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EXHIBIT 10.76
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LOAN AGREEMENT
BY AND BETWEEN
FUTURELINK EUROPE LIMITED
AS SUBSIDIARY BORROWER,
AND
FOOTHILL CAPITAL CORPORATION
AS LENDER
DATED AS OF DECEMBER 13, 2000
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TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION............................................ 1
1.1 Definitions...................................................... 1
1.2 Accounting Terms................................................. 22
1.3 Code............................................................. 22
1.4 Construction..................................................... 22
1.5 Schedules and Exhibits........................................... 23
2. LOAN AND TERMS OF PAYMENT............................................... 23
2.1 Revolver Advances................................................ 23
2.2 [intentionally omitted].......................................... 24
2.3 Borrowing Procedures and Settlements............................. 24
2.4 Payments......................................................... 25
2.5 Overadvances..................................................... 26
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations..................................................... 26
2.7 Cash Management.................................................. 28
2.8 Crediting Payments; Float Charge................................. 29
2.9 Designated Account............................................... 29
2.10 Maintenance of Loan Account; Statements of Obligations........... 30
2.11 Fees............................................................. 30
2.12 Letters of Credit................................................ 30
2.13 [intentionally omitted].......................................... 33
2.14 Capital Requirements............................................. 33
3. CONDITIONS; TERM OF AGREEMENT........................................... 34
3.1 Conditions Precedent to the Initial Extension of Credit.......... 34
3.2 Conditions Subsequent to the Initial Extension of Credit......... 36
3.3 Conditions Precedent to all Extensions of Credit................. 37
3.4 Term............................................................. 37
3.5 Effect of Termination............................................ 37
3.6 Early Termination by Subsidiary Borrower......................... 38
4. CREATION OF SECURITY INTEREST........................................... 38
4.1 Grant of Security Interest....................................... 38
4.2 Negotiable Collateral................ERROR! BOOKMARK NOT DEFINED.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral.......................... ERROR! BOOKMARK NOT DEFINED.
4.4 Delivery of Additional Documentation Required.................... 38
4.5 Power of Attorney................................................ 39
4.6 Right to Inspect................................................. 39
4.7 Control Agreements............................................... 39
5. REPRESENTATIONS AND WARRANTIES.......................................... 40
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5.1 No Encumbrances.................................................. 40
5.2 Eligible Accounts................................................ 40
5.3 [intentionally omitted].......................................... 41
5.4 Equipment........................................................ 41
5.5 Location of Inventory and Equipment.............................. 41
5.6 Inventory Records................................................ 41
5.7 Location of Chief Executive Office; FEIN......................... 41
5.8 Due Organization and Qualification; Subsidiaries................. 41
5.9 Due Authorization; No Conflict................................... 42
5.10 Litigation....................................................... 43
5.11 No Material Adverse Change....................................... 43
5.12 Fraudulent Transfer.............................................. 44
5.13 Employee Benefits................................................ 44
5.14 Environmental Condition.......................................... 44
5.15 Brokerage Fees................................................... 44
5.16 Intellectual Property............................................ 44
5.17 Leases........................................................... 44
5.18 DDAs............................................................. 45
5.19 Complete Disclosure.............................................. 45
5.20 Indebtedness..................................................... 45
5.21 Review and Approval of Parent Loan Agreement..................... 45
6. AFFIRMATIVE COVENANTS................................................... 45
6.1 Accounting System................................................ 45
6.2 Collateral Reporting............................................. 45
6.3 Financial Statements, Reports, Certificates...................... 47
6.4 [Intentionally Omitted].......................................... 49
6.5 Return........................................................... 49
6.6 Maintenance of Properties........................................ 50
6.7 Taxes............................................................ 50
6.8 Insurance........................................................ 50
6.9 Location of Inventory and Equipment.............................. 51
6.10 Compliance with Laws............................................. 51
6.11 Leases........................................................... 51
6.12 Brokerage Commissions............................................ 51
6.13 Existence........................................................ 52
6.14 Environmental.................................................... 52
6.15 Disclosure Updates............................................... 52
6.16 Compliance with Covenants of Parent Loan Agreement............... 52
7. NEGATIVE COVENANTS...................................................... 52
7.1 Indebtedness..................................................... 52
7.2 Liens............................................................ 53
7.3 Restrictions on Fundamental Changes.............................. 53
7.4 Disposal of Assets............................................... 53
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7.5 Change Name...................................................... 54
7.6 Guarantee........................................................ 54
7.7 Nature of Business............................................... 54
7.8 Prepayments and Amendments....................................... 54
7.9 Change of Control................................................ 54
7.10 Consignments..................................................... 54
7.11 Distributions.................................................... 54
7.12 Accounting Methods............................................... 54
7.13 Investments...................................................... 55
7.14 Transactions with Affiliates..................................... 55
7.15 Suspension....................................................... 55
7.16 [Intentionally Omitted].......................................... 55
7.17 Use of Proceeds.................................................. 55
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees........................................... 55
7.19 Securities Accounts.............................................. 56
7.20 Compliance with Covenants of Parent Loan Agreement............... 56
8. EVENTS OF DEFAULT....................................................... 56
9. THE LENDER'S RIGHTS AND REMEDIES........................................ 58
9.1 Rights and Remedies.............................................. 58
9.2 Remedies Cumulative.............................................. 59
10. TAXES AND EXPENSES...................................................... 59
11. WAIVERS; INDEMNIFICATION................................................ 60
11.1 Demand; Protest.................................................. 60
11.2 Lender's Liability for Collateral................................ 60
11.3 Indemnification.................................................. 60
12. NOTICES................................................................. 61
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.............................. 62
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.............................. 63
14.1 Assignments and Participations................................... 63
14.2 Successors....................................................... 65
15. AMENDMENTS; WAIVERS..................................................... 65
15.1 Amendments and Waivers........................................... 65
15.2 No Waivers; Cumulative Remedies.................................. 65
16. GENERAL PROVISIONS...................................................... 65
16.1 Effectiveness.................................................... 65
16.2 Section Headings................................................. 65
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16.3 Interpretation................................................... 66
16.4 Severability of Provisions....................................... 66
16.5 Withholding Taxes................................................ 66
16.6 Amendments in Writing............................................ 67
16.7 Counterparts; Telefacsimile Execution............................ 67
16.8 Revival and Reinstatement of Obligations......................... 67
16.9 Integration...................................................... 67
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EXHIBITS AND SCHEDULES
Exhibit S-1 Form of Subsidiary Borrower Borrowing Base Certificate
Schedule P-1 Permitted Liens
Schedule 2.7(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Subsidiary Borrower
Schedule 5.8(c) Capitalization of Subsidiary Borrower's Subsidiaries
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), is entered into as of
December 13, 2000, by and between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Lender") and FUTURELINK EUROPE LIMITED, a company organized under
the laws of England and Wales ("Subsidiary Borrower") and is the "UK Loan
Agreement" as that term is used in the below referenced Parent Loan Agreement.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"Accounts" means all of Subsidiary Borrower's now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"Acquisition" means any purchase or other acquisition by Parent or
its Subsidiaries of the Stock of any other Person or all or substantially all of
the assets of any other Person.
"Additional Documents" has the meaning set forth in Section 4.4.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
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"ASP Dilution" means, as of any date of determination, a percentage,
based upon the experience of the immediately prior 365 days, that is the result
of dividing (a) the Dollar amount of bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts arising from the Subsidiary Borrower's provision of services as an
application services provider during such period, by (b) the Dollar amount of
Subsidiary Borrower's Collections with respect to Accounts arising from the
Subsidiary Borrower's provision of services as an application services provider
during such period (excluding extraordinary items) plus the Dollar amount of
clause (a).
"ASP Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible ASP Accounts by
one percentage point for each percentage point by which ASP Dilution is in
excess of 5.0%.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of
Subsidiary Borrower.
"Availability" means, as of any date of determination, if such date
is a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Subsidiary Borrower is entitled to borrow as Subsidiary Borrower
Advances under Section 2.1 (after giving effect to all then outstanding
Obligations and all sublimits and reserves applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as in
effect from time to time, or any foreign equivalent thereof, including the
English Insolvency Act of 1986 as in effect from time to time in the United
Kingdom.
"Base Rate" means, the rate of interest announced within Xxxxx Fargo
at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Xxxxx Fargo may designate.
"Base Rate Margin" means, as of any date of determination, the
following margin, to be effective as of the first day of the calendar month
immediately following the date of determination, with such determination to be
made based on the most recent report submitted to Lender pursuant to Section
6.2(g):
(a) if the average of the Qualified Cash Amount for each of the days
in a month is greater than $10,000,000 and the Qualified Cash Amount is greater
than $10,000,000 on the last Business Day of such month, zero, and
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(b) if the average Qualified Cash Amount for each of the days in a
month is equal to or less than $10,000,000 or the Qualified Cash Amount is equal
to or less than $10,000,000 on the last Business Day of such month, 1.50
percentage points;
provided, however, the failure of the Borrowers to deliver the
report of the Qualified Cash Amount by the date required hereunder (after giving
effect to any applicable grace period) automatically shall cause the Base Rate
Margin to be the highest rate set forth above, effective as of the first day of
the calendar month immediately following the date on which the delivery of the
report was otherwise required; and provided further, however, that for the
period from the Closing Date through the last day of the calendar month during
which the Closing Date occurs the Base Rate Margin shall be zero.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Subsidiary Borrower or an ERISA Affiliate of
Subsidiary Borrower has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years, or the retirement, pension or health benefit plans
(or schemes) maintained or contributed to or required to be contributed to by
Subsidiary Borrower and established in the United Kingdom, including, without
limitation, the Kerridge Computer Company Pension Scheme and the FutureLink
Europe Limited Personal Pension Scheme.
"Board of Directors" means the board of directors of Subsidiary
Borrower or any committee thereof duly authorized to act on behalf thereof.
"Books" means all of Subsidiary Borrower's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of its Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).
"Borrowers" means Parent and each of its Subsidiaries signatory to
the Parent Loan Agreement, and "Borrower" means any one of them.
"Borrowing" means a borrowing hereunder of a Subsidiary Borrower
Advance.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Canadian Obligors" means 3045207 Nova Scotia Company, a company
organized under the laws of Nova Scotia, 1423280 Ontario Inc., a company
organized under the laws of Ontario, and FutureLink Canada Corp., a company
organized under the laws of Ontario.
"Canadian Security Documents" is defined in the Parent Loan
Agreement.
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"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Xxxxx'x,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Xxxxx'x, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Xxxxx'x, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Bank" has the meaning set forth in Section 2.7(a).
"Cash Management Account" has the meaning set forth in Section
2.7(a).
"Cash Management Agreements" means those certain cash management
service agreements, in form and substance satisfactory to Lender, each of which
is among Subsidiary Borrower, Lender, and one of the Cash Management Banks.
"CFC" means a controlled foreign corporation (as that term is
defined in the IRC) organized in connection with the consummation of a Permitted
Acquisition.
"Change of Control" means (a) Parent ceases to directly own and
control 51% of the outstanding capital Stock of UK Holding Company, (b) a
majority of the members of the Board of Directors do not constitute Continuing
Directors, (c) UK Holding Company ceases to directly own and control 100% of the
outstanding capital Stock of Subsidiary Borrower, or (d) the occurrence of a
Change of Control (as defined in the Parent Loan Agreement).
"Closing Date" means the date of the making of the initial
Subsidiary Borrower Advance (or other extension of credit) hereunder or the date
on which Lender sends Subsidiary Borrower a written notice that each of the
conditions precedent set forth in Section 3.1 either have been satisfied or have
been waived.
"Code" means the California Uniform Commercial Code, as in effect
from time to time.
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"Collateral" means all of Subsidiary Borrower's now owned or
hereafter acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property,
(i) money or other assets of Subsidiary Borrower that now or
hereafter come into the possession, custody, or control of Lender, and
(j) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance satisfactory to Lender.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Subsidiary Borrower.
"Companies Act" means the Companies Act of 1985 of England and
Wales, as amended.
"Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Subsidiary Borrower on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual
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or threatened election contest relating to the election of the directors (or
comparable managers) of Subsidiary Borrower (as such terms are used in Rule
14a-11 under the Exchange Act) and whose initial assumption of office resulted
from such contest or the settlement thereof.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by Subsidiary Borrower, Lender,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account.
"copyright" shall have the meaning ascribed to such term in the
United States Copyright Act of 1976, as amended, and includes unregistered
copyrights.
"Customer Deposit Reserve" means, as of any date of determination, a
reserve for deposits received by Subsidiary Borrower from its customers from
time to time for services to be rendered or goods to be delivered in an amount
as shall be determined by Lender in its Permitted Discretion from time to time
on or after the Closing Date.
"Daily Balance" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained
by Subsidiary Borrower.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 0000000 sort code 60-00-04
of Subsidiary Borrower maintained with the Designated Account Bank, or such
other Dollar deposit account of Subsidiary Borrower that has been designated as
such, in writing, by Subsidiary Borrower to Lender.
"Designated Account Bank" means National Westminster Bank, Plc of
West Berkshire CBC, X.X. Xxx 0000, Xxxxxx Xxxxx, Xxxxxxx, XX00 0XX.
"Dilution" means, as of any date of determination, a percentage,
based upon the experience of the immediately prior 365 days, that is the result
of dividing (a) the Dollar amount of bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts (other than such Accounts arising from Subsidiary Borrower's provision
of services as an application services provider) during such period, by (b) the
Dollar amount of Subsidiary Borrower's Collections with respect to Accounts
(other than such Accounts arising from Subsidiary Borrower's provision of
services as an application services provider) during such period (excluding
extraordinary items) plus the Dollar amount of clause (a).
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"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible UK Accounts by one
percentage point for each percentage point by which Dilution is in excess of
5.0%.
"Disbursement Letter" means an instructional letter executed and
delivered by Subsidiary Borrower to Lender regarding the extensions of credit to
be made on the Closing Date, the form and substance of which is satisfactory to
Lender.
"Dollars" or "$" means United States dollars.
"Domestic Excess Availability" means "Excess Availability" (as
defined in the Parent Loan Agreement.
"Domestic Maximum Revolver Amount" means the "Maximum Revolver
Amount" (as defined in the Parent Loan Agreement).
"Domestic Revolver Usage" means, as of any date of determination,
the "Revolver Usage" (as defined in the Parent Loan Agreement).
"Eligible Accounts" means Eligible ASP Accounts and Eligible UK
Accounts.
