1
EXHIBIT 10.12
================================================================================
LOAN AND SECURITY AGREEMENT
by and among
CRAY INC.
and
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
as Borrowers,
and
FOOTHILL CAPITAL CORPORATION
as Lender
Dated as of March 28, 2001
================================================================================
2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered
into as of March 28, 2001, between and among FOOTHILL CAPITAL CORPORATION, a
California corporation ("Lender"), CRAY INC., a Washington corporation
("Parent"), and each of Parent's Subsidiaries identified on the signature pages
hereof (such Subsidiaries, together with Parent, are referred to hereinafter
each individually as a "Borrower", and individually and collectively, jointly
and severally, as the "Borrowers").
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 Borrowers' 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.
"Additional Documents" has the meaning set forth in Section 4.4.
"Administrative Borrower" has the meaning set forth in Section
16.10.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 3% times the sum of (i) $7,500,000
plus (ii) the outstanding principal balance of the Term Loan on the date
immediately prior to the date of determination, (b) during the period of time
from and including the date that is the first anniversary of the Closing Date up
to the date that is the second anniversary of the Closing Date, 2% times the sum
of (i) $7,500,000 plus (ii) the outstanding principal balance of
1
3
the Term Loan on the date immediately prior to the date of determination, and
(c) during the period of time from and including the date that is the second
anniversary of the Closing Date up to the Maturity Date, 1% times the sum of (i)
$7,500,000 plus (ii) the outstanding principal balance of the Term Loan on the
date immediately prior to the date of determination.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of
Administrative 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 Borrowers are entitled to borrow as 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.
"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. In the event
that Xxxxx Fargo ceases announcing a "prime rate," then the "Base Rate" shall be
the "prime rate" as published in the national edition of the Wall Street
Journal.
"Base Rate Loan" means each portion of an Advance or the Term
Loan that bears interest at a rate determined by reference to the Base Rate.
"Base Rate Margin" means 2.00 percentage points.
"Base Rate Term Loan Margin" means 3.25 percentage points.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
Affiliate of any Borrower has been an "employer" (as defined in Section 3(5) of
ERISA) within the past six years.
"Board of Directors" means the board of directors (or comparable
managers) of Parent or any committee thereof duly authorized to act on behalf
thereof.
"Books" means all of each Borrower's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of its Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).
"Borrower" and "Borrowers" have the respective meanings set forth
in the preamble to this Agreement.
"Borrowing" means a borrowing hereunder of an Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit B-1.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
2
4
"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 Administrative Borrower, Lender, and one of the Cash Management Banks.
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 10%, or more, of the Stock of Parent having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors, or (c) any
Borrower ceases to directly own and control 100% of the outstanding capital
Stock of each of its Subsidiaries extant as of the Closing Date.
"Closing Date" means the date of the making of the initial
Advance (or other extension of credit) hereunder.
"Closing Date Business Plan" means the set of Projections of
Borrowers for the 3 year period beginning January 1, 2001 (on a year by year
basis, and for the 1 year period beginning January 1, 2001, on a
quarter-by-quarter basis), in form and substance (including as to scope and
underlying assumptions) satisfactory to Lender in its Permitted Discretion.
"Code" means the California Uniform Commercial Code, as in effect
from time to time.
"Collateral" means all of each Borrower's now owned or hereafter
acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
3
5
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) money or other assets of each such 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 acknowledgment 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 Borrowers.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 delivered by the chief financial officer of Parent to
Lender.
"Continuing Director" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) of Parent (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 the applicable
Borrower, Lender, and the applicable securities intermediary with respect to a
Securities Account or a bank with respect to a deposit account.
"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 any 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.
4
6
"Designated Account" means account number 153505549466 of
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative Borrower
to Lender.
"Designated Account Bank" means U.S. Bank, N.A., whose office is
located at U.S. Bank Business Client Services, 000 X.X. Xxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxx 00000 and whose ABA number is 000000000.
"Dilution" means, as of any date of determination, a percentage,
based upon the experience of the immediately prior 90 days, that is the result
of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrowers' Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed and
delivered by Administrative 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 Service/Maintenance Revenues" means Service/Maintenance
Revenues for which each Account Debtor obligated on the Accounts giving rise to
such revenues maintains its chief executive office in the United States and is
organized under the laws of the United States or any state thereof.
"EBITDA" means, with respect to any fiscal period, Parent's and
its Subsidiaries consolidated net earnings (or loss), minus extraordinary gains,
plus interest expense, income taxes, and depreciation and amortization for such
period, as determined in accordance with GAAP.
"Eligible Accounts" means those Accounts created by one of
Borrowers in the ordinary course of its business, that arise out of its sale of
goods (and that do not arise out of the rendition of services that lead to
Service/Maintenance Revenues) that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
and revised from time to time by Lender in Lender's Permitted Discretion to
address the results of any audit performed by Lender from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to Borrowers.
Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
within 75 days of original invoice date or within 45 days of the date the
payment was due under the original invoice,
(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,
5
7
(c) Accounts with respect to which the Account Debtor is
an employee or Affiliate of any 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 Dollars,
(f) Accounts with respect to which the Account Debtor
either (i) does not maintain its chief executive office in the United States or
Canada, or (ii) is not organized under the laws of the United States or any
state thereof or Canada or any Canadian province thereof, or (iii) is the
government of any foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any department,
agency, public corporation, or other instrumentality thereof, unless (y) the
Account is supported by an irrevocable letter of credit satisfactory to 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 any 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) [INTENTIONALLY OMITTED],
(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 a Borrower has received notice of an imminent Insolvency
Proceeding or a material impairment of the financial condition of such Account
Debtor,
(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 the applicable Borrower of the subject contract for goods or
services.
"Eligible Foreign Accounts" means an Account of a Borrower: (I)
acceptable to Lender in its Permitted Discretion, and (II) as to which each of
the following is applicable: (a) such Account does not qualify as an Eligible
Account solely because the Account Debtor with respect to such Account maintains
its chief executive office in a jurisdiction other than the United States or is
organized under the laws of a jurisdiction (or a political subdivision thereof)
other than the United States, and (b) Lender has a valid and perfected first
priority security interest in such Account.
6
8
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Borrower or any predecessor in interest, (b) adjoining
properties or businesses, or (c) or onto any facilities which received Hazardous
Materials generated by any Borrower or any predecessor in interest.
"Environmental Indemnity Agreement" means an environmental
indemnity agreement entered into by Borrower for the benefit of Lender, the form
and substance of which is satisfactory to Lender.
"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
Borrowers, 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.
"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 Borrowers' 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
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
a Borrower under IRC Section 414(c), (c) solely for purposes
7
9
of Section 302 of ERISA and Section 412 of the IRC, any organization subject to
ERISA that is a member of an affiliated service group of which a Borrower is a
member under IRC Section 414(m), or (d) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to
an arrangement with a Borrower and whose employees are aggregated with the
employees of a Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event (as defined in Section
4043 of ERISA) with respect to any Benefit Plan or Multiemployer Plan, (b) the
withdrawal of a Borrower or any of its Subsidiaries or ERISA Affiliates from a
Benefit Plan during a plan year in which it was a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA), (c) the providing of notice of intent
to terminate a Benefit Plan in a distress termination (as described in Section
4041(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a
Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides
a basis under Section 4042(a)(1), (2), or (3) of ERISA for the termination of,
or the appointment of a trustee to administer, any Benefit Plan or Multiemployer
Plan, or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of a Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any plan under Section 401(a)(29) of the IRC by a Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as in
effect from time to time.
"Existing Lender" means The CIT Group/Business Credit, Inc.
"FEIN" means Federal Employer Identification Number.
"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 Borrowers' now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
8
10
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity," (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means (a) all obligations of a Borrower for
borrowed money, (b) all obligations of a Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Borrower under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of a Borrower, irrespective of whether such
obligation or liability is assumed, (e) all obligations of a Borrower for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of a Borrower's business and repayable in accordance with
customary trade practices), and (f) any obligation of a Borrower guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to a Borrower) any obligation of any
other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intellectual Property Security Agreement" means an intellectual
security agreement executed and delivered by each Borrower and Lender, the form
and substance of which is satisfactory to Lender.
"Inventory" means all Borrowers' 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 a Borrower as lessor, goods that are furnished by a Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in a 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
9
11
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 Borrowers' 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 Borrowers shall make all
payments to Lender under this Agreement and the other Loan Documents; unless and
until Lender notifies Administrative Borrower to the contrary, Lender's Account
shall be that certain deposit account bearing account number 323-266193 and
maintained by Lender with The Chase Manhattan Bank, 4 New York Plaza, 15th
Floor, New York, New York 10004, ABA #000000000.
"Lender's Liens" means the Liens granted by Borrowers to Lender
under this Agreement or the other Loan Documents.
"Lender Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by a Borrower under any of
the Loan Documents that are paid or incurred by Lender, (b) fees or charges paid
or incurred by Lender in connection with Lender's transactions with Borrowers,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Lender in the disbursement of funds to or for
the account of Borrowers (by wire transfer or otherwise), (d) charges paid or
incurred by Lender resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by Lender to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) audit fees and expenses of Lender related to
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 Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Lender's relationship with
any Borrower or any guarantor of the Obligations, (h) Lender's reasonable fees
and expenses (including attorneys fees) incurred in advising, structuring,
drafting, reviewing, administering, or amending the Loan Documents, and (i)
10
12
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 any Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral, and any
legal fees and expenses incurred on appeal.
