Exhibit 10.1
================================================================================
LOAN AND SECURITY AGREEMENT
by and among
CELLSTAR CORPORATION
and
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
as Borrowers,
THE LENDERS THAT ARE SIGNATORIES HERETO
as the Lenders,
and
FOOTHILL CAPITAL CORPORATION
as the Arranger and Administrative Agent
Dated as of September 28, 2001
================================================================================
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS AND CONSTRUCTION ........................................................... 1
1.1 Definitions ................................................................... 1
1.2 Accounting Terms .............................................................. 28
1.3 Code .......................................................................... 28
1.4 Construction .................................................................. 28
1.5 Schedules and Exhibits ........................................................ 28
2. LOAN AND TERMS OF PAYMENT .............................................................. 28
2.1 Revolver Advances ............................................................. 28
2.2 Intentionally Omitted ......................................................... 30
2.3 Borrowing Procedures and Settlements .......................................... 30
2.4 Payments ...................................................................... 37
2.5 Overadvances .................................................................. 39
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations ... 39
2.7 Cash Management ............................................................... 40
2.8 Crediting Payments; Float Charge .............................................. 41
2.9 Designated Account ............................................................ 42
2.10 Maintenance of Loan Account; Statements of Obligations ........................ 42
2.11 Fees .......................................................................... 42
2.12 Letters of Credit ............................................................. 44
2.13 LIBOR Option .................................................................. 47
2.14 Capital Requirements .......................................................... 50
2.15 Joint and Several Liability of Borrowers ...................................... 50
3. CONDITIONS; TERM OF AGREEMENT .......................................................... 53
3.1 Conditions Precedent to the Initial Extension of Credit ....................... 53
3.2 Conditions Subsequent to the Initial Extension of Credit ...................... 56
3.3 Conditions Precedent to all Extensions of Credit .............................. 57
3.4 Term .......................................................................... 57
3.5 Effect of Termination ......................................................... 58
3.6 Early Termination by Borrowers ................................................ 58
-i-
Page
----
4. CREATION OF SECURITY INTEREST ................................................................... 59
4.1 Grant of Security Interest ............................................................. 59
4.2 Negotiable Collateral .................................................................. 59
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral ................. 59
4.4 Delivery of Additional Documentation Required; Authorization to File UCC Financing
Statements ............................................................................. 59
4.5 Power of Attorney ...................................................................... 60
4.6 Right to Inspect ....................................................................... 60
4.7 Control Agreements ..................................................................... 61
5. REPRESENTATIONS AND WARRANTIES .................................................................. 61
5.1 No Encumbrances ........................................................................ 61
5.2 Eligible Accounts ...................................................................... 61
5.3 Eligible Inventory ..................................................................... 61
5.4 Equipment .............................................................................. 61
5.5 Location of Inventory and Equipment .................................................... 61
5.6 Inventory Records ...................................................................... 61
5.7 Location of Chief Executive Office; FEIN ............................................... 62
5.8 Due Organization and Qualification; Subsidiaries ....................................... 62
5.9 Due Authorization; No Conflict ......................................................... 62
5.10 Litigation ............................................................................. 63
5.11 No Material Adverse Change ............................................................. 63
5.12 Fraudulent Transfer .................................................................... 63
5.13 Employee Benefits ...................................................................... 64
5.14 Environmental Condition ................................................................ 64
5.15 Brokerage Fees ......................................................................... 64
5.16 Intellectual Property .................................................................. 64
5.17 Leases ................................................................................. 64
5.18 DDAs ................................................................................... 64
5.19 Complete Disclosure .................................................................... 64
5.20 Indebtedness ........................................................................... 65
-ii-
Page
----
5.21 Management Agreements ............................................... 65
6. AFFIRMATIVE COVENANTS. ....................................................... 65
6.1 Accounting System ................................................... 65
6.2 Collateral Reporting ................................................ 65
6.3 Financial Statements, Reports, Certificates ......................... 66
6.4 Intentionally Omitted................................................ 69
6.5 Return .............................................................. 69
6.6 Maintenance of Properties ........................................... 69
6.7 Taxes ............................................................... 69
6.8 Insurance ........................................................... 69
6.9 Location of Inventory and Equipment ................................. 70
6.10 Compliance with Laws ................................................ 70
6.11 Leases .............................................................. 70
6.12 Brokerage Commissions ............................................... 70
6.13 Existence ........................................................... 71
6.14 Environmental ....................................................... 71
6.15 Disclosure Updates .................................................. 71
6.16 Convertible Subordinated Debt ....................................... 71
7. NEGATIVE COVENANTS ........................................................... 72
7.1 Indebtedness ........................................................ 72
7.2 Liens ............................................................... 73
7.3 Restrictions on Fundamental Changes ................................. 73
7.4 Disposal of Assets .................................................. 73
7.5 Change Name ......................................................... 73
7.6 Guarantee ........................................................... 74
7.7 Nature of Business .................................................. 74
7.8 Prepayments and Amendments .......................................... 74
7.9 Change of Control ................................................... 74
7.10 Consignments ........................................................ 74
7.11 Distributions ....................................................... 74
-iii-
Page
----
7.12 Accounting Methods .................................................................. 74
7.13 Investments ......................................................................... 75
7.14 Transactions with Affiliates ........................................................ 75
7.15 Suspension .......................................................................... 75
7.16 Intentionally Omitted. .............................................................. 75
7.17 Use of Proceeds ..................................................................... 75
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees .. 76
7.19 Securities Accounts ................................................................. 76
7.20 Financial Covenants ................................................................. 76
7.21 Permitted Foreign Subsidiary Credit Facilities ...................................... 79
8. EVENTS OF DEFAULT ............................................................................ 79
9. THE LENDER GROUP'S RIGHTS AND REMEDIES ....................................................... 81
9.1 Rights and Remedies ................................................................. 81
9.2 Remedies Cumulative ................................................................. 83
10. TAXES AND EXPENSES ........................................................................... 83
11. WAIVERS; INDEMNIFICATION ..................................................................... 84
11.1 Demand; Protest; etc ................................................................ 84
11.2 The Lender Group's Liability for Collateral ......................................... 84
11.3 Indemnification ..................................................................... 84
12. NOTICES ...................................................................................... 85
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER ................................................... 86
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS ................................................... 87
14.1 Assignments and Participations ...................................................... 87
14.2 Successors .......................................................................... 89
14.3 Additional Commitments .............................................................. 89
15. AMENDMENTS; WAIVERS .......................................................................... 90
15.1 Amendments and Waivers .............................................................. 90
15.2 Replacement of Holdout Lender ....................................................... 91
15.3 No Waivers; Cumulative Remedies ..................................................... 91
16. AGENT; THE LENDER GROUP ...................................................................... 92
-iv-
Page
----
16.1 Appointment and Authorization of Agent .................................................. 92
16.2 Delegation of Duties .................................................................... 93
16.3 Liability of Agent ...................................................................... 93
16.4 Reliance by Agent ....................................................................... 93
16.5 Notice of Default or Event of Default ................................................... 93
16.6 Credit Decision ......................................................................... 94
16.7 Costs and Expenses; Indemnification ..................................................... 94
16.8 Agent in Individual Capacity ............................................................ 95
16.9 Successor Agent ......................................................................... 95
16.10 Lender in Individual Capacity ........................................................... 96
16.11 Withholding Taxes ....................................................................... 96
16.12 Collateral Matters ...................................................................... 98
16.13 Restrictions on Actions by Lenders; Sharing of Payments ................................. 99
16.14 Agency for Perfection ................................................................... 99
16.15 Payments by Agent to the Lenders ........................................................ 100
16.16 Concerning the Collateral and Related Loan Documents .................................... 100
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information ................................................................. 100
16.18 Several Obligations; No Liability ....................................................... 101
16.19 Legal Representation of Agent ........................................................... 102
17. GENERAL PROVISIONS ............................................................................... 102
17.1 Effectiveness ........................................................................... 102
17.2 Section Headings ........................................................................ 102
17.3 Interpretation .......................................................................... 102
17.4 Severability of Provisions .............................................................. 102
17.5 Amendments in Writing ................................................................... 102
17.6 Counterparts; Telefacsimile Execution ................................................... 102
17.7 Revival and Reinstatement of Obligations ................................................ 103
17.8 Integration ............................................................................. 103
17.9 Parent as Agent for Borrowers ........................................................... 103
-v-
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule C-1 Commitments
Schedule D-1 Subsidiaries Comprising the Domestic Business Unit
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule P-2 Permitted Foreign Subsidiary Credit Facilities Outstanding
as of the Closing Date
Schedule R-1 Real Property Collateral
Schedule 2.7(a) Cash Management Banks
Schedule 3.2 Excluded First Tier Foreign Subsidiaries
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN; Organizational Identification
Number
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.9 Consents and Authorizations
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 5.21 Management Agreements
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is
---------
entered into as of September 28, 2001 between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL
-------
CORPORATION, a California corporation with an office in Atlanta, Georgia, as the
arranger and administrative agent for the Lenders ("Agent"), and, on the other
-----
hand, CELLSTAR CORPORATION, a Delaware corporation ("Parent" and "Administrative
------ --------------
Borrower"), and each of Parent's Subsidiaries identified on the signature pages
--------
hereof (such Subsidiaries, together with Parent, are referred to hereinafter
each individually as a "Borrower", and individually and collectively, jointly
--------
and severally, as the "Borrowers").
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
--------------
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"Accounts" means all of Borrowers' now owned or hereafter
--------
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"Additional Commitment" means such additional amounts which
---------------------
may from time to time after the Closing Date be issued by any New Lenders as a
commitment to make Advances hereunder pursuant to Section 14.3 hereof, which
------------
additional amounts shall be issued in increments of $5,000,000, and shall not
exceed $25,000,000 in the aggregate for all such additional amounts.
"Additional Documents" has the meaning set forth in Section
-------------------- -------
4.4.
---
"Administrative Borrower" has the meaning set forth in Section
----------------------- -------
17.9.
----
"Advances" has the meaning set forth in Section 2.1.
-------- -----------
"Affiliate" means, as applied to any Person, any other Person
---------
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by
1
contract, or otherwise; provided, however, that, in any event: (a) any Person
-------- -------
which owns directly or indirectly 10% or more of the securities having ordinary
voting power for the election of directors or other members of the governing
body of a Person or 10% or more of the partnership or other ownership interests
of a Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agent" means Foothill, solely in its capacity as agent for
-----
the Lenders hereunder, and any successor thereto.
"Agent's Account" means an account at a bank designated by
---------------
Agent from time to time as the account into which Borrowers shall make all
payments to Agent for the benefit of the Lender Group and into which the Lender
Group shall make all payments to Agent under this Agreement and the other Loan
Documents; unless and until Agent notifies Administrative Borrower and the
Lender Group to the contrary, Agent's Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Agent with The Chase
Manhattan Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA
#000000000. Agent shall provide Administrative Borrower with a copy of the
monthly bank statements for the Agent's Account.
"Agent Advances" has the meaning set forth in Section
-------------- -------
2.3(e)(i).
---------
"Agent's Liens" means the Liens granted by Borrowers to Agent
-------------
for the benefit of the Lender Group under this Agreement or the other Loan
Documents.
"Agent-Related Persons" means Agent together with its
---------------------
Affiliates, officers, directors, employees, and agents.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Applicable Prepayment Premium" means, as of any date of
-----------------------------
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 5% times the Maximum Revolver Amount,
(b) during the period of time from and including the date that is the first
anniversary of the Closing Date up to the date that is the second anniversary of
the Closing Date, 4% times the Maximum Revolver Amount, (c) during the period of
time from and including the date that is the second anniversary of the Closing
Date up to the date that is the third anniversary of the Closing Date, 3% times
the Maximum Revolver Amount, (d) during the period of time from and including
the date that is the third anniversary of the Closing Date up to the date that
is the fourth anniversary of the Closing Date, 2% times the Maximum Revolver
Amount, and (e) during the period of time from and including the fourth
anniversary of the Closing Date up to the Maturity Date, 1% times the Maximum
Revolver Amount, provided, however, if the Applicable Prepayment Premium, as
-------- -------
calculated hereunder, when added to all interest and other charges for the use
of money as contemplated by the Official Code of Georgia Annotated, Section
7-4-18 (the "Interest Charges") exceeds 5% per month (the "Legal Limit"),
---------------- -----------
2
the amount of such Applicable Prepayment Premium shall be reduced to an amount
which when added to the Interest Charges would equal the Legal Limit less $1.00;
and provided, further, that so long as the Fixed Charge Coverage Ratio, as
-------- -------
calculated on a rolling 12 fiscal month basis according to Section 7.20(b) and
---------------
(c) is at least 1.50:1.0 for the Domestic Business Unit and at least 2.0:1.0 for
---
each of the Asia, Europe and Latin American regions, respectively, for each
quarter in the preceding four quarter period prior to such early termination
date pursuant to Section 3.6, the amount which would otherwise be due pursuant
-----------
to subsections (c)-(e) above shall be reduced by 50%.
"Assignee" has the meaning set forth in Section 14.1.
-------- ------------
"Assignment and Acceptance" means an Assignment and Acceptance
-------------------------
in the form of Exhibit A-1.
-----------
"Assumption Agreement" means any agreement executed after the
--------------------
Closing Date by a New Lender pursuant to which such New Lender becomes a Lender
hereunder and purchases an Additional Commitment, in accordance with Section
-------
14.3 hereof, and in form and substance satisfactory to Agent.
----
"Authorized Person" means any officer or other employee of
-----------------
Administrative Borrower.
"Availability" means, as of any date of determination, if such
------------
date is a Business Day, and determined at the close of business on the
immediately preceding Business Day, if such date of determination is not a
Business Day, the amount that Borrowers are entitled to borrow as Advances under
Section 2.1 (after giving effect to all then outstanding Obligations and all
-----------
sublimits and reserves applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as
---------------
in effect from time to time.
"Base LIBOR Rate" means the rate per annum, determined by
---------------
Agent in accordance with its customary procedures, and utilizing such electronic
or other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/16%), on the basis of the rates at which Dollar
deposits are offered to major banks in the London interbank market on or about
2:00 p.m. (Georgia time) 2 Business Days prior to the commencement of the
applicable Interest Period, for a term and in amounts comparable to the Interest
Period and amount of the LIBOR Rate Loan requested by Administrative Borrower in
accordance with this Agreement, which determination shall be conclusive in the
absence of manifest error.
"Base Rate" means, the rate of interest announced within Xxxxx
---------
Fargo at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Xxxxx Fargo may designate.
3
"Base Rate Loan" means each portion of an Advance that bears
--------------
interest at a rate determined by reference to the Base Rate.
"Base Rate Margin" means 1 percentage point.
----------------
"Benefit Plan" means a "defined benefit plan" (as defined in
------------
Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
-------------
Affiliate of any Borrower has been an "employer" (as defined in Section 3(5) of
------------
ERISA) within the past six years which is covered by ERISA.
"Board of Directors" means the board of directors (or
------------------
comparable managers) of Parent or any committee thereof duly authorized to act
on behalf thereof.
"Books" means all of each Borrower's now owned or hereafter
-----
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of its Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).
"Borrower" and "Borrowers" have the respective meanings set
-------- ---------
forth in the preamble to this Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances
---------
made on the same day by the Lenders (or Agent on behalf thereof), or by Swing
Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance,
in each case, to Administrative Borrower.
"Borrowing Base" has the meaning set forth in Section 2.1.
-------------- -----------
"Borrowing Base Certificate" means a certificate in the form
--------------------------
of Exhibit B-1.
-----------
"Business Day" means any day that is not a Saturday, Sunday,
------------
or other day on which national banks are authorized or required to close, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term "Business Day" also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.
"Capital Lease" means a lease that is required to be
-------------
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness
----------------------------
represented by obligations under a Capital Lease.
"Cash Equivalents" means
----------------
(a) readily marketable direct obligations of the United States
of America or any agency thereof with maturities of one year or less from the
date of acquisition;
4
(b) fully insured certificates of deposit with maturities of one year or
less from the date of acquisition, issued by any commercial bank operating in
the United States of America having capital and surplus in excess of
$50,000,000, provided, however, that time deposits in an aggregate amount not in
excess of $100,000 may be maintained in any bank whose deposits are insured by
the Federal Deposit Insurance Corporation;
(c) commercial paper of a domestic issuer if at the time of purchase such
paper is rated in one of the two highest rating categories of Standard & Poor's
or Xxxxx'x Investors Services, Inc.;
(d) debt securities which shall have one of the two highest ratings from
Standard & Poor's or Xxxxx'x Investors Services, Inc. and which mature within
one year from the date of acquisition;
(e) investments in eurodollars placed through any financial institution
having combined capital, surplus, and undivided profits of not less than
$100,000,000;
(f) "overnight investments" or short-term obligations issued by any
commercial bank located in the U.S. in those areas where Borrowers conduct their
business whose deposits are insured by the Federal Deposit Insurance
Corporation; and
(g) investments in daily money market mutual funds having assets greater
than $2,000,000,000 and limited in holdings to assets of the types described in
clauses (a), (b) and (c) above.