"Eligible ASP Accounts" means any Account created by Subsidiary
Borrower as to which each of the following is applicable (a) such Account does
not qualify as an Eligible UK Account solely because the services giving rise to
such Account have not been performed by Subsidiary Borrower as of the original
invoice date, (b) Lender has a perfected first priority security interest in
such Account, (c) such Account arose from Subsidiary Borrower's anticipated
provision of services as an application service provider, wherein Subsidiary
Borrower hosts the applicable Account Debtor's applications from Subsidiary
Borrower's data center, and (d) the period during which such Account shall
become an Eligible ASP Account shall commence on the first Business Day of the
month immediately following the original invoice date and shall no longer be
deemed an Eligible ASP Account on the date that is 60 days immediately following
the date that the relevant Account became an Eligible ASP Account.
"Eligible UK Accounts" means those Accounts created by Subsidiary
Borrower in the ordinary course of its business, that arise out of its sale of
goods or rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Subsidiary Borrowers under the
Subsidiary Loan Documents, and that are not excluded as ineligible by virtue of
one or more of the criteria set forth below; provided, however, that such
criteria may be fixed and revised from time to time by Lender in Lender's
Permitted Discretion to address the results of any audit performed by Lender
from time to time after the Closing Date. Eligible UK Accounts shall not include
the following:
(a) Accounts that the Account Debtor has failed to pay within 90
days of original invoice date or Accounts with selling terms of more than 30
days; provided, however, upon written request from Subsidiary Borrower to extend
the foregoing 90 day
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period to up to 120 days in the case of highly creditworthy Account Debtors,
Lender agrees to consider such request and approve or deny such request based
upon its Permitted Discretion,
(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 Subsidiary Borrower,
(d) Accounts arising in a transaction wherein goods are placed
on consignment or are sold pursuant to a guaranteed sale, a sale or return, a
sale on approval, a xxxx and hold, or any other terms by reason of which the
payment by the Account Debtor may be conditional,
(e) Accounts that are not payable in a Specified Currency,
(f) Accounts with respect to which the Account Debtor either (i)
does not maintain its chief executive office in a Specified Country, or (ii) is
not organized under the laws of a Specified Country or any political subdivision
thereof, or (iii) is the government of any country or sovereign state (other
than that of the United Kingdom), or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Lender (as to form,
substance, and issuer or domestic confirming bank) that has been delivered to
Lender and is directly drawable by Lender, or (z) the Account is covered by
credit insurance in form, substance, and amount, and by an insurer, satisfactory
to Lender,
(g) [intentionally omitted],
(h) Accounts with respect to which the Account Debtor is a
creditor of Subsidiary Borrower, has or has asserted a right of setoff, has
disputed its liability, or has made any claim with respect to its obligation to
pay the Account, to the extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Subsidiary 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, in the case of Computacenter, the foregoing
percentage shall be 20% before the excess would be deemed ineligible,
(j) Accounts with respect to which the Account Debtor is subject
to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to
which Subsidiary Borrower has received notice of an imminent Insolvency
Proceeding or a material impairment of the financial condition of such Account
Debtor,
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(k) [intentionally omitted],
(l) Accounts, the collection of which, Lender, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Lender's Lien,
(n) Accounts with respect to which (i) the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or
(o) Accounts that represent the right to receive progress
payments or other advance xxxxxxxx that are due prior to the completion of
performance by Subsidiary Borrower of the subject contract for goods or services
(including any service or maintenance Accounts that are billed in advance of the
completion of the rendition of the subject services; provided, however, that
solely with respect to a maintenance Account that otherwise fully complies with
the criteria for eligibility as an Eligible UK Account and as to which
Subsidiary Borrower has completed performance for the period set forth on the
relevant invoice, any such Account shall be deemed an Eligible UK Account).
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Subsidiary Borrower or any predecessor in interest, (b) from
adjoining properties or businesses, or (c) from or onto any facilities which
received Hazardous Materials generated by Subsidiary Borrower or any predecessor
in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Subsidiary Borrower,
relating to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC Section
1251 et seq; the Toxic Substances Control Act, 15 USC, Section 2601 et seq; the
Clean Air Act, 42 USC Section 7401 et seq.; the Safe Drinking Water Act, 42 USC.
Section 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. Section 2701 et
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
USC. Section 11001 et seq.; the Hazardous Material Transportation Act, 49 USC
Section 1801 et seq.; and the Occupational Safety and Health Act, 29 USC.
Section 651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
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"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means all of Subsidiary Borrower's now owned or
hereafter acquired right, title, and interest with respect to equipment,
machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles
(including motor vehicles), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Subsidiary Borrower under IRC Section 414(b), (b) any trade or business subject
to ERISA whose employees are treated as employed by the same employer as the
employees of a Subsidiary Borrower under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which a
Subsidiary Borrower is a member under IRC Section 414(m), or (d) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject
to ERISA that is a party to an arrangement with a Subsidiary Borrower and whose
employees are aggregated with the employees of a Subsidiary Borrower under IRC
Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Subsidiary Borrower aged in excess of
their historical levels with respect thereto and all book overdrafts in excess
of their historical practices with respect thereto, in each case as determined
by Lender in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in
effect from time to time.
"Exchange Rate" means and refers to the nominal rate of exchange
(vis-a-vis Dollars) for a currency other than Dollars published in the Wall
Street Journal (Western Edition) on the date of determination (which shall be a
Business Day on which the Wall
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Xxxxxx Journal (Western Edition) is published), expressed as the number of units
of such other currency per one Dollar.
"Existing Lender" means National Westminster Bank, Plc.
"FEIN" means Federal Employer Identification Number.
"Foreign Exchange Reserve" means, as of any date of determination, a
reserve for foreign currency exchange rate risk with respect to the Eligible
Accounts in such amount as shall be determined by Lender in its Permitted
Discretion from time to time on or after the Closing Date.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of Subsidiary Borrower's now owned
or hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
memorandum and articles of association, the certificate or articles of
incorporation, by-laws, or other organizational documents of such Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Guarantors" means, collectively, each of the Borrowers, Canadian
Obligors, and the UK Holding Company, and "Guarantor" means any one of them.
"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
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xxxxxxxx", (x) 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 Subsidiary Borrower for
borrowed money, (b) all obligations of Subsidiary Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of Subsidiary Borrower in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations of Subsidiary Borrower under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of Subsidiary Borrower,
irrespective of whether such obligation or liability is assumed, (e) all
obligations of Subsidiary Borrower for the deferred purchase price of assets
(other than trade debt incurred in the ordinary course of Subsidiary Borrower's
business and repayable in accordance with Subsidiary Borrower's customary trade
practices), and (f) any obligation of Subsidiary Borrower guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to Subsidiary Borrower) any
obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state,
federal, or foreign bankruptcy or insolvency law, or the appointment of a
receiver, administrative receiver or liquidator with respect to a Person or any
of its assets, 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.
"Intellectual Property" means all patents, patent applications,
trademarks, trademark applications, tradenames, tradedress, copyrights,
copyright registrations, technology, know-how and processes used in or necessary
for the conduct of the business of any Person as currently conducted that are
material to the condition (financial or otherwise), business, or operations of
such Person.
"Inventory" means all of Subsidiary Borrower's now owned or
hereafter acquired right, title, and interest with respect to inventory,
including goods held for sale or lease or to be furnished under a contract of
service, goods that are leased by Subsidiary Borrower as lessor, goods that are
furnished by Subsidiary Borrower under a contract of
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service, and raw materials, work in process, or materials used or consumed in
Subsidiary Borrower's business.
"Investment" means, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of Subsidiary Borrower's now owned
or hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from
time to time.
"L/C" has the meaning set forth in Section 2.12(a).
"L/C Disbursement" means a payment made by Lender pursuant to a
Letter of Credit.
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
"Lender" has the meaning set forth in the preamble to this
Agreement.
"Lender's Account" means an account at a bank designated by Lender
from time to time as the account into which Subsidiary Borrower shall make all
payments to Lender under this Agreement and the other Subsidiary Loan Documents;
unless and until Lender notifies Subsidiary Borrower, Lender's Account shall be
that certain deposit account bearing account number 323-266193 and maintained by
Lender with The Chase Manhattan Bank, 4 New York Plaza, 15th Floor, New York,
New York 10004, ABA #000000000.
"Lender's Liens" means the Liens granted by Subsidiary Borrower to
Lender under this Agreement or the other Subsidiary Loan Documents.
"Lender Expenses" means all (a) costs or expenses (including taxes,
and insurance premiums) required to be paid by Subsidiary Borrower under any of
the Subsidiary Loan Documents that are paid or incurred by Lender, (b)
reasonable fees or charges paid or incurred by Lender in connection with
Lender's transactions with Subsidiary 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, the
department of motor vehicles, or any foreign equivalent thereof), filing,
recording,
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publication, appraisal (including periodic Collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) costs and expenses
incurred by Lender in the disbursement of funds to or for the account of
Subsidiary Borrower (by wire transfer or otherwise), (d) charges paid or
incurred by Lender resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by Lender to correct any default or enforce any
provision of the Subsidiary Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Lender related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by Lender in enforcing or defending the Subsidiary Loan Documents or
in connection with the transactions contemplated by the Subsidiary Loan
Documents or Lender's relationship with Subsidiary Borrower or any guarantor of
the Obligations, (h) Lender's reasonable fees and expenses (including attorneys
fees) incurred (i) in advising, structuring, drafting, reviewing, administering,
or amending the Subsidiary Loan Documents, or (ii) in obtaining any tax
clearances, reports, certifications, or other documentation from the Internal
Revenue Service, Inland Revenue, or any other relevant taxing authority in
connection with the transactions and undertakings contemplated by this
Agreement, and (i) Lender's reasonable fees and expenses (including attorneys
fees) incurred in terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning Subsidiary Borrower or in exercising rights or remedies
under the Subsidiary Loan Documents), or defending the Subsidiary Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"Lender-Related Person" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit.
"Lien" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, debenture,
fixed or floating charge, assignment by way of security, conditional sale or
trust receipt, or from a lease, consignment, or bailment for security purposes
and also including reservations, exceptions, encroachments,
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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" is defined in the Parent Loan 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 Subsidiary Borrower, (b) a material
impairment of Subsidiary Borrower's ability to perform its obligations under the
Subsidiary Loan Documents to which it is a party or of Lender's ability to
enforce the Obligations or realize upon the Collateral, (c) a material
impairment of the enforceability or priority of the Lender's Liens with respect
to the Collateral as a result of an action or failure to act on the part of
Subsidiary Borrower, or (d) a Material Adverse Change (as defined in the Parent
Loan Agreement).
"Maximum Subsidiary Revolver Amount" means the result of (a)
$5,000,000, minus (b) the amount by which the Domestic Revolver Usage exceeds
$20,000,000 (or, if clause (a) of the definition of Domestic Maximum Revolver
Amount has been increased to $30,000,000, the amount by which the Domestic
Revolver Usage exceeds $25,000,000).
"Negotiable Collateral" means all of Subsidiary Borrower's now owned
and hereafter acquired right, title, and interest with respect to letters of
credit, letter of credit rights, instruments, promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.
"Obligations" means all loans, Subsidiary Borrower Advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), contingent reimbursement obligations with
respect to outstanding Letters of Credit, premiums, liabilities (including all
amounts charged to Subsidiary Borrower's Loan Account pursuant hereto),
obligations, fees, charges, costs, Lender Expenses (including any fees or
expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties of any kind and
description owing by Subsidiary Borrower to Lender pursuant to or evidenced by
the Subsidiary Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all interest not paid when due
and all Lender Expenses that Subsidiary Borrower is required to pay or reimburse
by the Subsidiary Loan Documents, by law, or otherwise. Any reference in this
Agreement or in the Subsidiary Loan Documents to the Obligations shall include
all amendments, changes, extensions, modifications, renewals replacements,
substitutions, and supplements, thereto and thereof, as applicable, both prior
and subsequent to any Insolvency Proceeding.
"Originating Lender" has the meaning set forth in Section 14.1(d).
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"Overadvance" has the meaning set forth in Section 2.5.
"Parent" means FutureLink Corp., a Delaware corporation.
"Parent Loan Agreement" means that certain Loan and Security
Agreement, dated as of November 16, 2000, among Parent, certain of Parent's
Subsidiaries identified on the signature pages thereof, and Lender.
"Participant" has the meaning set forth in Section 14.1(d).
"Payoff Letter" means a letter, in form and substance satisfactory
to Lender, from Existing Lender to Lender respecting the amount necessary to
repay in full all of the obligations of Subsidiary Borrower owing to Existing
Lender and obtain a release of all of the Liens existing in favor of Existing
Lender in and to the assets of Subsidiary Borrower.
"Permitted Acquisition" means a Permitted Cash Acquisition or a
Permitted Non-Cash Acquisition, as the context requires.
"Permitted Cash Acquisition" means any Acquisition as to which each
of the following is applicable (a) such Acquisition does not qualify as an
Permitted Non-Cash Acquisition solely because the consideration payable in
respect of the proposed Acquisition includes some form of consideration other
than solely the common Stock of Parent or other Stock of Parent that does not
require any current cash payment during the term of this Agreement, (b) after
giving effect to the proposed Acquisition, the Borrowers have Domestic Excess
Availability and unrestricted cash and Cash Equivalents of not less than
$20,000,000, (c) the total value of the cash consideration payable by the
Borrowers in connection with the proposed Acquisition does not exceed
$2,500,000, and (d) the total value of the cash consideration payable by
Borrowers in connection with all Permitted Cash Acquisitions shall not exceed
$10,000,000 in any consecutive 12 month period.
"Permitted Discretion" means a determination made in good faith and
in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions by
Subsidiary Borrower of Equipment that is substantially worn, damaged, or
obsolete in the ordinary course of Subsidiary Borrower's business, (b) sales by
Subsidiary Borrower of Inventory to buyers in the ordinary course of business,
(c) the use or transfer of money or Cash Equivalents by Subsidiary Borrower in a
manner that is not prohibited by the terms of this Agreement or the other
Subsidiary Loan Documents, and (d) the licensing by Subsidiary Borrower, on a
non-exclusive basis, of patents, trademarks, and other intellectual property
rights in the ordinary course of Subsidiary Borrower's business.
"Permitted Investments" means (a) Investments in Cash Equivalents,
(b) Investments in negotiable instruments for collection, and (c) advances made
in connection with purchases of goods or services in the ordinary course of
business.
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"Permitted Liens" means (a) Liens held by Lender, (b) Liens for
unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute
an Event of Default hereunder and are the subject of Permitted Protests, (c)
Liens set forth on Schedule P-1, (d) the interests of lessors under operating
leases, (e) purchase money Liens or the interests of lessors under Capital
Leases to the extent that such Liens or interests secure Permitted Purchase
Money Indebtedness and so long as such Lien attaches only to the asset purchased
or acquired and the proceeds thereof, (f) Liens arising by operation of law in
favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of Subsidiary Borrower's business and
not in connection with the borrowing of money, and which Liens either (i) are
for sums not yet delinquent, or (ii) are the subject of Permitted Protests, (g)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
Subsidiary Borrower's business and not in connection with the borrowing of
money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of Subsidiary Borrower's
business, (j) Liens resulting from any judgment or award that is not an Event of
Default hereunder, and (k) with respect to any Real Property, easements, rights
of way, and zoning restrictions that do not materially interfere with or impair
the use or operation thereof by Subsidiary Borrower.
