Exhibit 10.11
LOAN AND SECURITY AGREEMENT
by and between
CONCURRENT COMPUTER CORPORATION
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 29, 1995
TABLE OF CONTENTS
{toc \f C |
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 16
1.3 Code 16
1.4 Construction 16
1.5 Schedules and Exhibits 16
2. LOAN AND TERMS OF PAYMENT 16
2.1 Revolving Advances. 17
2.2 Term Loan 18
2.3 Overadvances 18
2.4 Interest: Rates, Payments, and Calculations 18
2.5 Crediting Payments; Application of Collections 20
2.6 Statements of Obligations 20
2.7 Fees 20
2.8 Mandatory Prepayment Requirement 21
3. CONDITIONS; TERM OF AGREEMENT 22
3.1 Conditions Precedent to Initial Advance 22
3.2 Conditions Precedent to All Advances 24
3.3 Conditions Subsequent 25
3.4 Term; Automatic Renewal 25
3.5 Effect of Termination 25
3.6 Early Termination by Borrower 25
3.7 Termination Upon Event of Default 26
4. CREATION OF SECURITY INTEREST 26
4.1 Grant of Security Interest 26
4.2 Negotiable Collateral 27
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral 27
4.4 Delivery of Additional Documentation Required 27
4.5 Power of Attorney 27
4.6 Right to Inspect 28
5. REPRESENTATIONS AND WARRANTIES 28
5.1 No Prior Encumbrances 28
5.2 Eligible Accounts 29
5.3 Eligible Inventory 29
5.4 Location of Inventory and Equipment 29
5.5 Inventory Records 29
5.6 Location of Chief Executive Office; FEIN 29
5.7 Due Organization and Qualification; No Subsidiaries 29
5.8 Due Authorization; No Conflict 30
5.9 Litigation 30
5.10 No Material Adverse Change in Financial Condition 30
5.11 Solvency 30
5.12 Employee Benefits 31
5.13 Environmental Condition 31
5.14 Reliance by Foothill; Cumulative 32
6. AFFIRMATIVE COVENANTS 32
6.1 Accounting System 32
6.2 Collateral Reports 32
6.3 Schedules of Accounts 33
6.4 Financial Statements, Reports, Certificates 33
6.5 Tax Returns 34
6.6 Designation of Inventory 34
6.7 Returns 34
6.8 Title to Equipment 35
6.9 Maintenance of Equipment 35
6.10 Taxes 35
6.11 Insurance 35
6.12 Finacial Covenants 37
6.13 No Setoffs or Counterclaims 37
6.14 Location of Inventory and Equipment 37
6.15 Compliance with Laws 38
6.16 Employee Benefits 38
6.17 Leases 39
6.18 Repatriation ofForeign Earnings and Profits 39
6.19 Drawing of Letters of Credit 39
7. NEGATIVE COVENANTS. 39
7.1 Indebtedness. 39
7.2 Liens 40
7.3 Restrictions on Fundamental Changes 40
7.4 Extraordinary Transactions and Disposal of Assets 40
7.5 Change Name 41
7.6 Guarantee 41
7.7 Restructure 41
7.8 Prepayments 41
7.9 Repayments 41
7.10 Change of Control 41
7.11 Capital Expenditures 42
7.12 Consignments 42
7.13 Distributions 42
7.14 Accounting Methods 42
7.15 Investments 42
7.16 Transactions with Affiliates 43
7.17 Suspension 43
7.18 Compensation 43
7.19 Use of Proceeds 43
7.20 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees 44
7.21 Inactive Subsidiaries 44
7.22 Amendment of Credit Agreement 44
8. EVENTS OF DEFAULT 44
9. FOOTHILL'S RIGHTS AND REMEDIES 47
9.1 Rights and Remedies 47
9.2 Remedies Cumulative 48
10. TAXES AND EXPENSES 48
11. WAIVERS; INDEMNIFICATION 50
11.1 Demand; Protest; etc 50
11.2 Foothill's Liability for Collateral 50
11.3 Indemnification 50
12. NOTICES 50
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 51
14. DESTRUCTION OF BORROWER'S DOCUMENTS 52
15. GENERAL PROVISIONS 52
15.1 Effectiveness 52
15.2 Successors and Assigns 52
15.3 Section Headings 53
15.4 Interpretation 53
15.5 Severability of Provisions 53
15.6 Amendments in Writing 53
15.7 Counterparts; Telefacsimile Execution 53
15.8 Revival and Reinstatement of Obligations 54
15.9 Integration 54
}
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory
Schedule I-1 Inactive Subsidiaries
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.7 Capitalization
Schedule 5.9 Litigation
Schedule 5.13 Environmental Condition
Schedule 6.14 Location of Inventory and Equipment
Exhibit A-1 Acknowledgement Agreement
Exhibit C-1 Copyright Security Agreement
Exhibit E-1 Environmental Indemnity
Exhibit I-1 Intercreditor Agreement
Exhibit P-1 Patent Security Agreement
Exhibit S-1 Stock Pledge Agreement
Exhibit T-1 Trademark Security Agreement
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, is entered into as of June 29, 1995,
between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 00000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, and CONCURRENT
COMPUTER CORPORATION, a Delaware corporation ("Borrower"), with
its chief
executive office located at 0 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx
Xxxxxx 00000.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the
following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become
obligated under, with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter
arising
accounts, contract rights, and all other forms of obligations
owing to
Borrower arising out of the sale, license, or lease of goods or
software or
the rendition of services by Borrower, or arising out of the sale,
license,
or lease of goods or software or the rendition of services by a
Person other
than Borrower and acquired by Borrower from such Person by
assignment or
purchase, irrespective of whether earned by performance, and any
and all
credit insurance, guaranties, or security therefor.
"Acknowledgement Agreement" means an Acknowledgement
Agreement,
dated as of June 29, 1995, between Borrower and each Subsidiary of
Borrower,
entered into for the benefit of Foothill, which agreement shall be
substantially in the form of Exhibit A-1 attached hereto.
"Affiliate" means, as applied to any Person, any other
Person
directly or indirectly controlling, controlled by, or under common
control
with, that Person. For purposes of this definition, "control" as
applied to
any Person means the possession, directly or indirectly, of the
power to
direct or cause the direction of the management and policies of
that Person,
whether through the ownership of voting securities, by contract,
or
otherwise.
"Agreement" means this Loan and Security Agreement and
any
extensions, riders, supplements, notes, amendments, or
modifications to or
in connection with this Loan and Security Agreement.
"Annualized Service Revenues" means, with respect to
the last
day of any fiscal quarter of Borrower, aggregate total revenues of
Borrower
and its Subsidiaries that are derived from Service Contracts for
the four
most recent fiscal quarters of Borrower (including such fiscal
quarter).
"Authorized Officer" means any officer or employee of
Borrower.
"Availability" means, as of the date of determination,
the
result (so long as such result is a positive number) of (a) the
lesser of
the Borrowing Base or the Maximum Revolving Amount, minus (b) the
outstanding Obligations that arise under Section 2.1 hereof.
"Average Unused Portion of Revolver Amount" means the
Maximum
Revolver Amount; less the average Daily Balance of advances made
by Foothill
under Section 2.1 that were outstanding during the immediately
preceding
month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11
U.S.C. 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble
to this
Agreement.
"Borrower's Books" means all of Borrower's books and
records
including: ledgers; records indicating, summarizing, or
evidencing
Borrower's properties or assets (including the Collateral or the
Real
Property) or liabilities; all information relating to Borrower's
or its
Subsidiaries' business operations or financial condition; and all
related
computer programs, disc or tape files, printouts, runs, or other
computer
prepared information.
"Borrowing Base" has the meaning set forth in Section
2.1.
"Business Day" means any day that is not a Saturday,
Sunday, or
other day on which national banks are authorized or required to
close.
"Change of Control" shall be deemed to have occurred
at such
time as (a) a "person" or "group" (within the meaning of Sections
13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934),
directly or indirectly, of more than 25% of the total voting power
of all
classes of stock then outstanding of Borrower normally entitled to
vote in
the election of directors, or (b) Borrower shall fail to own free
and clear
of any liens of any Person (other than Foothill or Old Lenders'
Agent) and
control (without being subject to any voting trust, voting
agreement,
shareholders agreement, or any other agreement or arrangement
limiting or
affecting the voting of such stock) at any time not less than one
hundred
percent (100.0%) of the outstanding voting stock of each of
Borrower's
Subsidiaries reflected as being owned by it as of the Closing Date
on
Schedule 5.7 and that such outstanding voting stock retains the
same
percentage of voting control as exists on the Closing Date.
"Closing Date" means the date of the initial advance
hereunder.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the
Accounts;
Borrower's Books; the Equipment; the General Intangibles; the
Inventory; the
Negotiable Collateral; any money, or other assets of Borrower
which now or
hereafter come into the possession, custody, or control of
Foothill; and the
proceeds and products, whether tangible or intangible, of any of
the
foregoing including proceeds of insurance covering any or all of
the
Collateral, and any and all Accounts, Borrower's Books, Equipment,
General
Intangibles, Inventory, Negotiable Collateral, money, deposit
accounts, or
other tangible or intangible property resulting from the sale,
license,
exchange, collection, or other disposition of any of the
foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Concurrent Nippon" means Concurrent Nippon
Corporation, a
company organized under the laws of Japan.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of
Borrower and
its Subsidiaries calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower
and its Subsidiaries, calculated on a consolidated basis that would, in
accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all advances outstanding
under this Agreement shall be deemed to be current liabilities without
regard to whether they would be deemed to be so under GAAP.
"Copyright Security Agreement" means a security agreement, dated
as of June 29, 1995, between Borrower and Foothill, which agreement shall be
substantially in the form of Exhibit C-1 attached hereto.
"Credit Agreement" means that certain Third Amended and Restated
Credit Agreement, dated as of June 29, 1995, between Borrower, Old Lenders'
Agent, and Old Lenders.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Dilution Reserve" means, as of the date of any
determination, a
dollar amount sufficient to reduce Foothill's advance rate against
Eligible
Accounts by one (1) percentage point each for each percentage
point by which
the amount (expressed as a percentage point and based upon the
immediately
prior three months) of Borrower's Accounts that are subject to bad
debt
write-downs, credits, or other dilution is in excess of six
percent (6%).
"Early Termination Premium" has the meaning set forth
in Section
3.6.
"Eligible Accounts" means those Accounts created by
Borrower in
the ordinary course of business that arise out of Borrower's sale
of goods
or rendition of services, that strictly comply with all of
Borrower's
representations and warranties to Foothill, and that are and at
all times
shall continue to be acceptable to Foothill in all respects;
provided,
however, that standards of eligibility may be fixed and revised
from time to
time by Foothill in Foothill's reasonable credit judgment based
upon a
change in facts or circumstances or upon information that first
comes to
Foothill's attention after the Closing Date. Eligible Accounts
shall not
include the following:
(a) Accounts that the Account Debtor has
failed to pay
within ninety (90) days of invoice date or Accounts with selling
terms of
more than thirty (30) days (or, on a case by case basis, up to
sixty (60)
days with Foothill's prior consent) and all Accounts owed by an
Account
Debtor that has failed to pay fifty percent (50%) or more of its Accounts
owed to Borrower within ninety (90) days of invoice date;
(b) Accounts with respect to which the Account
Debtor is
an officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods or
software are
placed on consignment, guaranteed sale, sale or return, sale on
approval,
xxxx and hold, or other terms by reason of which the payment by
the Account
Debtor may be conditional; provided, however, that xxxx and hold
Accounts
shall not be excluded by reason of this clause (c) if they are
subject to
documentation, in form and substance satisfactory to Foothill,
clearly
evidencing that the obligation of the Account Debtor is absolute
and
unconditional notwithstanding the failure of Borrower to deliver
the subject
goods or software;
(d) Accounts with respect to which the Account
Debtor is
not a resident of the United States, and which are not either (i) covered by
credit insurance in form and amount, and by an insurer,
satisfactory to
Foothill, or (ii) supported by one or more letters of credit that
are
assignable by their terms and have been delivered to Foothill in
an amount,
of a tenor, and issued by a financial institution, acceptable to
Foothill;
(e) Accounts with respect to which the Account
Debtor is
the United States or any department, agency, or instrumentality of
the
United States (exclusive, however, of Accounts with respect to
which
Borrower has complied, to the satisfaction of Foothill, with the
Assignment
of Claims Act, 31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is
or may
become liable to the Account Debtor for goods or software sold or
licensed
or services rendered by the Account Debtor to Borrower;
(g) Accounts with respect to an Account Debtor
whose
total obligations owing to Borrower exceed ten percent (10%) of
all Eligible
Accounts, to the extent of the obligations owing by such Account
Debtor in
excess of such percentage; provided, however, that accounts owed
by the
Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing
Co.,
Grumman Aircraft, Xxxxxx Xxxxxxxx Corp., and other accounts that
may be
approved from time to time by Foothill may be eligible up to a maximum, per
Account Debtor, of fifteen percent (15%) of all Eligible Accounts,
so long
as they are otherwise eligible hereunder;
(h) Accounts with respect to which the Account
Debtor
disputes liability or makes any claim with respect thereto, or is
subject to
any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Accounts the collection of which Foothill,
in its
reasonable credit judgment, believes to be doubtful by reason of
the Account
Debtor's financial condition;
(j) Accounts that are payable in other than
United
States Dollars;
(k) Accounts that represent progress payments
or other
advance xxxxxxxx that are due prior to the completion of
performance by
Borrower of the subject contract for goods, software, or services;
and
(l) Accounts in which any Person other than
Borrower
owns any interest, to the extent of such interest, or in which any
Person
other than Foothill holds a lien, security interest, or charge.
"Eligible Inventory" means Inventory consisting of raw
materials
and spare parts held for use in the ordinary course of Borrower's
business,
that are located at Borrower's premises identified on Schedule X-
0, are
acceptable to Foothill in all respects, and strictly comply with
all of
Borrower's representations and warranties to Foothill; provided,
however,
that standards of eligibility may be fixed and revised from time
to time by
Foothill in Foothill's reasonable credit judgment based upon a
change in
facts or circumstances or upon information that first comes to
Foothill's
attention after the Closing Date. Eligible Inventory shall not
include
Inventory that is used in connection with Borrower's proprietary
computer
system or that is expected to be returned from customers, finished
goods,
slow moving or obsolete items, restrictive or custom items, work-
in-process,
packaging and shipping materials, supplies used or consumed in
Borrower's
business, Inventory at any location other than those set forth on Schedule
E-1, Inventory subject to a security interest or lien in favor of any third
Person, xxxx and hold goods, Inventory that is not subject to Foothill's
perfected security interests, returned or defective goods, "seconds," and
Inventory acquired on consignment. Anything contained herein to the
contrary notwithstanding, Borrower shall be entitled, from time to time upon
reasonable prior notice to Foothill, to amend Schedule E-1 in order to add
one or more additional locations to Schedule E-1 that are set
forth on
Schedule 6.14, so long as in connection with such amendment
Borrower
provides to Foothill a landlord waiver, bailee letter, or a
similar
acknowledgement agreement of any warehouseman in possession of
Inventory, in
each case, in form and substance satisfactory to Foothill.