"Cash Management Bank" has the meaning set forth in Section 2.7(a).
-------------------- --------------
"Cash Management Account" has the meaning set forth in Section 2.7(a).
----------------------- --------------
"Cash Management Agreements" means those certain cash management service
--------------------------
agreements, in form and substance satisfactory to Agent, each of which is among
Administrative Borrower, Agent, and one of the Cash Management Banks.
"CellStar, Ltd." means CellStar, Ltd., a Texas limited partnership.
--------------
"CellStar Netherlands" means CellStar Netherlands Holdings B.V., with a
--------------------
corporate seat in Amsterdam, the Netherlands.
"Change of Control" means (a) any "person" or "group" (within the meaning
-----------------
of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
35%, or more, of the Stock of Parent having the right to vote for the election
of members of the Board of Directors, or (b) a majority of the members of the
Board of Directors do not constitute Continuing Directors, or (c) Parent ceases
to directly or indirectly own and control 100% of the outstanding Stock of each
of its Subsidiaries extant as of the Closing Date (except as permitted by
Section 7.3 or in connection with a Permitted Disposition).
-----------
5
"Closing Date" means the date of the making of the initial
------------
Advance (or other extension of credit) hereunder or the date on which Agent
sends Borrower a written notice that each of the conditions precedent set forth
in Section 3.1 either have been satisfied or have been waived.
-----------
"Closing Date Business Plan" means the set of Projections of
--------------------------
Borrowers for the remainder of the fiscal year in which the Closing Date occurs
and for the two succeeding fiscal years following the Closing Date (on a month
by month basis for the remainder of the fiscal year in which the Closing Date
occurs and for fiscal year 2002, and on a yearly basis thereafter), in form and
substance (including as to scope and underlying assumptions) satisfactory to
Agent.
"Code" means the Georgia Uniform Commercial Code, as in effect
----
from time to time, together with any replacement or successor statutes enacted
thereto, including, without limitation, Revised Article 9.
"Collateral" means all of each Borrower's now owned or
----------
hereafter acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) money or other assets of each such Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(j) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement" means a landlord waiver, bailee
---------------------------
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person
6
in possession of, having a Lien upon, or having rights or interests in the
Equipment or Inventory, in each case, in form and substance satisfactory to
Agent.
"Collections" means all cash, checks, notes, instruments, and other items
-----------
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrowers.
"Commitment" means, with respect to each Lender, its Commitment, and, with
----------
respect to all Lenders, their Commitments, in each case as such Dollar amounts
are set forth beside such Lender's name under the applicable heading on Schedule
--------
C-1 or on the signature page of the Assignment and Acceptance pursuant to which
---
such Lender became a Lender hereunder in accordance with the provisions of
Section 14.1 or on the signature page to an Assumption Agreement pursuant to
------------
which any New Lender became a Lender hereunder in accordance with the provisions
of Section 14.3.
------------
"Compliance Certificate" means a certificate substantially in the form of
----------------------
Exhibit C-1 delivered by the chief executive officer, president, chief financial
-----------
officer, treasurer or controller of the Administrative Borrower to Agent.
"Consolidated Tangible Net Worth" means, with respect to Parent and its
-------------------------------
Subsidiaries on a consolidated basis as of any date of determination and without
duplication, the result of (a) total stockholder's equity, minus (b) the sum of
(i) all Intangible Assets, and (ii) all amounts due from Affiliates (other than
Subsidiaries), minus (c) the "cumulative translation adjustment account."
"Continuing Director" means (a) any member of the Board of Directors who
-------------------
was a director (or comparable manager) of Parent on the Closing Date, and (b)
any individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent (as such terms are used in Rule 14a-11 under the Exchange Act) and whose
initial assumption of office resulted from such contest or the settlement
thereof.
"Control Agreement" means a control agreement, in form and substance
-----------------
satisfactory to Agent, executed and delivered by the applicable Borrower, Agent,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account.
"Convertible Subordinated Debt" means the subordinated Indebtedness of
-----------------------------
Parent evidenced by $150,000,000 of convertible notes, due October 15, 2002.
"Convertible Subordinated Debt Documents" means the convertible
---------------------------------------
subordinated notes evidencing Convertible Subordinated Debt, the final
prospectus and indenture therefor and
7
all other agreements, documents and instruments executed and delivered pursuant
thereto or in connection therewith, in each case, as in effect on the Closing
Date.
"Cricket" means Cricket Communications, Inc., a Delaware
-------
corporation.
"Daily Balance" means, with respect to each day during the
-------------
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account
---
maintained by any Borrower.
"Default" means an event, condition, or default that, with the
-------
giving of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any
-----------------
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.
"Defaulting Lender Rate" means (a) the Base Rate for the first
----------------------
3 days from and after the date the relevant payment is due, and (b) thereafter,
at the interest rate then applicable to Advances that are Base Rate Loans
(inclusive of the Base Rate Margin applicable thereto).
"Designated Account" means account number 088-00000000 of
------------------
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative Borrower
to Agent.
"Designated Account Bank" means X. X. Xxxxxx Xxxxx & Company
-----------------------
(formerly known as The Chase Manhattan Bank), whose office is located at 0000
Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, and whose ABA number is 000000000.
"Dilution" means, as of any date of determination, a
--------
percentage that is the result of dividing the Dollar amount of (a) bad debt
write-downs, discounts, advertising allowances, credits, or other dilutive items
with respect to the Accounts during the applicable period, by (b) Borrowers'
Collections with respect to Accounts during such period (excluding extraordinary
items) plus the Dollar amount of clause (a), in each case, based the greater of
the experience of the immediately prior (x) trailing 6-months, or (y) trailing
12-months.
"Dilution Reserve" means, as of any date of determination, an
----------------
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point (or any fraction thereof equal to or
greater than .50%) by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed
-------------------
and delivered by Administrative Borrower to Agent regarding the extensions of
credit to be made on the Closing Date, the form and substance of which is
satisfactory to Agent.
8
"Dollars" or "$" means United States dollars.
------- -
"Domestic Business Unit" means the Parent and such Subsidiaries of
----------------------
Parent included as part of the "domestic business operations" in the Parent's
financial statements, which Subsidiaries, as of the Closing Date, are set forth
on Schedule D-1.
------------
"Domestic Subsidiary" means any Subsidiary of Parent organized under
-------------------
the laws of any State of the U.S. (or the District of Columbia) and domiciled in
the U.S.
"Due Diligence Letter" means the due diligence letter sent by Agent's
--------------------
counsel to Administrative Borrower, together with Administrative Borrower's
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Agent.
"EBITDA" means, with respect to any Person during any fiscal period,
-------------
(a) net earnings (or loss), minus (b) extraordinary gains, plus (c)(i)(x)
extraordinary losses incurred in connection with the exchange of the Convertible
Subordinated Debt permitted hereunder, and (y) other extraordinary losses in an
amount not to exceed $2,000,000, (ii) all non-cash expenses not associated with
Collateral, (iii) interest expense, (iv) income taxes, and (v) depreciation and
amortization for such period, as determined in accordance with GAAP.
"Eligible Accounts" means those Accounts created by any Borrower in
-----------------
the ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
-------- -------
and revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit performed by Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to Borrowers.
Eligible Accounts shall not include the following:
(a) Accounts owing by an Account Debtor that such Account Debtor has
failed to pay within 90 days of original invoice date or has selling terms of
more than 60 days,
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an employee
or Affiliate of any Borrower,
(d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a xxxx and hold, or any other terms by reason of which the payment
by the Account Debtor may be conditional (unless such Accounts (including,
without limitation, Accounts owed by Cricket) are subject to a xxxx and hold
letter or other agreement in form and substance satisfactory to Agent),
9
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i) does
not maintain its principal place of business in the United States, or (ii) is
not organized under the laws of the United States or any state thereof, or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit satisfactory to
Agent (as to form, substance, and issuer or domestic confirming bank) that has
been delivered to Agent and is directly drawable by Agent, or (z) the Account is
covered by credit insurance in form, substance, and amount, and by an insurer,
satisfactory to Agent,
(g) Accounts with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which the applicable
Borrower has complied, to the reasonable satisfaction of Agent, with the
Assignment of Claims Act, 31 USC (S) 3727), or (ii) any state of the United
States (exclusive, however, of (y) Accounts owed by any state that does not have
a statutory counterpart to the Assignment of Claims Act or (z) Accounts owed by
any state that does have a statutory counterpart to the Assignment of Claims Act
as to which the applicable Borrower has complied to Agent's satisfaction),
(h) Accounts with respect to which the Account Debtor is a creditor of
any Borrower, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to its obligation to pay the Account, but
only to the extent of such claim, right of setoff, or dispute,
(i) Accounts, to the extent such Accounts, together with all other
Accounts owing by such Account Debtor to Borrowers, exceed in the aggregate (i)
20% of all Eligible Accounts (without giving effect to this clause) in the case
of Cricket, (ii) 15% of all Eligible Accounts (without giving effect to this
clause) in the case of Lock\Line, and (iii) 10% of all Eligible Accounts
(without giving effect to this clause) in all other cases, provided, however,
(a) the foregoing percentages may be revised from time to time by Agent in its
Permitted Discretion, and (b) Accounts of the applicable Account Debtor which in
the aggregate exceed the limits set forth shall be deemed to constitute Eligible
Accounts (subject to compliance with all other standards of Eligible Accounts)
if the Accounts exceeding such limits are backed or secured by a letter of
credit reasonably satisfactory to Agent in all respects and such letter of
credit has been assigned to Agent upon terms acceptable to Agent in its
discretion,
(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(k) Accounts with respect to which the Account Debtor is located in
the states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a
10
business activity report or similar document in order to bring suit or otherwise
enforce its remedies against such Account Debtor in the courts or through any
judicial process of such state), unless the applicable Borrower has qualified to
do business in New Jersey, Minnesota, West Virginia, or such other states, or
has filed a business activities report with the applicable division of taxation,
the department of revenue, or with such other state offices, as appropriate, for
the then-current year, or is exempt from such filing requirement,
(l) Accounts, the collection of which, Agent, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Agent's Lien,
(n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, (unless such Accounts are subject to a xxxx and hold letter or
other agreement satisfactory to Agent), or
(o) Accounts that represent the right to receive progress payments or
other advance xxxxxxxx that are due prior to the completion of performance by
the applicable Borrower of the subject contract for goods or services.
"Eligible Inventory" means the Inventory of any Borrower located in
------------------
the U.S. consisting of two-way radio and digital handset finished goods held for
sale in the ordinary course of Borrowers' business located at one of the
business locations of Borrowers set forth on Schedule E-1 (or in-transit between
------------
any such locations), that complies with each of the representations and
warranties respecting Eligible Inventory made by Borrowers in the Loan
Documents, and that is not excluded as ineligible by virtue of the one or more
of the criteria set forth below; provided, however, that such criteria may be
-------- -------
fixed and revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit or appraisal performed by Agent from time to
time after the Closing Date. For purposes of this Agreement, finished goods
which are in the process of being packaged into kits shall not be considered
work-in-process Inventory and shall be considered finished goods. In determining
the amount to be so included, Inventory shall be valued at the lower of cost or
market on a basis consistent with Borrowers' historical accounting practices. An
item of Inventory shall not be included in Eligible Inventory if:
(a) a Borrower does not have good, valid, and marketable title
thereto,
(b) it is not located at one of the locations in the United States set
forth on Schedule E-1 or in transit from one such location to another such
------------
location,
(c) it is located on real property leased by a Borrower or in a
contract warehouse, in each case, unless it is subject to a Collateral Access
Agreement executed by the lessor, warehouseman, or other third party, as the
case may be, and unless it is segregated or otherwise separately identifiable
from goods of others, if any, stored on the premises,
11
(d) it is not subject to a valid and perfected first priority security
Agent's Lien,
(e) it consists of goods that are obsolete or slow moving (which shall
include all goods not sold within 120 days of the date of such Borrowers'
receipt of such goods), restrictive or custom items, analog handsets,
accessories, work-in-process, raw materials, or goods that constitute spare
parts, packaging and shipping materials, supplies used or consumed in a
Borrower's business, xxxx and hold goods, defective goods, "seconds," Inventory
acquired on consignment or Inventory held on consignment.
"Eligible Transferee" means (a) a commercial bank organized under the
-------------------
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender that was
party hereto as of the Closing Date, (e) so long as no Event of Default has
occurred and is continuing, any other Person approved by Agent and
Administrative Borrower, and (f) during the continuation of an Event of Default,
any other Person approved by Agent.
"Environmental Actions" means any complaint, summons, citation,
---------------------
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Borrower or any predecessor in interest, (b) from adjoining
properties or businesses onto any assets, properties or businesses of Borrower,
or (c) from or onto any facilities which received Hazardous Materials generated
by any Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety, or Hazardous Materials,
including the Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA"), 42 U.S.C.(S) 9601 et seq; the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. (S) 6901 et seq; the Federal Water Pollution Control
Act, 33 USC (S) 1251 et seq; the Toxic Substances Control Act, 15 USC, (S) 2601
-- ---
et seq; the Clean Air Act, 42 USC (S) 7401 et seq.; the Safe Drinking Water Act,
-- --- -- ---
42 USC. (S) 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. (S) 2701 et
-- --- --
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
---
USC. (S) 11001 et seq.; the Hazardous Material Transportation Act, 49 USC (S)
-- ---
1801 et seq.; and the Occupational Safety
-- ---
12
and Health Act, 29 USC. (S)651 et seq. (to the extent it regulates occupational
-- ---
exposure to Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities, monetary
-----------------------------------
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority for Environmental Liabilities and Costs.
"Equipment" means all of Borrowers' now owned or hereafter acquired
---------
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, including all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
---------------
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of a
Borrower under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
---------------- ---------
"Excess Availability" means the amount, as of the date any
-------------------
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrowers aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Agent in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect
------------
from time to time.
13
"Existing Credit Facility" means the credit facility extended to
------------------------
Parent pursuant to that certain Second Amended and Restated Credit Agreement by
and among Parent, the financial institutions signatory thereto, and the Chase
Manhattan Bank, as agent, dated as of February 27, 2001 (as amended, modified or
otherwise supplemented prior to the date hereof), together with the related Loan
Documents (as defined therein).
"Fee Letter" means that certain fee letter, dated as of even date
----------
herewith, between Borrowers and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
----
"First Tier Foreign Subsidiary" means any directly held Foreign
-----------------------------
Subsidiary of a Borrower.
"Fixed Charge Coverage Ratio" means, with respect to any Person during
---------------------------
any fiscal period and without duplication, the ratio for such Person during such
fiscal period, of (a) EBITDA, minus (i) cash capital expenditures, minus (ii)
tax expense (excluding amounts to be offset by any net operating losses) for
such Person during such fiscal period, plus cash tax refunds received in such
period, to (b) (i) principal payments made by such Person on any Indebtedness
during such fiscal period (other than refinancings permitted by Section 7.1(d),
--------------
payments on Advances, payments on revolving loans under any Permitted Foreign
Subsidiary Credit Facility to the extent available to be reborrowed under such
facility or to the extent cash collateral is released as a result thereof, cash
payments on the Convertible Subordinated Debt required by Section 6.16, and
------------
refinancings of debt of a Foreign Subsidiary with the proceeds of a credit
facility obtained by another Foreign Subsidiary within the same non-U.S.
geographic region) and (ii) cash interest expense minus cash interest income
during such fiscal period.
"Foothill" means Foothill Capital Corporation, a California
--------
corporation.
"Foreign Affiliate" means any Person in which any Borrower or any of
-----------------
its Subsidiaries has an equity or ownership interest equal to or less than 50%
and which is organized or domiciled in any country other than the U.S., except
Arcoa Communications Co., Ltd., a Taiwanese company, in which the Administrative
Borrower owns an approximate 3.5% interest.
"Foreign Subsidiary" means any Subsidiary of Parent organized or
------------------
domiciled in any country (or state, province or subdivision thereof) other than
the U.S.
"Funding Date" means the date on which a Borrowing occurs.
------------
"Funding Losses" has the meaning set forth in Section 2.13(b)(ii).
-------------- -------------------
"GAAP" means generally accepted accounting principles as in effect
----
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrowers' now owned or hereafter
-------------------
acquired right, title, and interest with respect to general intangibles
(including payment intangibles,
14
commercial tort claims, contract rights, rights to payment, rights arising under
common law, statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
money, deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), and any and all supporting obligations in respect thereof, and any
other personal property other than goods, Accounts, Investment Property, and
Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
-------------------
certificate or articles of incorporation, articles of organization, certificate
of limited partnership, partnership agreement, limited liability company
operating agreement, by-laws, or other organizational documents of such Person.