"Permitted Non-Cash Acquisition" means an Acquisition so long as:
(a) no Default or Event of Default shall have occurred and be
continuing or would result from the consummation of the proposed Acquisition,
(b) the assets being acquired, or the Person whose Stock is being
acquired, are useful in or engaged in, as applicable, the business of Parent and
its Subsidiaries or a business reasonably related thereto,
(c) the consideration payable in respect of the proposed Acquisition
shall be composed solely of common Stock of Parent or other Stock of Parent that
does not require any current cash payment during the term of this Agreement
(other than a permitted cash payment made pursuant to clause (e) of the
definition of Permitted Investments set forth in the Parent Loan Agreement),
(d) in the case of (i) a Stock Acquisition of a Person that will not
be a CFC or (ii) an asset Acquisition by Parent or any of its Subsidiaries,
Parent has provided Lender with written confirmation, supported by reasonably
detailed calculations, that on a pro forma basis, created by adding the
historical combined financial statements of Parent (including the combined
financial statements of any other Person or assets that were the subject of a
prior Permitted Acquisition during the relevant period) to the historical
consolidated financial statements of the Person to be acquired (or the
historical financial statements related to the assets to be acquired) pursuant
to the proposed Acquisition (adjusted to eliminate expense items that would not
have been incurred and include income items that would have been recognized, in
each case, if the combination had been accomplished at the beginning of the
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relevant period; such eliminations and inclusions to be mutually agreed upon by
Parent and Lender), Borrowers would have been in compliance with each of the
financial covenants in Section 7.20 hereof for the 12 months ending as of the
fiscal quarter ended immediately prior to the proposed date of consummation of
such proposed Acquisition for which there are available financial statements,
(e) in the case of (i) a Stock Acquisition of a Person that will not
be a CFC, or (ii) an asset Acquisition by Parent or any of its Subsidiaries,
Lender has completed its audit, appraisal, and standard due diligence with
respect to the assets or Person that is to be the subject of the proposed
Acquisition and the results thereof are reasonably satisfactory to Lender,
(f) in the case of (i) a Stock Acquisition of a Person that will be
a CFC, or (ii) an asset Acquisition by a CFC, Parent has provided to Lender
prior written notice thereof not less than 30 days prior to the anticipated
closing date of the subject Acquisition together with such documentation that
Lender may require demonstrating that after giving effect to the subject
Acquisition, the Borrowers and their Subsidiaries (taken as a whole) would not
suffer a Material Adverse Change as a result of such proposed Acquisition (and
Lender shall have 10 Business Days from and after the receipt by Lender of such
documentation to notify Parent of its consent to the consummation of the
proposed Acquisition and the failure to provide such notification within such
period shall be deemed to reflect Lender's consent thereto),
(g) in the case of an asset Acquisition by a Person that will not be
a CFC, the subject assets are being acquired by one or more of the Borrowers,
(h) in the case of a Acquisition of a Person that will not be a CFC,
the subject Stock is being acquired in such Acquisition directly by Parent (or
NewCo after the Reorganization Transactions),
(i) in the case of an asset Acquisition by a Person that will not be
a CFC, the relevant Borrower shall have executed and delivered any and all
security agreements, UCC-1 financing statements, fixture filings, and other
documentation reasonably requested by Lender in order to include the newly
acquired assets within the Collateral,
(j) in the case of a Stock Acquisition of a Person that will not be
a CFC, the Borrowers shall have executed and delivered a supplement to the Stock
Pledge Agreement in order to include the Stock being acquired thereunder and
shall have delivered to Lender possession of the original Stock certificates
respecting all of the issued and outstanding shares of Stock of such acquired
Person, together with stock powers with respect thereto endorsed in blank,
(k) in the case of a Stock Acquisition of a Person that will not be
a CFC, the Borrowers shall have caused such acquired Person to execute and
deliver a joinder to this Agreement in order to make such Person a party hereto,
together with any and all security agreements, UCC-1 financing statements,
fixture filings, and other documentation reasonably
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requested by Lender in order to cause such cause acquired Person to be obligated
with respect to the Obligations and to include the assets of the acquired Person
within the Collateral, and
(l) in the case of (i) a Stock Acquisition of a Person that will not
be a CFC, or (ii) an asset Acquisition by Parent or any of its Subsidiaries, the
agreements, instruments, and other documents executed in connection with the
proposed Acquisition provide that (A) neither any Borrower nor any of their
respective Subsidiaries shall, in connection with the proposed Acquisition,
assume or remain liable in respect of any Indebtedness of the sellers, or other
obligations of the sellers (except for obligations incurred in the ordinary
course of business in operating the property so acquired and necessary and
desirable to the continued operation of such property), and (B) all property so
acquired in connection with the proposed Acquisition shall be free and clear of
any and all Liens, except for Permitted Liens (and, if any such property is
subject to any Lien not permitted by this clause (B) then, concurrently with the
proposed Acquisition such Lien is released).
"Permitted Protest" means the right of Subsidiary Borrower to
protest any Lien (other than any such Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the Books in such amount as is required
under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by Subsidiary Borrower in good faith, and (c) Lender is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, so long as no Event
of Default has occurred and is continuing or would result therefrom, Purchase
Money Indebtedness incurred by Subsidiary Borrower in an amount not to exceed
$250,000 during any fiscal year.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than Real
Property.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Qualified Cash Amount" means, as of any date of determination, the
amount of cash and Cash Equivalents of Parent and its Subsidiaries that is on
deposit with banks, or in Securities Accounts with securities intermediaries, or
any combination thereof and which such deposit account or Securities Account, in
the case of any deposit account or Securities
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Account maintained by a branch office located within the United States of any
bank or securities intermediary, is subject to a Control Agreement.
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by Subsidiary Borrower and the improvements thereto.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601 or any equivalent
foreign legislation.
"Renewal Date" has the meaning set forth in Section 3.4.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"Securities Account" means a "securities account" as that term is
defined in the Code.
"Security Agreement" means a security agreement executed and
delivered by the Borrowers in favor of Lender, in form and substance
satisfactory to Lender.
"Specified Country" means the United States of America, the United
Kingdom, the Republic of Ireland, or such other countries as Lender may
determine from time to time.
"Specified Currency" means Dollars or the lawful money of the United
Kingdom.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including ordinary shares, preference
shares, common stock, preferred stock, or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the SEC under the Exchange Act).
"Stock Acquisition" means an Acquisition by Parent or its
Subsidiaries of all of the Stock of any Person.
"Stock Pledge Agreement" means that certain Stock Pledge Agreement,
dated as of November 16, 2000, among the Borrowers and Lender.
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"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity;
provided, however, that references herein to Parent and its Subsidiaries, to
Borrowers and their Subsidiaries, or other similar expressions shall not include
any CFCs acquired, directly or indirectly, by Parent after the Closing Date; it
being understood that UK Holding Company, Subsidiary Borrower, and each of the
Canadian Obligors shall be included in such references.
"Subsidiary Borrower" has the meaning set forth in the preamble to
this Agreement.
"Subsidiary Borrower Advances" has the meaning set forth in Section
2.1.
"Subsidiary Borrower Borrowing Base" has the meaning set forth in
Section 2.1.
"Subsidiary Borrower Borrowing Base Certificate" means a certificate
in the form of Exhibit S-1.
"Subsidiary Loan Documents" means this Agreement, the Payoff Letter,
the Cash Management Agreements, the Control Agreements, the Security Agreement,
the Canadian Security Documents, the UK Debenture, the UK Guaranty, the UK Stock
Pledge Agreement (Parent), any other UK Security Documents, any note or notes
executed by Subsidiary Borrower in connection with this Agreement and payable to
Lender, and any other agreement entered into, now or in the future, by
Subsidiary Borrower and Lender in connection with this Agreement.
"Subsidiary Borrower Revolver Usage" means, as of any date of
determination, the sum of (a) the then extant amount of outstanding Subsidiary
Borrower Advances, plus (b) the then extant amount of the Letter of Credit
Usage.
"Taxes" has the meaning set forth in Section 16.5.
"Triggering Event" means either (a) the occurrence and continuation
of an Event of Default, or (b) the failure of Parent and its Subsidiaries to
maintain (i) an average Qualified Cash Amount for each of the days in any month
greater than $10,000,000, or (ii) a Qualified Cash Amount greater than
$10,000,000 on the last Business Day of any month.
"UK Debenture" means the fixed and floating charge debenture,
executed and delivered by Subsidiary Borrower and UK Holding Company in favor of
Lender, in form and substance satisfactory to Lender.
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"UK Guaranty" means a Guaranty executed and delivered by UK Holding
Company and the Borrowers of the Indebtedness of Subsidiary Borrower owing under
the Subsidiary Loan Documents, in form and substance satisfactory to Lender.
"UK Holding Company" means KNS Holdings Limited, a company organized
under the laws of England and Wales.
"UK Stock Pledge Agreement (Parent)" means a share charge, in form
and substance satisfactory to Lender, executed and delivered by Parent with
respect to 65% of the shares of UK Holding Company.
Underlying Issuer" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of
Lender for the benefit of Borrowers.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 16.8.
"Xxxxx Fargo" means Xxxxx Fargo Bank, National Association, a
national banking association.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Subsidiary Loan Document refer to this Agreement or such other Subsidiary
Loan Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Subsidiary Loan Document, as the case
may be. Section, subsection, clause, schedule, and exhibit references herein are
to this Agreement unless otherwise specified. Any reference in this Agreement or
in the other Subsidiary Loan Documents to any agreement, instrument, or document
shall include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any reference herein
to any Person shall be construed to include such Person's successors and
assigns. Any requirement
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of a writing contained herein or in the other Subsidiary Loan Documents shall be
satisfied by the transmission of a Record and any Record transmitted shall
constitute a representation and warranty as to the accuracy and completeness of
the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, Lender agrees to make advances ("Subsidiary
Borrower Advances") to Subsidiary Borrower in an amount at any one time
outstanding not to exceed an amount equal to the lesser of (i) the then extant
Maximum Subsidiary Revolver Amount less the Letter of Credit Usage, or (ii) the
Subsidiary Borrower Borrowing Base less the Letter of Credit Usage. For purposes
of this Agreement, "Subsidiary Borrower Borrowing Base," as of any date of
determination, shall mean the result of:
(y) the lesser of
(i) the sum of
(A) 85% of the amount of Eligible UK Accounts; provided,
however, that the amount of Eligible UK Accounts owing by
all Account Debtors located in the Republic of Ireland shall
not exceed $250,000, less the amount, if any, of the
Dilution Reserve, plus
(B) the lesser of
(1) 85% of the amount
of Eligible ASP Accounts, less the amount, if any, of
the ASP Dilution Reserve, and,
(2) $500,000, and
(ii) an amount equal to Subsidiary Borrower's Collections
with respect to Accounts for the immediately preceding 45 day
period, minus
(z) the aggregate amount of reserves, if any, established by
Lender under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender in its Permitted Discretion
shall deem necessary or appropriate, against the
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Subsidiary Borrower Borrowing Base, including reserves with respect to (i) sums
that Subsidiary Borrower is required to pay (such as taxes, assessments,
insurance premiums, or, in the case of leased assets, rents or other amounts
payable under such leases) and has failed to pay under any Section of this
Agreement or any other Subsidiary Loan Document, (ii) amounts owing by
Subsidiary Borrower to any Person to the extent secured by a Lien on, or trust
over, any of the Collateral (other than any existing Permitted Lien set forth on
Schedule P-1 which is specifically identified thereon as entitled to have
priority over the Lender's Liens), which Lien or trust, in the Permitted
Discretion of Lender likely would have a priority superior to the Lender's Liens
(such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral, (iii) one (1) months rent for each
leased location of Subsidiary Borrower for which an acceptable Collateral Access
Agreement has not been received by Lender (irrespective of whether any rent is
currently due), (iv) the Foreign Exchange Reserve, (v) the Customer Deposit
Reserve, and (vi) interest that has accrued on the Obligations during the
Interim Period (as defined in Section 2.6(d) hereof) but has not yet been paid.
(c) Lender shall have no obligation to make additional
Subsidiary Borrower Advances hereunder to the extent such additional Subsidiary
Borrower Advances would cause the Subsidiary Borrower Revolver Usage to exceed
the then extant Maximum Subsidiary Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 [INTENTIONALLY OMITTED]
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by a
written request by an Authorized Person delivered to Lender (which notice must
be received by Lender no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business Day.
At Lender's election, in lieu of delivering the above-described request in
writing, any Authorized Person may give Lender telephonic notice of such request
by the required time, with such telephonic notice to be confirmed in writing
within 24 hours of the giving of such notice.
(b) MAKING OF SUBSIDIARY BORROWER ADVANCES. If Lender has
received a timely request for a Borrowing in accordance with the provisions
hereof, and subject to the satisfaction of the applicable terms and conditions
set forth herein, Lender shall make the proceeds of such Subsidiary Borrower
Advance available to Subsidiary Borrower
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on the applicable Funding Date by transferring available funds equal to such
proceeds to Subsidiary Borrower's Designated Account.
2.4 PAYMENTS.
(a) PAYMENTS BY SUBSIDIARY BORROWER. (i) Except as otherwise
expressly provided herein, all payments by Subsidiary Borrower
shall be made to Lender's Account and shall be made in Dollars
and in immediately available funds, no later than 11:00 a.m.
(California time) on the date specified herein. Any payment
received by Lender later than 11:00 a.m. (California time), shall
be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue until
such following Business Day.
(b) APPLICATION, AND REVERSAL OF PAYMENTS.
(i) All payments shall be remitted to Lender and all such
payments (other than payments received while no Default or Event
of Default has occurred and is continuing and which relate to the
payment of principal or interest of specific Obligations or which
relate to the payment of specific fees), and all proceeds of
Accounts or other Collateral received by Lender, shall be applied
as follows:
A. first, to pay any Lender Expenses then due to
Lender under the Subsidiary Loan Documents, until paid in
full,
B. second, to pay any fees then due to Lender under
the Subsidiary Loan Documents until paid in full,
C. third, ratably to pay interest due in respect of
Subsidiary Borrower Advances until paid in full,
D. fourth, to pay the principal of all Subsidiary
Borrower Advances until paid in full,
E. fifth, if an Event of Default has occurred and
is continuing, to be held by Lender as cash collateral in
an amount up to 105% of the then extant Letter of Credit
Usage until paid in full,
F. sixth, to pay any other Obligations until paid
in full, and
G. seventh, to Subsidiary Borrower (to be wired to
the Designated Account) or such other Person entitled
thereto under applicable law.