"Lender-Related Person" means Lender, Lender's Affiliates, and
the officers, directors, employees, and agents of Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.
"Letter of Credit Usage" means, as of any date of determination,
the aggregate undrawn amount of all outstanding Letters of Credit plus 100% of
the amount of outstanding time drafts accepted by an Underlying Issuer as a
result of drawings under Underlying Letters of Credit.
"Lien" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Cash Management
Agreements, the Disbursement Letter, the Intellectual Property Security
Agreement, the Letters of Credit, the Mortgage, the Environment Indemnity
Agreement, the Officers' Certificate, the Stock Pledge Agreements, the Warrant,
any note or notes executed by a Borrower in connection with this Agreement and
payable to Lender, and any other agreement entered into, now or in the future,
by any Borrower and Lender in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrowers taken as a whole, (b) a
material impairment of a Borrower's ability to perform its obligations under the
Loan Documents to which it is a party or of Lender's ability to enforce the
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Lender's Liens with respect to the Collateral
as a result of an action or failure to act on the part of a Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means (a) upon the Closing Date,
$3,000,000; and (b) thereafter, upon the completion of an audit by Lender of
Borrowers to Lender's sole satisfaction, delivery to Lender of copies of
certificates of registration in the U.S. Copyright Office of Borrower's material
(as determined in Lender's Permitted Discretion) software, and confirmation by
Lender that
11
13
a notice of Lender's security interest in said software has been recorded in the
U.S. Copyright Office, $7,500,000.
"Mortgage" means a mortgage, deed of trust, or deed to secure
debt, executed and delivered by Parent in favor of Lender, in form and substance
satisfactory to Lender, that encumbers the Real Property Collateral and the
related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 3(37) of ERISA) to which a Borrower or any of its Subsidiaries organized
under the laws of the United States or any state thereof or any ERISA Affiliate
is making, is obligated to make, has made or has been obligated to make,
contributions on behalf of participants who are or were employed by any of them,
other than a plan described in Section 4(b)(4) of ERISA.
"Negotiable Collateral" means all of Borrowers' 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 (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrowers' Loan Account pursuant hereto),
obligations (including indemnity 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 Borrowers to Lender pursuant to or
evidenced by the Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all interest not paid when due
and all Lender Expenses that Borrowers are required to pay or reimburse by the
Loan Documents, by law, or otherwise. Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
"Officers' Certificate" means the representations and warranties
of officers form submitted by Lender to Administrative Borrower, together with
Borrowers' completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Lender.
"Operative Contracts" shall mean maintenance or service contracts
of one of Borrowers giving rise to no less than $41,000,000 in Domestic
Service/Maintenance Revenues in the aggregate.
"Overadvance" has the meaning set forth in Section 2.5.
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Participant" has the meaning set forth in Section 14.1(d).
"Pay-Off Letter" means a letter, in form and substance
satisfactory to Lender, from Existing Lender to Lender respecting the amount
necessary to repay in full all of the obligations of Borrowers 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 Borrowers.
12
14
"PBGC" means Pension Benefit Guaranty Corporation or any
successor entity.
"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
Borrowers of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of the applicable Borrower's business, (b) sales by Borrowers of
Inventory to buyers in the ordinary course of business, (c) the use or transfer
of money or Cash Equivalents by Borrowers in a manner that is not prohibited by
the terms of this Agreement or the other Loan Documents, and (d) the licensing
by Borrowers, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of the applicable
Borrower's business.
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) investments by any Borrower in any other Borrower
provided that if any such investment is in the form of Indebtedness, such
Indebtedness investment shall be subject to the terms and conditions of the
Intercompany Subordination Agreement.
"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 Borrowers' business and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet delinquent, or (ii) are the subject of Permitted Protests, (g) Liens
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 Borrowers' 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 Borrowers' business, (j) Liens resulting from any judgment or
award that is not an Event of Default hereunder, (k) Liens with respect to the
Real Property Collateral that are exceptions to the commitments for title
insurance issued in connection with the Mortgage, as accepted by Lender, (l)
with respect to any Real Property that is not part of the Real Property
Collateral, easements, rights of way, and zoning restrictions that do not
materially interfere with or impair the use or operation thereof by Borrowers,
and (m) Liens held by Existing Lender which are to be released in accordance
with the terms of the Pay-Off Letter.
"Permitted Protest" means the right of the applicable 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 the applicable Borrower in
13
15
good faith, and (c) Lender is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of any
of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount not to exceed $10,000,000 in 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.
"Projections" means Parent's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
basis consistent with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property
now owned or hereafter acquired by any Borrower and the improvements thereto.
"Real Property Collateral" means the parcel or parcels of Real
Property identified on Schedule R-1.
"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.
"Required Availability" means the sum of (a) the amount, as of
the date any determination thereof is to be made, equal to the Availability
minus the aggregate amount, if any, of all trade payables of Borrowers 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, and (b) unrestricted cash and
Cash Equivalents, which sum shall be in an amount of not less than $3,000,000.
"Reserve Percentage" means, on any day, for Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long
14
16
as Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the sum
of (a) the then extant amount of outstanding Advances, plus (b) the then extant
amount of the Letter of Credit Usage.
"Sale Inventory" means Inventory which is held for sale by one of
Borrowers.
"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.
"Service/Maintenance Revenues" means revenues of Borrowers
derived from Accounts for which each Account Debtor has entered into a written
service or maintenance agreement, acceptable to Lender, with one Borrower.
"SGI" means Silicon Graphics, Inc., a Delaware corporation.
"Solvent" means, with respect to any Person on a particular date,
that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreements" means the stock pledge agreements, in
form and substance satisfactory to Lender, executed and delivered by each
Borrower and Subsidiary of Borrower that owns Stock of a Subsidiary of Parent or
another Subsidiary.
"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.
"Tangible Net Worth" means, as of any date of determination, the
result of (a) the total consolidated stockholder's equity of Parent and its
Subsidiaries, minus (b) the sum of (i) all Intangible Assets of Parent and its
Subsidiaries, (ii) all of Parent's prepaid expenses and (iii) other assets.
"Taxes" has the meaning set forth in Section 16.5.
"Term Loan" has the meaning set forth in Section 2.2.
"Term Loan Amount" means $7,500,000.
"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.
"Warrant" means a warrant, in form and substance satisfactory to
Lender, executed and delivered by Parent.
15
17
"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. Whenever
the term "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, Lender agrees to make advances ("Advances")
to Borrowers in an amount at any one time outstanding not to exceed an amount
equal to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the Borrowing Base less the Letter of Credit Usage. For purposes
of this Agreement, "Borrowing Base," as of any date of determination, shall mean
the result of:
16
18
(y) 80% of the difference between (i) the amount of
Eligible Accounts and Eligible Foreign Accounts, and (ii) the
amount, if any, of the Dilution Reserve, minus
(z) the aggregate amount of reserves, if any,
established by Lender under Section 2.1(b).
Notwithstanding anything to the contrary contained in this Section 2.1(a),
Lender shall determine, in its sole discretion, on an Account-by-Account basis,
each Account to be included in the Borrowing Base, and Lender's determination
shall be conclusive.
(b) Anything to the contrary in this Section 2.1 notwithstanding,
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves with
respect to (i) sums that Borrowers are required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any Section
of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrowers 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.
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Term Loan.
(a) Subject to the terms and conditions of this Agreement, on the
Closing Date Lender agrees to make a term loan (the "Term Loan") to Borrowers in
an amount equal to the Term Loan Amount.
(b) The Term Loan shall be repaid in equal principal installments
of $178,571.42, commencing on May 1, 2001, and continuing on the first day of
each succeeding calendar month until the Maturity Date; provided, however, that
so long as no Default or Event of Default has occurred and is continuing and
Borrowers have made all principal prepayments required under Section 2.2(c), no
such principal installments shall be required following the payment due April 1,
2002.
(c) In addition to the installment payments required under
Section 2.2(b), Borrowers shall prepay the principal balance of the Term Loan by
an amount equal to the amount by which the outstanding principal balance of the
Term Loan exceeds the lesser of:
(i) For the period:
17
19
(A) from the date hereof to and including December
31, 2001, 75% of Borrower's Domestic Service/Maintenance
Revenues for the immediately preceding three (3) complete
calendar months;
(B) from January 1, 2002, to and including June 30,
2002,70% of Borrower's Domestic Service/Maintenance
Revenues for the immediately preceding three (3) complete
calendar months; and
(C) from July 1, 2002, and thereafter, 65% of
Borrower's Domestic Service/Maintenance Revenues for the
immediately preceding three (3) complete calendar months;
and (ii) 65% of Borrower's Collections for the immediately
preceding three (3) complete calendar months.
Any prepayment required under this Section 2.2(c) shall be made by Borrowers
without notice or demand by Lender no later than 5 Business Days following the
later of: (y) the delivery of the Borrowing Base Certificate showing the
applicable calculations described in clauses (i) and (ii) above; and (z) the
date on which the Borrowing Base Certificate showing the applicable calculations
described in clauses (i) and (ii) was to have been delivered under Section 6.2.
