal to the sum for such fiscal period of (i) Net Income,
plus (ii) provision for taxes based on income, plus (iii) Interest Expense, plus
(iv) depreciation, amortization and other non-cash charges, minus (v)
extraordinary gains.
"Eligible Accounts" means those Accounts created by Borrower
in the ordinary course of business (net of customer deposits and unapplied cash
payments to the Borrower), that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by Foothill (after consultation in
good faith with Borrower if no Default or Event of Default is existing) in
Foothill's reasonable credit judgment. Eligible Accounts shall not include the
following:
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(a) Accounts that the Account Debtor has failed to pay within
60 days of invoice due date or within 90 days of invoice date or Accounts with
selling terms of more than 90 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 with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States or Canada, or (ii) is not organized under the laws of the
United States or any State thereof or Canada, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Foothill (as to
form, substance, and issuer or domestic confirming bank) that has been delivered
to Foothill and is directly drawable by Foothill, or (z) the Account is covered
by credit insurance in form and amount, and by an insurer, satisfactory to
Foothill;
(f) 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 satisfaction of Foothill, with the Assignment of
Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) 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 the Account, but only to the
extent of the amount of such Account Debtor's claim as a creditor, right of
setoff, disputed amount or other claim;
(h) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed 10% of all Eligible Accounts, to the extent
of the obligations owing by such Account Debtor in excess of such percentage;
provided, however that one (1) Account Debtor may account for up to 25% of all
Eligible Accounts, if such Account Debtor shall have been approved in advance by
Foothill in its reasonable business judgment;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
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(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods or intangibles
giving rise to such Account have not been shipped or delivered and billed to,
and accepted by, the Account Debtor, the services giving rise to such Account
have not been performed and accepted by the Account Debtor, or the Account
otherwise does not represent a final sale;
(l) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement;
(m) Accounts that represent progress payments or other advance
▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by Borrower of the
subject contract (or relevant portion thereof) for goods or services or
intangibles; and
(n) Accounts related to, derived from or payable in respect of
computer software or other copyrightable subject matter (i) not owned by
Borrower, or (ii) with respect to which a copyright has not been registered with
the United States Copyright Office or, if a copyright has been registered with
the United States Copyright Office, such copyright is not specifically
encumbered in favor of Foothill by a Copyright Security Agreement that has been
filed with the United States Copyright Office.
"Eligible Non-Maintenance Accounts" means Eligible Accounts
that are Non-Maintenance Accounts.
"Eligible Recurring Maintenance Revenues" means, as of any
date of determination, the aggregate maintenance contract revenues (excluding
deferred maintenance revenue in excess of one year) derived from Maintenance
Contracts with customers located in the United States and Canada (excluding
time, materials, warranties and other non-Maintenance Contract items) which have
been recognized by the Borrower during the preceding twelve (12) calendar month
period as reflected on the monthly income statements of the Borrower delivered
to Foothill pursuant to Section 6.3 for such months; provided that maintenance
contract revenues derived from Maintenance Contracts that (a) contain
proscriptions or limitations on Borrower's right to assign such contracts, or
(b) relate to computer software or other copyrightable subject matter (1) not
owned by Borrower, or (2) with respect to which a copyright has not been
registered with the United States Copyright Office or, with respect to any
copyright that is not specifically encumbered in favor of Foothill by a
Copyright Security Agreement that has been filed in the United States Copyright
Office, shall not be included in Eligible Recurring Maintenance Revenues.
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"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. ▇▇.▇▇. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Eurodollar Rate" means, with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum at which United States
dollar deposits are offered to Foothill (or its Affiliates) by major banks in
the London interbank market (or other Eurodollar Rate market selected by
Foothill) on or about 11:00 a.m. (California time) 2 Business Days prior to the
commencement of such Interest Period in amounts comparable to the amount of the
Eurodollar Rate Loans requested by and available to Borrower in accordance with
this Agreement, with a maturity of comparable duration to the Interest Period
selected by Borrower.
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"Eurodollar Rate Loans" means any Advance or Term Loan (or any
portion thereof) made or outstanding hereunder during any period when interest
on such Advance or Term Loan (or portion thereof) is payable based on the
Adjusted Eurodollar Rate.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means Fleet National Bank.
"Existing L/C Bank" means PNC Bank, National Association
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: 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 Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill'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), costs and expenses incurred by Foothill in the disbursement of
funds to Borrower (by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill 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; audit fees, costs and expenses paid or incurred by Foothill in
examining Borrower's Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or Foothill's relationship with Borrower or any guarantor; and
Foothill's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning Borrower or
any guarantor of the Obligations), defending, or concerning the Loan Documents,
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, computer software (whether or not considered to be a "good" rather
than an intangible and including the source code version thereof), blueprints,
drawings, purchase orders,
8
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, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government, any
state, province or other political subdivision thereof and any department,
commission, board, bureau, instrumentality, agency or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"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.
"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 property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Initial Term Loan" has the meaning set forth in Section
2.3(a).
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"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.
9
"Interest Expense" means the total interest obligations (paid
or accrued) of the Borrower, determined in accordance with GAAP on a basis
consistent with the latest audited financial statements of the Borrower.
"Interest Period" means, for any Eurodollar Rate Loan, the
period commencing on the Business Day such Eurodollar Rate Loan is disbursed or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date 1, 2, or 3 months thereafter,
as selected by Borrower and notified to Foothill pursuant to Sections 2.1(f) or
2.3(b), and as further provided in Section 2.12(a).
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, 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 Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Pledge Agreement
(Stock), the Cash Collateral Agreement, the Copyright Security Agreement, the
Trademark Security Agreement, the Source Code Escrow Agreement, any note or
notes executed by Borrower and payable to Foothill, and any other agreement
entered into, now or in the future, in connection with this Agreement.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
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"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means Fleet National Bank, or such other bank
or banks as may be agreed by the Borrower and Foothill.
"Lockboxes" has the meaning set forth in Section 2.7.
"Maintenance Account" means an account arising out of computer
software maintenance and support performed by the Borrower pursuant to a
Maintenance Contract; provided that such Accounts are invoiced and accounted for
separately from Accounts not arising from services and support performed
pursuant to a Maintenance Contract.
"Maintenance Contract" means a written agreement between the
Borrower and a customer pursuant to which the Borrower provides computer
software maintenance and support to such customer; provided that a Maintenance
Contract may be included within a software license agreement.
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of Foothill to enforce the Obligations or
realize upon the Collateral, (c) a material adverse effect on the value of the
Collateral or the amount that Foothill would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (d) a material impairment of the priority of Foothill's
Liens with respect to the Collateral to the extent not directly caused by
grossly negligent action or inaction of Foothill.
"Maximum Amount" means $10,000,000.
"Maximum Revolving Amount" means $10,000,000 less the then
outstanding principal balance of the Term Loan.
"Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, investment property,
financial assets, security entitlements, securities (including 65% of the shares
of stock of Subsidiaries of Borrower), documents, personal property leases
(wherein Borrower is the lessor), chattel paper, and Borrower's Books relating
to any of the foregoing.
"Net Income" shall mean, for any period, the net income (or
net loss) of the Borrower for such period after giving effect to deduction of or
provision for all operating expenses,
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all taxes and reserves (including reserves for deferred taxes) and all other
proper deductions, all determined in accordance with GAAP, provided that there
shall be excluded; (i) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such
period, (ii) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of capital assets, provided that there shall
also be excluded any related charges for taxes thereon, (iii) any net gain
arising from the collection of the proceeds of any insurance policy, (iv) any
write-up of any asset, and (v) any other extraordinary item.
"Non-Maintenance Accounts" means Accounts that are not
Maintenance Accounts.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Prepayment Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
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 any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Operating Income" shall mean, for any period, the gross
profit of the Borrower for such period less the total operating expenses
(excluding severance and restructuring related expenses not in excess of
$2,000,000 during 1998) of the Borrower for such period.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens
for unpaid taxes that either (i) are not yet due and payable or (ii) are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases, and purchase money Liens of lessors
under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased or acquired and only secures the purchase price
of the asset, (e) 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
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of money, and which Liens either (i) are for sums not yet due and payable, or
(ii) are the subject of Permitted Protests, (f) Liens arising from deposits made
in connection with obtaining worker's compensation or other unemployment
insurance, (g) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement), incurred in the ordinary
course of business of Borrower and not in connection with the borrowing of
money, (h) Liens arising by reason of security for surety or appeal bonds in the
ordinary course of business of Borrower, (i) Liens of or resulting from any
judgment or award that would not have a Material Adverse Effect and as to which
the time for the appeal or petition for rehearing of which has not yet expired,
or in respect of which Borrower is in good faith prosecuting an appeal or
proceeding for a review, and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, and (j) with respect to
any Real Property, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of Foothill's Lien thereon or therein, or
materially interfere with the ordinary conduct of the business of Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, payroll taxes or
taxes that are the subject of a United States federal tax lien, or rental
payments, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Foothill, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Foothill is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens of Foothill in and to the Collateral.