(ii) In each instance, so long as no Default or Event of
Default has occurred and is continuing, Section 2.4(b) shall not
be deemed to apply to any
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payment by Subsidiary Borrower specified by Subsidiary Borrower
to be for the payment of specific Obligations then due and
payable (or prepayable) under any provision of this Agreement.
(iii) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Subsidiary Loan Documents
according to the terms thereof, including loan fees, service
fees, professional fees, interest (and specifically including
interest accrued after the commencement of any Insolvency
Proceeding), default interest, interest on interest, and expense
reimbursements, whether or not the same would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained in
any other Subsidiary Loan Document, it is the intention of the
parties hereto that such priority provisions in such documents
shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.4 shall
control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Subsidiary Borrower to Lender pursuant to Sections 2.1 and
2.12 is greater than either the Dollar or percentage limitations set forth in
Sections 2.1 or 2.12, (an "Overadvance"), Subsidiary Borrower immediately shall
pay to Lender, in cash, the amount of such excess, which amount shall be used by
Lender to reduce the Obligations in accordance with the priorities set forth in
Section 2.4(b). In addition, Subsidiary Borrower hereby promises to pay the
Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to Lender as and when due and payable under the terms of this
Agreement and the other Subsidiary Loan Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit) that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to the Base Rate plus the Base Rate
Margin.
The foregoing notwithstanding, at no time shall any portion of the
Obligations bear interest on the Daily Balance thereof at a per annum rate less
than 8%. To the extent that interest accrued hereunder at the rate set forth
herein would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.
(b) LETTER OF CREDIT FEE. Subsidiary Borrower shall pay Lender a
Letter of Credit fee (in addition to the charges, commissions, fees, and costs
set forth in
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Section 2.12(e)) which shall accrue at a rate equal to 1.25% per annum times the
Daily Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default,
(i) all Obligations (except for undrawn Letters of Credit)
that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per
annum rate equal to 4 percentage points above the per annum rate
otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 4 percentage points above the per annum rate
otherwise applicable hereunder.
(d) PAYMENT. Interest, Letter of Credit fees, and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or obligation to extend credit hereunder are
outstanding. Subsidiary Borrower hereby authorizes Lender, from time to time,
without prior notice to Subsidiary Borrower, to charge such interest and fees,
all Lender Expenses (as and when incurred), the charges, commissions, fees, and
costs provided for in Section 2.12(e) (as and when accrued or incurred), the
fees and costs provided for in Section 2.11 (as and when accrued or incurred),
and all other payments as and when due and payable under any Subsidiary Loan
Document to Subsidiary Borrower's Loan Account, which amounts thereafter
constitute Subsidiary Borrower Advances hereunder and shall accrue interest at
the rate then applicable to Subsidiary Borrower Advances hereunder. Any interest
not paid when due shall be compounded by being charged to Subsidiary Borrower's
Loan Account and shall thereafter constitute Subsidiary Borrower Advances
hereunder and shall accrue interest at the rate then applicable to Subsidiary
Borrower Advances hereunder. Anything contained in this Section 2.6(d) to the
contrary notwithstanding, interest accruing on the Obligations solely for the
period (the "Interim Period") commencing on the Closing Date through May 1, 2001
(the "First Interest Payment Date") shall be paid on the First Interest Payment
Date; provided, however, that nothing herein shall be deemed to mean that
interest shall not accrue on the Obligations during the Interim Period. All
interest accruing on the Obligations from and after the First Interest Payment
Date shall be due and payable in accordance with the first sentence of this
Section 2.6(d).
(e) COMPUTATION. All interest and fees chargeable under the
Subsidiary Loan Documents shall be computed on the basis of a 360 day year for
the actual number of days elapsed. In the event the Base Rate is changed from
time to time hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in
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connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Subsidiary Borrower and Lender, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Subsidiary Borrower is and shall be liable only
for the payment of such maximum as allowed by law, and payment received from
Subsidiary 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 CASH MANAGEMENT.
(a) Subsidiary Borrower shall (i) continue to maintain cash
management services of a type and on terms satisfactory to Lender at one or more
of the banks set forth on Schedule 2.7(a) (each, a "Cash Management Bank"), and
shall request in writing and otherwise take such reasonable steps to ensure that
all of its Account Debtors forward payment of the amounts owed by them directly
to such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date
of receipt thereof, all Collections (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Lender's name (a "Cash
Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Subsidiary Borrower, in form and substance
acceptable to Lender. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank on behalf of
Lender or bailee-in-possession for Lender, (ii) the Cash Management Bank has no
rights of setoff or recoupment or any other claim against the applicable Cash
Management Account, other than for payment of its service fees and other charges
directly related to the administration of such Cash Management Account and for
returned checks or other items of payment, and (iii) from and after the receipt
by the applicable Cash Management Bank of a notice that a Triggering Event has
occurred, it immediately will forward in Dollars by daily sweep all amounts in
the applicable Cash Management Account to the Lender's Account.
(c) So long as no Default or Event of Default has occurred and
is continuing, Subsidiary Borrower may amend Schedule 2.7(a) to add or replace a
Cash Management Bank or Cash Management Account; provided, however, that (i)
such prospective Cash Management Bank shall be satisfactory to Lender and Lender
shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Subsidiary Borrower and
such prospective Cash Management Bank shall have executed and delivered to
Lender a Cash Management Agreement. Subsidiary Borrower shall close any of its
Cash Management Accounts (and establish replacement cash
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management accounts in accordance with the foregoing sentence) promptly and in
any event within 30 days of notice from Lender that the creditworthiness of any
Cash Management Bank is no longer acceptable in Lender's reasonable judgment, or
as promptly as practicable and in any event within 60 days of notice from Lender
that the operating performance, funds transfer, or availability procedures or
performance of the Cash Management Bank with respect to Cash Management Accounts
or Lender's liability under any Cash Management Agreement with such Cash
Management Bank is no longer acceptable in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item by
Lender (whether from transfers to Lender by the Cash Management Banks pursuant
to the Cash Management Agreements or otherwise) shall not be considered a
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Subsidiary Borrower shall be deemed
not to have made such payment and interest shall be calculated accordingly.
Anything to the contrary contained herein notwithstanding, any payment item
shall be deemed received by Lender only if it is received into the Lender's
Account on a Business Day on or before 11:00 a.m. (California time). If any
payment item is received into the Lender's Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by Lender as of the opening of business on the immediately
following Business Day. From and after the Closing Date, Lender shall be
entitled to charge Subsidiary Borrower for 1 Business Day of `clearance' or
`float' at the rate applicable to Subsidiary Borrower Advances under Section 2.6
on all Collections that are received by Subsidiary Borrower (regardless of
whether forwarded by the Cash Management Banks to Lender). This across-the-board
1 Business Day clearance or float charge on all Collections is acknowledged by
the parties to constitute an integral aspect of the pricing of the financing of
Subsidiary Borrower and shall apply irrespective of whether or not there are any
outstanding monetary Obligations; the effect of such clearance or float charge
being the equivalent of charging 1 Business Day of interest on such Collections.
2.9 DESIGNATED ACCOUNT. Lender is authorized to make the Subsidiary
Borrower Advances and Lender is authorized to issue the Letters of Credit under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Subsidiary Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Subsidiary Borrower Advances requested by Subsidiary
Borrower and made by Lender hereunder. Unless otherwise agreed by Lender and
Subsidiary Borrower, any Subsidiary Borrower Advance requested by Subsidiary
Borrower and made by Lender hereunder shall be made to the Designated Account.
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2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender
shall maintain an account on its books in the name of Subsidiary Borrower (the
"Loan Account") on which Subsidiary Borrower will be charged with all Subsidiary
Borrower Advances made by Lender to Subsidiary Borrower or for Subsidiary
Borrower's account, the Letters of Credit issued by Lender for Subsidiary
Borrower's account, and with all other payment Obligations hereunder or under
the other Subsidiary Loan Documents, including, accrued interest, fees and
expenses, and Lender Expenses. In accordance with Section 2.8, the Loan Account
will be credited with all payments received by Lender from Subsidiary Borrower
or for Subsidiary Borrower's account, including all amounts received in the
Lender's Account from any Cash Management Bank. Lender shall render statements
regarding the Loan Account to Subsidiary Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Subsidiary Borrower and Lender unless, within 30 days after receipt thereof by
Subsidiary Borrower, Subsidiary Borrower shall deliver to Lender written
objection thereto describing the error or errors contained in any such
statements.
2.11 FEES. Subsidiary Borrower shall pay to Lender the following fees
and charges, which fees and charges shall be non-refundable when paid
(irrespective of whether this Agreement is terminated thereafter):
(a) UNUSED LINE FEE. On the first day of each month during the
term of this Agreement, an unused line fee in the amount equal to .375% per
annum times the result of (a) the then extant Maximum Subsidiary Revolver
Amount, less (b) the sum of (i) the average Daily Balance of Subsidiary Borrower
Advances that were outstanding during the immediately preceding month, plus (ii)
the average Daily Balance of the Letter of Credit Usage during the immediately
preceding month, and
(b) AUDIT, APPRAISAL, AND VALUATION CHARGES. Audit, appraisal,
and valuation fees and charges as follows, (i) a fee of $750 pay day, per
auditor, plus out-of-pocket expenses for each financial audit of Subsidiary
Borrower performed by personnel employed by Lender, (ii) if implemented, a one
time charge of $3,000 plus out-of-pocket expenses for expenses for the
establishment of electronic collateral reporting systems, and (iii) the actual
charges paid or incurred by Lender if it elects to employ the services of one or
more third Persons to perform financial audits of Subsidiary Borrower, to
appraise the Collateral, or any portion thereof, or to assess Subsidiary
Borrower's business valuation.
2.12 LETTERS OF CREDIT
(a) Subject to the terms and conditions of this Agreement,
Lender agrees to issue letters of credit for the account of Subsidiary Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be Xxxxx Fargo) for the account of
Subsidiary Borrower. To request the issuance of an L/C or an L/C Undertaking
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(or the amendment, renewal, or extension of an outstanding L/C or L/C
Undertaking), Subsidiary Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by
Lender) to Lender and Lender (reasonably in advance of the requested date of
issuance, amendment, renewal, or extension) a notice requesting the issuance of
an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be
amended, renewed, or extended, the date of issuance, amendment, renewal, or
extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or of the Underlying Letter of Credit, as applicable), and such other
information as shall be necessary to prepare, amend, renew, or extend such L/C
or L/C Undertaking. If requested by Lender, Subsidiary Borrower also shall be an
applicant under the application with respect to any Underlying Letter of Credit
that is to be the subject of an L/C Undertaking. Lender shall have no obligation
to issue a Letter of Credit if any of the following would result after giving
effect to the requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Subsidiary
Borrower Borrowing Base less the amount of outstanding Subsidiary
Borrower Advances, or
(ii) the Letter of Credit Usage would exceed $500,000, or
(iii) the Letter of Credit Usage would exceed the then extant
Maximum Subsidiary Revolver Amount less the then extant amount of
outstanding Subsidiary Borrower Advances.
(b) Subsidiary Borrower and Lender acknowledge and agree that
certain Underlying Letters of Credit may be issued to support letters of credit
that already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the 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 (and corresponding Underlying Letter of Credit) shall be in
form and substance acceptable to Lender (in the exercise of its Permitted
Discretion), including the requirement that the amounts payable thereunder must
be payable in Dollars. If Lender is obligated to advance funds under a Letter of
Credit, Subsidiary Borrower immediately shall reimburse such L/C Disbursement to
Lender by paying to Lender an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Subsidiary Borrower shall have received written or telephonic notice of
such L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if
such notice has not been received by Subsidiary Borrower prior to such time on
such date, then not later than 11:00 a.m., California time, on (i) the Business
Day that Subsidiary Borrower receives such notice, if such notice is received
prior to 10:00 a.m., California time, on the date of receipt, and, in the
absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be a Subsidiary Borrower Advance hereunder and,
thereafter, shall bear interest at the rate then applicable to Subsidiary
Borrower Advances under Section 2.6. To the extent an L/C Disbursement is
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deemed to be a Subsidiary Borrower Advance hereunder, Subsidiary Borrower's
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Subsidiary Borrower Advance.
(c) Subsidiary Borrower hereby agrees to indemnify, save,
defend, and hold Lender harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by Lender arising out of or in connection
with any Letter of Credit; provided, however, that Subsidiary Borrower shall be
obligated hereunder to indemnify for any loss, cost, expense, or liability that
is caused by the gross negligence or willful misconduct of Lender. Subsidiary
Borrower agrees to be bound by the Underlying Issuer's regulations and
interpretations of any Underlying Letter of Credit or by Lender's
interpretations of any L/C issued by Lender to or for Subsidiary Borrower's
account, even though this interpretation may be different from Subsidiary
Borrower's own, and Subsidiary Borrower understands and agrees that Lender shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following Subsidiary Borrower's instructions or those contained
in the Letter of Credit or any modifications, amendments, or supplements
thereto; provided, however, that Subsidiary Borrower shall not be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of Lender. Subsidiary Borrower
understands that the L/C Undertakings may require Lender to indemnify the
Underlying Issuer for certain costs or liabilities arising out of claims by
Subsidiary Borrower against such Underlying Issuer. Subsidiary Borrower hereby
agrees to indemnify, save, defend, and hold Lender harmless with respect to any
loss, cost, expense (including reasonable attorneys fees), or liability incurred
by Lender under any L/C Undertaking as a result of Lender's indemnification of
any Underlying Issuer; provided, however, that Subsidiary Borrower shall not be
obligated hereunder to indemnify for any loss, cost, expense, or liability that
is caused by the gross negligence or willful misconduct of Lender.
(d) Subsidiary Borrower hereby authorizes and directs any
Underlying Issuer to deliver to Lender all instruments, documents, and other
writings and property received by such Underlying Issuer pursuant to such
Underlying Letter of Credit and to accept and rely upon Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred
by Lender relating to Underlying Letters of Credit shall be Lender Expenses for
purposes of this Agreement and immediately shall be reimbursable by Subsidiary
Borrower to Lender for the account of Lender; it being acknowledged and agreed
by Subsidiary Borrower that, as of the Closing Date, the issuance charge imposed
by the prospective Underlying Issuer is .35% per annum times the face amount of
each Underlying Letter of Credit, that such issuance charge may be changed from
time to time, and that the Underlying Issuer also imposes a schedule of charges
for amendments, extensions, drawings, and renewals.