(d) Following 45 Days' prior written notice to Lender, Borrower
may prepay the Term Loan at any time in an amount not to exceed $1,000,000 in
the aggregate during the term of this Agreement.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the outstanding unpaid principal balance and all accrued and unpaid
interest under the Term Loan shall be due and payable on the earlier of (i) the
Maturity Date and (ii) the date of termination of this Agreement, whether by its
terms, by prepayment, or by acceleration. All amounts outstanding under the Term
Loan shall constitute Obligations.
(f) Amounts borrowed pursuant to this Section 2.2 may not be
repaid and reborrowed.
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 Advances. If Lender has received a timely request
for a Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein, Lender
shall make the proceeds of such Advance available to Borrowers on the applicable
Funding Date by transferring available funds equal to such proceeds to
Administrative Borrower's Designated Account.
18
20
2.4 Payments.
(a) Payments by Borrowers.
(i) Except as otherwise expressly provided herein, all
payments by Borrowers shall be made in Dollars to Lender's Account and shall be
made in immediately available funds, no later than 11:00 a.m. (California time)
on the date specified herein. Any payment received by Lender later than 11:00
a.m. (California time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.
(b) Application of Payments.
(i) All payments shall be remitted to Lender and all such
payments (other than payments received while no Default or Event of Default has
occurred and is continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the payment of specific
fees), and all proceeds of Accounts or other Collateral received by Lender,
shall be applied as follows:
A. first, to pay any Lender Expenses then due to
Lender under the Loan Documents, until paid in full,
B. second, to pay any fees then due to Lender
under the Loan Documents until paid in full,
C. third, ratably to pay interest due in respect
of Advances and the Term Loan until paid in full,
D. fourth, ratably to pay all principal amounts
then due and payable (other than as a result of an
acceleration thereof) with respect to the Term Loan
until paid in full,
E. fifth, to pay the principal of all Advances
until paid in full,
F. sixth, if an Event of Default has occurred
and is continuing, to pay the outstanding principal
balance of the Term Loan (in the inverse order of the
maturity of the installments due thereunder) until the
Term Loan is paid in full,
G. seventh, 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,
H. eighth, to pay any other Obligations until
paid in full, and
I. ninth, to Borrowers (to be wired to the
Designated Account) or such other Person entitled
thereto under applicable law.
(ii) In each instance, so long as no Default or Event of
Default has occurred and is continuing, Section 2.4(b) shall not be deemed to
apply to any payment by Borrowers specified by Borrowers to be for the payment
of specific Obligations then due and payable (or prepayable) under any provision
of this Agreement.
(iii) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any Insolvency
Proceeding), default interest, interest on interest, and expense
19
21
reimbursements, whether or not the same would be or is allowed or disallowed in
whole or in part in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the
priority provisions of this Section 2.4 and other provisions contained in any
other Loan Document, it is the intention of the parties hereto that such
priority provisions in such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as aforesaid, the
terms and provisions of this Section 2.4 shall control and govern.
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers 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"), Borrowers immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to Lender as
and when due and payable under the terms of this Agreement and the other Loan
Documents.
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.
(a) Interest Rates. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit) that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof as follows (i) if the relevant Obligation is a portion of the
Term Loan at a per annum rate equal to the Base Rate plus the Base Rate Term
Loan Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus
the Base Rate Margin.
The foregoing notwithstanding, at no time shall any
portion of the Obligations bear interest on the Daily Balance thereof at a per
annum rate less than 9.00%. To the extent that interest accrued hereunder at the
rate set forth herein would be less than the foregoing minimum daily rate, the
interest rate chargeable hereunder for such day automatically shall be deemed
increased to the minimum rate.
(b) Letter of Credit Fee. Borrowers shall pay Lender a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 1.50% 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
20
22
(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. Borrowers hereby authorize Lender, from time to time, without prior
notice to Borrowers, to charge such interest and fees, all Lender Expenses (as
and when incurred), the charges, commissions, fees, and costs provided for in
Section 2.12(e) (as and when accrued or incurred), the fees and costs provided
for in Section 2.11 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document (including the installments due
and payable with respect to the Term Loan) to Borrowers' Loan Account, which
amounts thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances hereunder. Any interest not paid when due
shall be compounded by being charged to Borrowers' Loan Account and shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrowers and Lender, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
2.7 Cash Management.
(a) Borrowers shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Lender at one or more of the
banks set forth on Schedule 2.7(a) (each a "Cash Management Bank"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of 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.
21
23
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrowers, in form and substance
acceptable to Lender. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank as agent or
bailee-in-possession for Lender, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Lender's
Account.
(c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.7(a) to add or replace
a Cash Management Bank or Cash Management Account; provided, however, that (i)
such prospective Cash Management Bank shall be 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, Borrowers and such
prospective Cash Management Bank shall have executed and delivered to Lender a
Cash Management Agreement. Borrowers shall close any of their Cash Management
Accounts (and establish replacement cash management accounts in accordance with
the foregoing sentence) promptly and in any event within 30 days of notice from
Lender that the creditworthiness of any Cash Management Bank issuing such Cash
Management Accounts is no longer acceptable in Lender's Permitted Discretion, 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 Permitted Discretion.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrowers are hereby deemed to
have granted a Lien to Lender.
2.8 Crediting Payments; Float Charge. The receipt of any payment item by
Lender (whether from transfers to Lender by the Cash Management Banks pursuant
to the Cash Management Agreements or otherwise) shall not be considered a
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrowers shall be deemed not to
have made such payment and interest shall be calculated accordingly. Anything to
the contrary contained herein notwithstanding, any payment item shall be deemed
received by Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is
received into the Lender's Account on a non-Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received by
Lender as of the opening of business on the immediately following Business Day.
From and after the Closing Date, Lender shall be
22
24
entitled to charge Borrowers for 1 Business Day of 'clearance' or 'float' at the
rate applicable to Base Rate Loans under Section 2.6 on all Collections that are
received by Borrowers (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 Borrowers and shall apply irrespective
of whether or not there are any outstanding monetary Obligations; the effect of
such clearance or float charge being the equivalent of charging 1 Business Day
of interest on such Collections.
2.9 Designated Account. Lender is authorized to make the Advances and
the Term Loan, and Lender is authorized to issue the Letters of Credit, under
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Lender
hereunder. Unless otherwise agreed by Lender and Administrative Borrower, any
Advance requested by Borrowers and made by Lender hereunder shall be made to the
Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Lender
shall maintain an account on its books in the name of Borrowers (the "Loan
Account") on which Borrowers will be charged with the Term Loan, all Advances
made by Lender to Borrowers or for Borrowers' account, the Letters of Credit
issued by Lender for Borrowers' account, and with all other payment Obligations
hereunder or under the other Loan Documents, including, accrued interest, fees
and expenses, and Lender Expenses. In accordance with Section 2.8, the Loan
Account will be credited with all payments received by Lender from Borrowers or
for Borrowers' account, including all amounts received in the Lender's Account
from any Cash Management Bank. Lender shall render statements regarding the Loan
Account to Administrative Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and Lender
unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.
2.11 Fees. Borrowers shall pay to Lender the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter):
(a) Origination Fee. 1.50% of the sum of (i) $7,500,000 and (ii)
the Term Loan Amount, which shall be fully earned and payable on the Closing
Date,
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to 0.375% per
annum times the result of (a) the Maximum Revolver Amount, less (b) the sum of
(i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (ii) the average Daily Balance of the Letter
of Credit Usage during the immediately preceding month,
23
25
(c) Collateral Management Fee. On the first day of each month
during the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $3,500 in arrears; provided,
however, if Borrower is unable to establish an electronic collateral reporting
system satisfactory to Lender by the end of the sixth full calendar month
following the Closing Date, then the monthly collateral management fee shall
thereafter be $5,000, and
(d) Audit, Appraisal, and Valuation Charges. Audit, appraisal,
and valuation fees and charges as follows: (i) a fee of $750 per day, per
auditor, plus out-of-pocket expenses for each financial audit of a 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, (iii) a fee of $1,500 per day per
appraiser, plus out-of-pocket expenses, for each appraisal of the Real Property
Collateral performed by personnel employed by Lender, and (iv) 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 Borrowers, to appraise the
Collateral, or any portion thereof, or to assess a 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 Borrowers (each, an "L/C")
or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C Undertaking") with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be Xxxxx Fargo) for the account of
Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Administrative 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, Borrowers also shall be an applicant
under the application with respect to any Underlying Letter of Credit that is to
be the subject of an L/C Undertaking. Lender shall have no obligation to issue a
Letter of Credit if any of the following would result after giving effect to the
requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the
Borrowing Base less the then extant amount of
outstanding Advances, or
(ii) the Letter of Credit Usage would exceed
$1,000,000, or
(iii) the Letter of Credit Usage would exceed
the Maximum Revolver Amount less the then extant amount
of outstanding Advances.