"Eligible Raw Materials Inventory" means Eligible
Inventory
consisting of raw materials. Eligible Raw Materials Inventory
shall be
valued, on a first in, first out basis, at the lower of Borrower's
cost or
market value.
"Eligible Spare Parts Inventory" means Eligible
Inventory
consisting of spare parts. Eligible Spare Parts Inventory shall
be valued,
on a first in, first out basis, at Borrower's net book value.
"Eligible Unearned Service Accounts" means Accounts
created by
Borrower in the ordinary course of business that qualify as
Eligible
Accounts except for the fact that they arise under Service
Contracts and
that the right to payment therefor has not yet accrued, provided,
however,
that only the rights to payment under such Service Contracts that
will
accrue within one (1) month from the date of determination shall
constitute
Eligible Unearned Service Accounts.
"Environmental Indemnity" means an environmental
indemnity
executed by Borrower in favor of Foothill, which agreement shall
be
substantially in the form of Exhibit E-1 attached hereto.
"Equipment" means all of Borrower's present and
hereafter
acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and
trailers),
tools, parts, dies, jigs, goods (other than consumer goods, farm
products,
or Inventory), wherever located, and any interest of Borrower in
any of the
foregoing, and all attachments, accessories, accessions,
replacements,
substitutions, additions, and improvements to any of the
foregoing, wherever
located.
"ERISA" means the Employee Retirement Income Security
Act of
1974, as amended from time to time, or any predecessor, successor,
or
superseding laws of the United States of America, together with
all
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not
incorporated) which, within the meaning of Section 414 of the IRC,
is:
(i) under common control with Borrower; (ii) treated, together
with
Borrower, as a single employer; (iii) treated as a member of an
affiliated
service group of which Borrower is also treated as a member; or (iv) is
otherwise aggregated with the Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan;
(ii) a Prohibited Transaction with respect to any Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer
Plan; (iv) the complete or partial withdrawal of Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which it was, or was
treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which,
under the provisions of any Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under
Sections 4041 or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer,
any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any
liability
under Title IV of ERISA, other than PBGC premiums due but not
delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate;
and
(ix) a violation of the applicable requirements of Sections 404 or
405 of
ERISA, or the exclusive benefit rule under Section 403(c) of
ERISA, by any
fiduciary or disqualified person with respect to any Plan for
which Borrower
or any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in
Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble
to this
Agreement.
"Foothill Expenses" means all: reasonable,
documented, costs or
expenses (including taxes, photocopying, notarization,
telecommunication and
insurance premiums) required to be paid by Borrower under any of
the Loan
Documents that are paid or advanced by Foothill; documentation,
filing,
recording, publication, appraisal (including periodic Collateral
or Real
Property appraisals), real estate survey, environmental audit, and
search
fees assessed, paid, or incurred by Foothill in connection with
Foothill's
transactions with Borrower; costs and expenses incurred by
Foothill in the
disbursement of funds to Borrower (by wire transfer or otherwise);
charges
paid or incurred by Foothill resulting from the dishonor of
checks; costs
and expenses paid or incurred by Foothill to correct any default
or enforce
any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
licensing,
preparing for sale or license, or advertising to sell or license
the
Collateral or the Real Property, or any portion thereof,
irrespective of
whether a sale or license is consummated; costs and expenses paid
or
incurred by Foothill in examining Borrower's Books; costs and
expenses of
third party claims or any other suit paid or incurred by Foothill
in
enforcing or defending the Loan Documents; and Foothill's
reasonable
attorneys fees and expenses incurred in advising, structuring,
drafting,
reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower
or any
guarantor of the Obligations), defending, or concerning the Loan
Documents,
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently
applied.
"General Intangibles" means all of Borrower's present
and future
general intangibles and other personal property (including
contract rights,
rights arising under common law, statutes, or regulations, choses
or things
in action, goodwill, patents, trade names, trademarks,
servicemarks,
copyrights, 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,
infringements,
claims, computer programs, computer discs, computer tapes,
software, source
code, literature, reports, catalogs, deposit accounts, insurance
premium
rebates, tax refunds, and tax refund claims), other than goods,
Accounts,
and Negotiable Collateral.
"Hazardous Materials" means all or any of the
following:
(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 which contains any oil or dielectric fluid
containing
levels of polychlorinated biphenyls in excess of fifty (50) parts
per
million.
"Inactive Subsidiaries" means those subsidiaries of Borrower
identified on Schedule I-1 attached hereto.
"Indebtedness" means: (a) all obligations of Borrower
or any
Subsidiary of Borrower for borrowed money; (b) all obligations of
Borrower
or any Subsidiary of Borrower evidenced by bonds, debentures,
notes, or
other similar instruments and all reimbursement or other
obligations of
Borrower or any Subsidiary of Borrower in respect of letters of
credit,
letter of credit guaranties, bankers acceptances, interest rate
swaps,
controlled disbursement accounts, or other financial products; (c)
all
obligations of Borrower or any Subsidiary of Borrower under
capital leases;
(d) all obligations or liabilities of others secured by a lien or
security
interest on any property or asset of Borrower or any Subsidiary of
Borrower,
irrespective of whether such obligation or liability is assumed;
and (e) any
obligation of Borrower or any Subsidiary of Borrower guaranteeing
or
intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or
sold with recourse to Borrower or any Subsidiary of Borrower) any
indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person.
"Insolvency Proceeding" means any proceeding commenced
by or
against any Person under any provision of the Bankruptcy Code or
under any
other bankruptcy or insolvency law, including assignments for the
benefit of
creditors, formal or informal moratoria, compositions, extensions
generally
with its creditors, or proceedings seeking reorganization,
arrangement, or
other similar relief.
"Intercreditor Agreement" means an Intercreditor
Agreement,
dated as of June 29, 1995, between Foothill, on the one hand, and
Old
Lenders' Agent, on the other hand, and acknowledged by Borrower,
which
agreement shall be substantially in the form of Exhibit I-1
attached hereto.
"Inventory" means all present and future inventory in
which
Borrower has any interest, including goods and software held for
sale,
license, or lease or to be furnished under a contract of service
and all of
Borrower's present and future raw materials, work in process,
finished
goods, and packing and shipping materials, wherever located, and
any
documents of title representing any of the above.
"Inventory Reserve" means a reserve in an amount equal
to,
without duplication (a) an amount calculated to eliminate overhead
allocated
to the Eligible Raw Materials Inventory and Eligible Spare Parts
Inventory,
and (b) the amount of the inventory reserve set forth in
Borrower's general
ledger and calculated in accordance with its historical practices.
"IRC" means the Internal Revenue Code of 1986, as
amended, and
the regulations thereunder.
"Letters of Credit" means those certain letters of
credit in the
aggregate amount of Three Million Dollars ($3,000,000) issued by
Old
Lenders' Agent on behalf of the Old Lenders for the account of
Borrower and
to support the Indebtedness of Concurrent Nippon owing to Sumitomo
Bank,
Ltd., Mitsubishi Bank, Ltd., and Industrial Bank of Japan.
"Liquidity" means, as of any date of determination,
the
aggregate amount of Borrower's unrestricted cash, cash equivalents, and
Availability.
"Liquidity Conditions" means, as of any date of
determination,
that: (a) Borrower's Liquidity is not less than Two Million Five
Hundred
Thousand Dollars ($2,500,000); and (b) no Event of Default has
occurred and
is continuing.
"Loan Documents" means this Agreement, the Lockbox
Agreements,
the Mortgages, the Term Note, the Stock Pledge Agreement, the
Intercreditor
Agreement, the Copyright Security Agreement, the Patent Security
Agreement,
the Trademark Security Agreement, the Subsidiary Guaranty, the
Subsidiary
Security Agreement, the Source Code Escrow Agreement, the
Acknowledgement
Agreement, any other note or notes executed by Borrower and
payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Lockbox Account" shall mean the depositary account established
pursuant to the respective Lockbox Agreement.
"Lockbox Agreements" means those certain Lockbox
Operating
Procedural Agreements and those certain Depository Account
Agreements, in
form and substance satisfactory to Foothill, each of which is
among
Borrower, Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means First Interstate Bank and
Chemical Bank.
"Maximum Amount" means Eighteen Million Dollars ($18,000,000).
"Maximum Revolver Amount" means Eight Million Dollars
($8,000,000).
"Mortgages" means one or more mortgages, deeds of
trust, or
deeds to secure debt, executed by Borrower in favor of Foothill,
the form
and substance of which shall be satisfactory to Foothill, that
encumber the
Real Property and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as
defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in
which
employees of Borrower or an ERISA Affiliate participate or to
which Borrower
or any ERISA Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's
present and
future letters of credit, notes, drafts, instruments, certificated
and
uncertificated securities (including the shares of stock of
domestic
subsidiaries of Borrower, exclusive, however, of Borrower's
interest in
Concurrent Nippon and exclusive, however, of 34% of the stock of
each of
Borrower's controlled foreign subsidiaries), documents, personal
property
leases (wherein Borrower is the lessor), chattel paper, and
Borrower's Books
relating to any of the foregoing.
"Obligations" means all loans, advances, debts,
principal,
interest (including any interest that, but for the provisions of
the
Bankruptcy Code, would have accrued), premiums (including Early
Termination
Premiums), liabilities (including all amounts charged to
Borrower's loan
account pursuant to any agreement authorizing Foothill to charge
Borrower's
loan account), obligations, fees, lease payments, guaranties,
covenants, and
duties owing by Borrower to Foothill of any kind and description
(whether
pursuant to or evidenced by the Loan Documents, by any note or
other
instrument (including the Term Note), or pursuant to any other
agreement
between Foothill and Borrower, and irrespective of whether for the
payment
of money), whether direct or indirect, absolute or contingent, due
or to
become due, now existing or hereafter arising, and including any
debt,
liability, or obligation owing from Borrower to others that
Foothill may
have obtained by assignment or otherwise, and further including
all interest
not paid when due and all Foothill Expenses that Borrower is
required to pay
or reimburse by the Loan Documents, by law, or otherwise.
"Oceanport Real Property" means Borrower's Real
Property located
in Oceanport, New Jersey.
"Old Lenders" means Fleet Bank of Massachusetts, N.A.
and CIBC
Inc.
"Old Lenders' Agent" means Fleet Bank of
Massachusetts, N.A., as
agent for the Old Lenders.
"Overadvance" has the meaning set forth in Section
2.3.
"Patent Security Agreement" means a security
agreement, dated as
of June 29, 1995, between Borrower and Foothill, which agreement
shall be
substantially in the form of Exhibit P-1 attached hereto.
"Paydown Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Old Lenders' Agent
respecting the
amount necessary to repay in full all of the obligations of
Borrower owing
to Old Lenders, other than the obligations with respect to the
Letters of
Credit.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined
in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security
interests held
by Foothill; (b) liens for unpaid taxes that are not yet due and
payable;
(c) liens and security interests set forth on Schedule P-1
attached hereto;
(d) purchase money security interests and liens of lessors under
capital
leases to the extent that the acquisition or lease of the
underlying asset
was permitted under Section 7.11, and so long as the security
interest or
lien only secures the purchase price of the asset; (e) easements,
rights of
way, reservations, covenants, conditions, restrictions, zoning
variances,
and other similar encumbrances that do not materially interfere
with the use
or value of the property subject thereto; (f) obligations and
duties as
lessee under any lease existing on the date of this Agreement; (g)
mechanics', materialmen's, warehousemen's, or similar liens that
arise by
operation of law; (h) exceptions listed in the title insurance or
commitment
therefor to be delivered by Borrower hereunder in respect of the
Real
Property and as are approved in the sole discretion of Foothill;
and (i)
subject to the provisions of the Intercreditor Agreement, liens
and security
interests in favor of Old Lenders' Agent.
"Permitted Protest" means the right of Borrower or a
Subsidiary
of Borrower to protest any lien, tax, rental payment, or other
charge, other
than any such lien or charge that secures the Obligations, pro
vided (i) a
reserve with respect to such obligation is established on the
books of
Borrower or its Subsidiary in an amount that is reasonably
satisfactory to
Foothill, (ii) any such protest is instituted and diligently
prosecuted by
Borrower or its Subsidiary in good faith, and (iii) Foothill is
satisfied
that, while any such protest is pending, there will be no
impairment of the
enforceability, validity, or priority of any of the liens or security
interests of Foothill in and to the property or assets of Borrower
or any
Subsidiary of Borrower.
"Permitted Real Property Dispositions" means (a) the
sale of the
Tinton Falls Real Property so long as at the time thereof (i) no
Event of
Default has occurred and is continuing, and (ii) the net cash
proceeds of
such sale equals or exceeds Two Million Five Hundred Thousand
Dollars
($2,500,000), and (b) the sale of the Oceanport Real Property so
long as at
the time thereof (i) no Event of Default has occurred and is
continuing, and
(ii) the net cash proceeds of such sale equals or exceeds Ten
Million
Dollars ($10,000,000).
"Person" means and includes natural persons,
corporations,
limited partnerships, general partnerships, joint ventures,
trusts, land
trusts, business trusts, or other organizations, irrespective of
whether
they are legal entities, and governments and agencies and
political
subdivisions thereof.
"Plan" means an employee benefit plan (as defined in
Section
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or
maintains
or to which Borrower or any ERISA Affiliate makes, is making, or
is
obligated to make contributions, including any Multiemployer Plan
or
Qualified Plan.
"Prohibited Transaction" means any transaction
described in
Section 406 of ERISA which is not exempt by reason of Section 408
of ERISA,
and any transaction described in Section 4975(c) or (d) of the IRC
which is
not exempt by reason of Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in
Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a)
of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to
which any
such person makes, is making, or is obligated to make,
contributions, or, in
the case of a multiple-employer plan (as described in Section
4064(a) of
ERISA), has made contributions at any time during the immediately
preceding
period covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"Qualified Transaction" means a sale of all or
substantially all
of the assets of Borrower, a merger wherein Borrower is not the
surviving
entity, or a sale of all or substantially all of the issued and
outstanding
capital stock of Borrower.