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental
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Authority, or (ii) compliance by the Underlying Issuer or Lender with any
direction, request, or requirement (irrespective of whether having the force of
law) of any Governmental Authority or monetary authority including, Regulation D
of the Federal Reserve Board as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or
Lender any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Subsidiary
Borrower, and Subsidiary Borrower shall pay on demand such amounts as Lender may
specify to be necessary to compensate Lender for such additional cost or reduced
receipt, together with interest on such amount from the date of such demand
until payment in full thereof at the rate then applicable to Subsidiary Borrower
Advances hereunder. The determination by Lender of any amount due pursuant to
this Section, as set forth in a certificate setting forth the calculation
thereof in reasonable detail, shall, in the absence of manifest or demonstrable
error, be final and conclusive and binding on all of the parties hereto.
2.13 [INTENTIONALLY OMITTED].
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by Lender
or its parent bank holding company with any guideline, request or directive of
any such entity regarding capital adequacy (whether or not having the force of
law), the effect of reducing the return on Lender's or such holding company's
capital as a consequence of Lender's obligations hereunder to a level below that
which Lender or such holding company could have achieved but for such adoption,
change, or compliance (taking into consideration Lender's or such holding
company's then existing policies with respect to capital adequacy and assuming
the full utilization of such entity's capital) by any amount deemed by Lender to
be material, then Lender may notify Subsidiary Borrower thereof. Following
receipt of such notice, Subsidiary Borrower agrees to pay Lender on demand the
amount of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by Lender of a statement
in the amount and setting forth in reasonable detail Lender's calculation
thereof and the assumptions upon which such calculation was based (which
statement shall be deemed true and correct absent manifest
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error). In determining such amount, Lender will use any reasonable averaging and
attribution method.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to make the initial Subsidiary Borrower Advance (or
otherwise to extend any credit provided for hereunder), is subject to the
fulfillment, to the satisfaction of Lender, of each of the conditions precedent
set forth below:
(a) the Closing Date shall occur on or before December 31, 2000;
(b) Lender shall have received all financing statements required
by Lender, duly executed by Subsidiary Borrower, and Lender shall have received
searches reflecting the filing of all such financing statements;
(c) Lender shall have received each of the following documents,
in form and substance satisfactory to Lender, duly executed, and each such
document shall be in full force and effect:
(i) [intentionally omitted],
(ii) the Disbursement Letter,
(iii) the Cash Management Agreements,
(iv) the Payoff Letter,
(v) the UK Debenture, together with all certificates
representing the shares of Subsidiary Borrower pledged
thereunder, as well as Stock powers with respect thereto endorsed
in blank, and other deeds and documents of title required to be
deposited thereunder,
(vi) the UK Guaranty,
(vii) the UK Stock Pledge Agreement (Parent), together with
all certificates representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto endorsed
in blank,
(viii) the Canadian Security Documents, and
(ix) the Security Agreement;
(d) [intentionally omitted];
(e) Lender shall have received a certificate from the Secretary
of each of Subsidiary Borrower and UK Holding Company attesting to the
resolutions of the Board
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of Directors of each of Subsidiary Borrower and UK Holding Company authorizing
their respective execution, delivery, and performance of this Agreement and the
other Subsidiary Loan Documents to which each is a party and authorizing
specific officers of each to execute the same, and amending their respective
articles of association to disapply any rights of lien, pre-emption rights, or
any rights of veto on the transfer of any shares which are the subject of any
security granted pursuant to any of the Loan Documents or Subsidiary Loan
Documents or enforcement of such security or where the transfer is made at the
direction of Lender or a receiver;
(f) Lender shall have received copies of Subsidiary Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Subsidiary Borrower;
(g) Lender shall have received a certificate of status with
respect to Subsidiary Borrower, dated within 30 days of the Closing Date, such
certificate to be issued by the registrar of companies, which certificate shall
indicate that Subsidiary Borrower is in good standing in such jurisdiction;
(h) Lender shall have received certificates of status with
respect to Subsidiary Borrower, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of Subsidiary Borrower) in which
its failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that Subsidiary Borrower is in good
standing in such jurisdictions;
(i) Lender shall have received copies of UK Holding Company's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of UK Holding Company;
(j) Lender shall have received a certificate of status with
respect to UK Holding Company, dated within 30 days of the Closing Date, such
certificate to be issued by the registrar of companies, which certificate shall
indicate that UK Holding Company is in good standing in such jurisdiction;
(k) Lender shall have received certificates of status with
respect to UK Holding Company, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of UK Holding Company) in which its
failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that UK Holding Company is in good
standing in such jurisdictions;
(l) Lender shall have received a certificate from the Secretary
of each Guarantor attesting to the resolutions of such Guarantor's Board of
Directors authorizing its execution, delivery, and performance of each of the
Subsidiary Loan Documents to which such Guarantor is a party and authorizing
specific officers of such Guarantor to execute the same;
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(m) Lender shall have received a certificate from the Secretary
of Parent certifying that there have been no amendments, restatements,
supplements, or modifications to the Governing Documents of any of the Borrowers
since the "Closing Date" (as defined in the Parent Loan Agreement);
(n) Lender shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be satisfactory to Lender;
(o) Lender shall have received such Collateral Access Agreements
with respect to such of Subsidiary Borrower's facilities as Lender may require;
(p) Lender shall have received opinions of Subsidiary Borrower's
counsel (and, in Lender's sole discretion, Lender's foreign counsel) in form and
substance satisfactory to Lender;
(q) Lender shall have received satisfactory evidence (including
a certificate of a director of Subsidiary Borrower) that all tax returns
required to be filed by Subsidiary Borrower have been timely filed and all taxes
upon Subsidiary 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;
(r) Lender shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Subsidiary Borrower's books and records and verification of Subsidiary
Borrower's representations and warranties to Lender, the results of which shall
be satisfactory to Lender, and (ii) an inspection of each of the locations where
Inventory is located, the results of which shall be satisfactory to Lender;
(s) Subsidiary Borrower shall pay all Lender Expenses incurred
in connection with the transactions evidenced by this Agreement;
(t) Subsidiary Borrower shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Subsidiary Borrower of this
Agreement or any other Subsidiary Loan Document or with the consummation of the
transactions contemplated hereby and thereby; and
(u) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Lender.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to continue to make Subsidiary Borrower Advances (or
otherwise extend credit hereunder) is subject to the fulfillment, on or before
the date applicable thereto, of each of
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the conditions subsequent set forth below (the failure by Subsidiary Borrower to
so perform or cause to be performed constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Lender
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.8, the form and substance of which shall
be satisfactory to Lender and its counsel.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
Lender to make all Subsidiary Borrower Advances (or to extend any other credit
hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Subsidiary Loan Documents shall be true and correct in
all material respects on and as of the date of such extension of credit, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof, except to the extent such Default or Event of Default has
been waived in writing by Lender;
(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
Subsidiary Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Subsidiary Borrower and Lender and shall continue in full
force and effect for a term ending on November 16, 2003 (the "Renewal Date") and
automatically shall be renewed for successive 1 year periods thereafter, unless
sooner terminated pursuant to the terms hereof. Either Subsidiary Borrower or
Lender may terminate this Agreement effective on the Renewal Date or on any
anniversary of the Renewal Date by giving the other party at least 90 days prior
written notice thereof. The foregoing notwithstanding, Lender shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Subsidiary
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 Subsidiary Borrower of its
duties, Obligations, or covenants hereunder and the Lender's Liens in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Lender's obligations to provide additional credit
hereunder have been terminated. When this Agreement has been terminated and all
of the Obligations have
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been fully and finally discharged and Lender's obligations to provide additional
credit under the Subsidiary Loan Documents have been terminated irrevocably,
Lender will, at Subsidiary Borrower's sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the Lender's Liens and all notices of
security interests and liens previously filed by Lender with respect to the
Obligations.
3.6 EARLY TERMINATION BY SUBSIDIARY BORROWER. Subsidiary Borrower has
the option, at any time upon 90 days prior written notice by Subsidiary Borrower
to Lender, to terminate this Agreement by paying to Lender, in cash, the
Obligations (including either (i) providing cash collateral to be held by Lender
in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to Lender). If Subsidiary
Borrower has sent a notice of termination pursuant to the provisions of this
Section, then Lender's obligations to extend credit hereunder shall terminate
and Subsidiary Borrower shall be obligated to repay the Obligations (including
either (i) providing cash collateral to be held by Lender in an amount equal to
105% of the then extant Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to Lender), on the date set forth as the date
of termination of this Agreement in such notice.
4. CREATION OF SECURITY INTEREST.
4.1 [INTENTIONALLY OMITTED].
4.2 [INTENTIONALLY OMITTED].
4.3 [INTENTIONALLY OMITTED].
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the
request of Lender, Subsidiary Borrower shall execute and deliver to Lender, any
and all financing statements, original financing statements in lieu of
continuation statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, and all other documents (the
"Additional Documents") that Lender may request in its Permitted Discretion, in
form and substance satisfactory to Lender, to perfect and continue perfected or
better perfect the Lender's Liens in the Collateral (whether now owned or
hereafter arising or acquired), to create and perfect Liens in favor of Lender
in any Real Property acquired after the Closing Date, and in order to fully
consummate all of the transactions contemplated hereby and under the other
Subsidiary Loan Documents. To the maximum extent permitted by applicable law,
Subsidiary Borrower authorizes Lender to execute any such Additional Documents
in Subsidiary Borrower's name and authorize Lender to file such executed
Additional Documents in any appropriate filing office. In addition, on such
periodic basis as Lender shall require, Subsidiary Borrower shall (a) provide
Lender with a report of all new patentable, copyrightable, or trademarkable
materials acquired or generated by Subsidiary Borrower during the prior period,
(b) cause all patents, copyrights, and trademarks acquired or generated by
Subsidiary Borrower that are not already the subject of a registration with the
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appropriate filing office (or an application therefor diligently prosecuted) to
be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of Subsidiary Borrower's ownership thereof, and (c)
cause to be prepared, executed, and delivered to Lender supplemental schedules
to the applicable Subsidiary Loan Documents to identify such patents,
copyrights, and trademarks as being subject to the security interests created
thereunder.
4.5 POWER OF ATTORNEY. Subsidiary Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers, employees, or
Lenders designated by Lender) as Subsidiary Borrower's true and lawful attorney,
with power to (a) if Subsidiary Borrower refuses to, or fails timely to execute
and deliver any of the documents described in Section 4.4, sign the name of
Subsidiary Borrower on any of the documents described in Section 4.4, (b) at any
time that an Event of Default has occurred and is continuing, sign Subsidiary
Borrower's name on any invoice or xxxx of lading relating to the Collateral,
drafts against Account Debtors, or notices to Account Debtors, (c) send requests
for verification of Accounts, (d) endorse Subsidiary Borrower's name on any
Collection item that may come into Lender's possession, (e) at any time that an
Event of Default has occurred and is continuing, make, settle, and adjust all
claims under Subsidiary Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and (f)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts, chattel paper, or General
Intangibles directly with Account Debtors, for amounts and upon terms that
Lender determines to be reasonable, and Lender may cause to be executed and
delivered any documents and releases that Lender determines to be necessary. The
appointment of Lender as Subsidiary Borrower's attorney, and each and every one
of its rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully and finally repaid and performed and
Lender's obligations to extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Lender (through any of its respective officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect the Books and to check, test, and appraise the Collateral in order to
verify Subsidiary Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Subsidiary Borrower agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under
Section 7.19 and, if to another securities intermediary, unless each of
Subsidiary Borrower, Lender, and the substitute securities intermediary have
entered into a Control Agreement. No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other Investment
Property shall be modified by Subsidiary Borrower without the prior written
consent of Lender. Upon the occurrence and during the continuance of a Default
or Event of Default, Lender may notify any securities intermediary to liquidate
the applicable Securities Account or any related Investment Property maintained
or held thereby and remit the proceeds thereof to the Lender's Account.
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46
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, Subsidiary
Borrower makes the following representations and warranties to Lender which
shall be true, correct, and complete, in all material respects, as of the date
hereof, and shall be true, correct, and complete, in all material respects, as
of the Closing Date, and at and as of the date of the making of each Subsidiary
Borrower Advance (or other extension of credit) made thereafter, as though made
on and as of the date of such Subsidiary Borrower Advance (or other extension of
credit) (except to the extent that such representations and warranties relate
solely to an earlier date) and such representations and warranties shall survive
the execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Subsidiary Borrower has good and indefeasible title
to its Collateral and the Real Property, free and clear of Liens except for
Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Subsidiary Borrower's business, owed to Subsidiary Borrower without
known defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. As to each Eligible Account, such Account is not:
(a) owed by an employee, Affiliate, or agent of Subsidiary
Borrower,
(b) on account of a transaction wherein goods were placed on
consignment or were sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a xxxx and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than a Specified Currency,
(d) owed by an Account Debtor that has or has asserted a right
of setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the account,
(e) owed by an Account Debtor that is subject to any Insolvency
Proceeding or is not Solvent or as to which Subsidiary Borrower has received
notice of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(f) on account of a transaction as to which the goods giving
rise to such Account have not been shipped and billed to the Account Debtor or
the services giving rise to such Account have not been performed and accepted by
the Account Debtor,
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(g) a right to receive progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Subsidiary
Borrower of the subject contract for goods or services, and
(h) an Account that has not been billed to the customer.
5.3 [INTENTIONALLY OMITTED]
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Subsidiary Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment are
not stored with a bailee, warehouseman, or similar party and, other than
Inventory and Equipment in transit, are located only at the locations identified
on Schedule 5.5.
5.6 INVENTORY RECORDS. Subsidiary Borrower keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office
of Subsidiary Borrower is located at the address indicated in Schedule 5.7 and
the tax payer identification number of Subsidiary Borrower is identified in
Schedule 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
(a) Subsidiary Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of Subsidiary Borrower, by class,
and, as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding. Other than as described on Schedule
5.8(b), there are no subscriptions, options, warrants, or calls relating to any
shares of Subsidiary Borrower's capital Stock, including any right of conversion
or exchange under any outstanding security or other instrument. Subsidiary
Borrower is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or any
security convertible into or exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate
list of Subsidiary Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock or ordinary and preferred shares 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
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by Subsidiary Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of the capital
Stock of any Subsidiary of Subsidiary Borrower, including any right of
conversion or exchange under any outstanding security or other instrument.
Neither Subsidiary Borrower nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of any Subsidiary Borrower's Subsidiaries' capital Stock or
any security convertible into or exchangeable for any such capital Stock.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Subsidiary
Borrower of this Agreement and the Subsidiary Loan Documents to which it is a
party have been duly authorized by all necessary action on the part of
Subsidiary Borrower.