(b) Borrowers and Lender acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing
24
26
Date. Each Letter of Credit (and corresponding Underlying Letter of Credit)
shall have an expiry date no later than 30 days prior to the Maturity Date and
all such Letters of Credit (and corresponding Underlying Letter of Credit) shall
be in form and substance acceptable to Lender (in the exercise of its Permitted
Discretion), including the requirement that the amounts payable thereunder must
be payable in Dollars. If Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Lender by
paying to Lender an amount equal to such L/C Disbursement not later than 11:00
a.m., California time, on the date that such L/C Disbursement is made, if
Administrative Borrower shall have received written or telephonic notice of such
L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Administrative Borrower prior to such time on
such date, then not later than 11:00 a.m., California time, on the Business Day
that Administrative Borrower receives such notice, if such notice is received
prior to 10:00 a.m., California time, on the date of receipt, and, in the
absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrowers' obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance.
(c) Each Borrower hereby agrees to indemnify, save, defend, and
hold Lender harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of Lender. Each Borrower agrees to
be bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Lender's interpretations of any L/C issued by
Lender to or for such Borrower's account, even though this interpretation may be
different from such Borrower's own, and each Borrower understands and agrees
that Lender shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrowers' instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Each Borrower understands that the L/C Undertakings may
require Lender to indemnify the Underlying Issuer for certain costs or
liabilities arising out of claims by Borrowers against such Underlying Issuer.
Each Borrower hereby agrees to indemnify, save, defend, and hold Lender harmless
with respect to any loss, cost, expense (including reasonable attorneys fees),
or liability incurred by Lender under any L/C Undertaking as a result of
Lender's indemnification of any Underlying Issuer; provided, however, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability that is caused by the gross negligence or willful misconduct of
Lender.
(d) Each Borrower hereby authorizes and directs any Underlying
Issuer to deliver to Lender all instruments, documents, and other writings and
property received by such Underlying Issuer pursuant to such Underlying Letter
of Credit and to accept and rely upon Lender's instructions with respect to all
matters arising in connection with such Underlying Letter of Credit and the
related application.
(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
25
27
immediately shall be reimbursable by Borrowers to Lender for the account of
Lender; it being acknowledged and agreed by each Borrower that, as of the
Closing Date, the issuance charge imposed by the prospective Underlying Issuer
is 0.825% per annum times the face amount of each Underlying Letter of Credit,
that such issuance charge may be changed from time to time, and that the
Underlying Issuer also imposes a schedule of charges for amendments, extensions,
drawings, and renewals.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by 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
Administrative Borrower, and Borrowers shall pay on demand such amounts as
Lender may specify to be necessary to compensate Lender for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Lender of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
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), has the effect of reducing the return on Lender's or such holding
company's capital as a consequence of Lender's obligations hereunder to a level
below that which Lender or such holding company could have achieved but for such
adoption, change, or compliance (taking into consideration Lender's or such
holding company's then existing policies with respect to capital adequacy and
assuming the full utilization of such entity's capital) by any amount deemed by
Lender to be material, then Lender may notify Administrative Borrower thereof.
Following receipt of such notice, Borrowers agree to pay Lender on demand the
amount of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by Lender of a statement
in the amount and setting forth in
26
28
reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods.
2.15 Joint and Several Liability of Borrowers.
(a) Each of Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by Lender under this Agreement, for the mutual
benefit, directly and indirectly, of each of Borrowers and in consideration of
the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.
(b) Each of Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrowers, with respect to the
payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this Section 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint and
several obligations of each Person composing Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event the other Persons composing Borrowers will make such payment with respect
to, or perform, such Obligation.
(d) The Obligations of each Person composing Borrowers under the
provisions of this Section 2.15 constitute the absolute and unconditional, full
recourse Obligations of each Person composing Borrowers enforceable against each
such Borrower to the full extent of its properties and assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each Person composing Borrowers hereby waives notice of acceptance of its joint
and several liability, notice of any Advances or Letters of Credit issued under
or pursuant to this Agreement, notice of the occurrence of any Default, Event of
Default, or of any demand for any payment under this Agreement, notice of any
action at any time taken or omitted by Lender under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Person composing Borrowers hereby assents to,
and waives notice of, any extension or postponement of the time for the payment
of any of the Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Lender at any time or times in respect of any
default by any Person composing Borrowers in the performance or satisfaction of
any term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Lender in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Person composing Borrowers. Without
limiting the generality of the foregoing, each of Borrowers assents to any other
27
29
action or delay in acting or failure to act on the part of Lender with respect
to the failure by any Person composing Borrowers to comply with any of its
respective Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the provisions
of this Section 2.15 afford grounds for terminating, discharging or relieving
any Person composing Borrowers, in whole or in part, from any of its Obligations
under this Section 2.15, it being the intention of each Person composing
Borrowers that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of such Person composing Borrowers under this Section 2.15 shall
not be discharged except by performance and then only to the extent of such
performance. The Obligations of each Person composing Borrowers under this
Section 2.15 shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or Lender. The joint
and several liability of the Persons composing Borrowers hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, constitution or place
of formation of any of the Persons composing Borrowers or Lender.
(f) Each Person composing Borrowers represents and warrants to
Lender that such Borrower is currently informed of the financial condition of
Borrowers and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Obligations. Each Person
composing Borrowers further represents and warrants to Lender that such Borrower
has read and understands the terms and conditions of the Loan Documents. Each
Person composing Borrowers hereby covenants that such Borrower will continue to
keep informed of Borrowers' financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Obligations.
(g) Each of the Persons composing Borrowers waives all rights and
defenses arising out of an election of remedies by Lender, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for a guaranteed obligation, has destroyed Lender's rights of subrogation and
reimbursement against such Borrower by the operation of Section 580(d) of the
California Code of Civil Procedure or otherwise.
(h) Each of the Persons composing Borrowers waives all rights and
defenses that such Borrower may have because the Obligations are secured by Real
Property. This means, among other things:
(i) Lender may collect from such Borrower
without first foreclosing on any Real or Personal
Property Collateral pledged by Borrowers.
(ii) If Lender forecloses on any Real Property
Collateral pledged by Borrowers:
A. The amount of the Obligations may be
reduced only by the price for which that
collateral is sold at the foreclosure sale, even
if the collateral is worth more than the sale
price.
B. Lender may collect from such Borrower
even if Lender, by foreclosing on the Real
Property Collateral, has destroyed
28
30
any right such Borrower may have to collect from
the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.
(i) The provisions of this Section 2.15 are made for the benefit
of Lender and its respective successors and assigns, and may be enforced by it
or them from time to time against any or all of the Persons composing Borrowers
as often as occasion therefor may arise and without requirement on the part of
Lender, successor, or assign first to marshal any of its or their claims or to
exercise any of its or their rights against any of the other Persons composing
Borrowers or to exhaust any remedies available to it or them against any of the
other Persons composing Borrowers or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this Section 2.15 shall remain in effect until all of
the Obligations shall have been paid in full or otherwise fully satisfied. If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by Lender
upon the insolvency, bankruptcy or reorganization of any of the Persons
composing Borrowers, or otherwise, the provisions of this Section 2.15 will
forthwith be reinstated in effect, as though such payment had not been made.
(j) Each of the Persons composing Borrowers hereby agrees that it
will not enforce any of its rights of contribution or subrogation against the
other Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
Lender with respect to any of the Obligations or any collateral security
therefor until such time as all of the Obligations have been paid in full in
cash. Any claim which any Borrower may have against any other Borrower with
respect to any payments to Lender hereunder or under any other Loan Documents
are hereby expressly made subordinate and junior in right of payment, without
limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full in cash of the Obligations and, in the
event of any insolvency, bankruptcy, receivership, liquidation, reorganization
or other similar proceeding under the laws of any jurisdiction relating to any
Borrower, its debts or its assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or distribution of
any character, whether in cash, securities or other property, shall be made to
any other Borrower therefor.
(k) Each of the Persons composing Borrowers hereby agrees that,
after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness owing
by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that
after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, xxx for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such
29
31
Borrower as trustee for the Lender, and such Borrower shall deliver any such
amounts to Lender for application to the Obligations in accordance with Section
2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The
obligation of Lender to make the initial Advance (or otherwise to extend any
credit provided for hereunder), is subject to the fulfillment, to the
satisfaction of Lender, of each of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before March 29, 2001;
(b) Lender shall have received all financing statements required
by Lender, duly executed by the applicable Borrowers, and Lender shall have
received searches reflecting the filing of all such financing statements;
(c) Lender shall have received each of the following documents,
in form and substance satisfactory to Lender, duly executed, and each such
document shall be in full force and effect:
(i) the Control Agreements,
(ii) the Disbursement Letter,
(iii) the Cash Management Agreements,
(iv) the Intellectual Property Security Agreement,
(v) the Mortgage,
(vi) the Officers' Certificate,
(vii) the Stock Pledge Agreements, together with
all certificates representing the shares of Stock
pledged thereunder, as well as Stock powers with respect
thereto endorsed in blank,
(viii) the Environmental Indemnity Agreement,
(ix) the Warrant, and
(x) the Pay-Off Letter, together with UCC
termination statements and other documentation
evidencing the termination by Existing Lender of its
Liens in and to the properties and assets of Borrowers.