"Real Property" means the parcel or parcels of real
property and
the related improvements thereto identified on Schedule R-1, and
any estates
or interests in real property hereafter acquired by Borrower.
"Reference Rate" means the highest of the variable
rates of
interest, per annum, most recently announced by (a) Bank of
America, N.T. &
S.A., (b) Mellon Bank, N.A., and (c) Citibank, N.A., or any
successor to any
of the foregoing institutions, as its "prime rate" or "reference
rate," as
the case may be, irrespective of whether such announced rate is the best
rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section
3.4.
"Reportable Event" means any event described in
Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Service Contract" means a contract relative to
Borrower's
provision of maintenance (full maintenance, software only, or
hardware
only), consulting (professional advice, skill enhancement, or
training), or
repair services.
"Solvent" means, with respect to any Person on a
particular
date, that on such date (a) at fair valuations, all of the
properties and
assets of such Person are greater than the sum of the debts,
including
contingent liabilities, of such Person, (b) the present fair
salable value
of the properties and assets of such Person is not less than the
amount that
will be required to pay the probable liability of such Person on
its debts
as they become absolute and matured, (c) such Person is able to
realize upon
its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal
course of business, (d) such Person does not intend to, and does
not believe
that it will, incur debts beyond such Person's ability to pay as
such debts
mature, and (e) such Person is not engaged in business or a
transaction, and
is not about to engage in business or a transaction, for which
such Person's
properties and assets would constitute unreasonably small capital
after
giving due consideration to the prevailing practices in the
industry in
which such Person is engaged. In computing the amount of
contingent
liabilities at any time, it is intended that such liabilities will
be
computed at the amount that, in light of all the facts and
circumstances
existing at such time, represents the amount that reasonably can
be expected
to become an actual or matured liability.
"Source Code Escrow Agreement" means a Source Code
Escrow
Agreement among Borrower, Foothill and a third party escrowholder,
in form
and substance satisfactory to Foothill.
"Stock Pledge Agreement" means that certain Stock
Pledge
Agreement, dated as of June 29, 1995, between Borrower and
Foothill, which
agreement shall be substantially in the form of Exhibit S-1
attached hereto.
"Subsidiary" means any corporation, association,
partnership,
joint venture, or other business entity of which a Person,
directly or
indirectly, either (i) with respect to a corporation, owns or
controls 50%
or more of the voting rights attached to all outstanding
securities thereof
and has the ability to elect at least a majority of the board of
directors
or similar managing body, irrespective of whether a class or
classes shall
or might have voting power by reason of the happening of any
contingency, or
(ii) with respect to an association, partnership, joint venture or
other
business entity, is entitled to share in 50% or more of the profits and
losses, however determined, and has voting control with respect thereto.
The foregoing to the contrary notwithstanding, neither the Inactive
Subsidiaries nor Concurrent Nippon shall be "Subsidiaries" for purposes of
this Agreement or the other Loan Documents, other than for purposes of
financial reporting covenants and financial performance covenants.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total
stockholder's equity; prior to the effect of cumulative translation
adjustments, minus (b) the sum of: (i) all intangible assets of Borrower
(including capitalized software costs and deferred financing
fees); (ii) all
of Borrower's prepaid expenses; and (iii) all amounts due to
Borrower from
Affiliates, calculated on a consolidated basis in accordance with
GAAP.
"Term Note" has the meaning set forth in Section 2.2
hereof.
"Tinton Falls Real Property" means Borrower's Real
Property
located in Tinton Falls, New Jersey.
"Trademark Security Agreement" means a security
agreement, dated
as of June 29, 1995, between Borrower and Foothill, which
agreement shall be
substantially in the form of Exhibit T-1 attached hereto.
"Unfunded Benefit Liability" means the excess of a
Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA)
over the
current value of such Plan's assets, determined in accordance with
the
assumptions used by the Plan's actuaries for funding the Plan
pursuant to
Section 412 of the IRC for the applicable plan year.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
"Working Capital" means the result of subtracting
Consolidated
Current Liabilities from Consolidated Current Assets.
1.2 Accounting Terms. All accounting terms not
specifically
defined herein shall be construed in accordance with GAAP. When
used
herein, the term "financial statements" shall include the notes
and
schedules thereto. Whenever the term "Borrower" is used in
respect of a
financial covenant or a related definition, it shall be understood
to mean
Borrower on a consolidated basis unless the context clearly
requires
otherwise. If any changes in accounting principles from those
used in the
preparation of the financial statements referred to in this
Agreement are
hereafter occasioned by the promulgation of rules, regulations,
pronouncements, or opinions of, or required by, the Financial
Accounting Standards Board or the American Institute of Certified
Public
Accountants (or successors thereto or agencies with similar
functions), or
there shall occur any change in Borrower's fiscal periods
permitted
hereunder and, as a result of any such changes, there shall result
a change
in the method of calculating any of the financial covenants,
negative
covenants, standards, or other terms or conditions found in this
Agreement,
then the parties hereto agree to enter into negotiations in order
to amend
such provisions and the definition of "GAAP" set forth in Section
1.1 so as
to equitably reflect such changes with the desired result that the
criteria
for evaluating the financial condition of Borrower and its
Subsidiaries
shall be the same after such changes as if such changes had not
been made.
1.3 Code. Any terms used in this Agreement that are
defined
in the Code shall be construed and defined as set forth in the
Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this
Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term
"including" is not
limiting, and the term "or" has, except where otherwise indicated,
the
inclusive meaning represented by the phrase "and/or." The words
"hereof,"
"herein," "hereby," "hereunder," and similar terms in this
Agreement refer
to this Agreement as a whole and not to any particular provision
of this
Agreement. Section, subsection, clause, schedule, and exhibit
references
are to this Agreement unless otherwise specified. Any reference
in this
Agreement or in the Loan Documents to this Agreement or any of the
Loan
Documents shall include all alterations, amendments, changes,
extensions,
modifications, renewals, replacements, substitutions, and
supplements,
thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules
and exhibits
attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances. (a) Subject to the terms
and
conditions of this Agreement, Foothill agrees to make revolving
advances to
Borrower in an amount at any one time outstanding not to exceed
the
Borrowing Base hereunder. For purposes of this Agreement,
"Borrowing Base",
as of any date of determination, shall mean the sum of: (i) an
amount equal
to the lesser of: (x) Eight Million Dollars ($8,000,000), (y)(1)
eighty
percent (80%) of the amount of Eligible Accounts, less (2) the
amount of the
Dilution Reserve, and (z) an amount equal to seventy-five percent
(75%) of
Borrower's domestic cash collections with respect to Accounts for
the
immediately preceding ninety (90) day period; plus (ii) an amount
equal to
the lesser of: (y) One Million Dollars ($1,000,000), and (z)
eighty percent
(80%) of Eligible Unearned Service Accounts; plus (iii) an amount
equal to
the lowest of: (x)(1) the value of Eligible Raw Materials
Inventory plus the
value of Eligible Spare Parts Inventory less the amount of the
Inventory
Reserve, times (2) twenty five percent (25%), (y) one hundred
thirty-three
percent (133%) of the amount of credit availability created by
clauses (i)
and (ii) above, and (z) Two Million Dollars ($2,000,000), less an
amount
equal to (1) Fifty Thousand Dollars ($50,000) times (2) the number
of months since the Closing Date.
(b) Anything to the contrary in Section 2.1(a)
above
notwithstanding, Foothill may reduce its advance rates based upon
Eligible
Accounts or Eligible Inventory without declaring an Event of
Default if it
determines, in its reasonable discretion, that there is a material
impairment of the prospect of repayment of all or any portion of
the
Obligations or a material impairment of the value or priority of
Foothill's
security interests in the Collateral.
(c) Foothill shall have no obligation to make
advances
hereunder to the extent they would cause (i) the outstanding
Obligations
(other than the Obligations evidenced by the Term Note) to exceed
the
Maximum Revolver Amount, or (ii) the outstanding Obligations to
exceed the
Maximum Amount.
(d) Foothill is authorized to make advances
under this
Agreement based upon telephonic or other instructions received
from anyone
purporting to be an Authorized Officer of Borrower, or without
instructions
if pursuant to Section 2.4(d). Borrower agrees to establish and
maintain a
single designated deposit account for the purpose of receiving the
proceeds
of the advances requested by Borrower and made by Foothill
hereunder.
Unless otherwise agreed by Foothill and Borrower, any advance
requested by
Borrower and made by Foothill hereunder shall be made to such
designated
deposit account. Amounts borrowed pursuant to this Section 2.1
may be
repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
2.2 Term Loan. (a) Foothill has agreed to make a
term loan
to Borrower in the original principal amount of Ten Million
Dollars
($10,000,000), to be evidenced by and repayable in accordance with
the terms
and conditions of a promissory note (the "Term Note"), of even
date
herewith, executed by Borrower in favor of Foothill. The term
loan shall be
repaid in thirty-seven (37) installments of principal
in the following amounts:
Month Installment Amount
1 through 36 $139,000
37 Balance
Each such installment shall be due and payable on the first day of
each
month commencing on the first day of August, 1995 and continuing
until and
including the date on which the unpaid balance of the Term Loan is
paid in
full. The outstanding principal balance and all accrued and
unpaid interest
under the Term Loan shall be due and payable upon the termination
of this
Agreement, whether by its terms, by prepayment, by acceleration,
or
otherwise. All amounts evidenced by the Term Note shall
constitute
Obligations.
2.3 Overadvances.
(a) If, at any time or for any reason, the
amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1
is greater
than either the dollar or percentage limitations set forth in
Sections 2.1
(an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the
amount of such excess to be used by Foothill first, to repay non-
contingent
Obligations.
(b) In the event that the ratio of total
Obligations to
Annualized Service Revenues contained in Section 6.12(e) exceeds
0.35:1,
Borrower shall prepay to Foothill the amount of such excess to be
applied by
Foothill first to obligations under Section 2.1 and then to the
installments
due under the Term Note in the inverse order of their maturity.
2.4 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations shall bear
interest
at a per annum rate of two (2.0) percentage points above the
Reference Rate.
(b) Default Rate. All Obligations shall bear
interest,
from and after the occurrence and during the continuance of an
Event of
Default, at a per annum rate equal to five (5.0) percentage points
above the
Reference Rate.
(c) Minimum Interest. In no event shall the
rate of
interest chargeable hereunder be less than seven percent (7%) per
annum. To
the extent that interest accrued hereunder at the rate set forth
herein
would be less than the foregoing minimum rate, the interest rate
chargeable
hereunder for the period in question automatically shall be deemed
increased
to the minimum rate.
(d) Payments. Interest hereunder shall be due
and
payable, in arrears, on the first day of each month during the
term hereof.
Borrower hereby authorizes Foothill, at its option, without prior
notice to
Borrower, to charge such interest, all Foothill Expenses (as and
when
incurred), and all installments or other payments due under the Term Note or
any other note or other Loan Document to Borrower's loan account
with
respect to the revolving loan facility provided under Section 2.1,
which
amounts thereafter shall accrue interest at the rate then
applicable
hereunder. Any interest not paid when due shall be compounded by
becoming a
part of the Obligations, and such interest shall thereafter accrue
interest
at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the
date of
this Agreement is nine percent (9%) per annum. In the event the
Reference
Rate is changed from time to time hereafter, the applicable rate
of interest
hereunder automatically and immediately shall be increased or
decreased by
an amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis
of a
three hundred sixty (360) day year for the actual number of days
elapsed.
(f) Intent to Limit Charges to Maximum Lawful
Rate. In
no event shall the interest rate or rates payable under this
Agreement or
the Term Note, plus any other amounts paid in connection herewith,
exceed the highest rate permissible under any law that a court of
competent
jurisdiction shall, in a final determination, deem applicable.
Borrower and
Foothill, in executing this Agreement and the Term Note, intend
legally to
agree upon the rate or rates of interest and manner of payment
stated within
it; provided, however, that, anything contained herein or in the
Term Note
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 and the Term Note, Borrower
is and
shall be liable only for the payment of such maximum as allowed by
law, and
payment received from Borrower in excess of such legal maximum,
whenever
received, shall be applied to reduce the principal balance of the
Obligations to the extent of such excess.
2.5 Crediting Payments; Application of Collections.
The
receipt of any wire transfer of funds, check, or other item of
payment by
Foothill (whether from transfers to Foothill by the Lockbox Banks
pursuant
to the Lockbox Agreements or otherwise) immediately shall be
applied to
provisionally reduce the Obligations, but shall not be considered
a payment
on account unless such wire transfer is of immediately available
federal
funds and is made to the appropriate deposit account of Foothill
or unless
and until such check or other item of payment is honored when
presented for
payment. From and after the Closing Date, Foothill shall be
entitled to
charge Borrower for two (2) Business Days of `clearance' at the
rate set
forth in Section 2.4(a) or Section 2.4(b), as applicable, on all
collections, checks, wire transfers, or other items of payment that are
received by Foothill (regardless of whether forwarded by the
Lockbox Banks
to Foothill, whether provisionally applied to reduce the
Obligations, or
otherwise). This across-the-board two (2) Business Day clearance
charge on
all receipts is acknowledged by the parties to constitute an
integral aspect
of the pricing of Foothill's facility to Borrower, and shall apply
irrespective of the characterization of whether receipts are owned
by
Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should any check or item of payment not
be honored
when presented for payment, then Borrower shall be deemed not to have made
such payment, and interest shall be recalculated accordingly.
Anything to
the contrary contained herein notwithstanding, any wire transfer,
check, or
other item of payment shall be deemed received by Foothill only if
it is
received into Foothill's Operating Account (as such account is
identified in
the Lockbox Agreements) on or before 11:00 a.m. Los Angeles time.
If any
wire transfer, check, or other item of payment is received into
Foothill's
Operating Account (as such account is identified in the Lockbox
Agreements)
after 11:00 a.m. Los Angeles time it shall be deemed to have been
received
by Foothill as of the opening of business on the immediately
following
Business Day.
2.6 Statements of Obligations. Foothill shall
render
statements to Borrower of the Obligations, including principal,
interest,
fees, and including an itemization of all charges and expenses
constituting
Foothill Expenses owing, and such statements shall be conclusively
presumed
to be correct and accurate and constitute an account stated
between Borrower
and Foothill unless, within thirty (30) days after receipt thereof
by
Borrower, Borrower shall deliver to Foothill by registered or
certified mail
at its address specified in Section 12, written objection thereto
describing
the error or errors contained in any such statements.