(b) The execution, delivery, and performance by Subsidiary
Borrower of this Agreement and the Subsidiary Loan Documents to which it is a
party do not and will not (i) violate any provision of law or regulation
applicable to Subsidiary Borrower, the Governing Documents of Subsidiary
Borrower, or any order, judgment, or decree of any court or other Governmental
Authority binding on Subsidiary Borrower, (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of Subsidiary Borrower, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Subsidiary Borrower, other than Permitted Liens, or (iv)
require any approval of Subsidiary Borrower's interestholders or any approval or
consent of any Person under any material contractual obligation of Subsidiary
Borrower.
(c) Other than the filing of financing statements and fixture
filings, certain of the Subsidiary Loan Documents with the SEC, filings with the
registrar of Companies House in the United Kingdom, the execution, delivery, and
performance by Subsidiary Borrower of this Agreement and the Subsidiary Loan
Documents to which Subsidiary Borrower is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person.
(d) This Agreement and the other Subsidiary Loan Documents to
which Subsidiary Borrower is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by Subsidiary Borrower will be
the legally valid and binding obligations of Subsidiary Borrower, enforceable
against Subsidiary 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.
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(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens
(f) As to each Guarantor, the execution, delivery, and
performance by such Guarantor of the Subsidiary Loan Documents to which it is a
party have been duly authorized by all necessary action on the part of such
Guarantor.
(g) As to each Guarantor, the execution, delivery, and
performance by such Guarantor of the Subsidiary Loan Documents to which it is a
party do not and will not (i) violate any provision of law or regulation
applicable to such Guarantor, the Governing Documents of such Guarantor, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Guarantor, (ii) conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation of such Guarantor, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of such Guarantor, other than Permitted Liens, or (iv) require any
approval of such Guarantor's interestholders or any approval or consent of any
Person under any material contractual obligation of such Guarantor.
(h) As to each Guarantor, the execution, delivery, and
performance by such Guarantor of the Subsidiary Loan Documents to which such
Guarantor is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.
As to each Guarantor, the Subsidiary Loan Documents to which such
Guarantor is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Guarantor will be legally valid and binding
obligations of such Guarantor, enforceable against such Guarantor in accordance
with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Subsidiary Borrower, threatened against Subsidiary Borrower, except for (a)
matters that are fully covered by insurance (subject to customary deductibles),
and (b) matters arising after the Closing Date that, if decided adversely to
Subsidiary Borrower reasonably could not be expected to result in a Material
Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Subsidiary Borrower that have been delivered by Subsidiary Borrower to Lender
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and present fairly in all material respects, Subsidiary
Borrower's financial condition as of the date thereof and results of operations
for the period then ended. There has not been a Material Adverse Change with
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respect to Subsidiary Borrower since the date of the latest financial statements
submitted to Lender on or before the Closing Date.
5.12 Fraudulent Transfer.
(a) Subsidiary Borrower is Solvent.
(b) No transfer of property is being made by Subsidiary Borrower
and no obligation is being incurred by Subsidiary Borrower in connection with
the transactions contemplated by this Agreement or the other Subsidiary Loan
Documents with the intent to hinder, delay, or defraud either present or future
creditors of Subsidiary Borrower.
5.13 Employee Benefits. Except for mandatory Benefit Plans, none of
Subsidiary Borrower or any of its ERISA Affiliates maintains or contributes to
any Benefit Plan. Each mandatory Benefit Plan has been operated and administered
and complies in all material respects with applicable laws.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a)
to Subsidiary Borrower's knowledge, none of Subsidiary Borrower's properties or
assets has ever been used by Subsidiary Borrower or by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials, where such production, storage, handling,
treatment, release or transport was in violation, in any material respect, of
applicable Environmental Law, (b) to Subsidiary Borrower's knowledge, none of
Subsidiary Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) Subsidiary Borrower has not received
notice that a Lien arising under any Environmental Law has attached to any
revenues or to any Real Property owned or operated by Subsidiary Borrower, and
(d) Subsidiary 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 Subsidiary Borrower
resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.15 Brokerage Fees. Subsidiary Borrower has not utilized the services
of any broker or finder in connection with Subsidiary Borrower obtaining
financing from Lender under this Agreement and no brokerage commission or
finders fee is payable by Subsidiary Borrower in connection herewith.
5.16 Intellectual Property. Subsidiary Borrower owns, or holds licenses
in, all Intellectual Property that is necessary to the conduct of its business
as currently conducted. Attached hereto as Schedule 5.16 is a true, correct, and
complete listing of all Intellectual Property as to which Subsidiary Borrower is
the owner or is an exclusive licensee. Subsidiary Borrower holds no copyrights
or exclusive licenses relative to copyrights.
5.17 Leases. Subsidiary Borrower enjoys peaceful and undisturbed
possession under all leases material to the business of Subsidiary Borrower and
to which Subsidiary Borrower is a party or under which Subsidiary Borrower is
operating. All of such leases are
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valid and subsisting and no material default by Subsidiary Borrower exists under
any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of Subsidiary
Borrower, including, with respect to each depository (i) the name and address of
such depository, and (ii) the account numbers of the accounts maintained with
such depository.
5.19 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Subsidiary Borrower in writing to Lender (including
all information contained in the Schedules hereto or in the other Subsidiary
Loan Documents) for purposes of or in connection with this Agreement, the other
Subsidiary Loan Documents or any transaction contemplated herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of Subsidiary Borrower in writing to the Lender will be, true and
accurate, in all material respects, on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete
list of all Indebtedness of Subsidiary Borrower outstanding immediately prior to
the Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness
and the principal terms thereof.
5.21 Review and Approval of Parent Loan Agreement. Subsidiary Borrower
has reviewed the Parent Loan Agreement and all Exhibits and Schedules referred
to therein and has approved all terms and conditions relating to or affecting
Subsidiary Borrower contained therein. Subsidiary Borrower acknowledges and
agrees that the credit facility evidenced hereby shall terminate automatically
and be of no further force and effect in the event that the Parent Loan
Agreement shall terminate for any reason.
6. AFFIRMATIVE COVENANTS.
Subsidiary Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Subsidiary Borrower shall do and shall cause each of its
Subsidiaries to do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables
Subsidiary Borrower to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by Lender. Subsidiary Borrower also
shall keep an inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Lender with the following documents at
the following times in form satisfactory to Lender:
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--------------------------------------------------------------------------------
Weekly
(a) a sales journal, collection journal, and credit
register since the last such schedule (each such journal
and register shall identify separately all Accounts
arising from Subsidiary Borrower's provision of services
as an application services provider) and a calculation of
the Subsidiary Borrower Borrowing Base as of such date,
and
(b) notice of all returns, disputes, or claims.
--------------------------------------------------------------------------------
Monthly (not later (c) Inventory reports specifying Subsidiary Borrower's
than the 15th day cost of its Inventory, by category,
of each month)
(d) a detailed calculation of the Subsidiary Borrower
Borrowing Base (including detail regarding those Accounts
that are not Eligible Accounts and detail identifying
separately all Accounts arising from Subsidiary Borrower's
provision of services as an application services
provider),
(e) a detailed aging, by total, of the Accounts of
Subsidiary Borrower (each such aging shall identify
separately all Accounts arising from Subsidiary Borrower's
provision of services as an application services
provider), together with a reconciliation to the detailed
calculation of the Subsidiary Borrower Borrowing Base
previously provided to Lender,
(f) a summary aging, by vendor, of Subsidiary Borrower's
accounts payable and any book overdraft,
(g) a report calculating the Qualified Cash Amount for
each day of the prior month,
(h) a calculation of Dilution and ASP Dilution for the
prior month, and
(i) a detailed calculation of Subsidiary Borrower's
Collections for the immediately preceding month.
--------------------------------------------------------------------------------
Quarterly (j) a detailed list of Subsidiary Borrower's customers,
(k) a report regarding Subsidiary Borrower's accrued, but
unpaid, ad valorem taxes,
--------------------------------------------------------------------------------
Upon request by (l) copies of invoices in connection with the accounts,
Lender credit memos, remittance advices, deposit slips, shipping
and delivery documents in connection with the Accounts
and, for Inventory and Equipment acquired by Subsidiary
Borrower, purchase orders and invoices, and
(m) such other reports as to the Collateral or the
financial condition of Subsidiary Borrower as Lender may
request.
--------------------------------------------------------------------------------
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In addition, Subsidiary Borrower agrees to cooperate fully with
Lender to facilitate and implement a system of electronic collateral reporting
in order to provide electronic reporting of each of the items set forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Parent's
fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Parent's and its
Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Parent to the effect that:
A. the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the
lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects
the financial condition of Parent and its Subsidiaries,
B. the representations and warranties of Borrowers
contained in this Agreement and the other Loan Documents
are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of
such date (except to the extent that such representations
and warranties relate solely to an earlier date), and
C. there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge
and what action Borrowers have taken, are taking, or
propose to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.20 of the Parent Loan Agreement is to be
tested, a compliance certificate in the form attached to the
Parent Loan Agreement demonstrating, in reasonable detail,
compliance at the end of such period with the applicable
financial covenants contained in Section 7.20 of the Parent Loan
Agreement,
(iv) a certificate signed by the chief financial officer of
Subsidiary Borrower to the effect that:
A. the representations and warranties of Subsidiary
Borrower contained in this Agreement and the other
Subsidiary Loan Documents
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are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of
such date (except to the extent that such representations
and warranties relate solely to an earlier date), and
B. there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge
and what action Subsidiary Borrower has taken, is taking,
or proposes to take with respect thereto), and
(b) as soon as available, but in any event within 90 days after
the end of each of Parent's fiscal years,
(i) financial statements of Parent and its Subsidiaries for
each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Lender and certified,
without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial
statements to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants' letter
to management),
(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the
existence of any Default or Event of Default under Section 7.20
of the Parent Loan Agreement,
(c) as soon as available, but in any event within 30 days prior
to the start of each of Parent's fiscal years,
(i) copies of Borrowers' Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory
to Lender, in its sole discretion, for the forthcoming 2 years,
year by year, and for the forthcoming fiscal year, month by
month, certified by the chief financial officer of Parent as
being such officer's good faith best estimate of the financial
performance of Parent and its Subsidiaries during the period
covered thereby,
(d) if and when filed by any Borrower or Subsidiary Borrower,
(i) 10-Q quarterly reports, Form 10-K annual reports, Form
8-K current reports, or any filings with the registrar of
companies at Companies House,
(ii) any other filings made by any Borrower or Subsidiary
Borrower with the SEC,
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(iii) copies of (A) Borrowers' federal income tax returns,
and any amendments thereto, filed with the Internal Revenue
Service, and (B) Subsidiary Borrower's income tax returns filed
with the Inland Revenue authorities in the United Kingdom, and
(iv) any other information that is provided by Parent to its
shareholders generally,
(e) if and when filed by any Borrower, Canadian Obligor, or
Subsidiary Borrower and as requested by Lender, satisfactory evidence of payment
of applicable excise taxes in each jurisdiction in which (i) any Borrower,
Canadian Obligor, or Subsidiary Borrower conducts business or is required to pay
any such excise tax, (ii) where any Borrower's, Canadian Obligor's, or
Subsidiary Borrower's failure to pay any such applicable excise tax would result
in a Lien on the properties or assets of any Borrower, Canadian Obligor, or
Subsidiary Borrower, as applicable, or (iii) where any Borrower's, Canadian
Obligor's, or Subsidiary Borrower's failure to pay any such applicable excise
tax reasonably could be expected to result in a Material Adverse Change,
(f) as soon as Subsidiary Borrower has knowledge of any event or
condition that constitutes a Default or an Event of Default, notice thereof and
a statement of the curative action that Subsidiary Borrower proposes to take
with respect thereto, and
(g) upon the request of Lender, any other report reasonably
requested relating to the financial condition of Subsidiary Borrower.
In addition to the financial statements referred to above,
Subsidiary Borrower agrees to deliver financial statements prepared on both a
consolidated and consolidating basis and agrees that Subsidiary Borrower, or any
Subsidiary of Subsidiary Borrower, will not have a fiscal year different from
that of Parent. Subsidiary Borrower agrees that their independent certified
public accountants are authorized to communicate with Lender and to release to
Lender whatever financial information concerning Subsidiary Borrower that Lender
reasonably may request. Subsidiary Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to or in accordance with this Agreement, and agrees that Lender may contact
directly any such accounting firm or service bureau in order to obtain such
information.
6.4 [Intentionally Omitted].
6.5 Return. Cause returns and allowances as between Subsidiary Borrower
and its Account Debtors to be on the same basis and in accordance with the usual
customary practices of Subsidiary 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
Subsidiary Borrower, Subsidiary Borrower promptly shall determine the reason for
such return and, if Subsidiary Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Lender) in the appropriate
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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
Subsidiary Borrower, Subsidiary Borrower promptly shall determine the reason for
such return and, if Lender consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Lender) in the
appropriate amount to such Account Debtor.
6.6 Maintenance of Properties. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct 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,
so as to prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Subsidiary
Borrower or any of its assets to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest.
Subsidiary Borrower will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning PAYE, National Insurance, and other social security payments, VAT,
and UK, and foreign income and corporation taxes, and will, upon request,
furnish Lender with proof satisfactory to Lender indicating that Subsidiary
Borrower has made such payments or deposits. Subsidiary Borrower shall deliver
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which Subsidiary Borrower is required to pay any such excise
tax.
6.8 Insurance.
(a) At Subsidiary Borrower's expense, maintain insurance
respecting its property and assets wherever located, covering loss or damage by
fire, theft, explosion, and all other hazards and risks as ordinarily are
insured against by other Persons engaged in the same or similar businesses.
Subsidiary Borrower also shall maintain business interruption, public liability,
and product liability insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation. All such policies of insurance
shall be in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Subsidiary Borrower shall deliver copies of all such
policies to Lender with a satisfactory lender's loss payable endorsement naming
Lender as sole loss payee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Subsidiary Borrower shall give Lender prompt notice of any
loss covered by such insurance. Lender shall have the exclusive right to adjust
any losses payable under any such insurance policies in excess of $50,000,
without any liability to Subsidiary Borrower whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies)
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or as payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid over to Lender to be applied at the option of Lender
either to the prepayment of the Obligations or shall be disbursed to Subsidiary
Borrower under staged payment terms reasonably satisfactory to Lender for
application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction.
(c) Subsidiary 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 6.8, unless Lender is included thereon as named
insured with the loss payable to Lender under a lender's loss payable
endorsement or its equivalent. Subsidiary Borrower immediately shall notify
Lender whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the same, and
copies of such policies promptly shall be provided to Lender.