(d) Lender shall have received a certificate from the Secretary
of each Borrower attesting to the resolutions of such Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which such Borrower is a party and authorizing
specific officers of such Borrower to execute the same;
(e) Lender shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower;
(f) Lender shall have received a certificate of status with
respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Lender shall have received certificates of status with
respect to each Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the
30
32
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of such Borrower) in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that such Borrower is in good standing in such jurisdictions;
(h) [INTENTIONALLY OMITTED]
(i) [INTENTIONALLY OMITTED]
(j) [INTENTIONALLY OMITTED]
(k) [INTENTIONALLY OMITTED]
(l) 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;
(m) Lender shall have received Collateral Access Agreements with
respect to the following locations: 000 Xxxxx Xxxxxx X., Xxxxx 000, Xxxxxxx,
Xxxxxxxxxx 00000;
(n) Lender shall have received opinions of Borrowers' counsel in
form and substance satisfactory to Lender;
(o) Lender shall have received satisfactory evidence (including a
certificate of the chief financial officer of Parent) that all tax returns
required to be filed by Borrowers have been timely filed and all taxes upon
Borrowers or their 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;
(p) Borrowers shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(q) Lender shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrowers' books and records and verification of Borrowers' representations and
warranties to Lender, the results of which shall be satisfactory to Lender in
its Permitted Discretion, and (ii) an inspection of each of the locations where
Inventory is located, the results of which shall be satisfactory to Lender in
its Permitted Discretion;
(r) Lender shall have received completed reference checks with
respect to Borrowers' senior management, the results of which are satisfactory
to Lender in its sole discretion;
(s) [INTENTIONALLY OMITTED]
(t) Lender shall have received Borrowers' Closing Date Business
Plan;
(u) Borrowers shall pay all Lender Expenses incurred in
connection with the transactions evidenced by this Agreement;
(v) Lender shall have received (i) appraisals of the Real
Property Collateral satisfactory to Lender, and (ii) a mortgagee title insurance
policy (or marked commitments to issue the same) for the Real Property
Collateral issued by a title insurance company satisfactory to Lender ("Mortgage
Policy") in an amount satisfactory to Lender assuring Lender that the Mortgage
on such Real Property Collateral is a valid and enforceable first priority
mortgage Liens on such Real Property Collateral free and clear of all defects
and encumbrances except Permitted Liens, and the Mortgage Policy otherwise shall
be in form and substance satisfactory to Lender;
(w) [INTENTIONALLY OMITTED];
(x) [INTENTIONALLY OMITTED];
31
33
(y) Borrowers shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Borrowers of this Agreement or any other Loan
Document or with the consummation of the transactions contemplated hereby and
thereby; and
(z) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Lender.
3.2 Conditions Subsequent to the Initial Extension of Credit. The
obligation of Lender to continue to make Advances (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrowers 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;
(b) within 30 days of the Closing Date, deliver to Lender
certified copies of the financial statement of Parent and its Subsidiaries for
the fiscal year ending December 31, 2000, audited by 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 accountant's letter
to management), and which financial statement is not materially different (as
determined in Lender's Permitted Discretion) from the draft of the same
delivered to Lender prior to the Closing Date;
(c) within 90 days of the Closing Date, deliver to Lender a
certification that the Operative Contracts shall either: (a) be prepaid or (b)
be payable directly to one of Borrowers from the Account Debtor that is the
direct recipient of the services giving rise to such Domestic
Service/Maintenance Revenues;
(d) within 60 days of the Closing Date, deliver to Lender written
confirmation that the records of the United States Patent and Trademark Office
reflect Administrative Borrower as the owner of patents assigned by Cray
Research, L.L.C. to Tera Computer Company on May 24, 2000; and
(e) within 60 days of the Closing Date, deliver to Lender the
original stock certificates and executed blank stock powers, or cause
registration of the Lender's security interest as described in the Stock Pledge
Agreements, with respect to those Issuers marked with an asterisk on Exhibit A
to the Stock Pledge Agreements.
3.3 Conditions Precedent to all Extensions of Credit. The obligation of
Lender to make all Advances (or to extend any other credit hereunder) shall be
subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such
32
34
extension of credit, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against any
Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred; and
(e) Borrower shall have delivered to Lender a duly completed
Borrowing Base Certificate.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrowers and Lender and shall continue in full force and
effect for a term ending on March 29, 2004 (the "Maturity Date"). The foregoing
notwithstanding, Lender shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
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 Borrowers of their duties, Obligations, or covenants
hereunder and the Lender's Liens in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and Lender's obligations
to provide additional credit hereunder have been terminated. When this Agreement
has been terminated and all of the Obligations have been fully and finally
discharged and Lender's obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Lender will, at Borrowers' 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 Borrowers. Borrowers have the option, at any
time upon 90 days prior written notice by Administrative 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), in full, together with
the Applicable Prepayment Premium. If Administrative Borrower has sent a notice
of termination pursuant to the provisions of this Section, then Lender's
obligations to extend credit hereunder shall terminate and Borrowers shall be
obligated to repay the Obligations (including 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), in full, together with the Applicable Prepayment Premium,
on the date set forth as the date of termination of this Agreement in such
notice. In the
33
35
event of the termination of this Agreement and repayment of the Obligations at
any time prior to the Maturity Date, for any other reason, including (a)
termination upon the election of Lender to terminate after the occurrence of an
Event of Default, (b) foreclosure and sale of Collateral, (c) sale of the
Collateral in any Insolvency Proceeding, or (d) restructure, reorganization or
compromise of the Obligations by the confirmation of a plan of reorganization or
any other plan of compromise, restructure, or arrangement in any Insolvency
Proceeding, then, in view of the impracticability and extreme difficulty of
ascertaining the actual amount of damages to Lender or profits lost by Lender as
a result of such early termination, and by mutual agreement of the parties as to
a reasonable estimation and calculation of the lost profits or damages of
Lender, Borrowers shall pay the Applicable Prepayment Premium to Lender,
measured as of the date of such termination. Notwithstanding any provision to
the contrary herein provided, Borrowers shall not be liable for an Applicable
Prepayment Premium: (y) in connection with prepayment of the Term Loan as
provided in Section 2.2; and (z) if this Agreement is terminated as a direct
result of Borrowers refinancing the Obligations through a commercial banking
unit of Xxxxx Fargo.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower hereby grants to Lender a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrowers of each of their covenants and duties
under the Loan Documents. The Lender's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of Lender or Borrowers. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrowers have no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Lender's security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Lender, shall endorse and deliver physical possession of
such Negotiable Collateral to Lender.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors of
Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Lender or that Lender has a security interest therein, or (b)
collect the Accounts, chattel paper, or General Intangibles directly and charge
the collection costs and expenses to the Loan Account. Each Borrower agrees that
it will hold in trust for Lender, as Lender's trustee, any Collections that it
receives and immediately will deliver said Collections to Lender or a Cash
Management Bank in their original form as received by the applicable Borrower.
34
36
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Lender, Borrowers 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 Loan Documents. To
the maximum extent permitted by applicable law, each Borrower authorizes Lender
to execute any such Additional Documents in the applicable 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,
Borrowers shall (a) provide Lender with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrowers
during the prior period, (b) cause all patents, copyrights, and trademarks
acquired or generated by Borrowers that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrowers' ownership thereof,
and (c) cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
4.5 Power of Attorney. Each Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers, employees, or
Lenders designated by Lender) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of such 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 such 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 such 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 such 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 each 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
35
37
the Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 Control Agreements. Each 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 the applicable
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 Borrowers without the prior written consent of Lender. Upon
the occurrence and during the continuance of a Default or Event of Default,
Lender may notify any securities intermediary to liquidate the applicable
Securities Account or any related Investment Property maintained or held thereby
and remit the proceeds thereof to the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each Borrower
makes the following representations and warranties to Lender which shall be
true, correct, and complete, in all material respects, as of the date hereof,
and shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
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. Each Borrower has good and indefeasible title to
its Collateral and the Real Property, free and clear of Liens except for
Permitted Liens.
5.2 Accounts.
(a) None of the following Accounts shall have SGI as the Account
Debtor or be billed to the applicable Account Debtor through SGI:
(i) Accounts which arise from maintenance or service
contracts of one of Borrowers which are created after the Closing Date; or
(ii) Accounts which arise from maintenance or services
contracts of one of Borrowers which are renewed after the Closing Date and which
are included in the Operative Contracts.
(b) The Eligible Accounts and Eligible Foreign 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 Borrowers' business, owed to Borrowers without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. As to
each Eligible Account and Eligible Foreign Account, such Account is not:
(i) owed by an employee, Affiliate, or agent of a
Borrower,
(ii) 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,
36
38
a xxxx and hold, or on any other terms by reason of which the payment by
the Account Debtor may be conditional,
(iii) payable in a currency other than Dollars,
(iv) 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,
(v) owed by an Account Debtor that is subject to any
Insolvency Proceeding or is not Solvent or as to which a Borrower has
received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor,
(vi) 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,
(vii) a right to receive progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by
the applicable Borrower of the subject contract for goods or services,
and
(viii) an Account that has not been billed to the
customer.