"Governmental Authority" means any federal, state, local, or other
----------------------
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Hazardous Materials" means (a) substances that are defined or listed
-------------------
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances" under either CERCLA, RCRA or any other statute or regulation
intended for the protection of human health or the environment, or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, and (d) asbestos in any form or electrical equipment that contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"Hedging Obligations" of a Person shall mean any and all obligations
-------------------
of such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collateral protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
15
"Indebtedness" of any Person means (a) all obligations of such Person
------------
for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of such Person in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of such
Person under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of such Person, irrespective of whether such
obligation or liability is assumed, (e) all obligations of such Person for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of such Person's business and repayable in accordance with
customary trade practices), and (f) any obligation of such Person guaranteeing
or intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to a Borrower) any obligation of any
other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
----------------------- ------------
"Indemnified Person" has the meaning set forth in Section 11.3.
------------------ ------------
"Initial Consolidated Tangible Net Worth" means the greater of (a)
---------------------------------------
Consolidated Tangible Net Worth as of August 31, 2001 minus $3,000,000, or (b)
$170,000,000.
"Insolvency Proceeding" means any proceeding commenced by or against
---------------------
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that portion of
-----------------
the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Intellectual Property Security Agreement" means a security agreement
----------------------------------------
of even date herewith executed and delivered by any Borrower in favor of Agent,
granting to Agent, for the benefit of the Lender Group, a first-priority
security interest in all of such Borrower's patents, trademarks, copyrights,
licenses and other intellectual property, the form and substance of which is
satisfactory to Agent.
"Intercompany Subordination Agreement" means, individually and
------------------------------------
collectively, a subordination agreement executed and delivered by Parent, its
Subsidiaries and Agent, the form and substance of which is satisfactory to
Agent.
"Interest Period" means, with respect to each LIBOR Rate Loan, a
---------------
period commencing on the date of the making of such LIBOR Rate Loan and ending
1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period
-------- -------
would end on a day that is not a Business Day, such Interest Period shall be
extended (subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
16
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.
"Inventory" means all Borrowers' now owned or hereafter acquired
---------
right, title, and interest with respect to inventory, including goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by a Borrower as lessor, goods that are furnished by a Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in a Borrower's business.
"Inventory Reserves" means reserves (determined from time to time by
------------------
Agent in its Permitted Discretion) for (a) the estimated costs relating to
unpaid freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible In-Transit
Inventory by Borrowers, plus (b) the estimated reclamation claims of unpaid
sellers of Inventory sold to Borrowers.
"Investment" means, with respect to any Person, any investment by such
----------
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of Borrowers' now owned or hereafter
-------------------
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as amended and as in
---
effect from time to time.
"Issuing Lender" means Foothill or any other Lender that, at the
--------------
request of Administrative Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become an Issuing Lender for the purpose of issuing
L/Cs or L/C Undertakings pursuant to Section 2.12.
------------
"L/C" has the meaning set forth in Section 2.12(a).
--- ---------------
"L/C Disbursement" means a payment made by the Issuing Lender pursuant
----------------
to a Letter of Credit.
17
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
--------------- ---------------
"Lender" and "Lenders" have the respective meanings set forth in the
------ -------
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1 or Section
------------ -------
14.3.
----
"Lender Group" means, individually and collectively, each of the
------------
Lenders (including the Issuing Lender) and Agent.
"Lender Group Expenses" means all (a) costs or expenses (including
---------------------
taxes, and insurance premiums) required to be paid by a Borrower under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges paid or incurred by Agent in connection with the Lender Group's
transactions with Borrowers, including, reasonable fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals or business valuations as set forth in
Section 4.6) to the extent of the fees and charges contained in this Agreement,
-----------
real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) reasonable costs and expenses incurred by Agent in the
disbursement of funds to or for the account of Borrowers (by wire transfer or
otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of
checks, (e) reasonable costs and expenses paid or incurred by the Lender Group
to correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Agent related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with any Borrower or any guarantor
of the Obligations, (h) Agent's reasonable fees and expenses (including
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, or amending the Loan Documents, and (i) Agent's and each Lender's
reasonable fees and expenses (including attorneys fees) incurred in terminating,
enforcing (including attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning any
Borrower or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether suit is brought, or in
taking any Remedial Action concerning the Collateral.
"Lender-Related Person" means, with respect to any Lender, such
---------------------
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, and agents of such Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
----------------
requires.
18
"Letter of Credit Usage" means, as of any date of determination, the
----------------------
aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).
-------------- ------------------
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
------------ -----------
"LIBOR Option" has the meaning set forth in Section 2.13(a).
------------ ---------------
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan,
----------
the rate per annum determined by Agent (rounded upwards, if necessary, to the
next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b)
100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means each portion of an Advance that bears interest
---------------
at a rate determined by reference to the LIBOR Rate.
"LIBOR Rate Margin" means 4 percentage points.
-----------------
"Lien" means any interest in an asset securing an obligation owed to,
----
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
------------ ------------
"Loan Documents" means this Agreement, the Cash Management Agreements,
--------------
the Control Agreements, the Intellectual Property Security Agreement, the
Disbursement Letter, the Due Diligence Letter, the Fee Letter, the Letters of
Credit, the Mortgages, the Officers' Certificate, any Stock Pledge Agreement,
the Intercompany Subordination Agreement, any note or notes executed by a
Borrower in connection with this Agreement and payable to a member of the Lender
Group, and any other agreement entered into, now or in the future, by any
Borrower and the Lender Group in connection with this Agreement.
"Loan Party" means, (a) from the Closing Date until 90 days after such
----------
Closing Date, any Borrower or First Tier Foreign Subsidiary, and (b) thereafter,
any Borrower or Foreign
19
Subsidiary whose stock is subject to a first priority perfected Lien in favor of
the Agent pursuant to a Stock Pledge Agreement.
"Lock\Line" means lock\line, LLC, a Kansas limited liability company.
---------
"Management Agreement" means, individually and collectively, any
--------------------
agreement pursuant to which a Management Fee is payable to any Borrower by any
Subsidiary or Affiliate.
"Management Fee" means, individually and collectively, any
--------------
administrative, management, consulting, technical support, royalty, license, or
other similar fees paid or owing to any Borrower by any Subsidiary or Affiliate,
as more fully set forth in the applicable Management Agreement.
"Material Adverse Change" means (a) a material adverse change in the
-----------------------
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Parent and its Subsidiaries taken as a
whole, (b) a material impairment of a Borrower's ability to perform its
obligations under the Loan Documents to which it is a party or of the Lender
Group's ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of the Agent's Liens
with respect to the Collateral as a result of an action or failure to act on the
part of a Borrower.
"Material Vendor" means Nokia, Motorola, or any other trade creditor
---------------
of any Borrower that supplies 35% or more of the annual product needs of the
Borrowers, taken as a whole.
"Maturity Date" has the meaning set forth in Section 3.4.
------------- -----------
"Maximum Revolver Amount" means at any time of determination, the sum
-----------------------
of (a) $60,000,000, plus (b) the amount of any Additional Commitments which may
----
have been issued by any New Lenders as of such date.
"Mortgages" means, individually and collectively, one or more
---------
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by
any Borrower in favor of Agent, for the benefit of the Lender Group, in form and
substance satisfactory to Agent, that encumbers the Real Property Collateral
owned by such Borrower and the related improvements thereto.
"Negotiable Collateral" means all of Borrowers' now owned and
---------------------
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"Net Liquidation Percentage" means the percentage of the book value of
--------------------------
Borrowers' Inventory that is estimated to be recoverable, after liquidation
expenses, in an orderly liquidation of such Inventory, such percentage to be as
determined from time to time by a qualified appraisal company selected by Agent.
Administrative Borrower shall be provided with
20
a copy of the appraisal company's report or similar detailed information
reflecting the method and basis for such calculation upon request.
"New Lender" means any Person satisfactory to Agent in its sole
----------
discretion that becomes a Lender hereunder pursuant to the provisions of Section
-------
14.3 hereof.
----
"Non-Loan Party" means any Subsidiary of Parent that is not a Loan
--------------
Party.
"Obligations" means all loans, Advances, debts, principal, interest
-----------
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers' Loan Account pursuant hereto), obligations, fees
(including the fees provided for in the Fee Letter), charges, costs, Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties of any kind and description owing by Borrowers to the Lender Group
pursuant to or evidenced by the Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, and including all interest not
paid when due and all Lender Group Expenses that Borrowers are required to pay
or reimburse by the Loan Documents, by law, or otherwise. Any reference in this
Agreement or in the Loan Documents to the Obligations shall include all
amendments, changes, extensions, modifications, renewals replacements,
substitutions, and supplements, thereto and thereof, as applicable, both prior
and subsequent to any Insolvency Proceeding.
"Officers' Certificate" means the representations and warranties of
---------------------
officers form submitted by Agent to Administrative Borrower, together with
Borrowers' completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
"Originating Lender" has the meaning set forth in Section 14.1(e).
------------------ ---------------
"Overadvance" has the meaning set forth in Section 2.5.
----------- -----------
"Parent" has the meaning set forth in the preamble to this Agreement.
------
"Participant" has the meaning set forth in Section 14.1(e).
----------- ---------------
"Pay-Off Letter" means a letter, in form and substance satisfactory to
--------------
Agent, setting forth the amount necessary to repay in full all of the
obligations of Borrowers owing pursuant to the Existing Credit Facility and to
obtain a release of all Liens in and to the assets of such Borrowers pursuant to
such Existing Credit Facility.
"Permitted Affiliate Transaction" means a transaction between Parent
-------------------------------
and its Subsidiaries, or among Parent's Subsidiaries, that satisfies one or more
of the following criteria:
21
(a) Transactions between Parent and its Subsidiaries (including
-----------------------------------------------------------
Borrowers). Parent may, provided that no Event of Default exists or will result
---------
therefrom (i) guarantee obligations of any Subsidiary, including any Borrower,
with respect to (A) trade payables consisting of goods or materials purchased in
the ordinary course of business of such Subsidiary for which payment is not more
than 90 days past due (unless subject to a dispute being diligently contested),
(B) real property operating leases, and (C) a Permitted Foreign Subsidiary
Credit Facility, provided that (X) such guarantee is unsecured, and in the case
--------
of Parent's guarantee of any Permitted Foreign Subsidiary Credit Facility
entered into after the Closing Date, such guarantee is also subordinated to the
Obligations under this Agreement, (Y) no default has occurred pursuant to such
guarantee obligation, (Z) no demand for payment has resulted from any such
guarantee obligation; and (ii) make capital contributions pursuant to subsection
(h) below, for the benefit of any Subsidiary, including any Borrower;
(b) Transactions between Borrowers. Parent and any other Borrower
------------------------------
may (i) make unsecured loans to, or (ii) sell, lease or transfer assets
(provided Agent shall have a first priority perfected Lien on such asset after
such sale, lease or transfer) to, any other Borrower;
(c) Transactions between Borrowers and Foreign Subsidiaries. Any
-------------------------------------------------------
Borrower may, provided that no Event of Default exists or will result therefrom,
(i) make loans to any Foreign Subsidiary, up to an aggregate amount owing at any
time to all Borrowers not to exceed $5,000,000, and (ii) transfer assets (other
than Inventory and Accounts) with a market value not exceeding $1,000,000 for
all such transfers by all Borrowers in the aggregate during any fiscal year, to
any Foreign Subsidiary;
(d) Transactions between Foreign Subsidiaries and Loan Parties.
----------------------------------------------------------
Any Foreign Subsidiary Loan Party may (i) make unsecured loans to any other Loan
Party, (ii) sell, lease or transfer assets to, any other Loan Party, or (iii)
guarantee unsecured obligations arising in the ordinary course of business for
the benefit of, any other Loan Party;
(e) Transactions between Foreign Subsidiary Loan Parties and
--------------------------------------------------------
Non-Loan Parties. Provided that no Event of Default exists or will result
----------------
therefrom, any Foreign Subsidiary Loan Party may (i) transfer assets to any
Non-Loan Party with a market value not exceeding $2,000,000 for all such
transfers by Foreign Subsidiary Loan Parties in the aggregate during any fiscal
year, and (ii) make loans to, or guarantee unsecured obligations arising in the
ordinary course of business for the benefit of, any Non-Loan Party not to exceed
$135,000,000 in the aggregate owing at any one time for all such loans and
guarantees; provided, however, that loans to such Non-Loan Parties may not
-------- -------
exceed $100,000,000 in the aggregate owing at any one time;
(f) Transactions between Foreign Subsidiaries and CellStar
------------------------------------------------------
Netherlands. Any Foreign Subsidiary may (i) make unsecured loans to CellStar
-----------
Netherlands (or such other global agency treasury center as Borrowers may
establish from time to time) for the purpose of making a loan to an Affiliate
that would have been permitted hereunder if such loan was made directly by such
Foreign Subsidiary, or (ii) make investments through CellStar Netherlands
constituting the foreign equivalent of "Cash Equivalents" as such term is
defined herein;
22
(g) Transactions between Non-Loan Parties and any other Person.
----------------------------------------------------------
Any Non-Loan Party may (i) make unsecured loans to, (ii) make capital
contributions to, (iii) sell, lease or transfer assets to, or (iv) guarantee any
Indebtedness for the benefit of, any (x) Borrower, (y) Loan Party, or (z) other
Non-Loan Party (including, without limitation, CellStar Netherlands);
(h) Capital Contributions by any Loan Party. Provided that no
---------------------------------------
Event of Default exists or will result therefrom, any Loan Party may make (i)
initial capital contributions in any Subsidiary created after the Closing Date
in accordance with the other provisions of this Agreement not to exceed $25,000
for each such Subsidiary, and (ii) capital contributions, to the extent required
by applicable law, in an amount not to exceed $5,000,000 in the aggregate for
any such Subsidiary during the period from and including the Closing Date
through the Maturity Date, provided, that (x) all such capital contributions to
--------
all such Subsidiaries shall not exceed (i) $5,000,000 per fiscal year in the
aggregate, and (ii) $25,000,000 in the aggregate during the period from and
including the Closing Date through the Maturity Date, (y) Administrative
Borrower shall have given Agent notice promptly after becoming aware of any such
requirement for capital contributions, and (z) Excess Availability is at least
$10,000,000 after giving effect to any such capital contributions.
"Permitted Discretion" means a determination made in good faith and in
--------------------
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions by
----------------------
Borrowers of Equipment that is worn, damaged, or obsolete in the ordinary course
of the applicable Borrower's business, (b) sales by Borrowers of Inventory to
buyers in the ordinary course of business, (c) the use or transfer of money or
Cash Equivalents by Borrowers in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, (d) the licensing by Borrowers, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of the applicable Borrower's business,
(e) sales of Equipment and other assets (other than Real Property, Inventory and
Accounts) having a fair market value not to exceed $3,000,000 in the aggregate
during the period from the Closing Date through the Maturity Date, provided that
all proceeds of any and all dispositions of all such assets of any Borrower
shall be paid to Agent for application to outstanding Advances (which amounts
may be reborrowed subject to the terms and conditions of this Agreement), (f)
dispositions of assets during any fiscal year with an aggregate market value of
less than $100,000, and (g) so long as no Event of Default has occurred and is
continuing, the sale of any (i) Foreign Subsidiary with a net worth of less than
$1,500,000, or (ii) a Domestic Subsidiary or Borrower with a net worth of less
than $1,500,000 with the consent of Agent.
"Permitted Foreign Subsidiary Credit Facility" means, (a) any credit
--------------------------------------------
facility of a Foreign Subsidiary existing as of the date hereof, or (b) any
credit facility hereafter entered into by any Foreign Subsidiary or Foreign
Subsidiaries to provide financing for such Foreign Subsidiary's working capital
needs that: (i) is not guaranteed by any Borrower; provided, such Permitted
--------
Foreign Subsidiary Credit Facility may be guaranteed by Parent if such guaranty
is unsecured and subject to a subordination agreement satisfactory to Agent,
(ii) does not limit or prohibit (or would limit or prohibit upon the happening
of certain events) payment of any
23
Management Fees to any Borrower, and (iii) both before and after giving effect
thereto, does not result in a Fixed Charge Coverage Ratio calculated for the
immediately preceding four fiscal quarter period for the region in which such
Foreign Subsidiary is located of less than 2.0:1.0. As of the date hereof, all
existing Permitted Foreign Subsidiary Credit Facilities are set forth on
Schedule P-2 hereto and no such existing Foreign Subsidiary Credit Facility is
------------
guaranteed by Parent unless disclosed on Schedule P-2.
------------
"Permitted Investments" means (a) investments in Cash Equivalents, (b)
---------------------
investments in negotiable instruments for collection, and (c) advances made in
connection with purchases of goods or services in the ordinary course of
business.