"Person" means and includes 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.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"Pledge Agreement (Stock)" means that certain Pledge and
Security Agreement of even date herewith made by Borrower in favor of Foothill
in the form of Exhibit P-1 hereto securing the Obligations, as the same may be
amended or otherwise modified from time to time.
"Prepayment Premium" has the meaning set forth in Section 3.6.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by Borrower.
"Reference Rate" means the variable rate of interest, per
annum, most recently announced by Norwest Bank Minnesota, National Association,
or any successor thereto, as
13
its "base rate," irrespective of whether such announced rate is the best rate
available from such financial institution.
"Reference Rate Loan" means any Advance or Term Loan (or any
portion thereof) made or outstanding hereunder during any period when interest
on such Advance or Term Loan (or portion thereof) is payable based on the
Reference Rate.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Reserve Percentage" means and refers to, as of the date of
determination thereof, the maximum percentage (rounded upward, if necessary to
the nearest 1/100th of 1%), as determined by Foothill (or its Affiliates) in
accordance with its (or their) usual procedures (which determination shall be
conclusive in the absence of manifest error), that is in effect on such date as
prescribed by the Federal Reserve Board for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "eurocurrency
liabilities") by Foothill or its Affiliates.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA (or similar provisions of applicable law).
"Securities Account" has the meaning specified therefor in the
Code.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
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"Source Code Escrow Agreement" means a source code escrow
agreement, in the form of Exhibit C-4 hereto among Borrower, Foothill and Data
Securities International, Inc., as escrow agent.
"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 or other ownership interests
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.
"Tangible Net Worth" means, as of any date of determination,
the difference of (a) Borrower's total stockholder's equity, minus (b) the sum
of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid
expenses, and (iii) all amounts due to Borrower from Affiliates.
"Termination Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, to Existing Lender terminating the Existing
Lender's credit facility with Borrower.
"Trademark Security Agreement" means a Trademark Security
Agreement of even date herewith, in the form of Exhibit C-2 hereto, made by
Borrower in favor of Foothill securing the Obligations, as the same may be
amended or otherwise modified from time to time.
"Term Loan" has the meaning set forth in Section 2.3.
"Voidable Transfer" has the meaning set forth in Section 15.8.
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 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 refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Foothill or cured. Section, subsection, clause, schedule, and
exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan
15
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount less the outstanding balance of all undrawn or unreimbursed
Letters of Credit, or (ii) the Borrowing Base less the aggregate amount of all
undrawn or unreimbursed Letters of Credit. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(x) 85% of Eligible Non-Maintenance Accounts, less the
amount, if any, of the Dilution Reserve, minus
(y) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts without declaring an Event of Default if it
determines that there has occurred a Material Adverse Change.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations (other than
under the Term Loan) to exceed the Maximum Revolving Amount.
(d) Foothill shall have no obligation to make Advances
pursuant to this Section 2.1, to make the Term Loan pursuant to Section 2.3, or
to issue any Letter of Credit pursuant to Section 2.2 if, after giving effect to
such Advance, Term Loan or Letter of Credit, the aggregate outstanding principal
amount of such Advances, Term Loan and the undrawn amount of all Letters of
Credit would exceed the lesser of (i) 100% of the Eligible Recurring Maintenance
Revenues, and (ii) an amount equal to Borrower's Collections with respect to
Accounts for the immediately preceding ninety (90) days.
(e) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
(f) Each Advance shall be made upon Borrower's request
(pursuant to the terms of Section 2.9), which request shall be irrevocable
except as set forth in Section 2.12,
16
specifying (i) the amount of the requested Advance; (ii) the requested funding
date of such Advance; (iii) whether the Advance is to constitute a Eurodollar
Rate Loan or a Reference Rate Loan; and (iv) if such Advance is to constitute a
Eurodollar Rate Loan, the requested Interest Period therefor. If a requested
Advance constitutes a Eurodollar Rate Loan, such request must be delivered to
Foothill no later than 11:00 a.m. (California time) two Business Days prior to
the requested funding date therefor.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty")
with respect to letters of credit issued by an issuing bank for the account of
Borrower. Foothill shall have no obligation to issue a Letter of Credit if any
of the following would result:
(i) the aggregate amount of all undrawn and unreimbursed
Letters of Credit would exceed the Borrowing Base less the amount of
outstanding Advances; or
(ii) the aggregate amount of all undrawn or unreimbursed
Letters of Credit would exceed the lower of: (x) the Maximum
Revolving Amount less the amount of outstanding Advances less the
aggregate amount of reserves established under Section 2.1(b) or (y)
$2,000,000; or
(iii) the outstanding Obligations (other than under the
Term Loan(s)) would exceed the Maximum Revolving Amount.
Borrower expressly understands and agrees that Foothill shall have no obligation
to arrange for the issuance by issuing banks of the letters of credit that are
to be the subject of L/C Guarantees. Borrower and Foothill acknowledge and agree
that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than 60 days prior to the date on which this
Agreement is scheduled to terminate under Section 3.4 (without regard to any
potential renewal term) and all such Letters of Credit shall be in form and
substance acceptable to Foothill in its sole discretion. If Foothill is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such amount to Foothill and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.6.
(b) Borrower hereby agrees to indemnify, save, defend, and
hold Foothill harmless from any loss, cost, expense, or liability, including
payments made by Foothill, expenses, and reasonable attorneys fees incurred by
Foothill arising out of or in connection with any Letter of Credit. Borrower
agrees to be bound by the issuing bank's regulations and interpretations of any
Letters of Credit guarantied by Foothill and opened to or for Borrower's account
or by Foothill's interpretations of any L/C issued by Foothill to or for
Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands
17
and agrees that Foothill 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 Guarantees may require
Foothill to indemnify the issuing bank for certain costs or liabilities arising
out of claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold Foothill harmless with respect to any loss,
cost, expense (including reasonable attorneys fees), or liability incurred by
Foothill under any L/C Guaranty as a result of Foothill's indemnification of any
such issuing bank.
(c) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. Borrower may or may not
be the "applicant" or "account party" with respect to such letter of credit. In
the event of any conflict between the terms of any application for a Letter of
Credit and this Agreement, for purposes of this Agreement, the terms of this
Agreement shall control.
(d) Any and all charges, commissions, fees, and costs incurred
by Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either (i) provide cash collateral to be held by Foothill in
an amount equal to 102% of the maximum amount of Foothill's obligations under
Letters of Credit, or (ii) cause to be delivered to Foothill releases of all of
Foothill's obligations under outstanding Letters of Credit. At Foothill's
discretion, any proceeds of Collateral received by Foothill after the occurrence
and during the continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or Foothill with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or
Foothill any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
18
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill 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 the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill 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 set forth in
Section 2.6(a)(i) or (c)(i), as applicable. The determination by the issuing
bank or Foothill, as the case may be, of any amount due pursuant to this Section
2.2(f), 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.
2.3 Term Loan. (a) Subject to the terms and conditions of this
Agreement, Foothill has agreed to make a single term loan (the "Term Loan") to
Borrower in an aggregate original principal amount equal to $5,000,000. The Term
Loan shall be made on the Closing Date. Except as provided in paragraph (e) of
this Section 2.3, once repaid the principal amount of the Term Loan may not be
reborrowed.
(b) The Term Loan shall be made upon Borrower's request (pursuant to
the terms of Section 2.9), which request shall be irrevocable except as set
forth in Section 2.12, specifying (i) the amount of the requested Term Loan;
(ii) the requested funding date of the Term Loan; (iii) whether the Term Loan is
to constitute a Eurodollar Rate Loan or a Reference Rate Loan; and (iv) if the
Term Loan is to constitute a Eurodollar Rate Loan, the requested Interest Period
therefor. If the requested Term Loan constitutes a Eurodollar Rate Loan, such
request must be delivered to Foothill no later than 11:00 a.m. (California time)
2 Business Days prior to the requested funding date therefor.
(c) The aggregate outstanding principal amount of the Term Loan
shall be repaid in 36 equal monthly installments of principal plus accrued
interest. Each such installment shall be due and payable on the first day of
each month commencing on May 1, 1998 and continuing on the first day of each
succeeding month until and including the date on which the aggregate unpaid
balance of the Term Loan is paid in full. In the event that the Term Loan is
prepaid and reborrowed pursuant to paragraph (e) of this Section 2.3, the
aggregate outstanding principal amount of the Term Loan shall be repaid in equal
monthly installments of principal plus accrued interest commencing on the first
day of the month following the date of reborrowing and continuing on the first
day of each month thereafter until and including April 1, 2001, the date on
which the aggregate unpaid principal amount of the Term Loan and all accrued
interest thereon shall be paid in full. In any event, the outstanding principal
balance and all accrued and unpaid interest under the Term Loan shall be due and
payable upon the termination of this Agreement, whether by its terms, by
prepayment, by acceleration, or otherwise. Except upon the termination of this
Agreement and as provided in paragraphs (d) and (e) below, the unpaid principal
balance of the Term Loan may not be prepaid in whole or in part. All amounts
outstanding under the Term Loan shall constitute Obligations.