5.3 Sale Inventory. The material portion of the Sale Inventory is of
good and merchantable quality, free from defects. As to each item of Sale
Inventory, such Inventory is
(a) owned by a Borrower free and clear of all Liens other than
Permitted Liens,
(b) either located at one of the locations set forth on Schedule
5.5 or in transit from one such location to another such location,
(c) not located on real property leased by a Borrower or in a
contract warehouse, in each case, unless subject to a Collateral Access
Agreement executed by the lessor, the warehouseman, or other third party, as the
case may be, and unless segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises,
(d) not goods that have been returned or rejected by Borrowers'
customers, and
(e) not goods that are obsolete or slow moving, restrictive or
custom items, work-in-process, or that constitute spare parts, packaging and
shipping materials, supplies used or consumed in Borrowers' business, xxxx and
hold goods, defective goods, "seconds," or Inventory acquired on consignment.
5.4 Equipment. All of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. Except as indicated on Schedule
5.5, the Inventory and Equipment are not stored with a bailee, warehouseman, or
similar party and are located only at the locations identified on Schedule 5.5.
5.6 Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
37
39
5.7 Location of Chief Executive Office; FEIN. The chief executive office
of each Borrower is located at the address indicated in Schedule 5.7 and each
Borrower's FEIN is identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified reasonably could
be expected to 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 each Borrower, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding. Other than as described on Schedule 5.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of any Borrower's capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument. No Borrower is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate list
of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
5.9 Due Authorization; No Conflict.
(a) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local law or
regulation applicable to any Borrower, the Governing Documents of any Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on any Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of any Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of Borrower, other than Permitted Liens, or
38
40
(iv) require any approval of any Borrower's interestholders or any approval or
consent of any Person under any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements, fixture
filings, and Mortgage, and the execution of the Pay-Off Letter and termination
of Liens in its favor by Existing Lender, the execution, delivery, and
performance by each Borrower of this Agreement and the Loan Documents to which
such Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
Governmental Authority or other Person.
(d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
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
Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries, as applicable,
reasonably could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrowers that have been delivered by Borrowers to Lender have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrowers' financial condition as of
the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrowers since the date of
the latest financial statements submitted to Lender on or before the Closing
Date.
5.12 Fraudulent Transfer.
(a) Each Borrower is Solvent.
(b) No transfer of property is being made by any Borrower and no
obligation is being incurred by any Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrowers.
5.13 Employee Benefits. Except as set forth on Schedule 5.13, none of
Borrowers, their Subsidiaries, or any of their ERISA Affiliates maintains or
contributes to any Benefit Plan or Multiemployer Plan. Each of Borrowers, their
Subsidiaries and their ERISA Affiliates have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which it is
obligated to contribute and has made all contributions required under the terms
of each
39
41
Multiemployer Plan to which it is obligated to contribute. No ERISA Event has
occurred nor has any other event occurred that may result in an ERISA Event that
reasonably could be expected to result in a Material Adverse Change. None of
Borrowers, their Subsidiaries or any of their ERISA Affiliates is required to
provide security to any Benefit Plan under Section 401(a)(29) of the IRC.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a)
to Borrowers' knowledge, none of Borrowers' properties or assets has ever been
used by Borrowers 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
Borrowers' knowledge, none of Borrowers' properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) none of Borrowers have
received notice that a Lien arising under any Environmental Law has attached to
any revenues or to any Real Property owned or operated by Borrowers, and (d)
none of Borrowers have 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 any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 Brokerage Fees. Borrowers have not utilized the services of any
broker or finder in connection with Borrowers' obtaining financing from Lender
under this Agreement and no brokerage commission or finders fee is payable by
Borrowers in connection herewith.
5.16 Intellectual Property.
(a) Each Borrower owns, or holds licenses in, all material
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all patents,
patent applications, trademarks, trademark applications, copyrights, and
copyright registrations as to which each Borrower is the owner or is an
exclusive licensee (collectively, "Intellectual Property").
(b) Except as set forth in Schedule 5.16:
(i) Each Borrower is the sole owner of its Intellectual
Property, free and clear of any Lien (other than in favor of Lender) without the
payment of any monies or royalty except with respect to off-the-shelf software;
(ii) Each Borrower has taken, and will continue to take,
all actions which are necessary or advisable to acquire and protect its
Intellectual Property, consistent with prudent commercial practices and such
Borrower's business judgment, including without limitation: (x) registering all
copyrights which, in such Borrower's business judgment, are of sufficient value
to merit such treatment, in the U.S. Copyright Office, and (y) registering all
patents and trademarks which, in such Borrower's business judgment, are of
sufficient value to merit such treatment, in the United States Patent and
Trademark Office;
(iii) Each Borrower's rights in the Intellectual Property
are valid and enforceable;
40
42
(iv) No Borrower has received any demand, claim, notice or
inquiry from any Person in respect of the Intellectual Property which
challenges, threatens to challenge or inquiries as to whether there is any basis
to challenge, the validity of, the rights of Borrowers in or the right of
Borrowers to use, any such Intellectual Property, and Borrowers know of no basis
for any such challenge;
(v) to the knowledge of Borrowers, Borrowers are not in
violation or infringement of, and has not violated or infringed any proprietary
rights of any other Person;
(vi) to the knowledge of Borrowers, no Person is
infringing any Intellectual Property; and
(vii) except on an arm's-length basis for value and other
commercially reasonable terms, Borrowers have not granted any license with
respect to any Intellectual Property to any Person.
5.17 Leases. Borrowers enjoy peaceful and undisturbed possession under
all leases material to the business of Borrowers and to which Borrowers are a
party or under which Borrowers are operating. All of such leases are valid and
subsisting and no material default by Borrowers exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of each
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 Borrowers in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrowers
in writing to Lender will be, true and accurate, in all material respects, on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided. On the Closing Date,
the Closing Date Business Plan represents, and as of the date on which any other
Projections are delivered to Lender, such additional Projections represent
Borrowers' good faith best estimate of its future performance for the periods
covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete
list of all Indebtedness of each Borrower outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness
and the principal terms thereof.
6. AFFIRMATIVE COVENANTS.
41
43
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrowers shall and shall cause each of their respective Subsidiaries to do all
of the following:
6.1 Accounting System. Maintain a system of accounting that enables
Borrowers to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. Borrowers also shall keep 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:
================================================================================
Monthly (not later (a) a sales journal, collection journal, and credit register
than the since the last such schedule and a calculation of the
10th day Borrowing Base as of such date, and
of each month) (b) notice of all returns, disputes, or claims.
--------------------------------------------------------------------------------
(c) a calculation of the sums set forth in clauses (i) and
(ii) of Section 2.2(c) and the amount of principal of the
Term Loan required to be prepaid thereunder.
--------------------------------------------------------------------------------
(d) a detailed calculation of the Borrowing Base (including
detail regarding those Accounts that are not Eligible
Accounts),
(e) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the
Borrowing Base previously provided to Lender,
(f) a summary aging, by vendor, of Borrowers' accounts
payable and any book overdraft, and
(g) a calculation of Dilution for the prior month.
--------------------------------------------------------------------------------
Quarterly (h) a detailed list of each Borrower's customers,
(i) a report regarding each Borrower's accrued, but unpaid,
ad valorem taxes,
--------------------------------------------------------------------------------
Upon request by (j) 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 Borrowers, purchase
orders and invoices, and (k) such other reports as to the
Collateral, or the financial condition of Borrowers as
Lender may request.
================================================================================
42
44
In addition, each Borrower agrees to cooperate fully with Lender to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Lender:
(a) as soon as available, but in any event within 30 days (50
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 is to be tested, a Compliance
Certificate demonstrating, in reasonable detail, compliance at
the end of such period with the applicable financial covenants
contained in Section 7.20; and
(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,
43
45
(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 3 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 within 5 days of the date filed by any Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports,
(ii) any other filings made by any Borrower with the
SEC,
(iii) copies of Borrowers' federal income tax returns,
and any amendments thereto, filed with the Internal Revenue
Service, and
(iv) any other information that is provided by Parent to
its shareholders generally,
(e) if and when filed by any Borrower and as requested by Lender,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Borrower conducts business or is required to pay
any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of any
Borrower, or (iii) where any 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 a 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 Borrowers propose to take with respect
thereto, and
(g) upon the request of Lender, any other report reasonably
requested relating to the financial condition of Borrowers.
In addition to the financial statements referred to above,
Borrowers agree to deliver financial statements prepared on both a consolidated
and consolidating basis and that no Borrower, or any Subsidiary of a Borrower,
will have a fiscal year different from that of Parent. Borrowers agree that
their independent certified public accountants are authorized to communicate
with Lender and to release to Lender whatever financial information concerning
Borrowers that Lender reasonably may request. Each 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 agree that Lender may
contact directly any such accounting firm or service bureau in order to obtain
such information.
6.4 Intellectual Property. Comply with their continuing obligations
described in Section 5.16 and the Intellectual Property Security Agreement.
6.5 Return. Cause returns and allowances as between Borrowers and their
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the
44
46
applicable Borrower, as they exist at the time of the execution and delivery of
this Agreement. If, at a time when no Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to any Borrower, the
applicable Borrower promptly shall determine the reason for such return and, if
the applicable Borrower accepts such return, issue a credit memorandum (with a
copy to be sent to Lender) in the appropriate amount to such Account Debtor. If,
at a time when an Event of Default has occurred and is continuing, any Account
Debtor returns any Inventory to any Borrower, the applicable Borrower promptly
shall determine the reason for such return and, if Lender consents (which
consent shall not be unreasonably withheld), issue a credit memorandum (with a
copy to be sent to Lender) in the appropriate amount to such Account Debtor.