"Permitted Liens" means (a) Liens held by Agent for the benefit of
---------------
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
------------
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of Borrowers' business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of Borrowers' business and not in connection with the borrowing
of money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of Borrowers' business, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) Liens with respect to the Real Property Collateral that are
exceptions to the commitments for title insurance issued in connection with the
Mortgages, as accepted by Agent, (l) with respect to any Real Property that is
not part of the Real Property Collateral, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrowers, (m) Liens in favor of The Chase Manhattan Bank
on $4,120,000 of cash collateralizing letters of credit issued in connection
with the Existing Credit Facility which shall remain outstanding on the Closing
Date pursuant to that certain "Security Agreement-Pledge" between Parent and The
Chase Manhattan Bank dated of even date herewith, for so long as such letters of
credit remain cash collateralized, and (n) Liens in funds in the possession of
credit card companies pertaining to credit card sales of Inventory in the
ordinary course of business pursuant to merchant credit card services agreements
provided that Agent shall have a satisfactory agreement with such credit card
companies regarding the assignment of such credit card receivables to Agent.
"Permitted Protest" means the right of the applicable Borrower to
-----------------
protest any Lien (other than any such Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the Books in such amount as is required
24
under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by the applicable Borrower in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Agent's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
-------------------------------------
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $10,000,000.
"Person" means natural persons, corporations, limited liability companies,
------
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than Real
----------------------------
Property.
"Projections" means the forecasted (a) balance sheets, (b) profit and loss
-----------
statements, and (c) cash flow statements, all prepared on a consistent basis
with Parent's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, prepared
separately for the Parent (consolidated with its Subsidiaries) and the Domestic
Business Unit.
"Pro Rata Share" means:
--------------
(a) with respect to a Lender's obligation to make Advances and receive
payments of principal, interest, fees, costs, and expenses with respect thereto,
the percentage obtained by dividing (i) such Lender's Commitment, by (ii) the
aggregate Commitments of all Lenders,
(b) with respect to a Lender's obligation to participate in Letters of
Credit, to reimburse the Issuing Lender, and to receive payments of fees with
respect thereto, the percentage obtained by dividing (i) such Lender's
Commitment, by (ii) the aggregate Commitments of all Lenders, and
(c) with respect to all other matters (including the indemnification
obligations arising under Section 16.7), the percentage obtained by dividing (i)
------------
such Lender's Commitment, by (ii) the aggregate amount of Commitments of all
Lenders; provided, however, that, in each case, in the event all Commitments
-------- -------
have been terminated, Pro Rata Share shall be determined according to the
Commitments in effect immediately prior to such termination.
"Purchase Money Indebtedness" means Indebtedness (other than the
---------------------------
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any fee simple estates in real property now owned or
-------------
hereafter acquired by any Borrower and the improvements thereto.
25
"Real Property Collateral" means the parcel or parcels of Real Property
------------------------
identified on Schedule R-1 and any Real Property hereafter acquired by a
Borrower.
"Record" means information that is inscribed on a tangible medium or which
------
is stored in an electronic or other medium and is retrievable in perceivable
form.
"Remedial Action" means all actions taken to (a) clean up, remove,
---------------
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Report" has the meaning set forth in Section 16.17.
------ -------------
"Required Availability" means Excess Availability and unrestricted cash and
---------------------
Cash Equivalents (excluding any amounts held by institutions or at locations
outside of the U.S.) in an amount of not less than $15,000,000.
"Required Lenders" means, at any time, (a) Agent, and (b) Lenders whose Pro
----------------
Rata Shares aggregate 66-2/3% or more of the Commitments, or if the Commitments
have been terminated irrevocably, 66-2/3% or more of the Obligations then
outstanding, provided, however, that, if there are 2 or more Lenders at any
-------- -------
time, in no event shall the Required Lenders be less than 2 Lenders.
"Required Refinance Date" has the meaning set forth in Section 6.16.
------------------------ ------------
"Reserve Percentage" means, on any day, for any Lender, the maximum
------------------
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the sum of (a) the
--------------
then extant amount of outstanding Advances, plus (b) the then extant amount of
the Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of Credit, all
----------------------------
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrowers,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
26
"SEC" means the United States Securities and Exchange Commission and any
---
successor thereto.
"Securities Account" means a "securities account" as that term is defined
------------------
in the Code.
"Settlement" has the meaning set forth in Section 2.3(f)(i).
---------- -----------------
"Settlement Date" has the meaning set forth in Section 2.3(f)(i).
--------------- -----------------
"Solvent" means, with respect to any Person on a particular date, that such
-------
Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"Stock" means all shares, options, warrants, interests, participations, or
-----
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means, individually and collectively, each pledge
----------------------
agreement, in form and substance satisfactory to Agent, now or hereafter
executed and delivered by any Borrower that owns Stock of a Subsidiary of
Parent, pledging 100% of the Stock owned by such Borrower of a Domestic
Subsidiary and 65% of the Stock owned by such Borrower of a First Tier Foreign
Subsidiary.
"Subsidiary" of a Person means a corporation, partnership, limited
----------
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity and
including, without limitation, any Foreign Subsidiary or Domestic Subsidiary.
"Swing Lender" means Foothill or any other Lender that, at the request of
------------
Administrative Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(d)(i).
---------- -----------------
"Taxes" has the meaning set forth in Section 16.11(e).
----- ----------------
"U.S." means the United States of America.
----
"Voidable Transfer" has the meaning set forth in Section 17.7.
----------------- ------------
"Xxxxx Fargo" means Xxxxx Fargo Bank, National Association, a national
-----------
banking association.
27
1.2 Accounting Terms. All accounting terms not specifically defined herein
----------------
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrowers" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
----
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement or any other Loan
------------
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
----------------------
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolver Advances.
-----------------
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, each Lender with a Commitment agrees (severally, not
jointly or jointly and severally) to make advances ("Advances") to Borrowers in
--------
an amount at any one time outstanding not to exceed such Lender's Pro Rata Share
of an amount equal to the lesser of (i) the Maximum Revolver Amount less the
Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit
Usage. For purposes of this Agreement, "Borrowing Base," as of any date of
--------------
determination, shall mean the result of:
(x) 85% of the amount of Eligible Accounts, less the amount, if
any, of the Dilution Reserve, plus
28
(y) the lowest of
(i) $30,000,000,
(ii) the sum of
(A) the lesser of (1) 55% of the value of
Eligible Inventory consisting of digital handsets, or
(2) 80% times the then extant Net Liquidation
Percentage (as calculated by Agent), times the book
value of such Eligible Inventory consisting of digital
handsets, plus
(B) the lowest of (1) 45% of the value of
Eligible Inventory consisting of two-way radios, (2)
80% times the then extant Net Liquidation Percentage
(as calculated by Agent), times the book value of such
Eligible Inventory consisting of two-way radios, or (3)
$3,000,000, or
(iii) 70% of the amount of credit availability
created by clause (x) above, minus
(z) the aggregate amount of reserves, if any, established
by Agent under Section 2.1(b).
--------------
(b) Anything to the contrary in this Section 2.1 notwithstanding,
-----------
Agent shall have the right to establish reserves in such amounts, and with
respect to such matters, as Agent in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves with
respect to (i) sums that Borrowers are required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any Section
of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral (other than any existing Permitted Lien set forth on Schedule
--------
P-1 which is specifically identified thereon as entitled to have priority over
---
the Agent's Liens), which Lien or trust, in the Permitted Discretion of Agent
likely would have a priority superior to the Agent's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral. In addition to the foregoing, Agent shall have the right to have
the Inventory reappraised by a qualified appraisal company selected by Agent
from time to time after the Closing Date for the purpose of redetermining the
Net Liquidation Percentage of the Eligible Inventory portion of the Collateral
and, as a result, redetermining the Borrowing Base, as Agent in its Permitted
Discretion shall deem necessary or appropriate.
29
(c) The Lenders shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Intentionally Omitted.
---------------------
2.3 Borrowing Procedures and Settlements.
------------------------------------
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 1:00 p.m. (Georgia time) on the
Business Day prior to the date that is the requested Funding Date in the case of
a request for an Advance specifying (i) the amount of such Borrowing, and (ii)
the requested Funding Date, which shall be a Business Day; provided, however,
-------- -------
that in the case of a request for Swing Loan in an amount of $15,000,000, or
less, such notice will be timely received if it is received by Agent no later
than 1:00 p.m. (Georgia time) on the Business Day that is the requested Funding
Date) specifying (i) the amount of such Borrowing, and (ii) the requested
Funding Date, which shall be a Business Day. At Agent's election, in lieu of
delivering the above-described written request, any Authorized Person may give
Agent telephonic notice of such request by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving of
such notice.
(b) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i)
--------------
to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii)
--------------
if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested
--------------
Borrowing; provided, however, that if Swing Lender declines in its sole
-------- -------
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
--------------
have the terms of Section 2.3(c) apply to such requested Borrowing.
--------------
(c) Making of Advances.
(i) In the event that Agent shall elect to have the terms of this
Section 2.3(c) apply to a requested Borrowing as described in Section
-------------- -------
2.3(b), then promptly after receipt of a request for a Borrowing
------
pursuant to Section 2.3(a), Agent shall notify the Lenders, not later
--------------
than 4:00 p.m. (Georgia time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy, telephone,
or other similar form of transmission, of the requested Borrowing.
Each Lender shall make the amount of such Lender's Pro Rata Share of
the requested Borrowing available to Agent in immediately available
funds, to Agent's Account, not later than 1:00 p.m. (Georgia time) on
the Funding Date applicable thereto. After Agent's receipt of the
proceeds of such Advances, upon satisfaction of the applicable
conditions precedent set forth in Section 3 hereof,
---------
30
Agent shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring immediately
available funds equal to such proceeds received by Agent to
Administrative Borrower's Designated Account; provided, however, that,
-------- -------
subject to the provisions of Section 2.3(i), Agent shall not request
--------------
any Lender to make, and no Lender shall have the obligation to make,
any Advance if Agent shall have actual knowledge that (1) one or more
of the applicable conditions precedent set forth in Section 3 will not
---------
be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (2) the requested
Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to
the Closing Date or, with respect to any Borrowing after the Closing
Date, at least 1 Business Day prior to the date of such Borrowing,
that such Lender will not make available as and when required
hereunder to Agent for the account of Borrowers the amount of that
Lender's Pro Rata Share of the Borrowing, Agent may assume that each
Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount. If and to
the extent any Lender shall not have made its full amount available to
Agent in immediately available funds and Agent in such circumstances
has made available to Borrowers such amount, that Lender shall on the
Business Day following such Funding Date make such amount available to
Agent, together with interest at the Defaulting Lender Rate for each
day during such period. A notice submitted by Agent to any Lender with
respect to amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available, such
payment to Agent shall constitute such Lender's Advance on the date of
Borrowing for all purposes of this Agreement. If such amount is not
made available to Agent on the Business Day following the Funding
Date, Agent will notify Administrative Borrower of such failure to
fund and, upon demand by Agent, Borrowers shall pay such amount to
Agent for Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances composing
such Borrowing. The failure of any Lender to make any Advance on any
Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall
be responsible for the failure of any other Lender to make the Advance
to be made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrowers to Agent for the Defaulting
Lender's benefit, and, in the absence of such transfer to the
Defaulting Lender, Agent shall transfer any such payments to each
other non-Defaulting Lender member of the Lender Group ratably in
accordance with their Commitments (but only to the extent that such
Defaulting Lender's Advance was funded by the other members of the
Lender
31
Group) or, if so directed by Administrative Borrower and if no Default or Event
of Default had occurred and is continuing (and to the extent such Defaulting
Lender's Advance was not funded by the Lender Group), retain same to be
re-advanced to Borrowers as if such Defaulting Lender had made Advances to
Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrowers for the account of such Defaulting Lender the
amount of all such payments received and retained by it for the account of such
Defaulting Lender. Solely for the purposes of voting or consenting to matters
with respect to the Loan Documents, such Defaulting Lender shall be deemed not
to be a "Lender" and such Lender's Commitment shall be deemed to be zero. This
Section shall remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable, (y) the non-Defaulting Lenders, Agent, and
Administrative Borrower shall have waived such Defaulting Lender's default in
writing, or (z) the Defaulting Lender makes its Pro Rata Share of the applicable
Advance and pays to Agent all amounts owing by Defaulting Lender in respect
thereof. The operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, to relieve or excuse the
performance by such Defaulting Lender or any other Lender of its duties and
obligations hereunder, or to relieve or excuse the performance by Borrowers of
their duties and obligations hereunder to Agent or to the Lenders other than
such Defaulting Lender. Any such failure to fund by any Defaulting Lender shall
constitute a material breach by such Defaulting Lender of this Agreement and
shall entitle Administrative Borrower at its option, upon written notice to
Agent, to arrange for a substitute Lender to assume the Commitment of such
Defaulting Lender, such substitute Lender to be acceptable to Agent. In
connection with the arrangement of such a substitute Lender, the Defaulting
Lender shall have no right to refuse to be replaced hereunder, and agrees to
execute and deliver a completed form of Assignment and Acceptance Agreement in
favor of the substitute Lender (and agrees that it shall be deemed to have
executed and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (including an assumption of its
Pro Rata Share of the Risk Participation Liability) without any premium or
penalty of any kind whatsoever; provided further, however, that any such
-------- ------- -------
assumption of the Commitment of such Defaulting Lender shall not be deemed to
constitute a waiver of any of the Lender Groups' or Borrowers' rights or
remedies against any such Defaulting Lender arising out of or in relation to
such failure to fund.
(d) Making of Swing Loans.
(i) In the event Agent shall elect, with the consent of Swing
Lender, as a Lender, to have the terms of this Section 2.3(d)
--------------
apply to a requested Borrowing as described in Section 2.3(b),
--------------
Swing Lender as a Lender shall make such Advance in the amount
of such Borrowing (any such Advance made solely by Swing
Lender as a Lender pursuant to this Section 2.3(d) being
--------------
referred to as a
32
"Swing Loan" and such Advances being referred to collectively as
----------
"Swing Loans") available to Borrowers on the Funding Date applicable
-----------
thereto by transferring immediately available funds to Administrative
Borrower's Designated Account. Each Swing Loan is an Advance hereunder
and shall be subject to all the terms and conditions applicable to
other Advances, except that no such Swing Loan shall be eligible for
the LIBOR Option and payments on any Swing Loan shall be payable to
Swing Lender as a Lender solely for its own account (and for the
account of the holder of any participation interest with respect to
such Swing Loan). Subject to the provisions of Section 2.3(i), Agent
--------------
shall not request Swing Lender as a Lender to make, and Swing Lender
as a Lender shall not make, any Swing Loan if Agent has actual
knowledge that (i) one or more of the applicable conditions precedent
set forth in Section 3 will not be satisfied on the requested Funding
---------
Date for the applicable Borrowing unless such condition has been
waived, or (ii) the requested Borrowing would exceed the Availability
on such Funding Date. Swing Lender as a Lender shall not otherwise be
required to determine whether the applicable conditions precedent set
forth in Section 3 have been satisfied on the Funding Date applicable
---------
thereto prior to making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's Liens, shall
constitute Advances and Obligations hereunder, and shall bear interest
at the rate applicable from time to time to Advances that are Base
Rate Loans.
(e) Agent Advances.
(i) Agent hereby is authorized by Borrowers and the Lenders,
from time to time in Agent's sole discretion, (1) after the occurrence
and during the continuance of a Default or an Event of Default, or (2)
at any time that any of the other applicable conditions precedent set
forth in Section 3 have not been satisfied, to make Advances to
---------
Borrowers on behalf of the Lenders that Agent, in its Permitted
Discretion deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of
repayment of the Obligations, or (C) to pay any other amount
chargeable to Borrowers pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses
described in Section 10 (any of the Advances described in this Section
---------- -------
2.3(e) shall be referred to as "Agent Advances"). Each Agent Advance
------ --------------
is an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, except that no such Agent
Advance shall be eligible for the LIBOR Option and all payments
thereon shall be payable to Agent solely for its own account (and for
the account of the holder of any participation interest with respect
to such Agent Advance).
(ii) The Agent Advances shall be repayable on demand and secured
by the Agent's Liens granted to Agent under the Loan Documents, shall
constitute
33
Advances and Obligations hereunder, and shall bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.
(f) Settlement. It is agreed that each Lender's funded portion of the
Advances is intended by the Lenders to equal, at all times, such Lender's Pro
Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent,
Swing Lender, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with the Lenders on
----------
a weekly basis, or on a more frequent basis if so determined by Agent, (1)
on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2)
for itself, with respect to each Agent Advance, and (3) with respect to
Collections of any Borrower received, as to each by notifying the Lenders
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 5:00 p.m. (Georgia time) on the
Business Day immediately prior to the date of such requested Settlement
(the date of such requested Settlement being the "Settlement Date"). Such
---------------
notice of a Settlement Date shall include a summary statement of the amount
of outstanding Advances, Swing Loans, and Agent Advances for the period
since the prior Settlement Date. Subject to the terms and conditions
contained herein (including Section 2.3(c)(iii)): (y) if a Lender's balance
---------------------
of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro
Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, then Agent shall, by no later than 3:00 p.m. (Georgia
time) on the Settlement Date, transfer in immediately available funds to
the account of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and
Agent Advances is less than such Lender's Pro Rata Share of the Advances,
Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall
no later than 3:00 p.m. (Georgia time) on the Settlement Date transfer in
immediately available funds to the Agent's Account, an amount such that
each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the portion of
such Swing Loan or Agent Advance representing Swing Lender's Pro Rata Share
thereof, shall constitute Advances of such Lenders. If any such amount is
not made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be entitled
to recover for its account such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate.