19
(d) Notwithstanding anything herein to the contrary, if the
aggregate outstanding principal amount of the Term Loan exceeds (i) from and
after the Closing Date to the first anniversary of the Closing Date, an amount
equal to 60% of Eligible Recurring Maintenance Revenues at such time, (ii) from
and after the first anniversary of the Closing Date until the second anniversary
of the Closing Date, an amount equal to 40% of Eligible Recurring Maintenance
Revenues at such time, and (iii) from and after the second anniversary of the
Closing Date to the third anniversary of the Closing Date, an amount equal to
20% of Eligible Recurring Maintenance Revenues at such time, then the Borrower
shall prepay the principal amount of the Term Loan in an amount sufficient to
cause the aggregate principal amount of the Term Loan to be less than or equal
to the relevant amounts set forth in clauses (i) through (iii) above. All such
prepaid amounts shall be applied to the installments due on the Term Loan in the
inverse order of their maturity; provided that, if the aggregate principal
amount of the Term Loan outstanding prior to giving effect to such prepayment is
less than $3,000,000 then such prepaid amounts shall be applied to the
installments due on the Term Loan in the order of their maturity.
(e) Subject to the terms and conditions of this Agreement, if on the
date which is twenty-one (21) days after the Closing Date, the Borrower has not
satisfied the condition set forth in Section 3.2(e) (i) the Borrower may prepay
all principal of and accrued interest on the Term Loan in whole but not in part
without any obligation to pay the Prepayment Premium and (ii) the Borrower may
reborrow on a single date the principal amount of up to $5,000,000, which was
repaid pursuant to clause (i) of this paragraph (e), upon the satisfaction of
all of the conditions set forth in Section 3.2, provided that such borrowing
occurs on or before the date which is two hundred ten (210) days after the
Closing Date. The reborrowing of the Term Loan set forth in this paragraph (e)
and the Term Loan after such reborrowing shall be subject to the provisions of
paragraphs (b), (c) and (d) of this Section 2.3. At the Borrower's direction,
the prepayment of the Term Loan provided for in clause (i) of this paragraph (e)
may be made by the application of the cash collateral held by Foothill pursuant
to the Cash Collateral Agreement to all unpaid principal of and accrued interest
on the Term Loan.
2.4 RESERVED.
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1 or 2.2 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to repay Advances
outstanding under Section 2.1 and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to Letters of Credit.
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (b) below, all
Obligations shall bear interest as follows:
(i) all Advances that are Reference Rate Loans shall
bear interest at a per annum rate of 1.25 percentage points above
the Reference Rate,
20
(ii) all Advances that are Eurodollar Rate Loans shall
bear interest at a per annual rate of 4.25 percentage points above
the Adjusted Eurodollar Rate,
(iii) all Term Loan that are Reference Rate Loans shall
bear interest at a per annum rate of 1.50 percentage points above
the Reference Rate, and
(iv) all Term Loan that are Eurodollar Rate Loans shall
bear interest at a per annum rate of 4.50 percentage points above
the Adjusted Eurodollar Rate;
provided, however that, commencing on the first anniversary of the Closing Date,
if the Borrower achieves the following performance benchmarks, the applicable
interest rates shall be as set forth below:
If EBITDA shall
equal or exceed
for the
preceding four then the applicable interest rate shall be:
quarters:
Advances Term Loan
-------- ---------
For Reference Rate Loans For Reference Rate Loans
$4,500,000 Reference Rate plus 1.0% Reference Rate plus 1.375%
$7,500,000 Reference Rate plus .75% Reference Rate plus 1.25%
For Eurodollar Rate Loans For Eurodollar Rate Loans
$4,500,000 Adjusted Eurodollar Rate plus Adjusted Eurodollar Rate plus
$7,500,000 4.0% 4.375%
Adjusted Eurodollar Rate plus Adjusted Eurodollar Rate plus
3.75% 4.25%
(b) Letter of Credit Fee. Borrower shall pay Foothill a fee
(in addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to 1.25% per annum times the aggregate 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 and the Term Loan) shall bear interest at a per annum rate
equal to 3.25 percentage points above the Reference Rate, (ii) the Term Loan
shall bear interest at a per annum rate equal to 3.75 percentage points above
the Reference Rate, and (iii) the Letter of Credit fee provided in Section
2.6(b) shall be increased to 3.25% per annum times the amount of the undrawn
Letters of Credit that were outstanding during the immediately preceding month.
(d) Minimum Interest. In no event shall the rate of interest
chargeable hereunder for any day be less than 8% per annum. To the extent that
interest accrued hereunder at
21
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. To the extent that interest accrued
hereunder at the rate set forth herein (including the minimum interest rate)
would yield less than the foregoing minimum amount, the interest rate chargeable
hereunder for the period in question automatically shall be deemed increased to
that rate that would result in the minimum amount of interest being accrued and
payable hereunder.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Foothill, at its option,
without prior notice to Borrower, to charge such interest and Letter of Credit
fees, all Foothill Expenses (as and when incurred), the charges, commissions,
fees, and costs provided for in Section 2.2(d) (as and when accrued or
incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under the Term
Loan, or any Loan Document to Borrower's Loan Account, which amounts thereafter
shall accrue interest at the rate then applicable to Advances hereunder. Any
interest not paid when due shall be compounded and shall thereafter accrue
interest at the rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 8.5% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. 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.
(g) 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 Foothill, 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 to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 Collection of Accounts. Borrower shall at all times maintain
lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower to remit all Collections in respect
thereof to such Lockboxes. Borrower, Foothill, and the Lockbox Banks shall enter
into the Lockbox Agreements, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Borrower agrees that all Collections and other amounts received by Borrower from
any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or
22
arrangement contemplated thereby shall be modified by Borrower without the prior
written consent of Foothill. Upon the terms and subject to the conditions set
forth in the Lockbox Agreements and subject to the last two sentences of Section
2.8, all amounts received in each Lockbox Account shall be wired each Business
Day into an account (the "Foothill Account") maintained by Foothill at a
depositary selected by Foothill.
2.8 Crediting Payments; Application of Collections. The receipt of
any Collections by Foothill (whether from transfers to Foothill by the Lockbox
Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be
applied provisionally to reduce the Obligations outstanding under Section 2.1,
but shall not be considered a payment on account unless such Collection item is
a wire transfer of immediately available federal funds and is made to the
Foothill Account or unless and until such Collection item is honored when
presented for payment. From and after the Closing Date, Foothill shall be
entitled to charge Borrower for two (2) Business Days of `clearance' or `float'
at the rate set forth in Section 2.6(a)(i) or Section 2.6(c)(i), as applicable,
on all Collections that are received by Foothill (regardless of whether
forwarded by the Lockbox Banks to Foothill, whether provisionally applied to
reduce the Obligations under Section 2.1, or otherwise). This across-the-board
two (2) Business Day clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
Foothill's financing of Borrower, and shall apply irrespective of the
characterization of whether receipts are owned by Borrower or Foothill, and
whether or not there are any outstanding Advances, the effect of such clearance
or float charge being the equivalent of charging two (2) Business Days of
interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Foothill only if it is received into the Foothill Account on a
Business Day on or before 11:00 a.m. California time. If any Collection item is
received into the Foothill 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
Foothill as of the opening of business on the immediately following Business
Day. If Foothill shall not have made any Advance to Borrower hereunder and so
long as no Default or Event of Default shall have occurred and be continuing and
no Obligations shall be then due and payable, Foothill shall direct the Lockbox
Bank pursuant to standing instructions to credit the proceeds to the Designated
Account. In addition, at any time after Foothill has made the initial Advance to
the Borrower and the Collections are applied to reduce the outstanding Advances
and all other Obligations that are then due and payable, Foothill shall on the
day of receipt of such Collections initiate a wire transfer of the Collections
remaining after such application to Borrower to the Designated Account.
2.9 Designated Account. Foothill is authorized to make the Advances,
the Letters of Credit and the Term Loan 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(e).
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 Foothill hereunder. Unless otherwise
agreed by Foothill and Borrower, any Advance requested by Borrower and made by
Foothill hereunder shall be made to the Designated Account.