6.6 Maintenance of Properties. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct to its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee,
so as to prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that the applicable Borrower has made such payments or deposits. Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.
6.8 Insurance.
(a) At Borrowers' 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. Borrowers also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation. All such policies of insurance shall be in such amounts and
with such insurance companies as are reasonably satisfactory to Lender.
Borrowers shall deliver copies of all such policies to Lender with a
satisfactory lender's loss payable endorsement naming Lender as 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) Administrative Borrower shall give Lender prompt notice of
any loss covered by such insurance. Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain, shall be paid over jointly to Lender and Administrative
Borrower. If there then exists no Default or Event of Default, then Lender shall
45
47
assign the proceeds to the Administrative Borrower under staged payment terms
reasonably satisfactory to Lender for application to the costs of repairs,
replacements or restorations. If there then exists a Default or Event of
Default, then at the option of Lender, Borrowers agree to apply the funds either
to the prepayment of the Obligations and/or to apply the proceeds to the cost of
repairs, replacements or restoration as set forth above. 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) Borrowers shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 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. Administrative Borrower immediately shall notify Lender whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Lender.
6.9 Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that Administrative 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 the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as, at the
time of such written notification, the applicable Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Lender's Liens on such assets and also provides to Lender a
Collateral Access Agreement.
6.10 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any
leases to which any Borrower is a party or by which any Borrower's properties
and assets are 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 Borrowers' obtaining
financing from Lender under this Agreement. Borrowers agree and acknowledge that
payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Borrowers, and each Borrower agrees to indemnify, defend, and
hold Lender harmless from and against any claim of any broker or finder arising
out of Borrowers' obtaining financing from Lender under this Agreement.
6.13 Existence. At all times preserve and keep in full force and effect
each Borrower's valid existence and good standing and any rights and franchises
material to Borrowers' businesses.
46
48
6.14 Environmental.
(a) Keep any property either owned or operated by any 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
any 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 any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgment,
filing, or recordation thereof.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrowers will not and will not permit any of their respective Subsidiaries to
do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness; and
(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
Borrowers or materially impair Borrowers' creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced,
47
49
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 the
applicable Borrower, and (iv) if the Indebtedness that is refinanced, renewed,
or extended was subordinated in right of payment to the Obligations, then the
terms and conditions of the refinancing, renewal, or extension Indebtedness must
include subordination terms and conditions that are at least as favorable to
Lender as those that were applicable to the refinanced, renewed, or extended
Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(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) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock; provided, however, that any Borrower
may merge into Parent so long as: (x) Borrowers give Lender no less than 30 days
prior written notice of such merger; (y) no event has occurred that constitutes
a Default or Event of Default which is continuing; and (z) the consummation of
such merger shall not result in a Default or Event of Default.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of the assets of
any Borrower.
7.5 Change Name. Change any Borrower's name, FEIN, corporate structure
or identity, or add any new fictitious name; provided, however, that a Borrower
may change its name upon at least 30 days prior written notice by Administrative
Borrower to Lender of such change and so long as, at the time of such written
notification, such Borrower provides any financing statements or fixture 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 Borrowers or which
are transmitted or turned over to Lender.
7.7 Nature of Business. Make any change in the principal nature of
Borrowers' 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 any Borrower, other than the Obligations in accordance with this Agreement,
and
48
50
(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. Except for loans of equipment to third Persons in
accordance with historical business practices, 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. Other than distributions or declaration and payment
of dividends by a Borrower to another Borrower, make any distribution or declare
or pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of any Borrower's Stock, of any class,
whether now or hereafter outstanding; provided, however, that Borrowers may make
distributions to Subsidiaries in an aggregate amount not to exceed $2,000,000 at
any time, so long as, immediately prior to the making of any such distribution
and after giving effect thereto: (y) there has occurred no Default or Event of
Default; and (z) Borrower has Availability and unrestricted cash and Cash
Equivalents in the aggregate of no less than $3,000,000.
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 currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Borrowers' accounting records without said accounting firm or
service bureau agreeing to provide Lender information regarding the Collateral
or Borrowers' financial condition.
7.13 Investments. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrowers shall not have Permitted Investments (other than in the
Cash Management Accounts) in excess of $2,000,000 outstanding at any one time
unless the applicable 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) Lender's Liens in such Permitted Investments.
7.14 Transactions with Affiliates. Except for Administrative Borrower's
loans to employees of Administrative Borrower existing on the date hereof and
additional loans made after the date hereof to employees of Borrowers, which
additional loans shall not exceed $250,000 in the aggregate, directly or
indirectly enter into or permit to exist any transaction with any Affiliate of
any Borrower except for transactions that are in the ordinary course of
Borrowers' business, upon fair
49
51
and reasonable terms, that are fully disclosed to
Lender, and that are no less favorable to Borrowers 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 Advances and the Term Loan
for any purpose other than (a) on the Closing Date, (i) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted purposes.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without Administrative Borrower providing 30 days prior written notification
thereof to Lender and so long as, at the time of such written notification, the
applicable Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Lender's Liens and also provides
to Lender a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Lender's prior written consent.
7.19 Securities Accounts. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree 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, Borrowers may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 Financial Covenants. Fail to maintain all of the covenants set
forth in Schedule 7.20.
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 Borrowers fail to pay within 5 days of the date 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 (a) If Borrowers fail or neglect to perform, keep, or observe any
covenant or other provision contained in Sections 6.2 or 6.3 hereof and such
failure or neglect continues for a period
50
52
of 5 days after the date on which such failure or neglect first occurs, or (b)
if Borrower fails or neglects to perform, keep, or observe any covenant or other
provision contained in Sections 6.1, 6.7 or 6.11 hereof and such failure or
neglect is not cured within 15 days after the date on which such failure or
neglect first occurs, or (c) if Borrower fails or neglects to perform, keep, or
observe any other covenant or other provision contained in any Section of this
Agreement (other than a Section that is expressly dealt with elsewhere in this
Section 8) or the other Loan Documents (other than a Section of such other Loan
Document dealt with elsewhere in this Section 8); provided that, during any
period of time that any such failure or neglect of Borrower referred to in this
paragraph exists, even if such failure or neglect is not yet an Event of Default
by virtue of the existence of a grace or cure period or the pre-condition of the
giving of a notice, Lender shall be relieved of its obligation to extend credit
hereunder;
8.3 If any material portion of any Borrower's 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 any Borrower;
8.5 If an Insolvency Proceeding is commenced against any Borrower and
any of the following events occurs: (a) the applicable Borrower consents to the
institution of the Insolvency Proceeding against it, (b) the petition commencing
the Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 45 calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Lender shall be relieved of its obligation to extend credit
hereunder, (d) an interim trustee is appointed to take possession of all or any
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, any Borrower, or (e) an order for relief
shall have been entered therein;
8.6 If any Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any Borrower's assets (or any portion thereof) by the United States,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether xxxxxx or
otherwise, upon any Borrower's assets (or any portion thereof) 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 any Borrower's assets;
8.9 If there is a default in any material agreement to which any
Borrower is a party and such default (a) occurs at the final maturity of the
obligations thereunder, or (b) results in a right by the other party thereto,
irrespective of whether exercised, to accelerate the maturity of the applicable
51
53
Borrower's obligations thereunder, to terminate such agreement, or to refuse to
renew such agreement pursuant to an automatic renewal right therein;
8.10 If any Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.11 If any misstatement or misrepresentation exists now or hereafter in
any warranty, representation, statement, or Record made to Lender by any
Borrower, its Subsidiaries, or any officer, employee, agent, or director of any
Borrower or any of its Subsidiaries;
8.12 [INTENTIONALLY OMITTED]
8.13 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.14 Any provision of any Loan Document shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower, or a proceeding shall be commenced by any
Borrower, or by any Governmental Authority having jurisdiction over any
Borrower, seeking to establish the invalidity or unenforceability thereof, or
any Borrower shall deny that any Borrower has any liability or obligation
purported to be created under any Loan Document.