34
(ii) In determining whether a Lender's balance of the Advances, Swing
Loans, and Agent Advances is less than, equal to, or greater than such
Lender's Pro Rata Share of the Advances, Swing Loans, and Agent Advances as
of a Settlement Date, Agent shall, as part of the relevant Settlement,
apply to such balance the portion of payments actually received in good
funds by Agent with respect to principal, interest, fees payable by
Borrowers and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any such Lender
after such application, such net amount shall be distributed by Agent to
that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent Advances
or Swing Loans are outstanding, may pay over to Swing Lender any payments
received by Agent, that in accordance with the terms of this Agreement
would be applied to the reduction of the Advances, for application to Swing
Lender's Pro Rata Share of the Advances. If, as of any Settlement Date,
Collections of any Borrower received since the then immediately preceding
Settlement Date have been applied to Swing Lender's Pro Rata Share of the
Advances other than to Swing Loans, as provided for in the previous
sentence, Swing Lender shall pay to Agent for the accounts of the Lenders,
and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Swing
Lender with respect to Swing Loans, Agent with respect to Agent Advances,
and each Lender (subject to the effect of letter agreements between Agent
and individual Lenders) with respect to the Advances other than Swing Loans
and Agent Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the daily amount of funds employed by
Swing Lender, Agent, or the Lenders, as applicable.
(g) Notation. Agent shall record on its books the principal amount of the
Advances owing to each Lender, including the Swing Loans owing to Swing Lender,
and Agent Advances owing to Agent, and the interests therein of each Lender,
from time to time. In addition, each Lender is authorized, at such Lender's
option, to note the date and amount of each payment or prepayment of principal
of such Lender's Advances in its books and records, including computer records,
such books and records constituting conclusive evidence, absent manifest error,
of the accuracy of the information contained therein.
(h) Lenders' Failure to Perform. All Advances (other than Swing Loans and
Agent Advances) shall be made by the Lenders contemporaneously and in accordance
with their Pro Rata Shares. It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.
35
(i) Optional Overadvances.
(i) Any contrary provision of this Agreement notwithstanding,
the Lenders hereby authorize Agent or Swing Lender, as applicable, and
Agent or Swing Lender, as applicable, may, but is not obligated to,
knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists
or thereby would be created, so long as (x) after giving effect to
such Advances (including a Swing Loan), the Revolver Usage does not
exceed the Borrowing Base by more than $500,000, (y) after giving
effect to such Advances (including a Swing Loan) the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) does not exceed
the Maximum Revolver Amount, and (z) at the time of the making of any
such Advance (including a Swing Loan), Agent does not believe, in good
faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions are for
the exclusive benefit of Agent, Swing Lender, and the Lenders and are
not intended to benefit Borrowers in any way. The Advances and Swing
Loans, as applicable, that are made pursuant to this Section 2.3(i)
--------------
shall be subject to the same terms and conditions as any other Advance
or Swing Loan, as applicable, except that they shall not be eligible
for the LIBOR Option and the rate of interest applicable thereto shall
be the rate applicable to Advances that are Base Rate Loans under
Section 2.6(c) hereof without regard to the presence or absence of a
--------------
Default or Event of Default.
(ii) In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of, or reason for, such excess,
Agent shall notify Lenders as soon as practicable (and prior to making
any (or any additional) intentional Overadvances (except for and
excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) unless Agent determines that prior notice would
result in imminent harm to the Collateral or its value), and the
Lenders with Commitments thereupon shall, together with Agent, jointly
determine the terms of arrangements that shall be implemented with
Borrowers and intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an amount
permitted by the preceding paragraph. In the event Agent or any Lender
disagrees over the terms of reduction or repayment of any Overadvance,
the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.
(iii) Each Lender with a Commitment shall be obligated to settle
with Agent as provided in Section 2.3(f) for the amount of such
--------------
Lender's Pro Rata Share of any unintentional Overadvances by Agent
reported to such Lender, any intentional Overadvances made as
permitted under this Section 2.3(i), and any Overadvances resulting
--------------
from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
36
2.4 Payments.
--------
(a) Payments by Borrowers.
(i) Except as otherwise expressly provided herein, all payments
by Borrowers shall be made to Agent's Account for the account of the
Lender Group and shall be made in immediately available funds, no
later than 2:00 p.m. (Georgia time) on the date specified herein. Any
payment received by Agent later than 2:00 p.m. (Georgia time), shall
be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue until such
following Business Day.
(ii) Unless Agent receives notice from Administrative Borrower
prior to the date on which any payment is due to the Lenders that
Borrowers will not make such payment in full as and when required,
Agent may assume that Borrowers have made (or will make) such payment
in full to Agent on such date in immediately available funds and Agent
may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrowers do not
make such payment in full to Agent on the date when due, each Lender
severally shall repay to Agent on demand such amount distributed to
such Lender, together with interest thereon at the Defaulting Lender
Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(b) Apportionment and Application.
(i) Except as otherwise provided with respect to Defaulting
Lenders and except as otherwise provided in the Loan Documents
(including letter agreements between Agent and individual Lenders),
aggregate principal and interest payments shall be apportioned ratably
among the Lenders (according to the unpaid principal balance of the
Obligations to which such payments relate held by each Lender) and
payments of fees and expenses (other than fees or expenses that are
for Agent's separate account, after giving effect to any letter
agreements between Agent and individual Lenders) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of
Commitment or Obligation to which a particular fee relates. All
payments shall be remitted to Agent and all such payments (other than
payments received while no Default or Event of Default has occurred
and is continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the payment of
specific fees), and all proceeds of Accounts or other Collateral
received by Agent, shall be applied as follows:
A. first, to pay any Lender Group Expenses then due to Agent
-----
under the Loan Documents, until paid in full,
37
B. second, to pay any Lender Group Expenses then due to the
------
Lenders under the Loan Documents, on a ratable basis, until paid
in full,
C. third, to pay any fees then due to Agent (for its
-----
separate accounts, after giving effect to any letter agreements
between Agent and the individual Lenders) under the Loan Documents
until paid in full,
D. fourth, to pay any fees then due to any or all of the
------
Lenders (after giving effect to any letter agreements between
Agent and individual Lenders) under the Loan Documents, on a
ratable basis, until paid in full,
E. fifth, to pay interest due in respect of all Agent
-----
Advances, until paid in full,
F. sixth, ratably to pay interest due in respect of the
-----
Advances (other than Agent Advances) and the Swing Loans until
paid in full,
G. seventh, to pay the principal of all Agent Advances until
-------
paid in full,
H. eighth, to pay the principal of all Swing Loans until
------
paid in full,
I. ninth, to pay the principal of all Advances until paid in
-----
full,
J. tenth, if an Event of Default has occurred and is
-----
continuing, to Agent, to be held by Agent, for the ratable benefit
of Issuing Lender and those Lenders having a Commitment, as cash
collateral in an amount up to 105% of the then extant Letter of
Credit Usage until paid in full,
K. eleventh, to pay any other Obligations until paid in
--------
full, and
L. twelfth, to Borrowers (to be wired to the Designated
-------
Account) or such other Person entitled thereto under applicable
law.
(ii) Agent promptly shall distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in writing,
such funds as it may be entitled to receive, subject to a Settlement
delay as provided in Section 2.3(h).
--------------
(iii) In each instance, so long as no Default or Event of Default
has occurred and is continuing, Section 2.4(b) shall not be deemed to
--------------
apply to any payment by Borrowers specified by Borrowers to be for the
payment of specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.
38
(iv) For purposes of the foregoing, "paid in full" means payment
of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest
on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(v) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained in any
-----------
other Loan Document, it is the intention of the parties hereto that
such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this Section 2.4
-----------
shall control and govern.
2.5 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrowers to the Lender Group pursuant to Sections 2.1 and
------------
2.12 is greater than either the Dollar or percentage limitations set forth in
----
Sections 2.1 or 2.12, (an "Overadvance"), Borrowers immediately shall pay to
------------ ----
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priorities set forth in Section
-------
2.4(b). In addition, Borrowers hereby promise to pay the Obligations (including
------
principal, interest, fees, costs, and expenses) in Dollars in full to the Lender
Group as and when due and payable under the terms of this Agreement and the
other Loan Documents.
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
-------------------------------------------------------------
Calculations.
------------
(a) Interest Rates. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit) that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof as follows (i) if the relevant Obligation is an Advance that is
a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus
the Base Rate Margin.
(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable
benefit of the Lenders with a Commitment, subject to any letter agreement
between Agent and individual Lenders), a Letter of Credit fee (in addition to
the charges, commissions, fees, and costs set forth in Section 2.12(e)) which
----------------
shall accrue at a rate equal to 2.00% per annum times the Daily Balance of the
undrawn amount of all outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the continuation of
an Event of Default (and at the election of Agent or the Required Lenders),
(i) all Obligations (except for undrawn Letters of Credit ) that
have been charged to the Loan Account pursuant to the terms hereof
shall bear interest
39
on the Daily Balance thereof at a per annum rate equal to 2 percentage
points above the per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 2 percentage points above the per annum rate otherwise
applicable hereunder.
(d) Payment. Interest, Letter of Credit fees, and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or Commitments are outstanding. Borrowers
hereby authorize Agent, from time to time, without prior notice to Borrowers, to
charge such interest and fees, all Lender Group Expenses (as and when incurred),
the charges, commissions, fees, and costs provided for in Section 2.12(e) (as
---------------
and when accrued or incurred), the fees and costs provided for in Section 2.11
------------
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document to Borrowers' Loan Account, which amounts
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
-------- -------
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
2.7 Cash Management.
---------------
(a) Borrowers shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Agent at one or more of the
banks set forth on Schedule 2.7(a) (each a "Cash Management Bank"), and shall
--------------- --------------------
request in writing and otherwise take such reasonable steps to ensure that all
of its Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof,
40
all Collections of any Borrower (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Agent's name (a "Cash
----
Management Account") at one of the Cash Management Banks.
------------------
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Agent and Borrowers, in form and substance acceptable
to Agent. Each such Cash Management Agreement shall provide, among other things,
that (i) all items of payment deposited in such Cash Management Account and
proceeds thereof are held by such Cash Management Bank agent or
bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Agent's
Account.
(c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.7(a) to add or replace
---------------
a Cash Management Account Bank or Cash Management Account; provided, however,
-------- -------
that (i) such prospective Cash Management Bank shall be satisfactory to Agent
and Agent shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrowers and such
prospective Cash Management Bank shall have executed and delivered to Agent a
Cash Management Agreement. Borrowers shall, within 60 days of notice from Agent
that the creditworthiness of any Cash Management Bank is no longer acceptable in
Agent's reasonable judgment, or as promptly as practicable and in any event
within 60 days of notice from Agent that the operating performance, funds
transfer, or availability procedures or performance of the Cash Management Bank
with respect to Cash Management Accounts or Agent's liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in
Agent's reasonable judgment, (x) establish replacement Cash Management Accounts
in accordance with clauses (i) and (ii) above, and (y) direct all Account
Debtors to remit payments to the new Cash Management Accounts in writing, and
Borrowers shall close such unacceptable Cash Management Accounts as soon as
reasonably practicable thereafter.
(d) The Cash Management Accounts shall be cash collateral accounts,
with all cash, checks and similar items of payment in such accounts securing
payment of the Obligations, and in which Borrowers are hereby deemed to have
granted a Lien to Agent.
2.8 Crediting Payments; Float Charge. The receipt of any payment item by
--------------------------------
Agent (whether from transfers to Agent by the Cash Management Banks pursuant to
the Cash Management Agreements or otherwise) shall not be considered a payment
on account unless such payment item is a wire transfer of immediately available
federal funds made to the Agent's Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the
41
contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into the Agent's Account on a Business
Day on or before 2:00 p.m. (Georgia time). If any payment item is received into
the Agent's Account on a non-Business Day or after 2:00 p.m. (Georgia time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day. From and after
the Closing Date, Agent shall be entitled to charge Borrowers for two Business
Days of 'clearance' or 'float' at the rate applicable to Base Rate Loans under
Section 2.6 on all Collections that are received by any Borrower (regardless of
-----------
whether forwarded by the Cash Management Banks to Agent). This across-the-board
two Business Day clearance or float charge on all such Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrowers and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging two Business Days of interest on such
Collections. The parties acknowledge and agree that the economic benefit of the
foregoing provisions of this Section 2.8 shall be for the exclusive benefit of
-----------
Agent.
2.9 Designated Account. Agent is authorized to make the Advances and
------------------
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Administrative Borrower agrees to establish and maintain the
--------------
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower,
any Advance, Agent Advance, or Swing Loan requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
------------------------------------------------------
maintain an account on its books in the name of Borrowers (the "Loan Account")
------------
on which Borrowers will be charged with all Advances (including Agent Advances
and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for
Borrowers' account, the Letters of Credit issued by Issuing Lender for
Borrowers' account, and with all other payment Obligations hereunder or under
the other Loan Documents, including, accrued interest, fees and expenses, and
Lender Group Expenses. In accordance with Section 2.8, the Loan Account will be
-----------
credited with all payments received by Agent from Borrowers or for Borrowers'
account, including all amounts received in the Agent's Account from any Cash
Management Bank. Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrowers and the Lender Group
unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.
2.11 Fees. Borrowers shall pay to Agent the following fees and charges,
----
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is
42
terminated thereafter) and shall be apportioned among the Lenders in accordance
with the terms of letter agreements between Agent and individual Lenders:
(a) Unused Line Fee. On the first day of each month during the term of this
Agreement, an unused line fee in the amount equal to 0.50% per annum times the
result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the average
Daily Balance of Advances that were outstanding during the immediately preceding
month, plus (ii) the average Daily Balance of the Letter of Credit Usage during
the immediately preceding month,
(b) Fee Letter Fees. As and when due and payable under the terms of the Fee
Letter, Borrowers shall pay to Agent the fees set forth in the Fee Letter, and
(c) Audit, Appraisal, and Valuation Charges. For the separate account of
Agent, audit, appraisal, and valuation fees and charges as follows, (i) a fee of
$850 per day, per auditor, plus reasonable out-of-pocket expenses for each
financial audit of a Borrower performed by personnel employed by Agent, (ii) if
implemented, a one time charge of $3,000 plus reasonable out-of-pocket expenses
for the establishment of electronic collateral reporting systems, (iii) a fee of
$1,500 per day per appraiser, plus reasonable out-of-pocket expenses, for each
appraisal of the Collateral performed by personnel employed by Agent, and (iv)
the actual charges paid or incurred by Agent if it elects to employ the services
of one or more third Persons to perform financial audits of Borrowers, to
appraise the Collateral, or any portion thereof, or to assess a Borrower's
business valuation.
43
2.12 Letters of Credit
-----------------
(a) Subject to the terms and conditions of this Agreement, the Issuing
Lender agrees to issue letters of credit for the account of Borrowers (each, an
"L/C") or to purchase participations or execute indemnities or reimbursement
---
obligations (each such undertaking, an "L/C Undertaking") with respect to
---------------
letters of credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be Xxxxx Fargo) for the account of
Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Administrative Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the
Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the
requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew, or
extend such L/C or L/C Undertaking. If requested by the Issuing Lender,
Borrowers also shall be an applicant under the application with respect to any
Underlying Letter of Credit that is to be the subject of an L/C Undertaking. The
Issuing Lender shall have no obligation to issue a Letter of Credit if any of
the following would result after giving effect to the requested Letter of
Credit:
(i) the Letter of Credit Usage would exceed the Borrowing Base
less the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $10,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the then extant amount of outstanding Advances.
Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 2:00 p.m., Georgia time, on the date that such L/C Disbursement is made, if
Administrative Borrower shall have received written or telephonic notice of such
L/C Disbursement prior to 1:00 p.m., Georgia time, on such date, or, if such
notice has not been received by Administrative Borrower prior to such time on
such date, then not later than 2:00 p.m., Georgia time, on (i) the Business Day
that Administrative Borrower receives such notice, if such notice is received
prior to 1:00 p.m., Georgia time, on the date of receipt, and, in the
44
absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance
-----------
hereunder, Borrowers' obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt by
Agent of any payment from Borrowers pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender,
---------------
then to such Lenders and the Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender with a Commitment agrees to fund its
---------------
Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection
on the same terms and conditions as if Borrowers had requested such Advance and
Agent shall promptly pay to Issuing Lender the amounts so received by it from
the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter
of Credit increasing the amount thereof) and without any further action on the
part of the Issuing Lender or the Lenders with Commitment, the Issuing Lender
shall be deemed to have granted to each Lender with a Commitment, and each
Lender with a Commitment shall be deemed to have purchased, a participation in
each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit, and each such Lender agrees to
pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata
Share of any payments made by the Issuing Lender under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender with a Commitment
hereby absolutely and unconditionally agrees to pay to Agent, for the account of
the Issuing Lender, such Lender's Pro Rata Share of each L/C Disbursement made
by the Issuing Lender and not reimbursed by Borrowers on the date due as
provided in clause (a) of this Section, or of any reimbursement payment required
to be refunded to Borrowers for any reason. Each Lender with a Commitment
acknowledges and agrees that its obligation to deliver to Agent, for the account
of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant
to this Section 2.12(b) shall be absolute and unconditional and such remittance
---------------
shall be made notwithstanding the occurrence or continuation of an Event of
Default or Default or the failure to satisfy any condition set forth in Section
-------
3 hereof. If any such Lender fails to make available to Agent the amount of such
-
Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of
such Letter of Credit as provided in this Section, Agent (for the account of the
Issuing Lender) shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Defaulting Lender Rate until paid
in full.