23
2.10 Maintenance of Loan Account; Statements of Obligations.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances and the Term
Loan(s) made by Foothill to Borrower or for Borrower's account, including,
accrued interest, Foothill Expenses, and any other payment Obligations of
Borrower. In accordance with Section 2.8, the Loan Account will be credited with
all payments received by Foothill from Borrower or for Borrower's account,
including all amounts received in the Foothill Account from any Lockbox Bank.
Foothill shall render statements regarding the Loan Account to Borrower,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Foothill Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and Foothill unless, within 30 days after receipt
thereof by Borrower, Borrower shall deliver to Foothill written objection
thereto describing the error or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Foothill the following
non-refundable fees in immediately available funds as follows:
(a) Closing Fee. On the Closing Date, a closing fee of
$75,000;
(b) 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 .375% per annum
times the Average Unused Portion of the Maximum Amount.
(c) Annual Facility Fee. On each anniversary of the Closing
Date, an annual facility fee in an amount equal to .50% times the Maximum
Amount; provided, however, if the Borrower shall achieve the following
performance benchmarks, the annual facility fee shall be as follows:
If EBITDA shall equal or
exceed for the preceding
four quarters: then the annual facility fee shall be:
$4,500,000 .25% times the Maximum Amount
$7,500,000 .125% times the Maximum Amount
(d) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of $650 per day per examiner, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrower
performed by personnel employed by Foothill; Foothill's customary appraisal fee
of $1,500 per day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by personnel employed by Foothill; and, the actual
charges paid or incurred by Foothill if it elects to employ the services of one
or more third Persons to perform such financial analyses and examinations of
Borrower or to appraise the Collateral; provided, however that, so long as no
Default or Event of Default has occurred and is
24
continuing, Foothill shall not conduct more than four financial analyses and
examinations (i.e., audits) of Borrower per year; and
(e) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $3,000.
2.12 Eurodollar Rate Loans. Any other provisions herein to the
contrary notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) Borrowing; Conversion; Continuation. Borrower may from
time to time, on or after the Closing Date, request in a written or telephonic
communication with Foothill: (i) Advances or the Term Loan to constitute
Eurodollar Rate Loans (pursuant to Sections 2.1(f)) and 2.3(b); (ii) that
Reference Rate Loans be converted into Eurodollar Rate Loans; or (iii) that
existing Eurodollar Rate Loans continue for an additional Interest Period. Any
such request shall specify the aggregate amount of the requested Eurodollar Rate
Loans, the proposed funding date therefor (which shall be a Business Day, and
with respect to continued Eurodollar Rate Loans shall be the last day of the
Interest Period of the existing Eurodollar Rate Loans being continued), and the
proposed Interest Period, in each case subject to the limitations set forth
below). Eurodollar Rate Loans may only be made, continued, or extended if, as of
the proposed funding date therefor each of the following conditions is
satisfied:
(v) no Default or Event of Default exists;
(w) no more than four (4) Interest Periods may be in
effect at any one time;
(x) the amount of each Eurodollar Rate Loan borrowed,
converted, or continued must be in a principal amount of not less than
$1,000,000 and integral multiples of $100,000 in excess thereof;
(y) Foothill shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Foothill and can be
readily determined as of the date of the request for such Eurodollar Rate
Loan by Borrower; and
(z) Foothill shall have received such request at least
two Business Days prior to the proposed funding date therefor.
Any request by Borrower to borrow Eurodollar Rate Loans, to convert
Reference Rate Loans to Eurodollar Rate Loans, or to continue any existing
Eurodollar Rate Loans shall be irrevocable, except to the extent that Foothill
shall determine under Sections 2.12(a), 2.13 or 2.14 that such Eurodollar Rate
Loans cannot be made or continued.
(b) Determination of Interest Period. By giving notice as set
forth in Section 2.12(a), the Borrower shall have the option of selecting a 1, 2
or 3 month Interest Period
25
for such Eurodollar Rate Loan. The determination of Interest Periods shall be
subject to the following provisions:
(i) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if the
next succeeding Business Day occurs in the following calendar month, then
such Interest Period shall expire on the immediately preceding Business
Day;
(iii) if any Interest Period begins on the last Business
Day of a month, or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period, then the Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iv) the Borrower may not select an Interest Period
which expires later than the Renewal Date.
(c) Automatic Conversion; Optional Conversion by Foothill. Any
Eurodollar Rate Loan shall automatically convert to a Reference Rate Loan upon
the last day of the applicable Interest Period, unless Foothill has received a
request to continue such Eurodollar Rate Loan at least two Business Days prior
to the end of such Interest Period in accordance with the terms of Section
2.12(a). Any Eurodollar Rate Loan shall, at Foothill's option, upon notice to
Borrower, convert to a Reference Rate Loan in the event that (i) a Default or an
Event of Default shall have occurred and be continuing as of the last day of the
Interest Period for such Eurodollar Rate Loan, or (ii) this Agreement shall
terminate, and Borrower shall pay to Foothill any amounts required by Section
2.15 as a result thereof.
2.13 Illegality. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any requirement of law or
in the interpretation or application thereof shall make it unlawful for Foothill
to make or maintain Eurodollar Rate Loans as contemplated by this Agreement (a)
the obligation of Foothill hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be cancelled and (b) Foothill's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier period as required by law; provided,
however, that before making any such demand, Foothill agrees to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or regulatory manner) to
designate a different lending office if the making of such a designation would
allow Foothill or its lending office to continue to perform its obligations to
make Eurodollar Rate Loans. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower
26
shall pay to such Lender such amounts, if any, as may be required pursuant to
Section 2.15. If circumstances subsequently change so that Foothill shall
determine that it is no longer so affected. Foothill will promptly notify
Borrower, and upon receipt of such notice, the obligations of Foothill to make
or continue Eurodollar Rate Loans or to convert Reference Rate Loans into
Eurodollar Rate Loans shall be reinstated.
2.14 Requirements of Law. (a) If the adoption of or any change in
any requirement of law or in the interpretation or application thereof or
compliance by Foothill with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof
(i) shall subject Foothill to any tax, levy, charge,
fee, reduction, or withholding of any kind whatsoever with respect to this
Agreement or any Advance or the Term Loan, or change the basis of taxation
of payments to Foothill in respect thereof (except for the establishment
of a tax based on the net income of Foothill or changes in the rate of tax
on the net income of Foothill);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan, or similar requirement against
assets held by, deposits or other liabilities in or for the account of,
Advances, Term Loan or other extensions of credit by, or any other
acquisition of funds by, any office of Foothill; or
(iii) shall impose on Foothill any other condition with
respect to this Agreement or any Advance or the Term Loan;
and the result of any of the foregoing is to increase the cost to Foothill, by
an amount which Foothill deems to be material, of making, converting into,
continuing, or maintaining Advances or the Term Loan or to increase the cost to
Foothill, by an amount which Foothill deems to be material, or to reduce any
amount receivable hereunder in respect of Advances or the Term Loan, or to
forego any other sum payable thereunder or make any payment on account thereof,
then, in any such case, Borrower shall promptly pay Foothill, upon its demand,
any additional amounts necessary to compensate Foothill for such increased cost
or reduced amount receivable; provided, however, that before making any such
demand, Foothill agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, in its reasonable discretion, in any legal,
economic, or regulatory manner) to designate a different Eurodollar lending
office if the making of such designation would allow Foothill or its Eurodollar
lending office to continue to perform its obligations to make Eurodollar Rate
Loans or to continue to fund or maintain Eurodollar Rate Loans and avoid the
need for, or materially reduce the amount of such increased cost. If Foothill
becomes entitled to claim any additional amounts pursuant to this Section 2.14,
Foothill shall promptly notify Borrower of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable pursuant
to this Section 2.14 submitted by Foothill to Borrower shall be conclusive in
the absence of manifest error. If Borrower so notifies Foothill within 5
Business Days after Foothill notifies Borrower of any increased cost pursuant to
the foregoing provisions of this Section 2.14, Borrower may convert all
Eurodollar Rate Loans
27
then outstanding into Reference Rate Loans in accordance with Section 2.12 and,
additionally, reimburse Foothill for any cost in accordance with Section 2.15.
This covenant shall survive the termination of this Agreement and the payment of
the Advances, Term Loan and all other amounts payable hereunder.
(b) If Foothill shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by Foothill or any Person
controlling Foothill with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof does or shall have the effect of increasing the
amount of capital required to be maintained or reducing the rate of return on
Foothill's or such Person's capital as a consequence of its obligations
hereunder to a level below that which such Foothill or such Person could have
achieved but for such change or compliance (taking into consideration Foothill's
or such Person's policies with respect to capital adequacy) by an amount deemed
by Foothill to be material, then from time to time, after submission by Foothill
to Borrower of a prompt written request therefor, Borrower shall pay to Foothill
such additional amount or amounts as will compensate Foothill or such Person for
such reduction. This covenant shall survive the termination of this Agreement
and the payment of the Advances and all other amount payable hereunder.