2.7 Fees. Borrower shall pay to Foothill the
following fees:
(a) Closing Fee. A one time closing fee of
Ninety
Thousand Dollars ($90,000) which is earned, in full, on the
Closing Date and
is due and payable by Borrower to Foothill in connection with this
Agreement
on the Closing Date;
(b) Unused Line Fee. On the first day of each
month
during the term of this Agreement, a fee in an amount equal to
one-quarter
of one percent (.25%) per annum times the Average Unused Portion
of the
Maximum Revolver Amount;
(c) Annual Facility Fee. On each anniversary
of the
Closing Date, a fee in an amount equal to one-quarter of one
percent (.25%)
of the sum of: (i) the Maximum Revolver Amount; plus (ii) the then
outstanding principal balance of the Term Note; such fee to be
fully earned
and non-refundable on each such anniversary;
(d) Financial Examination, Documentation, and
Appraisal
Fees. Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day
per examiner, plus reasonable, documented, out-of-pocket expenses
for each
financial analysis and examination (i.e., audits) of Borrower
performed by Foothill or its agents; Foothill's customary
appraisal fee of One Thousand
Five Hundred Dollars ($1,500) per day per appraiser, plus
reasonable,
documented, out-of-pocket expenses for each appraisal of the
Collateral
performed by Foothill or its agents; provided, that, without
limiting the
number of audits or appraisals that Foothill may perform, prior to
the
occurrence of an Event of Default, Foothill shall not be entitled
to
reimbursement for any such costs and fees incurred in connection
with audits
in excess of four (4) per year or appraisals in excess of two (2)
per year;
and
(e) Servicing Fee. On the first day of each
month
during the term of this Agreement commencing with August 1, 1995,
and
thereafter so long as any Obligations are outstanding, a servicing
fee in an
amount equal to Ten Thousand Dollars ($10,000) per month.
2.8 Mandatory Prepayment Requirement. Concurrent
with the
Permitted Real Property Disposition of the Tinton Falls Real
Property and as
a condition concurrent to the release of Foothill's lien upon the
Tinton
Falls Real Property, Borrower shall prepay the Term Note by
seventy-five
percent (75%) of the net cash proceeds of such Permitted Real
Property
Disposition, such repayment to be applied as follows: (a) fifty
percent
(50%) thereof, up to a maximum of One Million Dollars
($1,000,000), to the
installments due under the Term Note in the order of their
maturity, and (b)
the balance thereof, to the installments due under the Term Note
in the
inverse order of their maturity. Concurrent with the Permitted Real
Property Disposition of the Oceanport Real Property and as a
condition
concurrent to the release of Foothill's lien upon the Oceanport
Real
Property, Borrower shall prepay the Term Note by seventy-five
percent (75%)
of the net cash proceeds of such Permitted Real Property
Disposition, such
repayment to be applied to the installments due under the Term
Note in the
inverse order of their maturity.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance. The
obligation
of Foothill to make the initial advance is subject to the
fulfillment, to
the satisfaction of Foothill and its counsel, of each of the
following
conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
July 15,
1995;
(b) Old Lender shall have executed and
delivered the
Paydown Letter;
(c) Foothill shall have received confirmation
of the
filing of its financing statements against Borrower in the State
of New
Jersey and the Commonwealth of Massachusetts;
(d) Foothill shall have received each of the
following
documents, duly executed, and each such document shall be in full
force and
effect:
i) the Lockbox Agreements;
ii) the Term Note;
iii) the Mortgages;
iv) the Intercreditor Agreement;
v) the Environmental Indemnity;
vii) the Stock Pledge Agreement;
viii) the Copyright Security Agreement;
viii) the Patent Security Agreement;
ix) the Trademark Security Agreement; and
x) the Acknowledgement Agreement;
(e) Foothill shall have received a certificate
from the
Secretary of Borrower attesting to the resolutions of Borrower's
Board of
Directors authorizing its execution, delivery, and performance of
this
Agreement and the other Loan Documents to which Borrower is a
party and
authorizing specific officers of Borrower to execute same;
(f) Foothill shall have received copies of
Borrower's
By-laws and Articles or Certificate of Incorporation, as amended,
modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(g) Foothill shall have received a certificate
of
corporate status with respect to Borrower, dated within ten (10)
days of the
Closing Date, by the appropriate officer of the jurisdiction of
incorporation of Borrower, which certificate shall indicate that
Borrower is
in good standing in such jurisdiction;
(h) Foothill shall have received a certificate
of
corporate status with respect to Borrower, dated within fifteen
(15) days of
the Closing Date, such certificate to be issued by the appropriate
officer
of the State of New Jersey and the Commonwealth of Massachusetts,
which
certificates shall indicate that Borrower is in good standing in
each such
jurisdiction;
(i) Foothill shall have received original
certificates
evidencing all of the issued and outstanding stock interests
pledged
pursuant to the Stock Pledge Agreement, together with stock powers
with
respect to such certificates duly executed in blank by Borrower.
(j) Foothill shall have received the certified
copies of
the policies of insurance, together with the endorsements thereto,
as are
required by Section 6.11 hereof, the form and substance of which
shall be
satisfactory to Foothill and its counsel;
(k) Foothill shall have received a
certificate, duly
executed by an Authorized Officer and dated as of the Closing
Date, that
identifies the Inactive Subsidiaries and contains information
concerning the
de minimis value of their assets;
(l) Foothill shall have received ALTA Lender's
Policies
of Title Insurance, or a commitment therefor, from a title company
reasonably satisfactory to Foothill, in an amount equal to not
less than
$6,000,000, insuring its first priority lien upon each fee parcel
composing
the Real Property, such policies to contain such endorsements as
may be
required by Foothill and only those exceptions acceptable to
Foothill, and
otherwise to be in form satisfactory to Foothill;
(m) Foothill shall have received the results
of
environmental site assessments for each parcel of Real Property
the results
of which shall be acceptable to Foothill in all respects. The
environmental
consultants retained for the environmental reports, the scope of
the
reports, and results of the reports would need to be acceptable to
Foothill
and its counsel, in their sole discretion;
(n) Foothill shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Foothill
in its
sole discretion;
(o) Foothill shall have received satisfactory
evidence
that all returns required to be filed by Borrower have been timely
filed and
all taxes upon Borrower or its properties, assets, income and
franchises
(including Real Property taxes and payroll taxes) have been paid
prior to
delinquency, except such taxes that are the subject of a Permitted
Protest;
(p) Foothill shall have received satisfactory
evidence
that the expiry date of the Letters of Credit is being extended to
on or
after the Renewal Date;
(q) Completion of customer referral checks,
the results
of which are acceptable to Foothill;
(r) Foothill shall have received evidence
satisfactory
to it as to the execution and delivery of the Credit Agreement;
and
(s) all other documents and legal matters in
connection
with the transactions contemplated by this Agreement shall have
been
delivered or executed or recorded and shall be in form and
substance
satisfactory to Foothill and its counsel.
3.2 Conditions Precedent to All Advances. The
following shall
be conditions precedent to all advances hereunder:
(a) the representations and warranties
contained in this
Agreement and the other Loan Documents shall be true and correct
in all
respects on and as of the date of such advance, 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 Event of Default or event which with
the giving
of notice or passage of time would constitute an Event of Default
shall have
occurred and be continuing on the date of such advance, nor shall
either
result from the making thereof; and
(c) no injunction, writ, restraining order, or
other
order of any nature prohibiting, directly or indirectly, the
making of such
advance shall have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates.
3.3 Conditions Subsequent. As conditions subsequent
to the
making of the initial advance, the failure by Borrower to fulfill
each of
which shall constitute an Event of Default:
(a) Borrower shall use reasonable efforts to provide
Foothill
with a landlord waiver, in form and substance satisfactory to
Foothill in
its sole discretion, from the lessor in respect of Borrower's
location in
Westford, Massachusetts; and
(b) Borrower shall enter into a Source Code
Agreement within
forty five (45) days of the Closing Date.
3.4 Term; Automatic Renewal. This Agreement shall
become
effective upon the execution and delivery hereof by Borrower and
Foothill
and shall continue in full force and effect for a term ending on
August 1,
1998 (the "Renewal Date") and automatically shall be renewed for
successive
one (1) year periods thereafter, unless sooner terminated pursuant
to the
terms hereof. Either party may terminate this Agreement effective
on the
Renewal Date or on any one (1) year anniversary of the Renewal
Date by
giving the other party at least ninety (90) days prior written
notice by
registered or certified mail, return receipt requested. The
foregoing
notwithstanding, Foothill shall have the right to terminate its
obligations
under this Agreement immediately and without notice upon the
occurrence and
during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of
termination of this
Agreement, all Obligations immediately shall become due and
payable without
notice or demand. No termination of this Agreement, however,
shall relieve
or discharge Borrower of Borrower's duties, Obligations, or
covenants
hereunder, and Foothill's continuing security interests in the
Collateral
and the Real Property shall remain in effect until all Obligations
have been
fully and finally discharged and Foothill's obligation to provide
advances
hereunder is terminated. If Borrower has sent a notice of
termination
pursuant to the provisions of Section 3.4, but fails to pay all
Obligations
on the date set forth in said notice, then Foothill may, but shall
not be
required to, renew this Agreement for an additional term of one
(1) year.
3.6 Early Termination by Borrower. The provisions
of Section
3.4 that allow termination of this Agreement by Borrower only on
the Renewal
Date and certain anniversaries thereof notwithstanding, Borrower
has the
option, at any time upon ninety (90) days prior written notice to
Foothill,
to terminate this Agreement by paying to Foothill, in cash, the
Obligations,
together with a premium (the "Early Termination Premium") equal to
(a) the
Maximum Revolver Amount, plus the then outstanding principal
balance of the
Term Note as of the date of termination, times (b)(i) three
percent (3%), if
during the first year following the Closing Date, (ii) one and
one-half
percent (1.5%), if during the second year following the Closing
Date, (iii)
three-quarters of one percent (.75%), if during the third year
following the
Closing Date, and (iv) zero, if thereafter. The foregoing
notwithstanding,
in the event Borrower terminates this Agreement in connection with
the
consummation of a Qualified Transaction, the Early Termination
Premium
payable shall be equal to one-half (1/2) of the applicable amount
otherwise
payable. At times other than in connection with the termination
of this
Agreement, Borrower shall have the right to prepay the Term Note,
in whole
or in part, upon ten (10) days prior written notice to Foothill,
without
penalty or premium, such prepayments to be applied to installments
due under
the Term Note in the inverse order of their maturity.
3.7 Termination Upon Event of Default. If Foothill
terminates
this Agreement upon the occurrence of an Event of Default that
intentionally
is caused by Borrower for the purpose, in Foothill's reasonable
judgment, of
avoiding payment of the Early Termination Premium provided in
Section 3.6,
in view of the impracticability and extreme difficulty of
ascertaining
actual damages and by mutual agreement of the parties as to a
reasonable
calculation of Foothill's lost profits as a result thereof,
Borrower shall
pay to Foothill upon the effective date of such termination, a
premium in an
amount equal to the Early Termination Premium. The Early
Termination
Premium shall be presumed to be the amount of damages sustained by
Foothill
as the result of the early termination and Borrower agrees that it
is
reasonable under the circumstances currently existing. The Early
Termination Premium provided for in this Section 3.7 shall be
deemed
included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby
grants to
Foothill a continuing security interest in all currently existing
and
hereafter acquired or arising Collateral in order to secure prompt
repayment
of any and all Obligations and in order to secure prompt
performance by
Borrower of each of its covenants and duties under the Loan
Documents.
Foothill's security interests in the Collateral shall attach to
all
Collateral without further act on the part of Foothill or
Borrower.
Anything contained in this Agreement or any other Loan Document to
the
contrary notwithstanding, except for the sale of Inventory to
buyers in the
ordinary course of business or, subject to compliance with Section
2.8
hereof, the Permitted Real Property Dispositions, Borrower has no
authority,
express or implied, to dispose of any item or portion of the
Collateral or
the Real Property.
4.2 Negotiable Collateral. In the event that any
Collateral,
including proceeds, is evidenced by or consists of Negotiable
Collateral,
Borrower shall, immediately upon the request of Foothill, endorse
and assign
such Negotiable Collateral to Foothill and deliver physical
possession of
such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles,
Negotiable
Collateral. On or before the Closing Date, Foothill, Borrower,
and the Lockbox Banks shall enter into the Lockbox Agreements, in
form and
substance satisfactory to Foothill in its sole discretion,
pursuant to which
all of Borrower's cash receipts, checks, and other items of
payment
(including, insurance proceeds, proceeds of cash sales, rental
proceeds, and
tax refunds) that are received by the Lockbox Banks are to be
forwarded by
the Lockbox Banks to Foothill on a daily basis. At any time that
an Event
of Default has occurred and is continuing or Foothill deems itself
insecure
(in accordance with Section 1208 of the Code), Foothill or Foothill's
designee may: (a) notify customers or Account Debtors of Borrower that the
Accounts, General Intangibles, or Negotiable Collateral have been assigned
to Foothill or that Foothill has a security interest therein; and
(b)
collect the Accounts, General Intangibles, and Negotiable
Collateral
directly and charge the collection costs and expenses to
Borrower's loan
account. Borrower agrees that it will hold in trust for Foothill,
as
Foothill's trustee, any cash receipts, checks, and other items of
payment
(including, insurance proceeds, proceeds of cash sales, rental
proceeds, and
tax refunds) that it receives and immediately will deliver said
cash
receipts, checks, and other items of payment to Foothill in their
original
form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any
time upon the request of Foothill, Borrower shall execute and
deliver to
Foothill all financing statements, continuation financing
statements,
fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications
for title,
affidavits, reports, notices, schedules of accounts, letters of
authority,
and all other documents that Foothill may reasonably request, in
form
satisfactory to Foothill, to perfect and continue perfected
Foothill's
security interests in the Collateral and the Real Property, and in
order to
fully consummate all of the transactions contemplated hereby and
under the
other Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably
makes,
constitutes, and appoints Foothill (and any of Foothill's
officers,
employees, or agents designated by Foothill) as Borrower's true
and lawful
attorney, with power to: (a) if Borrower refuses to, or fails
timely to
execute and deliver any of the documents described in Section 4.4,
sign the
name of Borrower on any of the documents described in Section 4.4;
(b) at
any time that an Event of Default has occurred and is continuing
or Foothill
deems itself insecure (in accordance with Section 1208 of the
Code), sign
Borrower's name on any invoice or xxxx of lading relating to any
Account,
drafts against Account Debtors, schedules and assignments of
Accounts,
verifications of Accounts, and notices to Account Debtors; (c)
send requests
for verification of Accounts; (d) endorse Borrower's name on any
checks,
notices, acceptances, money orders, drafts, or other item of payment or
security that may come into Foothill's possession; (e) at any time that an
Event of Default has occurred and is continuing or Foothill deems
itself
insecure (in accordance with Section 1208 of the Code), notify the
post
office authorities to change the address for delivery of
Borrower's mail to
an address designated by Foothill, to receive and open all mail
addressed to
Borrower, and to retain all mail relating to the Collateral and
forward all
other mail to Borrower; (f) at any time that an Event of Default
has
occurred and is continuing or Foothill deems itself insecure (in
accordance
with Section 1208 of the Code), make, settle, and adjust all
claims under
Borrower's policies of insurance and make all determinations and
decisions
with respect to such policies of insurance; and (g) at any time
that an
Event of Default has occurred and is continuing or Foothill deems
itself
insecure (in accordance with Section 1208 of the Code), settle and
adjust
disputes and claims respecting the Accounts directly with Account
Debtors,
for amounts and upon terms which Foothill determines to be
reasonable, and
Foothill may cause to be executed and delivered any documents and
releases
which Foothill determines to be necessary. The appointment of
Foothill as
Borrower's attorney, and each and every one of Foothill's rights
and powers,
being coupled with an interest, is irrevocable until all of the
Obligations
have been fully and finally repaid and performed and Foothill's
obligation
to extend credit hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its
officers,
employees, or agents) shall have the right, from time to time
hereafter to
inspect Borrower's Books and to check, test, and appraise the
Collateral or
the Real Property in order to verify Borrower's financial
condition or the
amount, quality, value, condition of, or any other matter relating
to, the
Collateral or the Real Property.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as
follows:
5.1 No Prior Encumbrances. Borrower has good and
indefeasible
title to the Collateral and the Real Property, free and clear of
liens,
claims, security interests, or encumbrances, except for Permitted
Liens.