6.9 Location of Inventory and Equipment. Keep the Inventory and
Equipment, other than Inventory and Equipment in transit, of Subsidiary Borrower
only at the locations identified on Schedule 5.5; provided, however, that
Subsidiary Borrower may amend Schedule 5.5 so long as such amendment occurs by
written notice to Lender not less than 30 days prior to the date on which such
inventory or equipment is moved to such new location, so long as such new
location is within the United Kingdom, and so long as, at the time of such
written notification, Subsidiary Borrower provides any filings necessary to
perfect and continue perfected the Lender's Liens, and also provides to Lender a
Collateral Access Agreement.
6.10 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any
leases to which Subsidiary Borrower is a party or by which any properties and
assets of Subsidiary Borrower is bound, unless such payments are the subject of
a Permitted Protest.
6.12 Brokerage Commissions. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Subsidiary Borrower
obtaining financing from Lender under this Agreement. Subsidiary Borrower agrees
and acknowledges that payment of all such brokerage commissions or finders fees
shall be the sole responsibility of Subsidiary Borrower, and Subsidiary Borrower
agrees to indemnify, defend, and hold Lender harmless from and against any claim
of any broker or finder arising out of Subsidiary Borrower obtaining financing
from Lender under this Agreement.
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6.13 Existence. At all times preserve and keep in full force and effect
Subsidiary Borrower's and each Canadian Obligor's valid existence and good
standing and any rights and franchises material to Subsidiary Borrower's
businesses.
6.14 Environmental.
(a) Keep any property either owned or operated by Subsidiary
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Lender documentation of such compliance which Lender
reasonably requests, (c) promptly notify Lender of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
Subsidiary Borrower and take any Remedial Actions required to xxxxx said release
or otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Lender with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of Subsidiary Borrower, (ii) commencement
of any Environmental Action or notice that an Environmental Action will be filed
against Subsidiary Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Subsidiary Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.
6.16 Compliance with Covenants of Parent Loan Agreement. Promptly take
all such actions as are necessary to assure that as a Subsidiary of Parent it is
in compliance with all requirements applicable to Subsidiaries of Parent
pursuant to the Parent Loan Agreement.
7. NEGATIVE COVENANTS.
Subsidiary Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Subsidiary Borrower will not and will not permit any of its
Subsidiaries to do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
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(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) 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, in Lender's
judgment, materially impair the prospects of repayment of the Obligations by
Subsidiary Borrower or materially impair Subsidiary Borrower's creditworthiness,
(ii) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to Subsidiary Borrower, and (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must include subordination terms and conditions that are
at least as favorable to Lender as those that were applicable to the refinanced,
renewed, or extended Indebtedness; and
(e) Indebtedness composing Permitted Investments.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 Restrictions on Fundamental Changes.
(a) Except in connection with the consummation of a Permitted
Acquisition (provided, however, that in any such Permitted Acquisition,
Subsidiary Borrower shall be the surviving entity of any merger, consolidation,
reorganization, or recapitalization), enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock;
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution); and
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of Subsidiary Borrower's
assets.
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7.5 Change Name. Change Subsidiary Borrower's name, FEIN (or foreign
equivalent), corporate structure or identity, or add any new fictitious name;
provided, however, that Subsidiary Borrower may change its name upon at least 30
days prior written notice by Subsidiary Borrower to Lender of such change and so
long as, at the time of such written notification, Subsidiary Borrower provides
any filings necessary to perfect and continue perfected Lender's Liens.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Subsidiary
Borrower or which are transmitted or turned over to Lender.
7.7 Nature of Business. Make any change in the principal nature of
Subsidiary Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Subsidiary Borrower, any Borrower, Canadian Obligor, or UK Holding Company,
other than the Obligations in accordance with this Agreement or the Indebtedness
under the Parent Loan Agreement in accordance with its terms, and
(b) Except in connection with a refinancing permitted by Section
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections
7.1(b) or (c).
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on xxxx
and hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property other than by way of a rights or bonus
issue of ordinary shares) on, or purchase, acquire, redeem, or retire any of
Subsidiary Borrower's Stock, of any class, whether now or hereafter outstanding;
provided, however, that Subsidiary Borrower may declare and pay dividends to UK
Holding Company so long as (i) after the receipt by UK Holding Company of the
proposed dividend, Parent continues to own and control 100% of the outstanding
capital Stock of UK Holding Company, and (ii) immediately upon receipt thereof,
UK Holding Company declares and pays a dividend to Parent of all amounts
received pursuant to clause (i) above.
7.12 Accounting Methods. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement
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currently existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of Subsidiary
Borrower's accounting records without said accounting firm or service bureau
agreeing to provide Lender information regarding the Collateral or the financial
condition of Subsidiary Borrower.
7.13 Investments. Except for Permitted Investments and Permitted
Acquisitions, directly or indirectly, make or acquire any Investment, or incur
any liabilities (including contingent obligations) for or in connection with any
Investment; provided, however, that Subsidiary Borrower shall not have Permitted
Investments (other than in the Cash Management Accounts) in excess of $50,000
outstanding at any one time unless Subsidiary Borrower and the applicable
securities intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Lender shall determine in
its Permitted Discretion, to perfect (and further establish) the Lender's Liens
in such Permitted Investments. Anything in this Section 7.13, this Agreement, or
any of the other Subsidiary Loan Documents to the contrary notwithstanding,
Subsidiary Borrower shall not permit a CFC to consummate an Acquisition of
another CFC unless any such Acquisition is a Permitted Cash Acquisition or
Permitted Non-Cash Acquisition.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of Subsidiary Borrower except
for transactions that are in the ordinary course of Subsidiary Borrower's
business, upon fair and reasonable terms, that are fully disclosed to Lender,
and that are no less favorable to Subsidiary 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 [Intentionally Omitted].
7.17 Use of Proceeds. Use the proceeds of the Subsidiary Borrower
Advances for any purpose other than (a) on the Closing Date, (i) to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses
owing to Existing Lender, and (ii) to pay transactional fees, costs, and
expenses incurred in connection with this Agreement, the other Subsidiary Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes; provided, however, that Subsidiary Borrower shall not use
the proceeds of the Subsidiary Borrower Advances to acquire shares in UK Holding
Company or Subsidiary Borrower, any company (as defined by the Companies Act)
which is a holding company of the UK Holding Company, Subsidiary Borrower, or
any company (as defined in the Companies Act) which is a subsidiary company of
the UK Holding Company or Subsidiary Borrower.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its registered office to a new location without
Subsidiary Borrower providing 30 days prior written notification thereof to
Lender and so long as, at the time of such written notification, Subsidiary
Borrower provides any filings necessary to perfect and
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continue perfected the Lender's Liens and also provides to Lender a Collateral
Access Agreement with respect to such new location. Other than in transit
Inventory and Equipment of Subsidiary Borrower, the Inventory and Equipment of
Subsidiary Borrower shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Lender's prior written consent.
7.19 Securities Accounts. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Subsidiary Borrower agrees to not transfer assets out of any
Securities Account; provided, however, that, so long as no Event of Default has
occurred and is continuing or would result therefrom, Subsidiary Borrower may
use such assets (and the proceeds thereof) to the extent not prohibited by this
Agreement.
7.20 Compliance with Covenants of Parent Loan Agreement. Take any action
which would cause Parent or the other Borrowers to be in violation of any
material term or provision of the Parent Loan Agreement or any other Loan
Document to which such Borrower may be a party.
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 Subsidiary Borrower fails to pay when due and payable or when
declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Lender, reimbursement of Lender Expenses, or other amounts constituting
Obligations);
8.2 If Subsidiary Borrower fails to perform, keep, or observe (a) any
term, provision, condition, covenant, or agreement (i) contained in Sections 6.2
or 6.3 hereof and such failure or neglect continues for a period of 5 days after
the date on which such failure or neglect first occurs, (ii) contained in
Sections 6.6 or 6.10 hereof and such failure or neglect continues for a period
of 15 days after the date on which such failure or neglect first occurs, or (b)
any other term, provision, condition, covenant, or agreement contained in this
Agreement or in any of the other Subsidiary Borrower Loan Documents (giving
effect to any grace period, cure periods, or required notices, if any, expressly
provided for in such other Subsidiary Borrower Loan Documents, in each case,
other than any 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 the Borrowers referred to in this
Section 8.2 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 precondition
of the giving of a notice, Lender shall not be required to make further
Subsidiary Borrower Advances or issue any Letters of Credit;
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8.3 If any material portion of Subsidiary Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Subsidiary Borrower or
any of its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Subsidiary
Borrower, or any of its Subsidiaries, and any of the following events occur: (a)
Subsidiary Borrower or the Subsidiary 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 60 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Lender shall be relieved of its obligation to extend credit hereunder, (d) an
interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Subsidiary Borrower or any of its Subsidiaries, or
(e) an order for relief shall have been entered therein;
8.6 If Subsidiary Borrower or any of its Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to Subsidiary Borrower's or any of its Subsidiaries' assets by the
United States, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether xxxxxx or otherwise, upon Subsidiary Borrower's or any of its
Subsidiaries' assets and the same is not paid before such payment is delinquent;
8.8 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of Subsidiary Borrower's or any of its Subsidiaries' assets;
8.9 If there is a default in any material agreement, including any
agreement with any purchase money financier or equipment lessor to which
Subsidiary Borrower or any of its Subsidiaries is a party and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by the other party thereto, irrespective of whether exercised, to
accelerate the maturity of Subsidiary Borrower's or its Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.10 If any software licensor of Subsidiary Borrower gives notice of its
election to terminate any agreement between such Person and Subsidiary Borrower
and Subsidiary Borrower does not have a suitable substitute for the licensed
software;
8.11 If Subsidiary Borrower or any of its Subsidiaries makes any payment
on account of Indebtedness that has been contractually subordinated in right of
payment to the
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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 material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Subsidiary Borrower, its Subsidiaries, or any officer, employee, agent, or
director of Subsidiary Borrower or any of its Subsidiaries;
8.13 If the obligation of any Guarantor under its guaranty is limited or
terminated by operation of law or by such Guarantor thereunder;
8.14 If this Agreement or any other Subsidiary Loan Document that
purports to create a Lien, shall, for any reason, fail or cease to create a
valid and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in the Collateral covered
hereby or thereby;
8.15 Any provision of any Subsidiary 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 Subsidiary Borrower, or a proceeding shall be
commenced by Subsidiary Borrower, or by any Governmental Authority having
jurisdiction over Subsidiary Borrower, seeking to establish the invalidity or
unenforceability thereof, or Subsidiary Borrower shall deny that any Borrower
has any liability or obligation purported to be created under any Loan Document;
or
8.16 If there is a default in any Loan Document and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by Lender, irrespective of whether exercised, to accelerate the maturity
of the Borrowers' obligations thereunder, to terminate such agreement, or to
refuse to renew such agreement pursuant to an automatic renewal right therein.
9. THE LENDER'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, Lender (at its election but without notice
of its election and without demand) may do any one or more of the following, all
of which are authorized by Subsidiary Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Subsidiary Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Subsidiary Borrower under this Agreement, under any of the Subsidiary
Loan Documents, or under any other agreement between Subsidiary Borrower and
Lender;
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(c) Terminate this Agreement and any of the other Subsidiary
Loan Documents as to any future liability or obligation of Lender, but without
affecting any of the Lender's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit the Loan Account with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all Lender Expenses
incurred or expended in connection therewith;
(e) Hold, as cash collateral, any and all balances and deposits
of Subsidiary Borrower held by Lender, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of all of the
Obligations;
(f) With respect to any of Subsidiary Borrower's owned or leased
premises, Subsidiary Borrower hereby grants Lender a license to enter into
possession of such premises and to occupy the same, in accordance with the terms
of the relevant signed waiver and consent of real property owners, if any, in
favor of Lender, without charge, in order to exercise any of Lender's rights or
remedies provided herein, at law, in equity, or otherwise;
(g) Lender shall have all other rights and remedies available to
it at law or in equity pursuant to any other Subsidiary Loan Documents; and
(h) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Subsidiary
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Lender to Subsidiary Borrower.
9.2 Remedies Cumulative. The rights and remedies of Lender under this
Agreement, the other Subsidiary Loan Documents, and all other agreements shall
be cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Subsidiary Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to Subsidiary Borrower, may do any or all of the
following: (a) make payment of the same or any part thereof, (b) set up such
reserves in Subsidiary Borrower's Loan Account as Lender deems necessary to
protect Lender from the exposure created by such failure, or (c) in the case of
the failure to comply
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with Section 6.8 hereof, obtain and maintain insurance policies of the type
described in Section 6.8 and take any action with respect to such policies as
Lender deems prudent. Any such amounts paid by Lender shall constitute Lender
Expenses and any such payments shall not constitute an agreement by Lender to
make similar payments in the future or a waiver by Lender of any Event of
Default under this Agreement. Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest. Subsidiary Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which Subsidiary Borrower may in any way be liable.
11.2 Lender's Liability for Collateral. Subsidiary Borrower hereby
agrees that: (a) so long as Lender complies with its obligations, if any, under
the Code, Lender shall not in any way or manner be liable or responsible for:
(i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring
or arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Subsidiary Borrower.
11.3 Indemnification. Subsidiary Borrower shall pay, indemnify, defend,
and hold the Lender-Related Persons, each Participant, and each of their
respective officers, directors, employees, agents, and attorneys-in-fact (each,
an "Indemnified Person") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration of this Agreement, any of the other Subsidiary
Loan Documents, or the transactions contemplated hereby or thereby, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Subsidiary Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event, or circumstance in any manner
related thereto (all the foregoing, collectively, the "Indemnified
Liabilities"). The foregoing to the contrary notwithstanding, Subsidiary
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any
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payment to any other Indemnified Person with respect to an Indemnified Liability
as to which Subsidiary Borrower was required to indemnify the Indemnified Person
receiving such payment, the Indemnified Person making such payment is entitled
to be indemnified and reimbursed by Subsidiary Borrower with respect thereto.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH ARE IN WHOLE OR IN PART
CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED
PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Subsidiary Borrower or Lender to the other relating to this Agreement
or any other Subsidiary Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as Subsidiary
Borrower or Lender, as applicable, may designate to each other in accordance
herewith), or telefacsimile to Subsidiary Borrower or to Lender, as the case may
be, at its address set forth below:
If to Subsidiary
Borrower: c/o FUTURELINK CORP.
0 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxx, Esq.
Fax No. 000.000.0000
with copies to: XXXX XXXXXXXX XXXXXXXX & XXXXXX, LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx Xxxxxxx, Esq.
Fax No. 000.000.0000
If to Lender: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies to: XXXXXXX, XXXXXXX & XXXXXXXX LLP
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx Hilson, Esq.