2.15 Indemnity. Borrower agrees to indemnify Foothill and to hold
Foothill harmless from any loss or expense which Foothill may sustain or incur
as a consequence of (a) default by Borrower in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b) default by Borrower in
making a borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrower in making any prepayment
after Borrower has given a notice thereof in accordance with the provisions of
this Agreement, or (d) the making of a prepayment of Eurodollar Rate Loans on a
day which is not the last day of an Interest Period with respect thereto
(whether due to the termination of this Agreement upon an Event of Default or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin) arising from the reemployment of funds obtained by it or from
fees payable to terminate the deposits from which such funds were obtained.
Calculation of all amounts payable to Foothill under this Section 2.15 shall be
made as though Foothill had actually funded the relevant Eurodollar Rate Loan
through the purchase of a deposit bearing instrument at the Eurodollar Rate in
an amount equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that Foothill may
fund each of the Eurodollar Rate Loans in any manner it sees fit and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 2.15. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.16 Repayments. The Borrower shall repay in full the unpaid
principal of, and interest on, each Advance, Term Loan and all other Obligations
in accordance with the terms of this Agreement including, without limitation, on
the date of termination of this Agreement.
28
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Term Loan. The obligation of
Foothill to make the Term Loan is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before April 15, 1998;
(b) Foothill shall have received evidence, satisfactory to it,
of the filing of its financing statements;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Lockbox Agreements;
(ii) the Disbursement Letter;
(iii) the Termination Letter;
(iv) the Pledge Agreement (Stock), together with the
original stock certificate representing 65% of the
shares of capital stock of each Subsidiary of the
Borrower;
(v) the Trademark Security Agreement
(vi) the Copyright Security Agreement;
(vii) the Source Code Escrow Agreement; and
(viii) the Cash Collateral Agreement;
(d) Foothill 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) Foothill 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) Foothill shall have received a certificate of status with
respect to Borrower, dated within 10 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;
29
(g) Foothill shall have received certificates of status with
respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which any Collateral with an aggregate fair market value in excess of $10,000 is
located or 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) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received duly executed certificates of
title with respect to any portion of the Collateral that is subject to
certificates of title;
(j) RESERVED;
(k) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(l) Except as otherwise disclosed to Foothill by Borrower in
writing on or prior to the Closing Date, Foothill shall have received
satisfactory evidence 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; and
(m) Borrower shall have paid to Foothill the closing fee
payable under Section 2.11(a), together with all Foothill Expenses incurred by
Foothill as of the Closing Date;
(n) Foothill shall have received (i) a field survey and
inspection with respect to the locations of the Borrower, and (ii) reference
checks with respect to the management of Borrower, each of which shall be
satisfactory to Foothill in its sole discretion;
(o) Foothill shall have received a letter from the Borrower
with respect to its accountants and accounting matters; and
(p) 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
Foothill and its counsel.
3.2 Conditions Precedent to all Advances and all Letters of Credit
and the Term Loan. The following shall be conditions precedent to all Advances,
all Letters of Credit and the Term Loan; provided that the conditions described
in clause (d), (e), (f) and (g) below shall not be a condition precedent to the
Term Loan made on the Closing Date:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such
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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, Foothill, or any of their Affiliates;
(d) Foothill shall have received satisfactory evidence that
Borrower shall have filed Applications for Registration with the United States
Copyright Office for each existing copyright of Borrower other than those
described in Schedule 5.17;
(e) Foothill shall have received satisfactory evidence that
all existing copyrights of Borrower required to be registered under clause (d)
of this Section 3.2 have been registered with the United States Copyright
Office, and that all such copyrights and any proceeds thereof are specifically
encumbered in favor of Foothill by the Copyright Security Agreement which has
been filed with the United States Copyright Office;
(f) Borrower, Data Securities International, Inc. and Foothill
shall have entered into the Source Code Escrow Agreement and Borrower shall have
deposited with Data Securities International, Inc. all Deposit Materials (as
defined in the Source Code Escrow Agreement); and
(g) Foothill shall have received evidence satisfactory to it
of the termination of the Uniform Commercial Code Financing Statements described
in Schedule 3.2(g) hereto.
3.3 Conditions Subsequent. As conditions subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to Foothill
the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.10, the form and substance of
which shall be satisfactory to Foothill and its counsel;
(b) within 60 days of the Closing Date, deliver to Foothill
any and all documents, instruments and agreements (including without limitation
opinions of counsel) reasonably requested by Foothill relating to the validity,
enforceability and perfection of the Pledge Agreement (Stock) and the rights
granted thereunder in favor of Foothill in the jurisdiction of formation of each
Subsidiary of the Borrower;
(c) within 10 days of the Closing Date, Foothill shall have
received satisfactory evidence that the Borrower has filed Applications for
Registration for all existing copyrights of Borrower required to be registered
under clause (d) of Section 3.2 and that the
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Borrower has made proper application for, and has paid all necessary fees to,
obtain expedited treatment from the United States Copyright Office for such
applications for registration;
(d) within 210 days of the Closing Date, Foothill shall have
received satisfactory evidence that all existing copyrights of Borrower required
to be registered under clause (d) of Section 3.2 are specifically encumbered in
favor of Foothill by the Copyright Security Agreement which has been filed with
the United States Copyright Office;
(e) within 90 days of the Closing Date, deliver to Foothill a
complete list of software license agreements, Maintenance Contracts and other
agreements giving rise to Accounts of Borrower which prohibit, restrict or
condition assignment of such agreements by Borrower;
(f) within 30 days of the Closing Date, Borrower, Data
Securities International, Inc. and Foothill shall have entered into the Source
Code Escrow Agreement and Borrower shall have deposited with Data Securities
International, Inc. all Deposit Materials (as defined in the Source Code Escrow
Agreement); and
(g) within 30 days of the Closing Date, Foothill shall have
received evidence satisfactory to it of the termination of the Uniform
Commercial Code financing statements described on Schedule 3.2(g); and
(h) use its best efforts to obtain and deliver to Foothill
within 30 days of the Closing Date, a Collateral Access Agreement from the
landlord of the Borrower's Rutherford New Jersey premises.
3.4 Term; Automatic Renewal. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term ending on the date (the "Renewal
Date") that is three (3) years from the Closing Date. This Agreement may be
renewed for successive one (1) year periods thereafter at the option of the
Borrower upon 90 days prior written notice to Foothill. Either party may
terminate this Agreement effective on any one (1) year anniversary of the
Renewal Date by giving the other party at least 90 days prior written notice.
The foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to provide
additional credit hereunder is terminated. If Borrower has sent a notice of
termination pursuant to the provisions of Section 3.4, but fails to pay the
Obligations in full on the date set forth in said notice, then Foothill may, but
shall not be required to, renew this Agreement for an additional term of one (1)
year.
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3.6 Early Termination by Borrower; Term Loan Prepayment. The
provisions of Section 3.4 that allow termination of this Agreement by Borrower
only on the Renewal Date and certain anniversaries thereof notwithstanding,
Borrower has the option, at any time upon 90 days prior written notice to
Foothill, to terminate this Agreement by paying to Foothill, in cash, the
Obligations (including an amount equal to 102% of the undrawn amount of the
Letters of Credit (the "Letter of Credit Deposit")), in full. Foothill shall
return the remaining portion of the Letter of Credit Deposit (if any) upon
payment in full of all Obligations hereunder and after the expiration or
cancellation of all outstanding Letters of Credit. If (a) Borrower shall
terminate this Agreement under the first sentence of this Section, or (b)
Borrower shall make any prepayment with respect to the Term Loan (other than in
connection with a prepayment under Sections 2.3(d) and (e)), the Borrower shall
pay to Foothill on the date of such termination or prepayment an amount (the
"Prepayment Premium") equal to (1) in the case of termination under the first
sentence of this Section, an amount equal to the greater of (A) the total
interest and Letter of Credit fees for the immediately preceding 6 months, and
(B) $10,000 multiplied by the number of months remaining until the then
scheduled termination date of this Agreement, and (2) in the case of a
prepayment of the Term Loan not in connection with a termination of this
Agreement, an amount equal to the greater of (x) the total interest charged on
the Term Loan for the immediately preceding 6 months, and (y) $10,000 multiplied
by the number of months remaining until the then scheduled termination date of
this Agreement.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the
Prepayment Premium. The Prepayment Premium shall be presumed to be the amount of
damages sustained by Foothill as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The Prepayment Premium provided for in this Section 3.7 shall be
deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Foothill's security interests in
the Collateral shall attach to all Collateral without further act on the part of
Foothill or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, Borrower has no authority, express or
implied, to dispose of any item or portion of the Collateral; provided however
that Borrower may dispose of Equipment having a fair market value of no greater
than $40,000 in any calendar year.