5.2 Eligible Accounts The Eligible Accounts are, at
the time
of the creation thereof and as of each date on which Borrower
includes them
in a Borrowing Base calculation or certification, bona fide
existing
obligations created by the sale or license and delivery of
Inventory or
software or the rendition of services to Account Debtors in the
ordinary
course of Borrower's business, unconditionally owed to Borrower
without
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation; provided, however, that in the case of Eligible
Unearned
Service Accounts the right to payment therefor has not yet
accrued. The
property giving rise to such Eligible Accounts has been delivered
to the
Account Debtor, or to the Account Debtor's agent for immediate
shipment to
and unconditional acceptance by the Account Debtor. At the time
of the
creation of an Eligible Account and as of each date on which
Borrower
includes an Eligible Account in a Borrowing Base calculation or
certification, Borrower has not received notice of actual or
imminent
bankruptcy, insolvency, or material impairment of the financial
condition of
any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is
now and at
all times hereafter shall be of good and merchantable quality,
free from
defects.
5.4 Location of Inventory and Equipment. The
Inventory and
Equipment are not stored with a bailee, warehouseman, or similar
party
(without Foothill's prior written consent) and are located only at
the
locations identified on Schedule 6.14 or otherwise permitted by
Section
6.14.
5.5 Inventory Records. Borrower now keeps, and
hereafter at
all times shall keep, correct and accurate records itemizing and
describing
the kind, type, quality, and quantity of the Inventory, and
Borrower's cost
therefor.
5.6 Location of Chief Executive Office; FEIN. The
chief
executive office of Borrower is located at the address indicated
in the
preamble to this Agreement and Borrower's FEIN is 00-0000000.
5.7 Due Organization and Qualification; Subsidiaries.
(a) Borrower and each Subsidiary is a
corporation duly
organized and existing and in good standing under the laws of the
jurisdiction of its incorporation and qualified and licensed to do
business
in, and in good standing in, any state where the failure to be so
licensed
or qualified could reasonably be expected to have a material
adverse effect
on the business, operations, condition (financial or otherwise),
finances,
or prospects of Borrower and its Subsidiaries, taken as a whole,
or on the
value of the Collateral or the Real Property to Foothill.
(b) Set forth on Schedule 5.7 is a complete
and accurate
list of Borrower's corporate Subsidiaries, showing: (i) the
jurisdiction of
their incorporation; and (ii) the number of outstanding and the
percentage
of outstanding shares of each such class owned (directly or
indirectly) by
Borrower or one or more of its Subsidiaries. All of the
outstanding capital
stock of each Subsidiary, none of which stock is classified as
preferred
stock, has been validly issued and is fully paid and non-
assessable.
(c) Except as set forth in Schedule 5.7, no
capital
stock (or any securities, instruments, warrants, options, purchase
rights,
conversion or exchange rights, calls, commitments or claims of any
character
convertible into or exercisable for capital stock) of any
Subsidiary is
subject to issuance under any security, instrument, warrant,
option,
purchase right, conversion or exchange right, call, commitment or
claim of
any right, title or interest therein or thereto.
5.8 Due Authorization; No Conflict. The execution,
delivery,
and performance of the Loan Documents to which they are a party
are within
Borrower's and its Subsidiaries' respective corporate powers, have
been duly
authorized, and are not in conflict with nor constitute a breach
of any
provision contained in Borrower's or its Subsidiaries' respective
Articles
or Certificate of Incorporation, or By-laws, nor will they
constitute an
event of default under any material agreement to which Borrower or
any
Subsidiary of Borrower is a party or by which its properties or
assets may
be bound.
5.9 Litigation. There are no actions or proceedings
pending
by or against Borrower or its Subsidiaries before any court or
administrative agency and Borrower does not have knowledge or
belief of any
pending, threatened, or imminent litigation, governmental
investigations, or
claims, complaints, actions, or prosecutions involving Borrower or
its
Subsidiaries or any guarantor of the Obligations, except for: (a)
ongoing
collection matters in which Borrower or its Subsidiaries are the
plaintiffs;
(b) matters disclosed on Schedule 5.9; and (c) matters arising
after the
date hereof that, if decided adversely to Borrower or its
Subsidiaries,
would not materially impair the prospect of repayment of the
Obligations or
materially impair the value or priority of Foothill's security
interests in
the Collateral or the Real Property.
5.10 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the
Obligations that have been delivered by Borrower to Foothill have
been
prepared in accordance with GAAP and fairly present Borrower's (or
such
guarantor's, as applicable) financial condition as of the date
thereof and
Borrower's results of operations for the period then ended. There
has not
been a material adverse change in the financial condition of
Borrower (or
such guarantor, as applicable) since the March 31, 1995 financial
statements
submitted to Foothill on or before the Closing Date.
5.11 Solvency. Borrower is Solvent, and each
Subsidiary of
Borrower is Solvent. No transfer of property is being made by
Borrower or
any Subsidiary of Borrower and no obligation is being incurred by
Borrower
or any Subsidiary of Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with
the intent
to hinder, delay, or defraud either present or future creditors of
Borrower
or any Subsidiary of Borrower.
5.12 Employee Benefits. Each Plan is in compliance
in all
material respects with the applicable provisions of ERISA and the
IRC. Each
Qualified Plan and Multiemployer Plan has been determined by the
Internal
Revenue Service to qualify under Section 401 of the IRC, and the
trusts
created thereunder have been determined to be exempt from tax
under Section
501 of the IRC, and, to the best knowledge of Borrower, nothing
has occurred
that would cause the loss of such qualification or tax-exempt
status. There
are no outstanding liabilities under Title IV of ERISA with
respect to any
Plan maintained or sponsored by Borrower or any ERISA Affiliate,
nor with
respect to any Plan to which Borrower or any ERISA Affiliate
contributes or
is obligated to contribute which could reasonably be expected to
have a
material adverse effect on the financial condition of Borrower.
No Plan
subject to Title IV of ERISA has any Unfunded Benefit Liability
which could
reasonably be expected to have a material adverse effect on the
financial
condition of Borrower. Neither Borrower nor any ERISA Affiliate
has
transferred any Unfunded Benefit Liability to a person other than
Borrower
or an ERISA Affiliate or has otherwise engaged in a transaction
that could
be subject to Sections 4069 or 4212(c) of ERISA which could
reasonably be
expected to have a material adverse effect on the financial
condition of
Borrower. Neither Borrower nor any ERISA Affiliate has incurred
nor
reasonably expects to incur (x) any liability (and no event has
occurred
which, with the giving of notice under Section 4219 of ERISA,
would result
in such liability) under Sections 4201 or 4243 of ERISA with
respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA
(other than
premiums due but not delinquent under Section 4007 of ERISA) with
respect to
a Plan, which could, in either event, reasonably be expected to
have a
material adverse effect on the financial condition of Borrower. No
application for a funding waiver or an extension of any
amortization period
pursuant to Section 412 of the IRC has been made with respect to
any Plan.
No ERISA Event has occurred or is reasonably expected to occur
with respect
to any Plan which could reasonably be expected to have a material
adverse
effect on the financial condition of Borrower. Borrower and each
ERISA
Affiliate have complied in all material respects with the notice
and
continuation coverage requirements of Section 4980B of the IRC.
5.13 Environmental Condition. Except as set forth on
Schedule
5.13 attached hereto, none of Borrower's properties or assets has
ever been
used by Borrower or, to the best of Borrower's knowledge, by
previous owners
or operators in the disposal of, or to produce, store, handle,
treat,
release, or transport, any Hazardous Materials. None of
Borrower's
properties or assets has ever been designated or identified in any
manner
pursuant to any environmental protection statute as a Hazardous
Materials
disposal site, or a candidate for closure pursuant to any
environmental
protection statute. No lien arising under any environmental
protection
statute has attached to any revenues or to any real or personal
property
owned or operated by Borrower. Borrower has not received a
summons,
citation, notice, or directive from the Environmental Protection
Agency or
any other federal or state governmental agency concerning any
action or
omission by Borrower resulting in the releasing or disposing of
Hazardous
Materials into the environment.
5.14 Reliance by Foothill; Cumulative. Each warranty
and
representation contained in this Agreement automatically shall be
deemed
repeated with each advance and shall be conclusively presumed to
have been
relied on by Foothill regardless of any investigation made or
information
possessed by Foothill. The warranties and representations set
forth herein
shall be cumulative and in addition to any and all other
warranties and
representations that Borrower now or hereafter shall give, or
cause to be
given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit
hereunder shall be available and until full and final payment of
the
Obligations, and unless Foothill shall otherwise consent in
writing,
Borrower shall do all of the following, and shall cause each of
its
Subsidiaries, as applicable, to do all of the following:
6.1 Accounting System. Borrower shall maintain, and
shall
cause each Subsidiary of Borrower to maintain a standard and
modern system
of accounting in accordance with GAAP with ledger and account
cards or
computer tapes, discs, printouts, and records pertaining to the
Collateral
which contain information as from time to time may be requested by
Foothill.
Borrower also shall keep, and shall cause each Subsidiary of
Borrower to
keep, proper books of account showing all sales, licenses, claims,
and
allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to
Foothill,
no later than the tenth (10th) day of each month during the term
of this
Agreement, a detailed aging, by total, of the Accounts, a
reconciliation
statement regarding the Accounts and any credits with respect
thereto, and a
summary aging, by vendor, of all accounts payable and any book
overdraft.
Original sales or licensing invoices evidencing daily sales or
licenses
shall be mailed by Borrower to each Account Debtor with, at
Foothill's
request, a copy to Foothill, and, at Foothill's direction, at any
time that
an Event of Default has occurred and is continuing or Foothill
deems itself
insecure (in accordance with Section 1208 of the Code), the
invoices shall
indicate on their face that the Account has been assigned to
Foothill and
that all payments are to be made directly to Foothill. Borrower
shall
deliver to Foothill, as Foothill may from time to time require,
collection
reports, sales journals, invoices, original delivery receipts,
customer's
purchase orders, shipping instructions, bills of lading, and other
documentation respecting shipment arrangements. Absent such a
request by
Foothill, copies of all such documentation shall be held by
Borrower as
custodian for Foothill. In addition, from time to time, Borrower
shall
deliver to Foothill such other and additional financial and
collateral
information or documentation as Foothill may request.
6.3 Schedules of Accounts. With such regularity as
Foothill
shall require, Borrower shall provide Foothill with schedules
describing all
Accounts. Foothill's failure to request such schedules or
Borrower's
failure to execute and deliver such schedules shall not affect or
limit
Foothill's security interests or other rights in and to the
Accounts.
6.4 Financial Statements, Reports, Certificates.
Borrower
agrees to deliver to Foothill: (a) with such frequency as
Foothill may
require, but in any event within fifty (50) days after the end of
each
quarter during each of Borrower's fiscal years, a company prepared
balance
sheet, income statement, and cash flow statement covering
Borrower's
operations during such period; and (b) as soon as available, but
in any
event within one hundred (100) days after the end of each of
Borrower's
fiscal years, financial statements of Borrower for each such
fiscal year,
audited by independent certified public accountants reasonably
acceptable to
Foothill and certified, without any qualifications, by such
accountants to
have been prepared in accordance with GAAP, together with a
certificate of
such accountants addressed to Foothill stating that such
accountants do not
have knowledge of the existence of any event or condition
constituting an
Event of Default, or that would, with the passage of time or the
giving of
notice, constitute an Event of Default. Such audited financial
statements
shall include a consolidated and consolidating balance sheet and
profit and
loss statement, a consolidated cash flow statement, and, if
prepared, such
accountants' letter to management.
Together with the above, Borrower also shall deliver
to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form
8-K Current Reports, and any other filings made by Borrower with
the
Securities and Exchange Commission, if any, other than Forms 3, 4,
and 5
under Section 16 of the Securities Act of 1933, as amended, as
soon as the
same are filed, or any other information that is provided by
Borrower to its
shareholders, and any other report reasonably requested by
Foothill relating
to the Collateral, the Real Property, or the financial condition
of
Borrower.