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Fax No. 000.000.0000
Lender and Subsidiary Borrower may change the address at which they
are to receive notices hereunder, by notice in writing in the foregoing manner
given to the other party. All notices or demands sent in accordance with this
Section 12, other than notices by Lender in connection with enforcement rights
against the Collateral under the provisions of the Code, shall be deemed
received on the earlier of the date of actual receipt or 3 Business Days after
the deposit thereof in the mail. Subsidiary Borrower acknowledges and agrees
that notices sent by Lender in connection with the exercise of enforcement
rights against Collateral under the provisions of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER SUBSIDIARY LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER SUBSIDIARY LOAN
DOCUMENT IN RESPECT OF SUCH OTHER SUBSIDIARY LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER SUBSIDIARY LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. SUBSIDIARY
BORROWER AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13(b).
SUBSIDIARY BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF THE SUBSIDIARY LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN,
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INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. SUBSIDIARY BORROWER AND LENDER REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Lender may assign and delegate to one or more assignees
(each an "Assignee") all, or any ratable part of all, of the Obligations and the
other rights and obligations of Lender hereunder and under the other Subsidiary
Loan Documents; and, if required by Lender, Subsidiary Borrower will join with,
and shall cause each of the Guarantors to join with, Lender and any Assignee in
novating the Obligations under this Agreement and the other Subsidiary Loan
Documents provided, however, that Subsidiary Borrower may continue to deal
solely and directly with Lender in connection with the interest so assigned to
an Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Subsidiary Borrower by Lender and the Assignee an appropriate
assignment and acceptance agreement.
(b) From and after the date that Lender provides Subsidiary
Borrower with such written notice and executed assignment and acceptance
agreement, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment and acceptance agreement, shall have the assigned and
delegated rights and obligations of Lender under the Subsidiary Loan Documents,
and (ii) Lender shall, to the extent that rights and obligations (subject to any
novation required under applicable law) hereunder and under the other Subsidiary
Loan Documents have been assigned and delegated by it pursuant to such
assignment and acceptance agreement, relinquish its rights (except with respect
to Section 11.3 hereof) and be released from its obligations under this
Agreement (and in the case of an assignment and acceptance agreement covering
all or the remaining portion of Lender's rights and obligations under this
Agreement and the other Subsidiary Loan Documents, Lender shall cease to be a
party hereto and thereto), and such assignment shall affect a novation between
Subsidiary Borrower and the Assignee.
(c) Immediately upon Subsidiary Borrower's receipt of such fully
executed assignment and acceptance agreement, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the rights and duties
of Lender arising therefrom.
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(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of Lender (a
"Participant") participating interests in Obligations and the other rights and
interests of Lender hereunder and under the other Subsidiary Loan Documents;
provided, however, that (i) Lender shall remain the "Lender" for all purposes of
this Agreement and the other Subsidiary Loan Documents and the Participant
receiving the participating interest in the Obligations and the other rights and
interests of Lender hereunder shall not constitute a "Lender" hereunder or under
the other Subsidiary Loan Documents and Lender's obligations under this
Agreement shall remain unchanged, (ii) Lender shall remain solely responsible
for the performance of such obligations, (iii) Subsidiary Borrower and Lender
shall continue to deal solely and directly with each other in connection with
Lender's rights and obligations under this Agreement and the other Subsidiary
Loan Documents, (iv) Lender shall not transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Subsidiary
Loan Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Subsidiary Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Subsidiary Loan Documents) supporting
the Obligations hereunder in which such Participant is participating, (D)
postpone the payment of, or reduce the amount of, the interest or fees payable
to such Participant through Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums, and (v) all amounts
payable by Subsidiary Borrower hereunder shall be determined as if Lender had
not sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be derivative through
Lender and no Participant shall have any rights under this Agreement or the
other Subsidiary Loan Documents or any direct rights as to Subsidiary Borrower,
the Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by Lender.
(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Subsidiary Borrower
or Subsidiary Borrower's business.
(f) Any other provision in this Agreement notwithstanding,
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR Section 203.14, and
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such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
(g) Subsidiary Borrower shall be under no obligation to pay any
greater amount under this Agreement following an assignment or participation by
the Lender of any of its rights or obligations pursuant to Section 14.1 if, in
the circumstances existing at the time of such assignment or participation, such
greater amount would not have been payable but for the assignment or
participation.
14.2 Successors. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; provided, however,
that Subsidiary Borrower may not assign this Agreement or any rights or duties
hereunder without Lender's prior written consent and any prohibited assignment
shall be absolutely void ab initio. No consent to assignment by Lender shall
release Subsidiary Borrower from its Obligations. Lender may assign this
Agreement and the other Subsidiary Loan Documents and its rights and duties
hereunder and thereunder pursuant to Section 14.1 hereof and, except as
expressly required pursuant to Section 14.1 hereof, no consent or approval by
Subsidiary Borrower is required in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Subsidiary Loan Document, and no consent with
respect to any departure by Subsidiary Borrower therefrom, shall be effective
unless the same shall be in writing and signed by Lender and Subsidiary Borrower
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given
15.2 No Waivers; Cumulative Remedies. No failure by Lender to exercise
any right, remedy, or option under this Agreement or, any other Subsidiary Loan
Document, or delay by Lender in exercising the same, will operate as a waiver
thereof. No waiver by Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by Lender on any occasion
shall affect or diminish Lender's rights thereafter to require strict
performance by Subsidiary Borrower of any provision of this Agreement. Lender's
rights under this Agreement and the other Subsidiary Loan Documents will be
cumulative and not exclusive of any other right or remedy that Lender may have.
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Subsidiary Borrower and Lender.
16.2 Section Headings. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
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72
16.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Subsidiary Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
16.4 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
16.5 Withholding Taxes.
(a) All payments made by Subsidiary Borrower hereunder or under
any note will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States), except as required by applicable law, or by any
political subdivision or taxing authority thereof or therein (other than of the
United States) with respect to such payments (but excluding, any tax imposed by
any jurisdiction or by any political subdivision or taxing authority thereof or
therein (i) measured by or based on the net income or net profits of Lender, or
(ii) to the extent that such tax results from a change in the circumstances of
Lender, including a change in the residence, place of organization, or principal
place of business of Lender, or a change in the branch or lending office of
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (including,
without limitation, any withholding taxes on any payments made pursuant to this
Agreement) being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, Subsidiary Borrower agrees to pay the full amount of such
Taxes, and such additional amounts (the "Gross Up Amount") as may be necessary
so that every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Subsidiary Borrower shall not be
required to increase any such amounts payable to Lender if the increase in such
amount payable results from Lender's own willful misconduct or gross negligence.
Subsidiary Borrower will furnish to Lender as promptly as possible after the
date the payment of any Taxes is due pursuant to applicable law certified copies
of tax receipts evidencing such payment by Subsidiary Borrower.
(b) Lender and Subsidiary Borrower shall cooperate in completing
any procedural formalities necessary for Subsidiary Borrower to obtain
authorization to make its payments to Lender without deduction or withholding
for or on account of applicable Taxes due on account of the making of a payment
hereunder. If (i) Subsidiary Borrower makes a payment to Lender pursuant to the
provisions of this Agreement, (ii) such payment includes an amount attributable
to a Gross Up Amount (the "Applicable Gross Up Amount"), and (iii)
-66-
73
Lender subsequently receives a tax credit against, relief or remission for, or
repayment of any tax, levy, impost, duty, or other charge or withholding of a
similar nature (including any penalty or interest payable in connection with any
failure to pay or any delay in paying any of the same) ("Tax Credit") that
Lender determines corresponds to the Applicable Gross Up Amount then Lender
shall pay an amount to Subsidiary Borrower equal to the Tax Credit actually
received by Lender.
16.6 Amendments in Writing. This Agreement only can be amended in
writing signed by Lender and Subsidiary Borrower.
16.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Subsidiary Loan Document
mutatis mutandis.
16.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Subsidiary Borrower or the transfer to Lender of
any property should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, transfers at an undervalue, or other voidable or recoverable
payments of money or transfers of property (collectively, a "Voidable
Transfer"), and if Lender is required to repay or restore, in whole or in part,
any such Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that
Lender is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of Lender related thereto, the liability of
Subsidiary Borrower automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made.
16.9 Integration. This Agreement, together with the other Subsidiary
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
FUTURELINK EUROPE LIMITED, a company organized
under the laws of England and Wales
By: /s/ XXXXX XXXXXX
----------------------------------------
Title: Director
By: /s/ YURI PASEA
----------------------------------------
Title: Director
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ XXXXXXX XXXXX
----------------------------------------
Title: Vice President
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EXHIBIT S-1
(Form of Subsidiary Borrower Borrowing Base Certificate)
[on Subsidiary Borrower's Letterhead]
Foothill Capital Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
The undersigned, the [chief financial officer] of FutureLink
Europe Limited, a corporation organized under the laws of the United Kingdom
("Subsidiary Borrower"), pursuant to Section 6.2 of that certain Loan and
Security Agreement, dated as of December 13, 2000 (the "Loan Agreement"),
entered into between Subsidiary Borrower and Foothill Capital Corporation, a
California corporation ("Lender"), hereby certifies to Lender that the following
items, calculated in accordance with the terms and definitions set forth in the
Loan Agreement for such items are true and correct, and that Subsidiary Borrower
is in compliance with and, after giving effect to any currently requested loans,
will be in compliance with the terms, conditions, and provisions of the Loan
Agreement.
All initially capitalized terms used in this Subsidiary Borrower
Borrowing Base Certificate have the meanings set forth in the Loan Agreement
unless specifically defined herein.
Effective Date of Calculation: ______________________
I. BORROWING BASE CALCULATION
(a) Eligible UK Accounts:
(1) Amount of Eligible UK Accounts
(as detailed on Schedule A.1
attached hereto and incorporated
herein by this reference): $
-------------
(2) Advance rate against Eligible
UK Accounts: 85%
(3) Item a(1) times Item a(2): $
-------------
(4) Amount, if any, of the Dilution
Reserve: $
-------------
-1-
76
(5) Net Eligible UK Accounts (Item
a(3) minus Item a(4)): $
-------------
(b) Eligible ASP Accounts
(1) Amount of Eligible ASP
Accounts (as detailed on Schedule
A-1 attached hereto and
incorporated herein by this
reference): $
--------------
(2) Advance rate against Eligible
ASP Accounts: 85%
(3) Item b(1) times Item b(2): $
--------------
(4) Amount, if any, of the ASP
Dilution Reserve: $
--------------
(5) Net Eligible ASP Accounts
(Item b(3) minus Item b(4)): $
--------------
(c) Eligible Accounts (Item a(5)
plus Item b(5)) $
--------------
(d) Amount of Subsidiary Borrower's
Collections with $ respect to
Accounts for the immediately
preceding 45 day period: $
--------------
(e) The lesser of Items c and d = $
--------------
(f) Aggregate amount of reserves, if any,
established by Lender under Section 2.1(b) of
the Loan Agreement: $
--------------
Item e minus Item f = $
--------------
16.10 II. AVAILABILITY CALCULATION
(a) Maximum Permitted Advances
(i) Maximum Revolver Amount $5,000,000, less
the amount by
which Domestic
Revolver Usage
exceeds
$25,000,000
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77
(ii) Letter of Credit Usage $
--------------
Item a(i) minus Item a(ii) = $
--------------
(b) Advances permitted under Borrowing Base
(i) Borrowing Base (from Section I) $
--------------
(ii)Letter of Credit Usage: $
--------------
Item b(i) minus Item b(ii) = $
--------------
(c) Availability
(i) Permitted Advances
(the lesser of item a and item b): $
--------------
(ii) Aggregate amount of outstanding
Advances: $
--------------
Item c(i) minus Item c(ii) = $
--------------
[Remainder of page intentionally left blank.]
-3-
78
The undersigned hereby certifies that all of the foregoing is true
and correct as of the effective date of the calculations set forth above and
that such calculations have been made in accordance with the requirements of the
Loan Agreement.
FUTURELINK EUROPE LIMITED,
a corporation organized under the laws of
the England and Wales,
as Subsidiary Borrower
By:
-------------------------------------
Title:
-----------------------------------
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79
SCHEDULE A.1
(ELIGIBLE UK ACCOUNTS)
[ ]
(ELIGIBLE ASP ACCOUNTS)
[ ]
80
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule P-1
PERMITTED LIENS
None.
1
81
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 2.7(a)
CASH MANAGEMENT BANK
National Westminster Bank plc
X.X. Xxx 0000
Xxxxxxx
Xxxxxxxxx
XX00 0XX
Xxxxxx Xxxxxxx
2
82
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.5
LOCATIONS OF INVENTORY AND EQUIPMENT
FutureLink Europe Limited
0 Xxx Xxxx Xxxx
Xxxxxxx
Xxxxxxxxx
XX00 0XX
Xxxxxx Xxxxxxx
3
83
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.7
CHIEF EXECUTIVE OFFICE; FEIN
FutureLink Europe Limited.
The Chestnuts
0 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxx Xxxxxxx
XX00 0XX
VAT: 724 5381 37
Company Number: 3159433
4
84
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.8 (b)
CAPITALIZATION OF SUBSIDIARY BORROWER
KNS Holdings Limited has 500,002 ordinary shares of Pound Sterling1 each issued
and outstanding, all of which are held by KNS Holdings Limited.
5
85
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.8 (c)
CAPITALIZATION OF SUBSIDIARY BORROWERS' SUBSIDIARY
None.
6
86
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.10
LITIGATION
In March 2000, a former employee filed a claim against FutureLink Europe Limited
with the Employment Tribunal, alleging unfair dismissal and sexual
discrimination. The claim is expected to be heard by the Tribunal before June
2001. No fixed amount has been claimed by the claimant however the claimant has
offered to withdraw the claim in consideration of a payment of Pound
Sterling40,000 by FutureLink Europe Limited which offer has been rejected by
FutureLink Europe Limited. The claim is not covered by insurance.
7
87
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.14
ENVIRONMENTAL MATTERS
None.
8
88
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.16
INTELLECTUAL PROPERTY
None.
9
89
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.18
DEMAND DEPOSIT ACCOUNTS
National Westminster Bank plc
Current Account Number
Branch Sort Code
Business Account Number
Branch Sort Code
US Dollar Account Number
Branch Sort Code
Receivables Account Number
Branch Code
Receivables Account Number
US Dollar Branch Code
Point to Point Number
Branch Code
Account Number
Branch Code
10
90
Disclosure Schedules to Loan and Security Agreement between
FutureLink Europe Limited. and Foothill Capital Corporation
Schedule 5.20
PERMITTED INDEBTEDNESS
Capital Leases Compaq Financial Services
0 Xxxxxxxxx Xxxxxxxx Xxx
Xxxxxxxxx Xxxxxx
Xxxxxxxxx
Xx Xxxxxx
Xxxxxxx
Obligation as of October 31, 2000
Short Term 129,726 GBP
Long Term 242,779 GBP
-----------
Total 372,505 GBP
11