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4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. Upon the occurrence and during the continuance of any Event of
Default, Foothill or Foothill's designee may (a) notify customers or Account
Debtors of Borrower that the Accounts, General Intangibles, or Negotiable
Collateral have been assigned to Foothill or that Foothill has a security
interest therein, and (b) collect the Accounts, General Intangibles, and
Negotiable Collateral directly and charge the collection costs and expenses to
the Loan Account. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately will
deliver said Collections to Foothill in their original form as received by
Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) 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 or Foothill deems itself insecure, sign
Borrower's name on any invoice or ▇▇▇▇ of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
Foothill's possession, (e) at any time that an Event of Default has occurred and
is continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, 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 (g) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
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4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter during
normal business hours to inspect Borrower's Books and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance, Letter of Credit or Term Loan made thereafter, as
though made on and as of the date of such Advance, Letter of Credit or Term Loan
(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
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business,
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise to
such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance by
the Account Debtor. Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 RESERVED.
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 Equipment. The Equipment is not stored with a
bailee, warehouseman, or similar party (without Foothill's prior written
consent) and are located only at the locations identified on Schedule 6.12 or
otherwise permitted by Section 6.12.
5.6 RESERVED.
5.7 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
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5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate list
of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 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 corporate action.
(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
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease 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 stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of appropriate financing statements,
filings with the United States Copyright Office and the United States Patent and
Trademark Office, 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 federal, state, foreign, or other Governmental
Authority or other Person.
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(d) This Agreement and the 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 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 Liens granted by Borrower to Foothill in and to its
properties and assets pursuant to this Agreement and the other Loan Documents
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, would not have a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating
to Borrower or any guarantor of the Obligations as set forth in Borrower's SEC
Form 10-K for the period ended December 31, 1997, have been prepared in
accordance with GAAP and fairly present Borrower's (or such guarantor's, as
applicable) financial condition as of the date thereof and Borrower's results of
operations for the period then ended. There has not been a Material Adverse
Change with respect to Borrower (or such guarantor, as applicable) since the
date of the latest financial statements submitted to Foothill on or before the
Closing Date.
5.12 Solvency. Borrower is Solvent. 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,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 Environmental Condition. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous
37
Materials. 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, or a candidate for closure pursuant to any
environmental protection statute. No Lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned or operated by Borrower. 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.
5.15 Intellectual Property. Borrower owns or possesses adequate
licenses or other rights to use all patents, patent applications, trademark,
trademark applications, servicemarks, servicemark applications, trade names,
copyrights, source code, mask-works, trade secrets and know-how (collectively,
the "Intellectual Property") that are necessary for the operation of Borrower's
business as currently conducted. No claim is pending or threatened in writing to
the effect that Borrower infringes upon, or conflicts with, the asserted rights
of any other Person under any Intellectual Property, and there is no basis for
any such claim (whether pending or threatened, and which, if determined
adversely to Borrower, reasonably could be expected to result in a Material
Adverse Change). No claim is pending or threatened in writing to the effect that
any such Intellectual Property owned or licensed by any Obligor or in which any
Obligor otherwise has the right to use is invalid or unenforceable by such
Obligor, and there is no basis for any such claim (whether or not pending or
threatened, and which, if determined adversely to any Obligor, reasonably could
be expected to result in a Material Adverse Change).
5.16 Year 2000 Compliance. Borrower's internally developed computer
software programs (whether used in Borrower's business or licensed by Borrower
to third parties) effectively process data including data fields requiring
references to dates on and after January 1, 2000 and have been designed not to
experience or produce invalid or incorrect results or abnormal software
operation related to or as a result of the occurrence of such dates. With
respect to computer software licensed by Borrower from third parties, to the
best of Borrower's knowledge, such software effectively processes data including
data fields requiring references to dates on and after January 1, 2000 and has
been designed not to experience or produce invalid or incorrect results or
abnormal software operation related to or as a result of the occurrence of such
dates.
5.17 Copyrights. Except as set forth in Schedule 5.17 attached
hereto, the Applications for Registration to be filed by Borrower under Section
3.3(c), upon issuance of such registrations, will be sufficient to register
copyrights in all computer software programs currently marketed, sold, licensed,
maintained or distributed by Borrower and all computer software pursuant to
which Borrower generates Accounts, including without limitation, each version of
such program that the Borrower makes generally available to its customers and in
which Borrower is entitled to claim a copyright. Each of the Applications for
Registration to be filed by Borrower under Section 3.3(c), when filed, will be
is in proper form for filing with the United States Copyright Office and
Borrower will have made proper application for, and will have paid all fees
necessary to obtain, expedited treatment from the United States Copyright Office
for registration of the copyrights related to such Applications for
Registration.
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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, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern 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 may be requested by Foothill. Borrower also
shall keep a modern inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) not less
frequently than once every two weeks (on dates agreed upon by Borrower and
Foothill), sales journal, collection journal, and credit register since the last
such schedule and a calculation of the Borrowing Base as of such date, (b) on a
monthly basis and, in any event, by no later than the 10th Business Day of each
month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, and (ii) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the 10th Business Day of each month during the term of this
Agreement, a summary aging, by vendor, of Borrower's accounts payable and any
book overdraft, (d) not less frequently than once every two weeks (on dates
agreed in good faith by Borrower and Foothill), notice of all returns, disputes,
or claims, (e) upon request, copies of invoices in connection with the Accounts,
customer statements, credit memos, remittance advices and reports, deposit
slips, shipping and delivery documents in connection with the Accounts and for
Inventory and Equipment acquired by Borrower, purchase orders and invoices, (f)
on a quarterly basis, a detailed list of Borrower's customers, (g) on a monthly
basis, a calculation of the Dilution for the prior month, (h) as soon as
practicable, and in any event on a monthly basis, a list of any software license
agreements, Maintenance Contracts or other agreements giving rise to Accounts of
Borrower which contain proscriptions of, or limitations on, Borrower's right to
assign such agreements; and (i) such other reports as to the Collateral or the
financial condition of Borrower as Foothill may request from time to time.
Original sales invoices evidencing daily sales shall be mailed by Borrower to
each Account Debtor and, upon the occurrence and during the continuance of an
Event of Default, at Foothill's direction the invoices shall indicate on their
face that the Account has been assigned to Foothill and that all payments are to
be made directly to Foothill.
6.3 Financial Statements, Reports, Certificates. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after the
end of each month during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Foothill and certified,
without any qualifications, by such accountants to have been prepared in
accordance with GAAP. Such audited financial statements shall include a balance
39
sheet, profit and loss statement, and statement of cash flow and, if prepared,
such accountants' letter to management. In addition to the financial statements
referred to above, Borrower agrees to deliver internal financial statements
prepared on a consolidating basis so as to present Borrower and each such
related entity separately, which shall be consistent with and reconciled to the
Borrower's audited consolidated financial statements which are required to be
delivered hereunder.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower to its shareholders, and any
other report reasonably requested by Foothill relating to the financial
condition of Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer, vice president of finance or corporate
controller to the effect that: (i) all financial statements delivered or caused
to be delivered to Foothill hereunder 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 fairly present
the financial condition of Borrower, (ii) 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), (iii) for each
month that also is the date on which a financial covenant in Section 7.20 is to
be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes a
Default or Event of Default (or, in the case of clauses (i), (ii), or (iii), 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).
In addition to the financial statements required to be
delivered as set forth above, not later than 30 days prior to the end of each
fiscal year of the Borrower, the Borrower shall deliver to Foothill financial
projections (including projected income statements, balance sheets and
statements of cash flow, all projected on a monthly basis for the succeeding
fiscal year and on an annual basis for each fiscal year thereafter until the
termination of this Agreement and in each case prepared on a consolidated and
stand alone basis), in form and substance reasonably satisfactory to Foothill;
all such financial projections shall be reasonable, shall be prepared on a
reasonable basis and in good faith, and shall be based on assumptions believed
by the Borrower to be reasonable at the time made and from the best information
then available to the Borrower.
6.4 Tax Returns. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
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6.5 Guarantor Reports. Cause any guarantor of any of the Obligations
to deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later than 30
days after the same are required to be filed by law.
6.6 Returns. Cause returns and allowances, if any, 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 Foothill) 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 Foothill consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor.
6.7 Title to Equipment. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
6.8 Maintenance of Equipment. Maintain the Equipment required in the
ordinary course of the business operations of the Borrower in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.
6.9 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 property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Except as
otherwise agreed upon by Foothill in writing, Borrower shall make due and timely
payment or deposit of all such federal, state, and local taxes, assessments, or
contributions required of it by law (except in the case of state and local taxes
for which the failure to so pay or deposit will not result in a Material Adverse
Change), and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
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 Foothill with proof satisfactory to
Foothill indicating that Borrower has made such payments or deposits.