Each quarter and year-end, together with the financial
statements provided pursuant to this Section 6.4, Borrower shall
deliver to
Foothill a certificate signed by its chief financial officer to
the effect
that: (i) all reports, statements, or computer prepared
information of any
kind or nature delivered or caused to be delivered to Foothill
hereunder
have been prepared in accordance with GAAP and fairly present the
financial
condition of Borrower; (ii) Borrower and its Subsidiaries are in
timely
compliance with all of its covenants and agreements hereunder;
(iii) the
representations and warranties of Borrower and its Subsidiaries
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 representa
tions and
warranties relate solely to an earlier date); and (iv) on the date
of
delivery of such certificate to Foothill there does not exist any
condition
or event that constitutes an Event of Default (or, in each case,
to the
extent of any non-compliance, describing such non-compliance as to
which he
or she may have knowledge and what action Borrower and its Subsidiaries have
taken, are taking, or propose to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to
communicate
with Foothill in concert with Borrower and to release to Foothill
whatever
financial information concerning Borrower and its Subsidiaries
that Foothill
and Borrower may request. Borrower hereby irrevocably authorizes
and
directs all auditors, accountants, or other third parties to
deliver to
Foothill, at Foothill's request, with written notification of such
request
provided to Borrower, and at Borrower's expense, copies of
Borrower's and
its Subsidiaries' financial statements, papers related thereto,
and other
accounting records of any nature in their possession, and to
disclose to
Foothill any written information they may have regarding
Borrower's and its
Subsidiaries' business affairs and financial conditions.
6.5 Tax Returns. Borrower agrees to deliver to
Foothill
copies of each of Borrower's future federal income tax returns,
and any
amendments thereto, within thirty (30) days of the filing thereof
with the
Internal Revenue Service.
6.6 Designation of Inventory. Borrower shall
execute and
deliver to Foothill, no later than the tenth (10th) day of each
month during
the term of this Agreement, a designation of Inventory specifying
Borrower's
net book value of Eligible Spare Parts Inventory, the lesser of
Borrower's
cost and market value of Borrower's Eligible Raw Materials
Inventory, and
the lesser of the cost and market value of all remaining
Inventory,
specifying which Inventory is proprietary and which is open-
system, and
further specifying such other information as Foothill may
reasonably
request.
6.7 Returns. Returns and allowances, if any, as
between
Borrower and its Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they
exist at
the time of the execution and delivery of this Agreement. If, at
a time
when no Event of Default has occurred and is continuing, any
Account Debtor
returns any Inventory to Borrower, Borrower promptly shall
determine the
reason for such return and, if Borrower accepts such return, issue
a credit
memorandum (with, at Foothill's request, a copy to be sent to
Foothill) in
the appropriate amount to such Account Debtor. If, at a time when
an Event
of Default has occurred and is continuing, any Account Debtor
returns any
Inventory to Borrower, Borrower promptly shall determine the
reason for such
return and, if Foothill consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in
the appropriate amount to such Account Debtor. With such
regularity as
Foothill may require, but not less frequently than weekly,
Borrower shall
notify Foothill of all returns and recoveries and of all disputes
and
claims.
6.8 Title to Equipment. Upon Foothill's request,
Borrower
immediately shall deliver to Foothill, properly endorsed, any and
all
certificates of title to any items of Equipment.
6.9 Maintenance of Equipment. Borrower shall keep
and
maintain the Equipment in good operating condition and repair
(ordinary wear
and tear excepted), and make all necessary replacements thereto so
that the
value and operating efficiency thereof shall at all times be
maintained and
preserved. Borrower shall not permit any item of Equipment to
become a
fixture to real estate or an accession to other property, and the
Equipment
is now and shall at all times remain personal property.
6.10 Taxes. All assessments and taxes, whether real,
personal,
or otherwise, due or payable by, or imposed, levied, or assessed
against
Borrower and its Subsidiaries or any of their property shall be
paid in
full, before delinquency or before the expiration of any extension
period.
Borrower and its Subsidiaries shall make due and timely payment or
deposit
of all federal, state, and local taxes, assessments, or
contributions
required of them by law, and will execute and deliver to Foothill,
on
demand, appropriate certificates attesting to the payment thereof
or deposit
with respect thereto. Borrower and its Subsidiaries will make
timely
payment or deposit of all tax payments and withholding taxes
required of
them by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A.,
state disability, and local, state, and federal income taxes, and
will, upon
request, furnish Foothill with proof satisfactory to Foothill
indicating
that Borrower and its Subsidiaries have made such payments or
deposits.
6.11 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral
and the Real Property insured against loss or damage by fire,
theft,
explosion, sprinklers, and all other hazards and risks, and in
such amounts,
as are ordinarily insured against by other owners in similar
businesses.
Borrower also shall maintain business interruption, public
liability,
product liability, and property damage insurance relating to
Borrower's
ownership and use of the Collateral and the Real Property, as well
as
insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in
such
form, with such companies, and in such amounts as may be
reasonably
satisfactory to Foothill. All such policies of insurance (except
those of
public liability and property damage) shall contain a 438BFU
lender's loss
payable endorsement, or an equivalent endorsement in a form
satisfactory to
Foothill, showing Foothill as sole loss payee thereof, and shall
contain a
waiver of warranties, and shall specify that the insurer must give
at least
ten (10) days prior written notice to Foothill before canceling
its policy
for any reason. Borrower shall deliver to Foothill certified
copies of such
policies of insurance and evidence of the payment of all premiums
therefor.
All proceeds payable under any such policy shall be payable to
Foothill to
be applied on account of the Obligations.
(c) Borrower shall provide written notice to
Foothill of
the occurrence of any of the following events within five (5)
Business Days
after the occurrence of such event: any asset or property owned
or used by
Borrower is (i) damaged or destroyed, or suffers any material
loss, or (ii)
condemned, confiscated, or otherwise taken, in whole or in part,
or the use
thereof is otherwise diminished so as to render impracticable or
unreasonable the use of such asset or property for the purposes
for which
such asset or property was used immediately prior to such
condemnation,
confiscation, or taking, by exercise of the powers of condemnation
or
eminent domain or otherwise, and in any such case the amount of
the damage,
destruction, loss or diminution in value is in excess of Two
Hundred Fifty
Thousand Dollars ($250,000) (collectively, a "Casualty Loss").
Borrower
diligently shall file and prosecute its claim or claims for any
award or
payment in connection with a Casualty Loss. In the event of a
Casualty
Loss, Borrower shall pay to Foothill, promptly upon receipt
thereof, any and
all insurance proceeds and payments received by Borrower on
account of
damage, destruction, loss, condemnation, or eminent domain
proceedings.
Foothill may, in the exercise of its reasonable judgment, either
(x) apply
the proceeds realized from Casualty Losses to payment of
outstanding
Obligations, or (y) pay such proceeds to Borrower to be used to
repair,
replace, or rebuild the asset or property or portion thereof that
was the
subject of the Casualty Loss. After the occurrence and during the
continuance of an Event of Default, (i) no settlement on account
of any such
Casualty Loss shall be made without the consent of Foothill and (ii)
Foothill may participate in any such proceedings and Borrower
shall deliver
to Foothill such documents as may be requested by Foothill to
permit such
participation and shall consult with Foothill, its attorneys, and
its agents
in the making and prosecution of such claim or claims. Borrower
hereby
irrevocably authorizes and appoints Foothill its attorney-in-fact,
after the
occurrence and continuance of an Event of Default, to collect and receive
for any such award or payment and to file and prosecute such claim
or
claims, which power of attorney shall be irrevocable and shall be
deemed to
be coupled with an interest, and Borrower shall, upon demand of
Foothill,
make, execute, and deliver any and all assignments and other
instruments
sufficient for the purpose of assigning any such award or payment
to
Foothill, free and clear of any encumbrances of any kind or nature
whatsoever.
6.12 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. A ratio of Consolidated
Current
Assets divided by Consolidated Current Liabilities of at least six
tenths to
one (0.60 : 1.0), measured on a fiscal quarter-end basis;
(b) Total Liabilities to Tangible Net Worth
Ratio. A
ratio of Borrower's total liabilities divided by Tangible Net
Worth of not
more than two and nine tenths to one (2.90 : 1.0), measured on a
fiscal
quarter-end basis;
(c) Tangible Net Worth. Tangible Net Worth of
at least
Twenty Six Million Dollars ($26,000,000), measured on a fiscal
quarter-end
basis; and
(d) Total Obligations to Annualized Service
Revenues. A
ratio of the total amount outstanding under Section 2.1 and the
Term Note
divided by the Annualized Service Revenues of not more than
0.35:1, as
measured on a fiscal quarter-end basis.
6.13 No Setoffs or Counterclaims. All payments
hereunder and
under the other Loan Documents made by or on behalf of Borrower or
any
Subsidiary shall be made without setoff or counterclaim and free
and clear
of, and without deduction or withholding for or on account of, any
federal,
state, or local taxes.
6.14 Location of Inventory and Equipment. Borrower
shall keep
the Inventory and Equipment only at the locations identified on
Schedule
6.14; provided, however, that Borrower may amend Schedule 6.14 so
long as
such amendment occurs by written notice to Foothill not less than
thirty
(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,
Borrower provides any financing statements or fixture filings
necessary to
perfect and continue perfected Foothill's security interests in
such assets
and, at Foothill's request based upon a reasonable evaluation of
the value
of the Collateral in such location, also provides to Foothill a
landlord's
waiver in form and substance satisfactory to Foothill.
6.15 Compliance with Laws. Borrower shall comply,
and shall
cause its Subsidiaries to comply, with the requirements of all
applicable
aws, rules, regulations, and orders of any governmental authority,
including
the Fair Labor Standards Act and the Americans With Disabilities
Act, other
than laws, rules, regulations, and orders the non-compliance with
which,
individually or in the aggregate, would not have and could not
reasonably be
expected to have a material adverse effect on the business,
operations,
condition (financial or otherwise), finances, or prospects of
Borrower and
its Subsidiaries or on the value of the Collateral and the Real
Property to
Foothill.
6.16 Employee Benefits.
(a) Borrower promptly shall deliver to Foothill a
written
statement by the chief financial officer of Borrower specifying
the nature
of any of the following events and the actions which Borrower
proposes to
take with respect thereto, and in any event within ten (10) days
of becoming
aware of any of them, and when known, any action taken or
threatened by the
Internal Revenue Service, PBGC, Department of Labor, or other
party with
respect thereto: (i) an ERISA Event with respect to any Plan;
(ii) the
incurrence of an obligation to pay additional premium to the PBGC
under
Section 4006(a)(3)(E) of ERISA with respect to any Plan; and
(iii) any lien
on the assets of Borrower or any Subsidiary of Borrower arising in
connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill
copies
prepared or received by Borrower or an ERISA Affiliate of: (i) at
the
request of Foothill, each annual report (Internal Revenue Service
Form 5500
series) and all accompanying schedules, actuarial reports,
financial
information concerning the financial status of each Plan, and
schedules
showing the amounts contributed to each Plan by or on behalf of
Borrower or
its ERISA Affiliates for the most recent three (3) plan years;
(ii) all
notices of intent to terminate or to have a trustee appointed to
administer
any Plan; (iii) all written demands by the PBGC under Subtitle D
of Title IV
of ERISA; (iv) all notices required to be sent to employees or to
the PBGC
under Section 302 of ERISA or Section 412 of the IRC; (v) all
written
notices received with respect to a Multiemployer Plan concerning
(x) the
imposition or amount of withdrawal liability pursuant to Section
4202 of
ERISA, (y) a termination described in Section 4041A of ERISA, or
(z) a
reorganization or insolvency described in Subtitle E of Title IV
of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of
ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate;
(vii) the
adoption of any amendment to any Plan that is subject to Title IV
of ERISA
or Section 412 of the IRC, if such amendment results in a material
increase
in benefits or Unfunded Benefit Liability; or (viii) the
commencement of
contributions by Borrower or any ERISA Affiliate to any Plan that
is subject
to Title IV of ERISA or Section 412 of the IRC.
6.17 Leases. Borrower shall pay, and shall cause its
Subsidiaries to pay, when due all rents and other amounts payable
under any
leases to which Borrower or any Subsidiary of Borrower is a party
or by
which Borrower's or any Subsidiary of Borrower's properties and
assets are
bound, unless such payments are the subject of a Permitted
Protest. To the
extent that Borrower or any Subsidiary of Borrower fails timely to
make
payment of such rents and other amounts payable when due under its
leases,
Foothill shall be entitled, in its discretion, and without the
necessity of
declaring an Event of Default, to reserve an amount equal to such
unpaid
amounts from the loan availability created under Section 2.1
hereof.
6.18 Repatriation of Foreign Earnings and Profits.
Borrower
shall continue at all times after the Closing Date to cause its
foreign
Subsidiaries to repatriate their surplus earnings and profits to
Borrower in
a manner consistent with the historical practices of Borrower and
its
Subsidiaries prior to the Closing Date.
6.19 Drawing of Letters of Credit. If and whenever
there is a
drawing under any one or more of the Letters of Credit, Borrower
shall,
within twenty-four (24) hours of such drawing, give, by telephone
and in
writing, notice of such drawing.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit
hereunder shall be available and until full and final payment of
the
Obligations, Borrower will not do any of the following, and will
not permit
any of its Subsidiaries to do any of the following, without
Foothill's prior
written consent:
7.1 Indebtedness.{tc \l 2 "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
or the Term
Note;
(b) Indebtedness evidenced by the Credit
Agreement as it
exists on the Closing Date;
(c) Indebtedness disclosed in the March 31,
1995
financial statements of Borrower and its Subsidiaries, other than
Indebtedness (i) owed to the Old Lenders (which Indebtedness
(other than the
Letters of Credit) shall have been repaid in full on or before the
Closing
Date), and (ii) of foreign Subsidiaries of Borrower with respect
to
overdraft lines, factoring arrangements, and similar short-term
working
capital credit facilities of such foreign Subsidiaries of Borrower
(which
Indebtedness is intended to be provided for under Section 7.1(e));
(d) Indebtedness secured by liens that are
Permitted
Liens as described in clause (d) of the definition thereof;
(e) Indebtedness of foreign Subsidiaries of
Borrower
with respect to overdraft lines, factoring arrangements, and
similar short-
term working capital credit facilities of such foreign
Subsidiaries of
Borrower; provided, however, that the aggregate amount of all such
Indebtedness together with the amount of all guarantees issued and
outstanding under Section 7.6(a) shall not exceed, at any one
time,
$2,500,000;
(f) guaranties permitted under Section 7.6 hereof;
(g) Refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), (d), and (e) of
this Section
7.1 and continuance or renewal of any Permitted Liens associated
therewith)
so long as: (i) the terms and conditions of such refinancings,
renewals, or
extensions do not materially impair the prospects of repayment of
the
Obligations by Borrower, (ii) the net cash proceeds of such
refinancings,
renewals, or extensions do not result in an increase in the
aggregate
principal amount of the Indebtedness so refinanced, renewed, or
extended,
(iii) such refinancings, renewals, refundings, or extensions do
not result
in a shortening of the average weighted maturity of the
Indebtedness so
refinanced, renewed, or extended (it being expressly understood
that any
refinancing or replacement of the Letters of Credit must involve
replacement
letters of credit with expiry dates that are on or after the
Renewal Date),
and (iv) to the extent that Indebtedness that is refinanced was
subordinated
in right of payment to the Obligations, then the subordination
terms and
conditions of the refinancing Indebtedness must be at least as
favorable to
Foothill as those applicable to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to
exist,
directly or indirectly, any lien on or with respect to any of its
property
or assets, of any kind, whether now owned or hereafter acquired,
or any
income or profits therefrom, except for Permitted Liens (including
liens
that are replacements of Permitted Liens to the extent that the
original
Indebtedness is refinanced under Section 7.1(g) and so long as the
replacement liens secure only those assets or property that
secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into
any
acquisition, merger, consolidation, reorganization, or
recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve
itself (or
suffer any liquidation or dissolution), or convey, sell, license,
assign,
lease, transfer, or otherwise dispose of, in one transaction or a
series of
transactions, all or any substantial part of its business,
property, or
assets, whether now owned or hereafter acquired, or acquire by
purchase or
otherwise all or substantially all of the properties, assets,
stock, or
other evidence of beneficial ownership of any Person.