(c) Each Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided, however, that no Borrower shall
-------- -------
be obligated hereunder to indemnify for any loss, cost, expense, or liability
that is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. Each Borrower agrees to be bound
by the Underlying Issuer's regulations and interpretations of any Underlying
Letter of Credit or by Issuing Lender's interpretations of any L/C issued by
Issuing Lender to or for such Borrower's account, even
45
though this interpretation may be different from such Borrower's own, and each
Borrower understands and agrees that the Lender Group shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrowers' instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however, that no Borrower
-------- -------
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.
(d) Each Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by the
Issuing Lender relating to Underlying Letters of Credit shall be Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrowers to Agent for the account of the Issuing Lender; it being acknowledged
and agreed by each Borrower that, as of the Closing Date, the issuance charge
imposed by the prospective Underlying Issuer is .825% per annum times the face
amount of each Underlying Letter of Credit, that such issuance charge may be
changed from time to time, and that the Underlying Issuer also imposes a
schedule of charges for amendments, extensions, drawings, and renewals.
(f) If by reason of (i) any change after the date of this Agreement in
any applicable law, treaty, rule, or regulation or any change after the date of
this Agreement in the interpretation or application thereof by any Governmental
Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with
any direction, request, or requirement (irrespective of whether having the force
of law) of any Governmental Authority or monetary authority including,
Regulation D of the Federal Reserve Board as from time to time in effect (and
any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or the
Lender Group any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto;
46
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this Section, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
(g) Each Borrower acknowledges and agrees that certain of the
Qualified Import Letters of Credit may provide for the presentation of time
drafts to the Underlying Issuer. If an Underlying Issuer accepts such a time
draft that is presented under an Underlying Letter of Credit, it is acknowledged
and agreed that (i) the Letter of Credit will require the Issuing Lender to
reimburse the Underlying Issuer for amounts paid on account of such time draft
on or after the maturity date thereof, (ii)the pricing provisions hereof
(including Sections 2.6(b) and 2.12(e)) shall continue to apply, until payment
--------------- -------
of such time draft on or after the maturity date thereof, as if the Underlying
Letter of Credit were still outstanding, and (iii) on the date on which Issuing
Lender makes payment to the Underlying Issuer of the amounts paid on account of
such time draft, the Borrowers immediately shall reimburse such amount to
Issuing Lender and such amount shall constitute an L/C Disbursement hereunder.
2.13 LIBOR Option.
------------
(a) Interest and Interest Payment Dates. In lieu of having interest
charged at the rate based upon the Base Rate, Borrowers shall have the option
(the "LIBOR Option") to have interest on all or a portion of the Advances be
------------
charged at the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the
earliest of (i) the last day of the Interest Period applicable thereto, (ii) the
occurrence of an Event of Default in consequence of which the Required Lenders
or Agent on behalf thereof elect to accelerate the maturity of the Obligations,
or (iii) termination of this Agreement pursuant to the terms hereof. On the last
day of each applicable Interest Period, unless Administrative Borrower properly
has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any
time that an Event of Default has occurred and is continuing, Borrowers no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate and Agent shall have the right to convert the interest rate on all
outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans
hereunder.
(b) LIBOR Election.
(i) Administrative Borrower may, at any time and from time to
time, so long as no Event of Default has occurred and is continuing,
elect to exercise
47
the LIBOR Option by notifying Agent prior to 2:00 p.m. (Georgia time)
at least 3 Business Days prior to the commencement of the proposed
Interest Period (the "LIBOR Deadline"). Notice of Administrative
--------------
Borrower's election of the LIBOR Option for a permitted portion of the
Advances and an Interest Period pursuant to this Section shall be made
by delivery to Agent of a LIBOR Notice received by Agent before the
LIBOR Deadline, or by telephonic notice received by Agent before the
LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice
received by Agent prior to 5:00 p.m. (Georgia time) on the same day.
Promptly upon its receipt of each such LIBOR Notice, Agent shall
provide a copy thereof to each of the Lenders having a Commitment.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Loan, each Borrower
shall indemnify, defend, and hold Agent and the Lenders harmless
against any loss, cost, or expense incurred by Agent or any Lender as
a result of (a) the payment of any principal of any LIBOR Rate Loan
other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of
any LIBOR Rate Loan other than on the last day of the Interest Period
applicable thereto, or (c) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice
delivered pursuant hereto (such losses, costs, and expenses,
collectively, "Funding Losses"). Funding Losses shall, with respect to
Agent or any Lender, be deemed to equal the amount determined by Agent
or such Lender to be the excess, if any, of (i) the amount of interest
that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have
been applicable thereto, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period therefor), minus (ii) the amount
of interest that would accrue on such principal amount for such period
at the interest rate which Agent or such Lender would be offered were
it to be offered, at the commencement of such period, Dollar deposits
of a comparable amount and period in the London interbank market. A
certificate of Agent or a Lender delivered to Administrative Borrower
setting forth any amount or amounts that Agent or such Lender is
entitled to receive pursuant to this Section shall be conclusive
absent manifest error.
(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in
effect at any given time. Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of
$500,000 in excess thereof.
(c) Prepayments. Borrowers may prepay LIBOR Rate Loans at any time;
provided, however, that in the event that LIBOR Rate Loans are prepaid on any
-------- -------
date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance
48
with Section 2.4(b) or for any other reason, including early termination of the
--------------
term of this Agreement or acceleration of the Obligations pursuant to the terms
hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in accordance
with clause (b) above.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with respect to
any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or
obtaining any eurodollar deposits or increased costs due to
changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including
changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding the Reserve
Percentage, which additional or increased costs would increase
the cost of funding loans bearing interest at the LIBOR Rate. In
any such event, the affected Lender shall give Administrative
Borrower and Agent notice of such a determination and adjustment
and Agent promptly shall transmit the notice to each other Lender
and, upon its receipt of the notice from the affected Lender,
Administrative Borrower may, by notice to such affected Lender
(y) require such Lender to furnish to Administrative Borrower a
statement setting forth the basis for adjusting such LIBOR Rate
and the method for determining the amount of such adjustment, or
(z) repay the LIBOR Rate Loans with respect to which such
adjustment is made (together with any amounts due under clause
(b)(ii) above).
(ii) In the event that any change in market conditions or
any law, regulation, treaty, or directive, or any change therein
or in the interpretation of application thereof, shall at any
time after the date hereof, in the reasonable opinion of any
Lender, make it unlawful or impractical for such Lender to fund
or maintain LIBOR Advances or to continue such funding or
maintaining, or to determine or charge interest rates at the
LIBOR Rate, such Lender shall give notice of such changed
circumstances to Agent and Administrative Borrower and Agent
promptly shall transmit the notice to each other Lender and (y)
in the case of any LIBOR Rate Loans of such Lender that are
outstanding, the date specified in such Lender's notice shall be
deemed to be the last day of the Interest Period of such LIBOR
Rate Loans, and interest upon the LIBOR Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable to
Base Rate Loans, and (z) Borrowers shall not be entitled to elect
the LIBOR Option until such Lender determines that it would no
longer be unlawful or impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate. The provisions of this Section shall apply as if
49
each Lender or its Participants had match funded any Obligation as to which
interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each
Interest Period in the amount of the LIBOR Rate Loans.
2.14 Capital Requirements. If, after the date hereof, any Lender determines
--------------------
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof within 360 days
after such Lender obtains knowledge of such reduction. Following receipt of such
notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
2.15 Joint and Several Liability of Borrowers.
----------------------------------------
(a) Each of Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement,
for the mutual benefit, directly and indirectly, of each of Borrowers and in
consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations.
(b) Each of Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
-------------
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Persons composing Borrowers will make such payment with respect to, or
perform, such Obligation.
50
(d) The Obligations of each Person composing Borrowers under the
provisions of this Section 2.15 constitute the absolute and unconditional, full
------------
recourse Obligations of each Person composing Borrowers enforceable against each
such Borrower to the full extent of its properties and assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Person composing Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Advances or Letters of Credit issued under or
pursuant to this Agreement, notice of the occurrence of any Default, Event of
Default, or of any demand for any payment under this Agreement, notice of any
action at any time taken or omitted by Agent or Lenders under or in respect of
any of the Obligations, any requirement of diligence or to mitigate damages and,
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). Each Person composing Borrowers hereby
assents to, and waives notice of, any extension or postponement of the time for
the payment of any of the Obligations, the acceptance of any payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Agent or Lenders at any time or times
in respect of any default by any Person composing Borrowers in the performance
or satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by Agent or Lenders in respect of any
of the Obligations, and the taking, addition, substitution or release, in whole
or in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Person
composing Borrowers. Without limiting the generality of the foregoing, each of
Borrowers assents to any other action or delay in acting or failure to act on
the part of any Agent or Lender with respect to the failure by any Person
composing Borrowers to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this Section 2.15 afford
------------
grounds for terminating, discharging or relieving any Person composing
Borrowers, in whole or in part, from any of its Obligations under this Section
-------
2.15, it being the intention of each Person composing Borrowers that, so long as
----
any of the Obligations hereunder remain unsatisfied, the Obligations of such
Person composing Borrowers under this Section 2.15 shall not be discharged
------------
except by performance and then only to the extent of such performance. The
Obligations of each Person composing Borrowers under this Section 2.15 shall not
------------
be diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Person composing Borrowers or any Agent or Lender. The joint and several
liability of the Persons composing Borrowers hereunder shall continue in full
force and effect notwithstanding any absorption, merger, amalgamation or any
other change whatsoever in the name, constitution or place of formation of any
of the Persons composing Borrowers or any Agent or Lender.
(f) Each Person composing Borrowers represents and warrants to Agent
and Lenders that such Borrower is currently informed of the financial condition
of Borrowers and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Obligations. Each
Person composing Borrowers further represents and
51
warrants to Agent and Lenders that such Borrower has read and understands the
terms and conditions of the Loan Documents. Each Person composing Borrowers
hereby covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
(g) Intentionally Omitted.
(h) Each of the Persons composing Borrowers waives all rights and
defenses that such Borrower may have because the Obligations are secured by Real
Property. This means, among other things:
(i) Agent and Lenders may collect from such Borrower without
first foreclosing on any Real or Personal Property Collateral pledged
by Borrowers.
(ii) If Agent or any Lender forecloses on any Real Property
Collateral pledged by Borrowers:
A. The amount of the Obligations may be reduced only by the
price for which that collateral is sold at the foreclosure sale,
even if the collateral is worth more than the sale price.
B. Agent and Lenders may collect from such Borrower even if
Agent or Lenders, by foreclosing on the Real Property Collateral,
has destroyed any right such Borrower may have to collect from
the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property.
(i) The provisions of this Section 2.15 are made for the benefit of
------------
the Agent, the Lenders and their respective successors and assigns, and may be
enforced by it or them from time to time against any or all of the Persons
composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of this
Section 2.15 shall remain in effect until all of the Obligations shall have been
------------
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Agent or Lender upon the insolvency,
bankruptcy or reorganization of any of the Persons composing Borrowers, or
otherwise, the provisions of this Section 2.15 will forthwith be reinstated in
------------
effect, as though such payment had not been made.
52
(j) Each of the Persons composing Borrowers hereby agrees that it
will not enforce any of its rights of contribution or subrogation against the
other Persons composing Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
the Agent or the Lenders with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have been
paid in full in cash. Any claim which any Borrower may have against any other
Borrower with respect to any payments to any Agent or Lender hereunder or under
any other Loan Documents are hereby expressly made subordinate and junior in
right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.
(k) Each of the Persons composing Borrowers hereby agrees that,
after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness owing
by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that
after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, xxx for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Agent, and the Agent shall deliver
any such amounts to the Administrative Agent for application to the Obligations
in accordance with Section 2.4(b).
-------------
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The obligation
-------------------------------------------------------
of the Lender Group (or any member thereof) to make the initial Advance (or
otherwise to extend any credit provided for hereunder), is subject to the
fulfillment, to the satisfaction of Agent, of each of the conditions precedent
set forth below:
(a) the Closing Date shall occur on or before September 28, 2001;
(b) Agent shall have received all financing statements required
by Agent, duly executed by the applicable Borrowers, and Agent shall have
received searches reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and each such document
shall be in full force and effect:
(i) the Disbursement Letter,
53
(ii) the Due Diligence Letter,
(iii) the Fee Letter,
(iv) the Cash Management Agreements,
(v) the Mortgages,
(vi) the Officers' Certificate,
(vii) the Intellectual Property Security Agreement,
(viii) the Stock Pledge Agreements pledging all Stock of the
Domestic Subsidiaries, together with all certificates representing the
shares of Stock pledged thereunder, as well as Stock powers with
respect thereto endorsed in blank,
(ix) the Intercompany Subordination Agreement,
(x) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by the
agent pursuant to the Existing Credit Agreement of its Liens in and to
the properties and assets of any Borrower or Subsidiary, including,
without limitation, documents evidencing the termination of any
mortgages, deeds of trust and security interests in any intellectual
property in connection therewith, and
(xi) recent financial statements of, or information on, Cricket
and Lock\Line for such periods, and in form and substance, acceptable
to Agent.
(d) Agent shall have received a certificate from the Secretary of each
Borrower attesting to the resolutions of such Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Borrower is a party and authorizing specific
officers of such Borrower to execute the same;
(e) Agent shall have received copies of each Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
(f) Agent shall have received a certificate of status with respect to
each Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Borrower, which certificate shall indicate that such Borrower is in good
standing in such jurisdiction;
(g) Agent shall have received certificates of status with respect to
each Borrower, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such
54
Borrower) in which its failure to be duly qualified or licensed would constitute
a Material Adverse Change, which certificates shall indicate that such Borrower
is in good standing in such jurisdictions;
(h) Agent shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.8, the form and
-----------
substance of which shall be satisfactory to Agent;
(i) Agent shall have received Collateral Access Agreements with
respect to all leased locations, including, without limitation: 0000 XxXxxxxx,
Xxxxxxxxxx, Xxxxxx Xxxxxx, Xxxxx; 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxx
Xxxxxx, Xxxxx; 0000 XX 0000 Xxxx, Xxxxx X, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx; and
0000 XX 00xx Xxxxxx, Xxxxx, Xxxx Xxxxxx, together with all other locations where
any Eligible Inventory is at any time located;
(j) Agent shall have received opinions of Borrowers' counsel in form
and substance satisfactory to Agent;
(k) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of each Borrower) that all tax
returns required to be filed by Borrowers have been timely filed and all taxes
upon Borrowers or their properties, assets, income, and franchises (including
Real Property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest;
(l) Borrowers shall have the Required Availability after giving effect
to the initial extensions of credit hereunder;
(m) Agent shall have completed its business, legal, and collateral due
diligence, including (i) a collateral audit and review of Borrowers' books and
records and verification of Borrowers' representations and warranties to the
Lender Group, the results of which shall be satisfactory to Agent, and (ii) an
inspection of each of the locations where Inventory is located, the results of
which shall be satisfactory to Agent;
(n) Agent shall have received completed reference checks with respect
to Borrowers' senior management, the results of which are satisfactory to Agent
in its sole discretion;
(o) Agent shall have received an appraisal of the Net Liquidation
Percentage applicable to Borrowers' Inventory, the results of which shall be
satisfactory to Agent;
(p) Agent shall have received copies of Borrowers' unaudited
consolidated and consolidating financial statements for the fiscal year to date
period ended July 31, 2001;
(q) Agent shall have received Borrowers' Closing Date Business Plan;
(r) Borrowers shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
55
(s) Agent shall have received (i) appraisals of the Real Property
Collateral satisfactory to Agent, (ii) mortgagee title insurance policies (or
marked commitments to issue the same) for the Real Property Collateral issued by
a title insurance company satisfactory to Agent (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Agent assuring
Agent that the Mortgages on such Real Property Collateral are valid and
enforceable first priority mortgage Liens on such Real Property Collateral free
and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies otherwise shall be in form and substance satisfactory to
Agent, (iii) environmental indemnity agreements with respect to each such parcel
of Real Property Collateral, and (iv) local counsel opinions with respect to
each parcel of Real Property Collateral in form and substance satisfactory to
Agent;
(t) Agent shall have received satisfactory Inventory test counts and
other applicable audit testing for Borrowers' Inventory located in Miami,
Florida;
(u) Agent shall have reviewed copies of the Management Agreements and
such Management Agreements shall be in form and substance satisfactory to Agent,
including provisions with respect to payment of Management Fees;
(v) Borrowers shall have received all licenses, approvals or evidence
of other actions required by any Governmental Authority in connection with the
execution and delivery by Borrowers of this Agreement or any other Loan Document
or with the consummation of the transactions contemplated hereby and thereby;
and
(w) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Agent.