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6.10 Insurance.
(a) At its expense, keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain public liability, product
liability, and property damage insurance relating to Borrower's ownership and
use of the Collateral.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the States of New York and New Jersey.
All hazard insurance and such other insurance as Foothill shall specify, shall
contain a standard form mortgagee endorsement satisfactory to Foothill, showing
Foothill as sole loss payee thereof, and shall contain a waiver of warranties.
Every policy of insurance referred to in this Section 6.10 shall contain an
agreement by the insurer that it will not cancel such policy except after 30
days prior written notice to Foothill and that any loss payable thereunder shall
be payable notwithstanding any act or negligence of Borrower or Foothill which
might, absent such agreement, result in a forfeiture of all or a part of such
insurance payment. Borrower shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums therefor.
(c) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least 30
days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss. Foothill shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill to be applied
at the option of Foothill either to the prepayment of the Obligations without
premium, in such order or manner as Foothill may elect, or shall be disbursed to
Borrower under stage payment terms satisfactory to Foothill for application to
the cost of repairs, replacements, or restorations. All 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 or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, Foothill
shall have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Foothill shall determine.
(d) Borrower shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Foothill is included thereon as named insured
with the loss payable to Foothill under a standard mortgagee endorsement.
Borrower immediately shall notify Foothill whenever such separate insurance is
taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and originals of such policies immediately shall
be provided to Foothill.
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6.11 No Setoffs or Counterclaims. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 Location of Equipment. Keep the Equipment (excluding portable
personal computers and related equipment and trade show materials used by
Borrower's employees in the ordinary course of Borrower's business) only at the
locations identified on Schedule 6.12; provided, however, that Borrower may
amend Schedule 6.12 so long as such amendment occurs by written notice to
Foothill not less than 30 days prior to the date on which the 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 or fixture filings necessary to
perfect and continue perfected Foothill's security interests in such assets and
also provides to Foothill a Collateral Access Agreement.
6.13 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 have and could not reasonably be
expected to have a Material Adverse Change.
6.14 Employee Benefits.
(a) (i) Promptly, and in any event within 10 Business Days
after Borrower or any of its Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
Material Adverse Change, provide to Foothill a written statement of the chief
financial officer of Borrower describing such ERISA Event and any action that is
being taken with respect thereto by Borrower, any such Subsidiary or ERISA
Affiliate, and any action taken or threatened by the IRS, Department of Labor,
or PBGC. Borrower or such Subsidiary, as applicable, shall be deemed to know all
facts known by the administrator of any Benefit Plan of which it is the plan
sponsor, (ii) promptly, and in any event within 3 Business Days after the filing
thereof with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within 3 Business Days
after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, a complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any
43
governmental agency for each Benefit Plan; (iv) all actuarial reports prepared
for the last three plan years for each Benefit Plan; (v) a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by Borrower or any ERISA Affiliate to each
such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to Borrower or any
ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan; and
(vii) the aggregate amount of the most recent annual payments made to former
employees of Borrower or its Subsidiaries under any Retiree Health Plan.
6.15 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.
To the extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16 Preservation of Existence, Etc. Maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary.
6.17 Keeping of Records and Books of Account. Keep, and cause each
of its Subsidiaries to keep, adequate records and books of account, with
complete entries made in accordance with GAAP.
6.18 Maintenance of Properties, Etc. Maintain and preserve all of
its properties which are necessary or useful in the proper conduct of 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 or under which each of it occupies property, so as to prevent any loss
or forfeiture thereof or thereunder.
6.19 Copyright Registrations. No less frequently than semiannually,
but in any event prior to the generation of any Accounts from the marketing,
sale, license or distribution of computer software products or other copyrights
other than those set forth on Schedule 5.17, unless Foothill in Foothill's sole
discretion agrees otherwise, Borrower shall (i) cause all copyrights generated
by Borrower that are not already the subject of a registration with the United
States Copyright Office to be registered with the United States Copyright Office
in a manner sufficient to impart constructive notice of Borrower's ownership
thereof which obligation may be satisfied by the Borrower by filing Applications
for Registration in proper form for filing with the United States Copyright
Office and otherwise making proper application for, and paying all fees
necessary to obtain, expedited treatment from the United States Copyright Office
for registration of the copyrights related to such Applications for
Registration, and (ii) cause to be prepared, executed, and filed with the United
States Copyright Office, a Copyright Security Agreement or supplemental
schedules to a Copyright Security Agreement reflecting the security interest of
Foothill in such new copyrights, which shall be in form and content suitable for
44
registration with the United States Copyright Office so as to give constructive
notice of the transfer by Borrower to Foothill of a security interest in such
copyrights. Foothill agrees to file the Copyright Security Agreement encumbering
specific copyrights with the United States Copyright Office promptly upon
receipt of notice by Borrower of all information necessary to file such
Copyright Security Agreement.
6.20 Further Assurances. Take such action and execute, acknowledge
and deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense such agreements,
instruments or other documents as Foothill may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this Agreement
and the other Loan Documents, (ii) to maintain the validity and effectiveness of
any of the Loan Documents, and (iii) to better assure, convey, grant, assign,
transfer and confirm unto Foothill the rights now or hereafter intended to be
granted to Foothill under this Agreement or any other Loan Document.
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 do any of the following without Foothill's prior written consent:
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, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest financial statements
of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) Indebtedness of Borrower subordinated in right of payment
to Borrower's Obligations under this Agreement pursuant to general terms and
pursuant to a subordination agreement in each case satisfactory to Foothill; and
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then
45
the subordination terms and conditions of the refinancing Indebtedness must be
at least as favorable to Foothill as those applicable to the refinanced
Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets, in each case without the prior written consent of
Foothill which shall not be unreasonably withheld.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of Borrower's properties or assets other than (a) sales of
Inventory to buyers in the ordinary course of Borrower's business as currently
conducted, (b) sales of stock of wholly-owned Subsidiaries of Borrower so long
as no Default or Event of Default shall have occurred and be continuing at the
time of such sale and so long as the proceeds of such sale shall be paid into
the Lockbox Account, and (c) sales of Equipment in any calendar year with a fair
market less than or equal to $40,000, so long as no Default or Event of Default
shall have occurred and be continuing at the time of such sale and so long as
the proceeds of such sale shall be paid into the Lockbox Account.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure
(within the meaning of Section 9-402(7) of the Code), or identity, or add any
new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except (a) by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill, and (b) for letters of support or
keepwell letters for foreign Subsidiaries entered into after the Closing Date so
long as Foothill shall have received a copy of each such letter.
7.7 Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(d) or (e), prepay, redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any third Person, other than the Obligations
in accordance with this Agreement, and
46
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c) or (e).
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control without the prior written consent of Foothill
which shall not be unreasonably withheld.
7.10 RESERVED.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition.
7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person except (i) loans and advances to employees of Borrower in
an aggregate amount not to exceed $ 250,000 at any time outstanding so long as
at the time of making any such loan or advance no Default or Event of Default
shall have occurred and be continuing, and (ii) loans and advances by Borrower
made after the Closing Date to its wholly-owned Subsidiaries (and Subsidiaries
in which Borrower owns all but director qualifying shares or a nominal ownership
interest required to be held by other Persons due to foreign law ownership
requirements) not to exceed $3,000,000 in the aggregate over the term of this
Agreement, so long as at the time of making any such loan or advance no Default
or Event of Default shall have occurred and be continuing, or (c) the
acquisition of all or substantially all of the properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
7.16 Compensation. Increase the aggregate annual fee or aggregate
per-meeting fees paid to directors during any year to an amount greater than
$75,000 in 1998 or by more than 15% over the prior year for any year thereafter;
pay or accrue total cash compensation (excluding performance based bonus
compensation), during any year, to existing officers and senior
47
management employees in an aggregate amount in excess of 115% of that paid or
accrued in the prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances and the Term
Loan made hereunder for any purpose other than (i) on the Closing Date, (y) to
repay in full the outstanding principal, accrued interest, and accrued fees and
expenses (if any) owing to Existing Lender, and (z) to pay transactional costs
and expenses incurred in connection with this Agreement, and (ii) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes.
7.18 Change in Location of Chief Executive Office; Equipment with
Bailees. Relocate its chief executive office to a new location without providing
30 days prior written notification thereof to Foothill and so long as, at the
time of such written notification, Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a Collateral Access Agreement with
respect to such new location. The Equipment shall not at any time now or
hereafter be stored with a bailee, warehouseman, or similar party without
Foothill's prior written consent.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any
48
Subsidiary of Borrower or any ERISA Affiliate is required to provide security to
such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $375,000.