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 Borrowers:
(a) Declare all Obligations (including the Dollar amount of
contingent unreimbursed liabilities under L/C's and L/C Undertakings), whether
evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrowers and Lender;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations;
(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
52
54
Loan Account with only the net amounts received by Lender in payment of such
disputed Accounts after deducting all Lender Expenses incurred or expended in
connection therewith;
(e) Cause Borrowers to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrowers or
in Borrowers' possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon any Borrower, make such
payments and do such acts as Lender considers necessary or reasonable to protect
its security interests in the Collateral. Each Borrower agrees to assemble the
Personal Property Collateral if Lender so requires, and to make the Personal
Property Collateral available to Lender at a place that Lender may designate
which is reasonably convenient to both parties. Each Borrower authorizes Lender
to enter the premises where the Personal Property Collateral is located, to take
and maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Lender's
determination appears to conflict with the Lender's Liens and to pay all
expenses incurred in connection therewith and to charge Borrowers' Loan Account
therefor. With respect to any of Borrowers' owned or leased premises, each
Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of any
Borrower held by Lender;
(h) Lender or Lender's designee may (a) notify Account Debtors of
Borrowers that the Accounts, General Intangibles and Negotiable Collateral of
Borrowers have been assigned to Lender or that Lender has a security interest
therein, or (b) collect such Accounts, General Intangibles and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account. Borrowers agree that they will hold in trust for Lender, as Lender's
trustee, any Collections that it receives and immediately will deliver said
Collections to Lender in their original form as received by Borrowers;
(i) Hold, as cash collateral, any and all balances and deposits
of any 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;
(j) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Each Borrower hereby grants to Lender
a license or other right to use, without charge, such Borrower's software
(including all rights thereto as owner or licensee thereof), labels, patents,
copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and such Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit;
53
55
(k) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrowers' premises)
as Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(l) Lender shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Lender shall give Administrative Borrower (for the
benefit of the applicable Borrower) a notice in writing of the
time and place of public sale, or, if the sale is a private sale
or some other disposition other than a public sale is to be made
of the Personal Property Collateral, the time on or after which
the private sale or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Administrative Borrower as provided in
Section 12, at least 10 days before the earliest time of
disposition set forth in the notice; no notice needs to be given
prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized
market;
(m) Lender may credit bid and purchase at any public sale;
(n) Lender may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(o) Lender shall have all other rights and remedies available to
it at law or in equity pursuant to any other Loan Documents; and
(p) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrowers. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Lender to Administrative Borrower (for the benefit of the applicable
Borrower).
9.2 Remedies Cumulative. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or
54
56
any part thereof, (b) set up such reserves in Borrowers' Loan Account as Lender
deems necessary to protect Lender from the exposure created by such failure, or
(c) in the case of the failure to comply with Section 6.8 hereof, obtain and
maintain insurance policies of the type described in Section 6.8 and take any
action with respect to such policies as Lender deems prudent. Any such amounts
paid by Lender shall constitute Lender Expenses and any such payments shall not
constitute an agreement by Lender to make similar payments in the future or a
waiver by Lender of any Event of Default under this Agreement. Lender need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which any such Borrower may in any way be liable.
11.2 Lender's Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as Lender complies with its obligations, if any, under the
Code, Lender shall not in any way or manner be liable or responsible for: (i)
the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.
11.3 Indemnification. Each 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 Loan
Documents, or the transactions contemplated hereby or thereby, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The
foregoing to the contrary notwithstanding, Borrowers shall have no obligation to
any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrowers were
55
57
required to indemnify the Indemnified Person receiving such payment, the
Indemnified Person making such payment is entitled to be indemnified and
reimbursed by Borrowers with respect thereto. WITHOUT LIMITATION, THE FOREGOING
INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as the Administrative Borrower or Lender, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Lender, as the case may be, at its
address set forth below:
If to Administrative
Borrower: Cray Inc.
000 Xxxxx Xxxxxx X., Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx,
Chief Financial Officer
Fax No. (000) 000-0000
with copies to: Stoel Rives LLP
000 Xxxxxxxxxx Xx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx, 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: Jeffer, Mangels, Xxxxxx & Marmaro LLP
2121 Avenue of the Stars
Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
56
58
Lender and Borrowers may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 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. Each Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND
LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
BORROWERS AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
57
59
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Lender may assign and delegate to one or more assignees (each
an "Assignee") all, or any ratable part of all, of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents;
provided, however, that Borrowers may continue to deal solely and directly with
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been given
to Administrative Borrower by Lender and the Assignee, and (ii) Lender and the
Assignee have delivered to Administrative Borrower an appropriate assignment and
acceptance agreement.
(b) From and after the date that Lender provides Administrative
Borrower with such written notice and executed assignment and acceptance
agreement, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment and acceptance agreement, shall have the assigned and
delegated rights and obligations of Lender under the Loan Documents, and (ii)
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned and delegated by it pursuant to such
assignment and 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 Loan Documents, Lender shall cease to be a party hereto
and thereto), and such assignment shall affect a novation between Borrowers and
the Assignee.
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the rights and duties of Lender
arising therefrom.
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of Lender (a
"Participant") participating interests in Obligations and the other rights and
interests of Lender hereunder and under the other Loan Documents; provided,
however, that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and interests of
Lender hereunder shall not constitute a "Lender" hereunder or under the other
Loan Documents and Lender's obligations under this Agreement shall remain
unchanged, (ii) Lender shall remain solely responsible for the performance of
such obligations, (iii) Borrowers and Lender shall continue to deal solely and
directly with each other in connection with Lender's rights and obligations
under this Agreement and the other Loan Documents, (iv) Lender shall not
transfer or grant any participating interest under which the Participant has the
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such Participant is participating, (B) reduce the
58
60
interest rate applicable to the Obligations hereunder in which such Participant
is participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrowers hereunder shall be determined
as if Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through Lender and no Participant shall have any rights under this
Agreement or the other Loan Documents or any direct rights as to Borrowers, the
Collections, 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. The provisions of this Section 14.1(d) are solely for the
benefit of Lender, and no Borrower shall have any rights as third party of any
such provisions.
(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 Borrowers or
Borrowers' 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 such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release any
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 14.1 hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Administrative Borrower (on behalf of all
Borrowers) and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
59
61
15.2 No Waivers; Cumulative Remedies. No failure by Lender to exercise
any right, remedy, or option under this Agreement or any other Loan Document, or
delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by Borrowers
of any provision of this Agreement. Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrowers 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.
16.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrowers, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto. Time is of the essence in Borrowers' payment
and performance of the Obligations.
16.4 Severability of Provisions. Every provision of this Agreement is
intended to be severable. In the event that any provision hereof is declared by
a court to be illegal or invalid for any reason whatsoever, such illegal or
invalid provision shall not affect the balance of the provisions hereof, which
provisions shall remain binding and enforceable, and to the extent possible all
of the other provisions shall be reformed so as to most closely approximate the
original intent of the parties hereto without the offending provision.
16.5 Withholding Taxes. All payments made by Borrowers hereunder or
under any note will be made without setoff, counterclaim, or other defense,
except as required by applicable law other than for Taxes (as defined below).
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of Lender, or (ii) to the extent
that such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with
60
62
respect thereto (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If any
Taxes are so levied or imposed, each Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement 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 Borrowers 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. Borrowers 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 Borrowers.
16.6 Amendments in Writing. [INTENTIONALLY OMITTED]
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 Loan Document mutatis
mutandis.
16.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by any Borrower or the transfer to Lender of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrowers automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
16.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
16.10 Parent as Agent for Borrowers. Each Borrower hereby irrevocably
appoints Parent as the borrowing agent and attorney-in-fact for all Borrowers
(the "Administrative Borrower") which appointment shall remain in full force and
effect unless and until Lender shall have received prior written notice signed
by each Borrower that such appointment has been revoked and that another
61
63
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Lender with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce Lender to do so, and in consideration thereof, each Borrower hereby
jointly and severally agrees to indemnify Lender harmless against any and all
liability, expense, loss or claim of damage or injury, made against Lender by
any Borrower or by any third party whosoever, arising from or incurred by reason
of (a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) Lender's relying on any instructions of the Administrative
Borrower, or (c) any other action taken by Lender hereunder or under the other
Loan Documents, except that Borrowers will have no liability to any
Lender-Related Person under this Section 16.10 with respect to any liability
that has been finally determined by a court of competent jurisdiction to have
resulted solely from the gross negligence or willful misconduct of such
Lender-Related Person.
[Signature page to follow.]
62
64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered as of the date first above written.
CRAY INC.,
a Washington corporation
By: ___________________________________
Title:__________________________________
CRAY FEDERAL INC.,
a Washington corporation
By:____________________________________
Title:__________________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:____________________________________
Title:__________________________________
63
65
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
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 Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 7.20 Financial Covenants
XVI
66
SCHEDULE 7.20
FINANCIAL COVENANTS
(a) Fail to maintain:
(i) Minimum EBITDA. EBITDA, measured on a fiscal quarter-end
basis, of not less than the required amount set forth in the following
table for the applicable period set forth opposite thereto;
Applicable Amount Applicable Period
----------------- -----------------
-$5,000,000 For the 12-month period
ending June 30, 2001
$3,000,000 For the 12-month period
ending September 30, 2001
$10,000,000 For the 12-month period
ending December 31, 2001
$6,000,000 For the 12-month period
ending March 31, 2002
$9,000,000 For the 12-month period
ending June 30, 2002
$14,000,000 For the 12-month period
ending September 30, 2002
$16,000,000 For the 12-month period
ending each fiscal quarter thereafter
(ii) Tangible Net Worth. Tangible Net Worth of at least the
required amount set forth in the following table as of the applicable
date set forth opposite thereto:
Applicable Amount Applicable Date
----------------- ---------------
$23,000,000 June 30, 2001
$29,000,000 September 30, 2001, December 31, 2001, March 31,
2002, June 30, 2002, and September 30, 2002
$32,000,000 December 31, 2002, and the first date of each
calendar quarter thereafter
(iii) Minimum Domestic Service/Maintenance Revenues. Domestic
Service/Maintenance Revenues of no less than $34,000,000 for the
immediately preceding 12 calendar months, tested quarterly.
(b) Make:
(i) Capital Expenditures. Capital expenditures in any fiscal
year in excess of $10,000,000.