3.2 Conditions Subsequent to the Initial Extension of Credit. The
--------------------------------------------------------
obligation of the Lender Group (or any member thereof) to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) by October 15, 2001, Agent shall have received a real estate
survey with respect to each parcel composing the Real Property Collateral; the
surveyor retained for such survey, the scope of the such survey, and the results
thereof shall be acceptable to Agent;
(b) by October 15, 2001, Agent shall have received copies of each of
the Permitted Foreign Subsidiary Credit Facilities in effect as of the date
hereof and disclosed on Schedule P-2 hereto, and the Convertible Subordinated
------------
Debt Documents, together with a certificate of the Secretary of the applicable
Borrower certifying each such document as being a true, correct, and complete
copy thereof;
(c) within 30 days of the Closing Date, Borrowers shall deliver to
Agent certified copies of the policies of insurance, together with the
endorsements thereto, as are
56
required by Section 6.8, the form and substance of which shall be satisfactory
-----------
to Agent and its counsel;
(d) within 30 days of the Closing Date, Borrowers shall deliver to
Agent a transfer pricing study performed by Xxxxxx Xxxxxxxx in form and
substance satisfactory to Agent;
(e) within 90 days of the Closing Date, Borrowers shall deliver to
Agent the Stock Pledge Agreements pledging to Agent 65% of the Stock and other
equity interests held by any Borrower in any First Tier Foreign Subsidiary
(other than those Subsidiaries listed on Schedule 3.2 hereto), together with all
------------
opinions of foreign and U.S. counsel and all certificates representing the
shares of Stock pledged thereunder, as well as Stock powers with respect thereto
endorsed in blank; and
(f) by the Required Refinance Date, Borrowers shall refinance (in
accordance with Section 7.1(d) hereof), obtain an extension of the maturity date
--------------
for, or convert (provided that no Change of Control results therefrom), such
amount of the Convertible Subordinated Debt as required by, and in accordance
with, Section 6.16 hereof.
------------
3.3 Conditions Precedent to all Extensions of Credit. The obligation of the
------------------------------------------------
Lender Group (or any member thereof) to make all Advances (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the date of such extension of credit, as though made on and as of such
date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against any
Borrower, Agent, any Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and
----
delivery hereof by Borrowers, Agent, and the Lenders and shall continue in full
force and effect for a term ending on September 27, 2006 (the "Maturity Date").
-------------
The foregoing notwithstanding, the Lender Group, upon the election of the
Required Lenders, 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.
57
3.5 Effect of Termination. On the date of termination of this Agreement,
---------------------
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to any outstanding Letters of Credit) immediately shall become due
and payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrowers of their duties, Obligations, or covenants
hereunder and the Agent's Liens in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and the Lender Group's
obligations to provide additional credit hereunder have been terminated. When
this Agreement has been terminated and all of the Obligations have been fully
and finally discharged and the Lender Group's obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Agent will, at
Borrowers' sole expense, execute and deliver any UCC termination statements,
lien releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent's Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.
3.6 Early Termination by Borrowers. Borrowers have the option, at any time
------------------------------
upon 90 days prior written notice by Administrative Borrower to Agent, to
terminate this Agreement by paying to Agent, for the benefit of the Lender
Group, in cash, the Obligations (including either (i) providing cash collateral
to be held by Agent for the benefit of those Lenders with a Commitment in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender), in full,
together with the Applicable Prepayment Premium (to be allocated based upon
letter agreements between Agent and individual Lenders). If Administrative
Borrower has sent a notice of termination pursuant to the provisions of this
Section, then the Commitments shall terminate and Borrowers shall be obligated
to repay the Obligations (including either (i) providing cash collateral to be
held by Agent for the benefit of those Lenders with a Commitment in an amount
equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to the Issuing Lender), in full,
together with the Applicable Prepayment Premium, on the date set forth as the
date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise
of the Obligations by the confirmation of a plan of reorganization, or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
58
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower hereby grants to Agent, for
--------------------------
the benefit of the Lender Group, a continuing security interest in all of its
right, title, and interest in all currently existing and hereafter acquired or
arising Personal Property Collateral in order to secure prompt repayment of any
and all of the Obligations in accordance with the terms and conditions of the
Loan Documents and in order to secure prompt performance by Borrowers of each of
their covenants and duties under the Loan Documents. The Agent's Liens in and to
the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of Agent or Borrowers. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrowers have no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
---------------------
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Agent's security interest is dependent
on or enhanced by possession, the applicable Borrower, immediately upon the
request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.
----------------------------------------------------------------------
At any time after the occurrence and during the continuation of an Event of
Default, Agent or Agent's designee may (a) notify Account Debtors of Borrowers
that the Accounts, chattel paper, or General Intangibles have been assigned to
Agent or that Agent has a security interest therein, or (b) collect the
Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Each Borrower agrees that it
will hold in trust for the Lender Group, as the Lender Group's trustee,
Collections of any Borrower that such Borrower receives and immediately will
deliver said Collections to Agent or a Cash Management Bank in their original
form as received by the applicable Borrower.
4.4 Delivery of Additional Documentation Required; Authorization to File
--------------------------------------------------------------------
UCC Financing Statements. Each Borrower authorizes Agent to file, transmit, or
------------------------
communicate, as applicable, UCC financing statements, in-lieu financing
statements and amendments describing the Collateral as "all personal property of
Borrowers" or words of similar effect, in order to perfect the Agent's Liens on
the Collateral without such Borrower's signature to the extent permitted by
applicable law. Notwithstanding the foregoing, at any time upon the request of
Agent, Borrowers shall execute and deliver to Agent, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the "Additional Documents") upon
--------------------
which any Borrower's signature may be required and that Agent may request in its
Permitted Discretion, in form and substance satisfactory to Agent, to perfect
and continue perfected or better perfect the Agent's Liens in the Collateral
(whether now owned or hereafter arising or acquired), to create and perfect
Liens in favor of Agent in any Real Property acquired after the Closing Date,
and in order to fully consummate all of the transactions contemplated hereby and
under the other Loan Documents. To the maximum extent permitted by applicable
law, each Borrower authorizes Agent to execute any such Additional Documents in
59
the applicable Borrower's name and authorize Agent to file such executed
Additional Documents in any appropriate filing office. No Borrower shall
terminate, amend or file a correction statement with respect to any UCC
financing statement filed pursuant to this Section 4 without Agent's prior
---------
written consent. In addition, on such periodic basis as Agent shall require,
Borrowers shall (a) provide Agent with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrowers
during the prior period, and (b) cause to be prepared, executed, and delivered
to Agent supplemental schedules to the applicable Loan Documents to identify
such patents, copyrights, and trademarks as being subject to the security
interests created thereunder. In addition, Borrowers agree that, upon acquiring
any interest in a commercial tort claim such Borrower shall, in writing,
describe the details of such claim and assign an interest thereto to Agent, and
upon acquiring any chattel paper after the date hereof (electronic, tangible or
otherwise), such Borrower shall assign to Agent a security interest in such
chattel paper, or if applicable, deliver such chattel paper to Agent as
Collateral hereunder.
4.5 Power of Attorney. Each Borrower hereby irrevocably makes, constitutes,
-----------------
and appoints Agent (and any of Agent's officers, employees, or agents designated
by Agent) as such Borrower's true and lawful attorney, with power to (a) if such
Borrower refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of such Borrower on any of the documents
-----------
described in Section 4.4, (b) at any time that an Event of Default has occurred
-----------
and is continuing, sign such Borrower's name on any invoice or xxxx of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts, (d) endorse
such Borrower's name on any Collection item that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as each Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group's obligations to extend credit
hereunder are terminated.
4.6 Right to Inspect. Agent and each Lender (through any of their
----------------
respective officers, employees, or agents) shall have the right, from time to
time and during normal business hours, to inspect the Books and to check, test,
and appraise the Collateral in order to verify Borrowers' financial condition or
the amount, quality, value, condition of, or any other matter relating to, the
Collateral. Borrower shall allow Agent to conduct Inventory appraisals, at
Agent's option, one time each quarter, and shall provide Agent with Real
Property appraisals and Phase I environmental reports upon request, but absent
the occurrence of an Event of Default, not more frequently than once every 2
years, in form and substance satisfactory to Agent.
60
4.7 Control Agreements. Each Borrower agrees that it will not transfer
------------------
assets out of any Securities Accounts other than as permitted under Section 7.19
------------
and, if to another securities intermediary, unless each of the applicable
Borrower, Agent, and the substitute securities intermediary have entered into a
Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrowers without the prior written consent of Agent. Upon
the occurrence and during the continuance of an Event of Default, Agent may
notify any securities intermediary to liquidate the applicable Securities
Account or any related Investment Property maintained or held thereby and remit
the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, each
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material respects,
as of the Closing Date, and at and as of the date of the making of each Advance
(or other extension of credit) made thereafter, as though made on and as of the
date of such Advance (or other extension of credit) (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 No Encumbrances. Each Borrower has good and indefeasible title to its
---------------
Collateral and the Real Property, free and clear of Liens except for Permitted
Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide existing payment
-----------------
obligations of Account Debtors created by the sale and delivery of Inventory or
the rendition of services to such Account Debtors in the ordinary course of
Borrowers' business, owed to Borrowers without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. As to each Account that is
included as an Eligible Account on a Borrowing Base Certificate, such Account
meets all of the requirements of an Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
------------------
quality, free from defects. As to each item of Inventory that is included as
Eligible Inventory on a Borrowing Base Certificate, such Inventory meets all of
the requirements for Eligible Inventory.
5.4 Equipment. All of the Equipment is used or held for use in Borrowers'
---------
business and is fit for such purposes.
5.5 Location of Inventory and Equipment. Except as disclosed on Schedule
----------------------------------- --------
5.5, the Inventory and Equipment are not stored with a bailee, warehouseman, or
---
similar party and are located only at the locations in the U.S. identified on
Schedule 5.5.
------------
5.6 Inventory Records. Each Borrower keeps correct and accurate records
-----------------
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
61
5.7 Location of Chief Executive Office; FEIN. The chief executive office of
----------------------------------------
each Borrower is located at the address indicated in Schedule 5.7 and each
------------
Borrower's FEIN and organizational identification number issued by such
Borrower's state of formation or incorporation is identified in Schedule 5.7.
------------
5.8 Due Organization and Qualification; Subsidiaries
------------------------------------------------
(a) Each Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified reasonably could
be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
---------------
description of the authorized Stock of each Borrower, by class, and, as of the
Closing Date, a description of the number of shares of each such class that are
issued and outstanding. Other than as described on Schedule 5.8(b), there are no
---------------
subscriptions, options, warrants, or calls relating to any shares of each
Borrower's Stock, including any right of conversion or exchange under any
outstanding security or other instrument. No Borrower is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Stock or any security convertible into or exchangeable
for any of its Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate list
---------------
of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the applicable Borrower. All of the outstanding Stock
of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
---------------
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' Stock, including any right of conversion or exchange
under any outstanding security or other instrument. No Borrower or any of its
respective Subsidiaries is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of any Borrower's
Subsidiaries' Stock or any security convertible into or exchangeable for any
such Stock.
5.9 Due Authorization; No Conflict.
------------------------------
(a) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
have been duly authorized by all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and performance
by such Borrower of this Agreement and the Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local law or
regulation applicable to any Borrower, the Governing Documents of any Borrower,
or any order, judgment, or decree of any court or other Governmental Authority
binding on any Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual
62
obligation of any Borrower, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
Borrower, other than Permitted Liens, or (iv) except as set forth on Schedule
--------
5.9, require any approval of any Borrower's interestholders or any approval or
---
consent of any Person under any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements, fixture
filings, and Mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which such Borrower is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Governmental Authority or
other Person, except such consents, registrations or other similar filings as
may be required in connection with the pledge of Stock of Foreign Subsidiaries.
(d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(e) The Agent's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
5.10 Litigation. Other than those matters disclosed on Schedule
---------- --------
5.10, there are no actions, suits, or proceedings pending or, to the best
----
knowledge of Borrowers, threatened against Borrowers, or any of their
Subsidiaries, as applicable, except for (a) matters that are fully covered by
insurance (subject to customary deductibles), and (b) matters arising after the
Closing Date that, if decided adversely to Borrowers, or any of their
Subsidiaries, as applicable, reasonably could not be expected to result in a
Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating
--------------------------
to Borrowers that have been delivered by Borrowers to the Lender Group have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, Borrowers' financial
condition as of the date thereof and results of operations for the period then
ended. There has not been a Material Adverse Change with respect to Borrowers
since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.
5.12 Fraudulent Transfer.
-------------------
(a) Each Borrower is Solvent (except for CellStar International
Corporation/SA, a Delaware corporation).
(b) No transfer of property is being made by any Borrower and no
obligation is being incurred by any Borrower in connection with the transactions
contemplated by this
63
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrowers.
5.13 Employee Benefits. None of Borrowers, any of their Subsidiaries, or
-----------------
any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
----------------------- -------------
Borrowers' knowledge, none of Borrowers' owned properties or assets has ever
been used by Borrowers or by previous owners or operators in the disposal of, or
to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable Environmental
Law, (b) to Borrowers' knowledge, none of Borrowers' properties or assets has
ever been designated or identified in any manner pursuant to any Environmental
Law as a Hazardous Materials disposal site, (c) none of Borrowers have received
notice that a Lien arising under any Environmental Law has attached to any
revenues or to any Real Property owned or operated by Borrowers, and (d) none of
Borrowers have received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Borrower resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 Brokerage Fees. Except for the services described in the engagement
--------------
letter, dated September 12, 2000 with Dresdner Kleinwort Xxxxxxxxxxx, Inc.,
Borrowers have not utilized the services of any broker or finder in connection
with Borrowers' obtaining financing from the Lender Group under this Agreement
and no brokerage commission or finders fee is payable by Borrowers in connection
herewith.
5.16 Intellectual Property. Each Borrower owns, or holds licenses in, all
---------------------
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
-------------
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which each Borrower is the owner or is an
exclusive licensee.
5.17 Leases. Borrowers enjoy peaceful and undisturbed possession under all
------
leases material to the business of Borrowers and to which Borrowers are a party
or under which Borrowers are operating. All of such leases are valid and
subsisting and no material default by Borrowers exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of the DDAs of each Borrower,
---- -------------
including, with respect to each depository (i) the name and address of that
depository, and (ii) the account numbers of the accounts maintained with such
depository.
5.19 Complete Disclosure. All factual information (taken as a whole)
-------------------
furnished by or on behalf of Borrowers in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and
64
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of Borrowers in writing to the Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided. On the Closing Date, the Closing Date Projections represent, and as of
the date on which any other Projections are delivered to Agent, such additional
Projections represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list
------------ -------------
of all Indebtedness of Parent and each of its Subsidiaries outstanding
immediately prior to the Closing Date that is to remain outstanding after the
Closing Date and such Schedule accurately reflects the aggregate principal
amount of such Indebtedness and the principal terms thereof.
5.21 Management Agreements. Set forth on Schedule 5.21 is a true and
--------------------- -------------
complete list of all Management Agreements of any Borrower in effect as of the
Closing Date.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables
-----------------
Administrative Borrower to produce financial statements in accordance with GAAP
and maintain records pertaining to the Collateral that contain information as
from time to time reasonably may be requested by Agent. Borrowers also shall
keep an inventory reporting system that shows all additions, sales, claims,
returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Agent (and if so requested by Agent,
--------------------
with copies for each Lender) with the following documents at the following times
in form satisfactory to Agent:
================================================================================
Weekly (a) summary agings of Accounts, and
(b) a list of the top 10 customers, with
total Account balances and summary agings of
such Account balances, and
(c) Inventory reports specifying each
Borrower's cost of its Inventory, by
category.
--------------------------------------------------------------------------------
Monthly (not later than the 15th (d) a sales journal, collection journal, and
day of each month) credit register since the last such schedule
and calculation of the Borrowing Base as of
such date, including Lock\Line and Cricket,
and
================================================================================
65
================================================================================
(e) a detailed calculation of the Borrowing Base
(including detail regarding those Accounts that are not
Eligible Accounts), and
(f) a summary aging, by vendor, of Borrowers' accounts
payable and any book overdraft, and
(g) a calculation of Dilution for the prior month.
--------------------------------------------------------------------------------
Quarterly (h) a detailed list of each Borrower's customers, and
(i) a report regarding each Borrower's accrued, but
unpaid, ad valorem taxes.