7.20 Financial Covenants. Fail to maintain:
(a) Operating Income. Operating Income of at least the
following amounts, measured on a cumulative basis for the period from the
beginning of a calendar year to each calendar quarter end set forth below:
3/31/98 ($5,500,000)
6/30/98 ($7,375,000)
9/30/98 ($7,425,000)
12/31/98 ($5,090,000)
provided that, thereafter, upon receipt of the financial projections required to
be delivered to Foothill pursuant to Section 6.3 (fourth paragraph) hereof for
each fiscal year, the Borrower and Foothill shall negotiate in good faith to
determine the minimum Operating Income as of the end of each fiscal quarter
covered by such financial projections and, in the event that the Borrower and
Foothill are unable to agree upon the amounts of such Operating Income on or
before the date that is 30 days after the date that Foothill has received such
projections, the Operating Income at the end of each fiscal quarter of the
fiscal year covered by such financial projections shall not be less than the
amount set forth for the corresponding fiscal quarter end set forth above plus
10% of such amount.
(b) Tangible Net Worth. Tangible Net Worth of at least the
following amounts, measured on a fiscal quarter-end basis, as of the following
dates:
3/31/98 ($6,070,000)
6/30/98 ($7,500,000)
9/30/98 ($7,140,000)
12/31/98 ($4,400,000)
provided that, thereafter, upon receipt of the financial projections required to
be delivered to Foothill pursuant to Section 6.3 (fourth paragraph) hereof for
each fiscal year, the Borrower and Foothill shall negotiate in good faith to
determine the minimum Tangible Net Worth as of the end of each fiscal quarter
covered by such financial projections and, in the event that the Borrower and
Foothill are unable to agree upon the amounts of such Tangible Net Worth on or
before the date that is 30 days after the date that Foothill has received such
projections, the
49
Tangible Net Worth at the end of each fiscal quarter of the fiscal year covered
by such financial projections shall not be less than the amount set forth for
the corresponding quarter end set forth above plus 10% of such amount.
7.21 Capital Expenditures. Make capital expenditures in any fiscal
year in excess of $4,000,000.
7.22 Existing Letters of Credit. Extend any letters of credit issued
by or through the Existing L/C Bank or allow or cause the Existing L/C Bank to
issue any new or replacement letters of credit on the Borrower's behalf.
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, any portion of the Obligations (whether of principal, interest,
fees and charges due Foothill, reimbursement of Foothill Expenses, or other
amounts constituting Obligations); provided, however, that in the case of
Overadvances that are caused by the charging of principal on the Term Loan,
interest, fees, or Foothill Expenses to the Loan Account, such event shall not
constitute an Event of Default if, within 5 Business Days of incurring such
Overadvance, Borrower repays, or otherwise eliminates, such Overadvance;
8.2 (a) If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.4
(Tax Returns), 6.7 (Title to Equipment), 6.12 (Location of Equipment), 6.13
(Compliance with Laws), 6.14 (Employee Benefits), 6.15 (Leases) of this
Agreement and such failure continues for a period of 5 Business Days; (b) if
Borrower fails or neglects to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Sections 6.1 (Accounting System)
or 6.8 (Maintenance of Equipment) of this Agreement and such failure continues
for a period of 15 Business 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, or in any of the other Loan Documents
(giving effect to any grace periods, cure periods, or required notices, if any,
expressly provided for in such Loan Documents); in each case, other than any
such term, provision, condition, covenant, or 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 Section exists, even if such
failure or neglect is not yet an Event of Default by virtue of the existence of
a grace or cure period or the pre-condition of the giving of a notice, Foothill
shall not be required during such period to make Advances or the Term Loan to
Borrower or issue Letters of Credit for the account of Borrower;
8.3 If there is a Material Adverse Change;
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8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the 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,
Foothill shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof; provided that, if the aggregate
amount claimed with respect to any of the foregoing is less than $200,000, an
Event of Default shall not occur under this Section 8.8 if such claims are the
subject of a Permitted Protest and the Lien, levy or assessment is released,
discharged or satisfied;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
8.11 If Borrower 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;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn;
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8.13 If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding;
8.14 This Agreement or any security document after delivery thereof
pursuant hereto, 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 any Collateral covered hereby or
thereby; or
8.15 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 the Borrower, or a proceeding shall be commenced
by the Borrower, or by any Governmental Authority or other regulatory body
having jurisdiction over the Borrower, seeking to establish the invalidity or
unenforceability thereof, or the Borrower shall deny that the Borrower has any
liability or obligation purported to be created under any Loan Document.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests 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 Foothill considers advisable, and in
such cases, Foothill will credit Borrower's Loan Account with only the net
amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security
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interests in the Collateral. Borrower agrees to assemble the Collateral if
Foothill so requires, and to make the Collateral available to Foothill as
Foothill may designate. Borrower authorizes Foothill to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or Lien that in Foothill's determination appears to conflict with its
security interests and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned or leased premises, Borrower hereby
grants Foothill a license to enter into possession of such premises and to
occupy the same, without charge, for up to 120 days in order to exercise any of
Foothill'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 Section 9-505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Lockbox
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Foothill is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, servicemarks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least 10 days before
the date fixed for the sale, or at least 10 days before the date on or after
which the private sale or other disposition is to be made;
53
no notice needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrower claiming an interest in the Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale;
and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill 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, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill 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 Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described in Section 6.10, and take any
action with respect to such policies as Foothill deems prudent. Any such amounts
paid by Foothill shall constitute Foothill Expenses. Any such payments made by
Foothill shall not constitute an agreement by Foothill to make similar payments
in the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. 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 accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
54
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9-207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and
hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). 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. Notwithstanding anything herein to the contrary, no Participant shall be
entitled to receive any greater amount hereunder than Foothill would have been
entitled to receive in respect of the amount of the participation transferred by
Foothill to such Participant had no such transfer occurred. This provision shall
survive the termination of this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
If to Borrower: COMPUTRON SOFTWARE, INC.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which PROSKAUER ROSE LLP
copies shall not be a ▇▇▇▇ ▇▇▇▇▇▇▇▇
prerequisite to the ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
giving of any notice Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
hereunder) to: Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
55
If to Foothill: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
copies shall not be a ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
prerequisite to the ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
giving of any notice Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
hereunder) to: Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9-504 or 9-505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9-504 or 9-505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANY 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 NEW YORK. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON
56
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS
THAT IT 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. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that, except to the extent Foothill has given its consent
pursuant to Section 7.9, Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participations in all or any part
of, or any interest in Foothill's rights and benefits hereunder, provided that
if no Default or Event of Default shall have occurred and be continuing,
Foothill shall not assign its rights hereunder without the prior written consent
of Borrower (which shall not be unreasonably withheld or delayed) unless such
assignment is in connection with a sale of all or substantially all of the
assets of Foothill (in which case no such consent shall be required). In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
57
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill 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 fairly
accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended by a
writing signed by both Foothill and Borrower.
15.7 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, 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.
15.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill 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 Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 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.
15.10 Brokers Fees. Borrower shall be solely responsible for any and
all brokerage commissions, finders fees or similar compensation payable in
connection with this Agreement and the transactions contemplated hereby, and
Borrower agrees to indemnify and hold harmless Foothill and its officers,
directors, employees, agents and representatives from any and all such
commissions, fees and similar compensation.
58
15.11 Article 2B Opt-Out. Borrower and Foothill hereby agree that,
if Article 2B of the Code (governing licenses of information) shall be enacted
in any relevant jurisdiction, this Agreement and the transactions evidenced
hereby shall not be covered by the provisions of such Article 2B and shall
instead be governed by Article 9 of the Code.
15.12 Confidentiality. Foothill agrees to keep the information
obtained by it pursuant hereto identified as confidential in writing at the time
of delivery to Foothill confidential in accordance with Foothill's customary
practices and agrees that it will only use such information in connection with
the transactions contemplated by this Agreement and not disclose any of such
information other than (a) to Foothill's directors, employees, representatives,
attorneys, accountants, agents or Affiliates who are advised of the confidential
nature of such information, (b) to the extent such information presently is or
hereafter becomes available to Foothill on a non-confidential basis from any
source or such information that is in the public domain at the time of
disclosure, (c) to the extent disclosure is required by law, regulation,
subpoena or judicial order or process or requested or required by regulators or
auditors or any administrative body or commission to whose jurisdiction Foothill
may be subject, (d) to transferees, assignees or participants or potential
transferees, assignees or Participants of Foothill who agree to be bound by the
provisions of this Section 15.12, (e) to the extent required in connection with
any litigation between Borrower and Foothill with respect to this Agreement or
any other Loan Document, (f) in connection with the exercise of any remedy
hereunder or under the other Loan Documents, or (g) with Borrower's prior
written consent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Los Angeles, California.
COMPUTRON SOFTWARE, INC.
a Delaware corporation
By ___________________________
Title:________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By ___________________________
Title:________________________