7.4 Extraordinary Transactions and Disposal of
Assets. Except
for the Permitted Real Property Dispositions (each of which is
subject to
the provisions of Section 2.8 hereof), enter into any transaction
not in the
ordinary and usual course of Borrower's or its Subsidiaries'
business,
including the sale, license, lease, or other disposition of,
moving,
relocation, or transfer, whether by sale, license, or otherwise,
of any of
Borrower's or its Subsidiaries' properties or assets. After the
Closing
Date, Borrower and its Subsidiaries shall not enter into any
contract,
lease, license, or agreement (other than Product Agreements
containing
general restrictions on assignment that do not specifically
prohibit the
creation of security interests by Borrower or its Subsidiaries in
their
rights to payment, if any, thereunder), or any modification or
amendment of
any contract, lease, license, or agreement, that prohibits
Borrower or its
Subsidiaries from pledging, assigning, or encumbering their rights
under
such contract, lease, license, or agreement.
7.5 Change Name. Change Borrower's or any
Subsidiaries' name,
FEIN, business structure, or identity, or add any new fictitious
name.
7.6 Guarantee. Guarantee or otherwise become in any
way
liable with respect to the obligations of any third Person except
by
endorsement of instruments or items of payment for deposit to the
account of
Borrower or which are transmitted or turned over to Foothill. The
foregoing
notwithstanding, (a) Borrower may guarantee the Indebtedness of
its foreign
Subsidiaries with respect to overdraft lines, factoring
arrangements, and
similar short-term working capital credit facilities of such
foreign
Subsidiaries of Borrower; provided, however, that the aggregate
amount of
all such guaranties together with the amount of all Indebtedness
outstanding
under Section 7.1(e) shall not exceed, at any one time,
$2,500,000, (b)
Borrower may guarantee the Indebtedness of one or more joint
ventures as to
which it is a venturer so long as such joint ventures are formed
for the
purpose of the same business as Borrower or businesses reasonably
incidental
thereto; provided, however, that the aggregate amount of all such
guarantees
and all investments (as described in Section 7.15(a)) in such
joint ventures
during the term of this Agreement shall not exceed One Million
Dollars
($1,000,000), and (c) so long as the Liquidity Conditions are
satisfied
after giving effect to each such proposed guaranty, Borrower may
guaranty
the Indebtedness of Concurrent Nippon; provided, however, that the
aggregate
amount of all such guarantees and all other investments (as
described in
Section 7.15(d)) in Concurrent Nippon shall not exceed the amount
permitted
by Section 7.15(d).
7.7 Restructure. Make any change in Borrower's
financial
structure, the principal nature of Borrower's or its Subsidiaries'
business
operations, or the date of their fiscal year.
7.8 Prepayments. Except in connection with a
refinancing
permitted by Section 7.1(g), prepay any Indebtedness owing to any
third
Person.
7.9 Repayments. Make a payment in respect of the
Indebtedness
owed to Old Lenders' Agent or the Old Lenders that they are not
permitted to
receive, collect, or retain under the terms and conditions of the
Intercreditor Agreement.
7.10 Change of Control. Cause, permit, or suffer,
directly or
indirectly, any Change of Control.
7.11 Capital Expenditures. Make any capital
expenditure, or
any commitment therefor, [where the aggregate amount of such
capital
expenditures, made or committed in any fiscal year, in excess of
Six Million
Five Hundred Thousand Dollars ($6,500,000), Eight Million Dollars
($8,000,000), and Nine Million Dollars ($9,000,000) for fiscal
years 1996,
1997, and 1998 and beyond, respectively, provided that if the
aggregate
amount of capital expenditures made or committed by Borrower
during any such
fiscal year is less than the maximum amount permitted hereby
(after taking
into account any increases in such amount as a result of this
proviso) for
such fiscal year, the amount of capital expenditures permitted for
the
succeeding fiscal year shall be increased by such difference, but
in no
event shall the amount of such capital expenditures for any fiscal
year
exceed Ten Million Dollars (10,000,000).
7.12 Consignments. Consign any Inventory or sell any
Inventory
on xxxx and hold, sale or return, sale on approval, or other
conditional
terms of sale; provided, however, that xxxx and hold Accounts
shall not be
prohibited by reason of this Section 7.12 if they are subject to
documentation, in form and substance satisfactory to Foothill, clearly
evidencing that the obligation of the Account Debtor is absolute
and
unconditional notwithstanding the failure of Borrower to deliver
the subject goods or software.
7.13 Distributions. Make any distribution or declare
or pay
any dividends (in cash or other property, other than capital
stock) on, or
purchase, acquire, redeem, or retire any of Borrower's capital
stock, of any
class, whether now or hereafter outstanding.
7.14 Accounting Methods. Modify or change its method
of
accounting or enter into, modify, or terminate any agreement
currently
existing, or at any time hereafter entered into with any third
party
accounting firm or service bureau for the preparation or storage
of
Borrower's or its Subsidiaries' accounting records without said
accounting
firm or service bureau agreeing, subject to the provisions of
Section 6.4
hereof, to provide Foothill information regarding the Collateral
and the
Real Property or Borrower's and its Subsidiaries' financial
condition.
Borrower, on its own behalf and on behalf of each of its
Subsidiaries,
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 Foothill pursuant to or in accordance
with this
Agreement, and agrees that Foothill may contact directly any such
accounting
firm or service bureau in order to obtain such information.
7.15 Investments. Directly or indirectly make any
investment
or acquire any beneficial interest in (including stock,
partnership
interest, or other securities of), or make any loan, advance,
deferral of
repayment of Accounts, or capital contribution to, any Person;
provided,
however, that, so long as no Event of Default has occurred and is
continuing, Borrower shall be entitled to make the following
investments:
(a) the making or acquisition of beneficial interests in, or the
making of
loans, advances, or capital contributions to, one or more joint
ventures as
to which it is a venturer so long as such joint ventures are
formed for the
purpose of engaging in the same business as Borrower or businesses
reasonably incidental thereto; provided, however, that the
aggregate amount
of all such investments made during the term of this Agreement and all
guarantees (as described in Section 7.6(b)) made by Borrower
during the term
of this Agreement in connection with such joint ventures shall not
exceed
One Million Dollars ($1,000,000) and prior to making any such
investment
Borrower shall hypothecate to Foothill, pursuant to agreements in
form and
substance satisfactory to Foothill, the investment to be acquired,
(b) the
acquisition by Borrower of beneficial interests in, or the making
of loans,
advances, or capital contributions by Borrower as a result of the
performance by it of its obligations under the guarantees permitted under
Section 7.6(b) hereof, (c) the making or acquisition of beneficial
interests
in, or the making of loans, advances, or capital contributions to
foreign
Subsidiaries of Borrower (it being understood that this does not
include the
Inactive Subsidiaries and Concurrent Nippon) in an aggregate
amount not to
exceed One Million Dollars ($1,000,000); provided, however, that
the sole
purpose for making such investments must be to satisfy a mandatory
statutory
obligation imposed upon Borrower or such foreign Subsidiary, and
(d) so long
as the Liquidity Conditions are satisfied after giving effect to
each such
proposed investment, investments in Concurrent Nippon equal to an
aggregate
amount not to exceed, as of any date of determination, (i) Five
Hundred
Forty Million Yen (540,000,000), minus (ii) the then Yen
equivalent of the
amount available to be drawn under the Letters of Credit, plus the
then Yen
equivalent of the amount drawn under the Letters of Credit, plus
the then
Yen equivalent of the aggregate amount of Accounts owed by
Concurrent Nippon
to Borrower outstanding in excess of ninety (90) days, plus the
maximum
amount that Borrower may be required to pay under guaranties of
lines of
credit made available by third party lenders to Concurrent Nippon.
7.16 Transactions with Affiliates. Directly or
indirectly
enter into or permit to exist any material transaction with any
Affiliate of
Borrower except for transactions that are in the ordinary course
of
Borrower's business, upon fair and reasonable terms, that are
fully
disclosed to Foothill, and that are no less favorable to Borrower
than would
be obtained in an arm's length transaction with a non-Affiliate.
7.17 Suspension. Suspend or go out of a substantial
portion of
its business.
7.18 Compensation. Increase the annual fee or per-
meeting fees
paid to directors during any year by more than fifteen percent
(15%) over
the prior year.
7.19 Use of Proceeds. Use the proceeds of the
advances made
hereunder 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 the Old Lenders, exclusive, however, of the
Letters of
Credit, and (ii) to pay transactional costs and expenses incurred
in
connection with this Agreement; and (b) thereafter, consistent
with the
terms and conditions hereof, for its lawful and permitted
corporate
purposes.
7.20 Change in Location of Chief Executive Office;
Inventory
and Equipment with Bailees. Without thirty (30) days prior
written
notification to Foothill, relocate its chief executive office to a
new
location and so long as, at the time of such written notification,
Borrower
provides any financing statements or fixture filings necessary to
perfect
and continue perfected Foothill's security interests and also
provides to
Foothill a landlord's waiver in form and substance satisfactory to
Foothill.
The Inventory and Equipment shall not at any time now or hereafter
be stored
with a bailee, warehouseman, or similar party without Foothill's
prior
written consent.
7.21 Inactive Subsidiaries. Permit any Inactive
Subsidiary to
own assets that have a value in excess of Twenty-Five Thousand
Dollars
($25,000) or to conduct any business operations.
7.22 Amendment of Credit Agreement. Amend or modify
the Credit
Agreement and related documents in any respect that increases the
rates of
interest or fees payable with respect thereto, shortens the
scheduled
maturity thereo, foreshortens the expiry date of any letter of
credit issued
pursuant to the Credit Agreement, adds or modifies events of
default, or
adds or modifies representations, warranties, or covenants of
Borrower,
unless Foothill, in its sole and absolute discretion, shall have
consented
in writing to such amendment or modification.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an
event of default (each, an "Event of Default") under this
Agreement:
8.1 If Borrower fails to pay when due and payable or
when
declared due and payable, any portion of the Obligations (whether
of
principal, interest (including any interest which, but for the
provisions of
the Bankruptcy Code, would have accrued on such amounts), fees and
charges
due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations);
8.2 (a) If Borrower or any Subsidiary of Borrower
fails or
neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Sections 6.2 (Collateral
Reports), 6.3
(Schedule of Accounts), or 6.7 (Designation of Inventory) of this
Agreement
and such failure continues for a period of five (5) days from the
date of
such failure or neglect; (b) If Borrower or any Subsidiary of
Borrower fails
or neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Sections 6.4 (Financial
Statements), 6.5
(Tax Returns), 6.8 (Title to Equipment), 6.14 (Location of
Inventory and
Equipment), 6.15 (Compliance with Laws), or 6.17 (Leases) of this
Agreement
and such failure continues for a period of ten (10) days from the
date of
such failure or neglect; (c) If Borrower or any Subsidiary of
Borrower fails
or neglects to perform, keep, or observe any term, provision,
condition,
covenant, or agreement contained in Section 6.9 (Maintenance of
Equipment)
of this Agreement and such failure continues for a period of
fifteen (15)
days from the date Foothill sends Borrower written notice of such
failure or
neglect; (d) If Borrower or any Subsidiary of Borrower fails or
neglects to
perform, keep, or observe any other term, provision, condition,
covenant, or
agreement contained in this Agreement, in any of the Loan
Documents, or in
any other present or future agreement between any Debtor and
Foothill (other
than any such term, provision, condition, covenant, or agreement
that is the
subject of another provision of this Section 8);
8.3 If there is a material impairment of the
prospect of
repayment of any portion of the Obligations owing to Foothill or a
material
impairment of the value or priority of Foothill's security
interests in the
Collateral or the Real Property;
8.4 If any material portion of Borrower's properties
or assets
is attached, seized, subjected to a writ or distress warrant, or
is levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by
Borrower;
8.6 If an Insolvency Proceeding is commenced against
Borrower
or any Subsidiary of Borrower and any of the following events
occur:
(a) Borrower or any Subsidiary of 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
forty-five (45)
calendar days of the date of the filing thereof; provided,
however, that,
during the pendency of such period, Foothill shall be relieved of
its
obligation to make additional advances hereunder; (d) an interim
trustee is
appointed to take possession of all or a substantial portion of
the
properties or assets of, or to operate all or any substantial
portion of the
business of, Borrower or any Subsidiary of Borrower; or (e) an
order for
relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any
way
prevented by court order from continuing to conduct all or any
material part
of its business affairs;
8.8 (a) If a notice of lien, levy, or assessment is
filed of
record with respect to any of Borrower's properties or assets by
the United
States, or if any taxes or debts owing at any time hereafter to
the United
States becomes a lien, whether xxxxxx or otherwise, upon any of
Borrower's
properties or assets; or (b) If a notice of lien, levy, or
assessment is
filed of record with respect to any of Borrower's properties or
assets by
any state, county, municipal, or other non-federal 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 of
Borrower's
properties or assets and, in any such case, such taxes or debts
are not the
subject of a Permitted Protest and relate to an amount in excess
of One
Hundred Thousand Dollars ($100,000);
8.9 If a judgment or other claim becomes a lien or
encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement
(including, the Credit Agreement) to which Borrower is a party
with one or
more third Persons resulting in a right by such third Persons,
irrespective
of whether exercised, to accelerate the maturity of Borrower's
obligations
thereunder;
8.11 If Borrower makes any payment on account of
Indebtedness
that has been contractually subordinated in right of payment to
the payment
of the Obligations, except to the extent such payment is permitted
by the
terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or
misrepresentation exists
now or hereafter in any warranty, representation, statement, or
report made
to Foothill by Borrower or any Subsidiary of Borrower or any
officer,
employee, agent, or director of Borrower or any Subsidiary of Borrower, or
if any such warranty or representation is withdrawn;
8.13 If the obligation of any guarantor or other
third Person
under any Loan Document is limited or terminated by operation of
law or by
the guarantor or other third Person thereunder, or any such
guarantor or
other third Person becomes the subject of an Insolvency
Proceeding;
8.14 If (a) with respect to any Plan, there shall
occur any of
the following which could reasonably be expected to have a
material adverse
effect on the financial condition of Borrower: (i) the violation
of any of
the provisions of ERISA; (ii) the loss by a Plan intended to be a
Qualified
Plan of its qualification under Section 401(a) of the IRC; (iii)
the
incurrence of liability under Title IV of ERISA; (iv) a failure to
make full
payment when due of all amounts which, under the provisions of any
Plan or
applicable law, Borrower or any ERISA Affiliate is required to
make; (v) the
filing of a notice of intent to terminate a Plan under Sections
4041 or
4041A of ERISA; (vi) a complete or partial withdrawal of Borrower
or an
ERISA Affiliate from any Plan; (vii) the receipt of a notice by
the plan
administrator of a Plan that the PBGC has instituted proceedings
to
terminate such Plan or appoint a trustee to administer such Plan;
(viii) a
commencement or increase of contributions to, or the adoption of
or the
amendment of, a Plan; and (ix) the assessment against Borrower or
any ERISA
Affiliate of a tax under Section 4980B of the IRC; or (b) the
Unfunded
Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates
shall, in the aggregate, exceed One Million Five Hundred Thousand
Dollars
($1,500,000);
8.15 If and whenever there is a drawing under any one
of more
of the Letters of Credit; or
8.16 If, within ten (10) days of the Closing Date,
the expiry date of the Letters of Credit has not been extended by
the Old Lenders' Agent with the respective beneficiaries thereof.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and
during the
continuation, of an Event of Default Foothill may, at its
election, without
notice of its election and without demand, do any one or more of
the
following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due
and payable;
(b) Cease advancing money or extending credit
to or for
the benefit of Borrower under this Agreement, under any of the
Loan
Documents, or under any other agreement between Borrower and
Foothill;
(c) Terminate this Agreement and any of the
other Loan
Documents as to any future liability or obligation of Foothill,
but without
affecting Foothill's rights and security interests in the
Collateral or the
Real Property and without affecting the Obligations;
(d) Settle or adjust disputes and claims
directly with
Account Debtors for amounts and upon terms which Foothill
considers
advisable, and in such cases, Foothill will credit Borrower's loan
account
with only the net amounts received by Foothill in payment of such
disputed
Accounts after deducting all Foothill Expenses incurred or
expended in
connection therewith;
(e) Cause Borrower to hold all returned
Inventory in
trust for Foothill, segregate all returned Inventory from all
other property
of Borrower or in Borrower's possession and conspicuously label
said
returned Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower
or any
guarantor, make such payments and do such acts as Foothill
considers
necessary or reasonable to protect its security interests in the
Collateral.
Borrower agrees to assemble the Collateral if Foothill so
requires, and to
make the Collateral available to Foothill as Foothill may
designate.
Borrower authorizes Foothill to enter the premises where the
Collateral is
located, to take and maintain possession of the Collateral, or any
part of
it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or
lien that in Foothill's determination appears to conflict with its
security
interests and to pay all expenses incurred in connection
therewith. With
respect to any of Borrower's owned premises, Borrower hereby
grants Foothill
a license to enter into possession of such premises and to occupy
the same,
without charge, for up to one hundred twenty (120) days in order
to exercise
any of Foothill's rights or remedies provided herein, at law, in
equity, or
otherwise;
(g) Without notice to Borrower (such notice
being
expressly waived), and without constituting a retention of any
collateral in
satisfaction of an obligation (within the meaning of Section 9505
of the
Code), set off and apply to the Obligations any and all (i)
balances and
deposits of Borrower held by Foothill (including any amounts
received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or
for the
credit or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all
balances and
deposits of Borrower held by Foothill, and any amounts received in
the
Lockbox Accounts, to secure the full and final repayment of all of
the
Obligations;
(i) Ship, reclaim, recover, store, finish,
maintain,
repair, prepare for sale or license, advertise for sale or
license, and sell
or license (in the manner provided for herein) the Collateral.
Foothill is
hereby granted a license or other right to use, without charge,
Borrower's
labels, patents, copyrights, source code, software, rights of use
of any
name, trade secrets, trade names, trademarks, service marks, and
advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale or
license,
and selling or licensing any Collateral and Borrower's rights
under all
licenses and all franchise agreements shall inure to Foothill's
benefit;
(j) Sell the Collateral at either a public or
private
sale, or both, by way of one or more contracts or transactions,
for cash or
on terms, in such manner and at such places (including Borrower's
premises)
as Foothill determines is commercially reasonable. It is not
necessary that
the Collateral be present at any such sale;
(k) Foothill shall give notice of the
disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each
holder of
a security interest in the Collateral who has filed with Foothill
a written
request for notice, a notice in writing of the time and place of
public
sale, or, if the sale is a private sale or some other disposition
other than
a public sale is to be made of the Collateral, then the time on or
after
which the private sale or other disposition is to be made;
(2) The notice shall be personally
delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at
least
five (5) days before the date fixed for the sale, or at least five
(5) days
before the date on or after which the private sale or other
disposition is
to be made; no notice needs to be given prior to the disposition
of any
portion of the Collateral that is perishable or threatens to
decline
speedily in value or that is of a type customarily sold on a
recognized
market. Notice to Persons other than Borrower claiming an
interest in the
Collateral shall be sent to such addresses as they have furnished
to
Foothill;
(3) If the sale is to be a public sale,
Foothill
also shall give notice of the time and place by publishing a
notice one time
at least five (5) days before the date of the sale in a newspaper
of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at
any public
sale;
(m) Any deficiency that exists after
disposition of the
Collateral as provided above will be paid immediately by Borrower.
Any
excess will be returned, without interest and subject to the
rights of third
Persons, by Foothill to Borrower; and
(n) In addition to the foregoing rights,
Foothill shall
have all of the other rights and remedies provided for at law or
in equity
and such other rights and remedies available to it as are provided
for in
any other Loan Document, including, the Mortgages.
9.2 Remedies Cumulative. Foothill's rights and
remedies under
this Agreement, the Loan Documents, and all other agreements shall
be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in
equity. No
exercise by Foothill of one right or remedy shall be deemed an
election, and
no waiver by Foothill of any Event of Default shall be deemed a
continuing
waiver. No delay by Foothill shall constitute a waiver, election,
or
acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third
Persons, or
fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then,
to the
extent that Foothill determines that such failure by Borrower
could have a
material adverse effect on Foothill's interests in the Collateral
or the
Real Property, in its discretion and with concurrent notice to
Borrower,
Foothill may do any or all of the following: (a) make payment of
the same
or any part thereof; (b) set up such reserves in Borrower's loan
account as
Foothill deems necessary to protect Foothill from the exposure
created by
such failure; or (c) obtain and maintain insurance policies of the
type
described in Section 6.12, and take any action with respect to
such policies
as Foothill deems prudent. Any such amounts paid by Foothill
shall
constitute Foothill Expenses. Any such payments made by Foothill
shall not
constitute an agreement by Foothill to make similar payments in
the future
or a waiver by Foothill of any Event of Default under this
Agreement.
Foothill need not inquire as to, or contest the validity of, any
such
expense, tax, security interest, encumbrance, or lien and the
receipt of the
usual official notice for the payment thereof shall be conclusive
evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Borrower waives demand,
protest,
notice of protest, notice of default or dishonor, notice of
payment and
onpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by
Foothill on
which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill
complies with its obligations, if any, under Section 9207 of the
Code,
Foothill shall not in any way or manner be liable or responsible
for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto
occurring
or arising in any manner or fashion from any cause; (c) any
diminution in
the value thereof; or (d) any act or default of any carrier,
warehouseman,
bailee, forwarding agency, or other Person. All risk of loss,
damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to defend,
indemnify,
save, and hold Foothill and its officers, employees, and agents
harmless
against: (a) all obligations, demands, claims, and liabilities
claimed or
asserted by any other Person arising out of or relating to the
transactions
contemplated by this Agreement or any other Loan Document,
including any
claim of any broker or finder, and (b) all losses (including
attorneys fees
and disbursements) in any way suffered, incurred, or paid by
Foothill as a
result of or in any way arising out of, following, or
consequential to the
transactions contemplated by this Agreement or any other Loan
Document. This
provision shall survive the termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all
notices or
demands by any party relating to this Agreement or any other Loan
Document
shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail,
postage
prepaid) shall be personally delivered or sent by registered or
certified
mail, postage prepaid, return receipt requested, or by prepaid
telex, TWX,
telefacsimile, or telegram (with messenger delivery specified) to
Borrower
or to Foothill, as the case may be, at its address set forth
below:
If to Borrower: CONCURRENT COMPUTER CORPORATION
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxx
with copies to: CONCURRENT COMPUTER CORPORATION
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Dell, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
with copies to: XXXXXXX, PHLEGER & XXXXXXXX
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx Hilson, Esq.
The parties hereto may change the address at which
they are to
receive notices hereunder, by notice in writing in the foregoing
manner
given to the other. All notices or demands sent in accordance
with this
Section 12, other than notices by Foothill in connection with
Sections 9504
or 9505 of the Code, shall be deemed received on the earlier of
the date of
actual receipt or three (3) days after the deposit thereof in the
mail.
Borrower acknowledges and agrees that notices sent by Foothill in
connection
with Sections 9504 or 9505 of the Code shall be deemed sent when
deposited
in the mail or transmitted by telefacsimile or other similar
method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL
BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF
THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY
IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE
OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN
WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH
THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF
ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT
THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers
delivered to Foothill may be destroyed or otherwise disposed of by
Foothill
four (4) months after they are delivered to or received by
Foothill, unless
Borrower requests, in writing, the return of said documents,
schedules, or
other papers and makes arrangements, at Borrower's expense, for
their
return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding
and deemed
effective when executed by Borrower
and Foothill.
15.2 Successors and Assigns. This Agreement shall
bind and
inure to the benefit of the respective successors and assigns of
each of the
parties; provided, however, that Borrower may not assign this
Agreement or
any rights or duties hereunder without Foothill's prior written
consent and
any prohibited assignment shall be absolutely void. No consent to
an
assignment by Foothill shall release Borrower from its
Obligations.
Foothill may assign this Agreement and its rights and duties
hereunder and
no consent or approval by Borrower is required in connection with
any such
assignment. Foothill reserves the right to sell, assign,
transfer,
negotiate, or grant participations in all or any part of, or any
interest in
Foothill's rights and benefits hereunder. In connection with any
such
assignment or participation, Foothill may disclose all documents
and
information which Foothill now or hereafter may have relating to
Borrower or
Borrower's business. To the extent that Foothill assigns its
rights and
obligations hereunder to a third Person, Foothill thereafter shall
be
released from such assigned obligations to Borrower and such
assignment
shall effect a novation between Borrower and such third Person.
Anything to
the contrary contained herein notwithstanding, Foothill agrees
that (a) so
long as no Event of Default has occurred and is continuing,
Foothill will
not assign any of its rights and obligations hereunder to a third
Person
known to be engaged in a business that is directly competitive
with the
business of Borrower or to a third Person known to have a
significant investment, directly or indirectly, in a Person that
is engaged in a
business that is directly competitive with the business of
Borrower, and (b)
the costs and expenses of any participant of Foothill shall not be
for the
account of Borrower.
15.3 Section Headings. Headings and numbers have
been set
forth herein for convenience only. Unless the contrary is
compelled by the
context, everything contained in each section applies equally to
this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved
against
Foothill or Borrower, whether under any rule of construction or
otherwise.
On the contrary, this Agreement has been reviewed by all parties
and shall
be construed and interpreted according to the ordinary meaning of
the words
used so as to fairly accomplish the purposes and intentions of all
parties
hereto.
15.5 Severability of Provisions. Each provision of
this
Agreement shall be severable from every other provision of this
Agreement
for the purpose of determining the legal enforceability of any
specific
provision.
15.6 Amendments in Writing. This Agreement can only
be amended
by a writing signed by both
Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This
Agreement may
be executed in any number of counterparts and by different parties
on
separate counterparts, each of which, when executed and delivered,
shall be
deemed to be an original, and all of which, when taken together,
shall
constitute but one and the same Agreement. Delivery of an
executed
counterpart of this Agreement by telefacsimile shall be equally as
effective
as delivery of a manually executed counterpart of this Agreement.
Any party
delivering an executed counterpart of this Agreement by
telefacsimile also
shall deliver a manually executed counterpart of this Agreement
but the
failure to deliver a manually executed counterpart shall not
affect the
validity, enforceability, and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If
the
incurrence or payment of the Obligations by Borrower or any
guarantor of the
Obligations or the transfer by either or both of such parties to
Foothill of
any property of either or both of such parties should for any
reason
subsequently be declared to be void or voidable under any state or
federal
law relating to creditors' rights, including provisions of the
Bankruptcy
Code relating to fraudulent conveyances, preferences, and other
voidable or
recoverable payments of money or transfers of property
(collectively, a
"Voidable Transfer"), and if Foothill is required to repay or
restore, in
whole or in part, any such Voidable Transfer, or elects to do so
upon the
reasonable advice of its counsel, then, as to any such Voidable
Transfer, or
the amount thereof that Foothill is required or elects to repay or
restore,
and as to all reasonable costs, expenses, and attorneys fees of
Foothill
related thereto, the liability of Borrower or such guarantor
automatically
shall be revived, reinstated, and restored and shall exist as
though such
Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the
other Loan
Documents, reflects the entire understanding of the parties with
respect to
the transactions contemplated hereby and shall not be contradicted
or
qualified by any other agreement, oral or written, before the date
hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /S/ Xxxxxxxx XxXxxxxxxx
Xxxxxxxx XxXxxxxxxx
Vice President
CONCURRENT COMPUTER CORPORATION,
a Delaware corporation
By: /S/ Xxxxx X. Dell
Xxxxx X. Dell
Vice President, General
Counsel and Secretary
??
BPHLA\KLB\0324946.06
June 29, 1995
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BPHLA\KLB\0324946.06
June 29, 1995
-{page \* roman}-