--------------------------------------------------------------------------------
Upon request by Agent (j) copies of invoices in connection with the Accounts,
credit memos, remittance advices, deposit slips,
shipping and delivery documents in connection with the
Accounts and, for Inventory and Equipment acquired by
Borrowers, purchase orders and invoices, and
(k) such other reports as to the Collateral, or the
financial condition of Borrowers as Agent may request.
================================================================================
If Excess Availability is less than $10,000,000 at any time, Agent
may request, and Borrowers shall implement, the Collateral reporting described
in this Section more frequently than as set forth above, including, without
limitation, certain daily reporting requirements.
6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
-------------------------------------------
copies to each Lender:
(a) as soon as available, but in any event within 45 days (60 days
in the case of a month that is the end of one of the first 3 fiscal quarters in
a fiscal year) after the end of each month during each of Parent's fiscal years,
(i) a company prepared balance sheet and income statement,
covering operations during such period, on both a consolidated and
consolidating basis for Parent, its Subsidiaries and the Domestic
Business Unit, in form and substance reasonably satisfactory to
Agent,
(ii) a company prepared statement of cash flow, covering
operations on a year to date basis, on a consolidated basis for
Parent in form and substance reasonably satisfactory to Agent,
(iii) a certificate signed by the chief executive officer,
president, chief financial officer, treasurer or controller of
Administrative Borrower to the effect that:
66
A. the financial statements delivered hereunder have been
prepared in accordance with GAAP (except for the lack of footnotes
and being subject to year-end audit adjustments) and fairly present
in all material respects the financial condition of Parent and its
Subsidiaries,
B. the representations and warranties of Borrowers contained
in this Agreement and the other Loan Documents are true and correct
in all material respects on and as of the date of such certificate,
as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier
date), and
C. there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrowers have taken, are
taking, or propose to take with respect thereto), and
(iv) for each month that is the date on which a financial covenant
in Section 7.20 is to be tested, a Compliance Certificate
------------
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in Section
-------
7.20, and
----
(b) as soon as available, but in any event within 120 days after the
end of each of Parent's fiscal years, financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP (such audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such accountants' letter
to management),
(c) as soon as available, but in any event at least 30 days prior to
the start of each of Parent's fiscal years,
(i) copies of Projections, in form and substance (including as to
scope and underlying assumptions) satisfactory to Agent, in its sole
discretion, for the forthcoming 3 years, year by year, and for the
forthcoming fiscal year, month by month, for the Parent and the
Domestic Business Unit, in each case certified by the chief executive
officer, president, chief financial officer, treasurer or controller of
Administrative Borrower as being such officer's good faith best
estimate of the financial performance of Parent and its Subsidiaries
during the period covered thereby,
(d) if and when filed by any Borrower, within five days of such filing,
(i) 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K
current reports,
67
(ii) any other filings made by any Borrower with the SEC,
(iii) copies of Borrowers' federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Parent to its
shareholders generally,
(e) if and when filed by any Borrower and as requested by Agent,
within five days of the later of the filing or such request, satisfactory
evidence of payment of applicable excise taxes in each jurisdictions in which
(i) any Borrower conducts business or is required to pay any such excise tax,
(ii) where any Borrower's failure to pay any such applicable excise tax would
result in a Lien on the properties or assets of any Borrower, or (iii) where any
Borrower's failure to pay any such applicable excise tax reasonably could be
expected to result in a Material Adverse Change,
(f) as soon as a Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrowers propose to take with respect
thereto,
(g) promptly upon any Borrower obtaining knowledge thereof, notice
of any price decrease (without consideration of price protection agreements)
established by any Material Vendor, affecting the value of Eligible Inventory
included in the Borrowing Base by more than 5%,
(h) promptly upon the Parent obtaining knowledge or notice
thereof, notice of any demand for payment pursuant to the Parent's guarantee of
trade payables and real property operating leases of any Foreign Subsidiary,
(i) promptly upon the Parent obtaining knowledge or notice
thereof, notice of any default, event of default, or request for payment from
Parent pursuant to any Permitted Foreign Subsidiary Credit Facility that Parent
has guaranteed, and
(j) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrowers.
In addition to the financial statements referred to above, Borrowers
agree to deliver financial statements prepared on both a consolidated and
consolidating basis and that no Borrower, or any Subsidiary of a Borrower, will
have a fiscal year different from that of Parent, other than certain Foreign
Subsidiaries, but only to the extent such Foreign Subsidiary's jurisdiction of
organization requires a different fiscal year by law. Borrowers agree that their
independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning
Borrowers that Agent reasonably may request, provided, however, that
-------- -------
Administrative Borrower will be provided with reasonable notice of the time and
place for such communication and have the opportunity to be present during such
communication. Each Borrower waives the right to assert a confidential
relationship,
68
if any, it may have with any accounting firm or service bureau in connection
with any information requested by Agent pursuant to or in accordance with this
Agreement, and agree that Agent may contact directly any such accounting firm or
service bureau in order to obtain such information.
6.4 Intentionally Omitted.
---------------------
6.5 Return. Cause returns and allowances as between Borrowers and their
------
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement.
6.6 Maintenance of Properties. Maintain and preserve all of its properties
-------------------------
which are necessary or useful in the proper conduct to its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee, so as
to prevent any loss or forfeiture thereof or thereunder.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
-----
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers
or any of their assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrowers
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that the applicable Borrower has made such payments or deposits. Borrowers shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.
6.8 Insurance.
---------
(a) At Borrowers' expense, maintain insurance respecting its
property and assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by
other Persons engaged in the same or similar businesses. Borrowers also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation. All such policies of insurance shall be in such amounts and
with such insurance companies as are reasonably satisfactory to Agent. Borrowers
shall deliver copies of all such policies to Agent with a satisfactory lender's
loss payable endorsement naming Agent as loss payee as its interest may appear
or additional insured, as appropriate. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever.
(b) Administrative Borrower shall give Agent prompt notice of any
loss in excess of $100,000 covered by such insurance attributable to operations
in the U.S. Agent shall have the exclusive right to adjust any losses payable
under any such insurance policies in excess of $250,000, without any liability
to Borrowers whatsoever in respect of such adjustments. Any
69
monies received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Agent to be applied at the option of the Required Lenders either to the
prepayment of the Obligations or shall be disbursed to Administrative Borrower
under staged payment terms reasonably satisfactory to the Required Lenders for
application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction.
(c) Borrowers shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.8, unless Agent is included thereon as named insured with
-----------
the loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Agent whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Agent.
6.9 Location of Inventory and Equipment. Except for Inventory and
-----------------------------------
Equipment with an aggregate market value less than $500,000 and Inventory and
Equipment delivered to repair facilities in the normal course of business, keep
the Inventory and Equipment only at the locations identified on Schedule 5.5;
------------
provided, however, that Administrative Borrower may amend Schedule 5.5 so long
-------- ------- ------------
as such amendment occurs by written notice to Agent not less than 30 days prior
to the date on which the Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United States, and so
long as, at the time of such written notification, the applicable Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement.
6.10 Compliance with Laws. Comply with the requirements of all
--------------------
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any
------
leases to which any Borrower is a party or by which any Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest.
6.12 Brokerage Commissions. Pay any and all brokerage commission or
---------------------
finders fees incurred in connection with or as a result of Borrowers' obtaining
financing from the Lender Group under this Agreement. Borrowers agree and
acknowledge that payment of all such brokerage commissions or finders fees shall
be the sole responsibility of Borrowers, and each Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrowers' obtaining financing from the
Lender Group under this Agreement.
70
6.13 Existence. At all times preserve and keep in full force and effect
---------
each Borrower's valid existence and good standing and any rights and franchises
material to Borrowers' businesses.
6.14 Environmental. (a) Keep any property either owned or operated by any
-------------
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity under Environmental Laws from or onto
property owned or operated by any Borrower and take any Remedial Actions
required to xxxxx said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Borrower, (ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against any Borrower, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business
------------------
Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.16 Convertible Subordinated Debt. (a) At least 180 days prior to maturity
-----------------------------
thereof (the "Required Refinance Date"), refinance (in accordance with Section
----------------------- -------
7.1(d) hereof), obtain an extension of the maturity date for, (provided that in
------
connection with such refinancing or extension, the maturity date of the
Convertible Subordinated Debt is extended to a date after the Maturity Date), or
convert or exchange (provided that no Change of Control results therefrom), not
less than 80% (in principal amount) of the Convertible Subordinated Debt on
terms and in form and substance satisfactory to Agent and provided the foregoing
shall not result in aggregate cash payments to or on behalf of such holders in
excess of $20,000,000, and (b) on the Required Refinance Date, deliver
projections in form and substance satisfactory to Agent demonstrating that
Borrowers will have the ability to pay, in full, on the maturity date thereof
the amount of any Convertible Subordinated Debt not refinanced, extended,
converted or exchanged pursuant to clause (a) above, and demonstrating that,
both before and after giving effect to such maturity payment, Borrowers will
have Excess Availability of not less than $10,000,000; provided, in connection
--------
with any cash payments made to the holders of Convertible Subordinated Debt
whether on or before the Required Refinance Date or at the scheduled maturity
thereof, (i) no Default or Event of Default shall exist at the time of any such
payment or result therefrom, and (ii) both before and after giving effect to any
such payment, Borrowers shall have Excess Availability of not less than
$10,000,000.
71
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not and will not permit any of their respective
Subsidiaries to do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
------------
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) the Convertible Subordinated Debt and other Indebtedness set
forth on Schedule 5.20;
-------------
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b), (c) and (e) of this Section 7.1 (and continuance or renewal
-----------
of any Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not, in Agent's
judgment, materially impair the prospects of repayment of the Obligations by
Borrowers or materially impair Borrowers' creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, interest payment on, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the applicable Borrower, and (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension of such Indebtedness must include subordination terms and conditions
that are at least as favorable to the Lender Group as those that were applicable
to the refinanced, renewed, or extended Indebtedness;
(e) a Permitted Foreign Subsidiary Credit Facility that complies
with Section 7.21.
------------
(f) Indebtedness permitted by Section 7.6;
-----------
(g) Indebtedness that constitutes a Permitted Affiliate
Transaction; and
(h) Customary, prudent and non-speculative Hedging Obligations
entered into in the ordinary course of business for the purpose of protecting
the Parent and its Subsidiaries against fluctuations in interests rates,
currency exchange rates and similar risks.
72
7.2 Liens. Create, incur, assume, or permit to exist, directly or
-----
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for (a) Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced,
renewed, or extended under Section 7.1(d) and so long as the replacement Liens
--------------
only encumber those assets that secured the refinanced, renewed, or extended
Indebtedness) and (b) Liens on the assets of any Foreign Subsidiaries securing
any Permitted Foreign Subsidiary Credit Facility.
7.3 Restrictions on Fundamental Changes.
-----------------------------------
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
Notwithstanding the foregoing, so long as no Default or Event
of Default exists or would result therefrom and the Agent receives at least 30
days prior written notice and delivery of any documentation requested to ensure
the continued perfection and priority of Agent's Liens:
(i) any Borrower (other than Administrative Borrower) may
merge or consolidate with any other Borrower;
(ii) any Borrower may be dissolved or liquidated so long as
such dissolution or liquidation results in all assets of such
Borrower being owned by another Borrower; and
(iii) any Subsidiary that is not a Borrower hereunder and in
which Agent does not have a Stock pledge may be dissolved or
liquidated, so long as such dissolution or liquidation results in all
assets of such Subsidiary being owned by a Borrower or another
Subsidiary in which Agent has a valid perfected first priority Lien in
the Stock of such transferee Subsidiary.
7.4 Disposal of Assets. Convey, sell, lease, license, assign, transfer, or
------------------
otherwise dispose of any of its assets other than (a) Permitted Dispositions,
and (b) pursuant to a Permitted Affiliate Transaction.
7.5 Change Name. Change any Borrower's name, FEIN, corporate structure or
-----------
identity, or add any new fictitious name; provided, however, that a Borrower may
-------- -------
change its name upon at least 30 days prior written notice by Administrative
Borrower to Agent of such change and so long as, at the time of such written
notification, such Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Agent's Liens.
73
7.6 Guarantee. Guarantee or otherwise become in any way liable with
---------
respect to the obligations of any third Person except (a) as provided herein,
(b) by endorsement of instruments or items of payment for deposit to the account
of such Person or which are transmitted or turned over to Agent, and (c)
guarantees that constitute a Permitted Affiliate Transaction.
7.7 Nature of Business. Make any change in the principal nature of
------------------
Borrowers' business.
7.8 Prepayments and Amendments.
--------------------------
(a) Except in connection with a refinancing permitted by
Section 7.1(d) or the conversion, exchange, refinancing or repayment of the
--------------
Convertible Subordinated Debt in accordance with the terms of Section 6.16,
------------
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any
Borrower or make any payment on the Convertible Subordinated Debt, other than
(i) the Obligations in accordance with this Agreement, and (ii) provided no
Default or Event of Default has occurred or will be caused thereby, (x)
regularly scheduled payments of accrued and unpaid interest on the Convertible
Subordinated Debt and (y) Indebtedness under Permitted Affiliate Transactions to
the extent the repayment thereof is permitted by the Intercompany Subordination
Agreement, and
(b) Except in connection with a refinancing permitted by
Section 7.1(d), directly or indirectly, amend, modify, alter, increase, or
--------------
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b) or (c).
--------------- ---
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
-----------------
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on xxxx and
------------
hold (without providing prior notice to Agent thereof), sale or return, sale on
approval, or other conditional terms of sale, except for Inventory with an
aggregate market value, at any point in time, not in excess of $100,000.
7.11 Distributions. Other than distributions or declaration and payment of
-------------
dividends by a Borrower to another Borrower and payment of dividends by a
Foreign Subsidiary to another Foreign Subsidiary that is a Loan Party, or to a
Borrower, make any distribution or declare or pay any dividends (in cash or
other property, other than common Stock) on, or purchase, acquire, redeem, or
retire any Stock, of any class, whether now or hereafter outstanding of such
Person, except for the payment of Management Fees to Parent.
7.12 Accounting Methods. Modify or change its method of accounting (other
------------------
than as may be required to conform to GAAP) or enter into, modify, or terminate
any agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
Borrowers' accounting records without said accounting firm or service bureau
agreeing to provide Agent information regarding the Collateral or Borrowers'
financial condition.
74
7.13 Investments. Directly or indirectly, make or acquire any Investment,
-----------
or incur any liabilities (including contingent obligations) for or in connection
with any Investment except for (a) Permitted Investments; provided, however,
that Borrowers shall not have Permitted Investments constituting Cash
Equivalents (other than in the Cash Management Accounts) in excess of $1,000,000
outstanding at any one time unless the applicable Borrower and the applicable
securities intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Agent shall determine in
its Permitted Discretion, to perfect (and further establish) the Agent's Liens
in such Permitted Investments, (b) the ownership of the Stock of any Subsidiary
or Foreign Affiliate owned on the Closing Date, (c) the ownership of the Stock
of any wholly-owned Subsidiary created after the Closing Date; provided, if such
new Subsidiary is a Domestic Subsidiary at the time of its creation, it becomes
a Borrower hereunder by executing an amendment to this Agreement assuming all
Obligations hereunder and delivers to Agent all other documentation necessary to
grant Agent a first-priority perfected Lien on its assets and the parent of such
new Subsidiary executes and delivers a Stock Pledge Agreement to Agent pledging
the Stock of such new Subsidiary in favor of Agent, or, if such new Subsidiary
is a Foreign Subsidiary, at the time of its creation, Agent receives a pledge of
65% of such Foreign Subsidiary's Stock, (d) Investments that constitute a
Permitted Affiliate Transaction, and (e) advances made by any Borrower or any
Subsidiary of any Borrower to its respective officers and employees in the
ordinary course of business not to exceed $100,000 in the aggregate outstanding
at any time.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
----------------------------
permit to exist any transaction with any Affiliate of any Borrower except for
(a) transactions that are in the ordinary course of Borrowers' or such
Subsidiary's business, upon fair and reasonable terms, that are fully disclosed
to Agent, and that are no less favorable to Borrowers or such Subsidiary than
would be obtained in an arm's length transaction with a non-Affiliate, or (b)
Permitted Affiliate Transactions. Notwithstanding the foregoing, Borrowers shall
not sell Eligible Inventory with a value in excess of $2,000,000 in the
aggregate in any month to Foreign Subsidiaries unless Borrowers (x) promptly
notify Agent of the occurrence of such sale and the aggregate amount of the
transaction, and (y) promptly upon the occurrence of such transaction, deduct
the aggregate amount of such Eligible Inventory sold, from the Borrowing Base.
7.15 Suspension. Suspend or go out of a substantial portion of its business
----------
except as permitted by Section 7.3 or in connection with a Permitted
-----------
Disposition.
7.16 Intentionally Omitted.
----------------------
7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose
---------------
other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing under the
Existing Credit Facility, and (ii) to pay transactional fees, costs, and
expenses incurred in connection with this Agreement, the other Loan Documents,
and the transactions contemplated hereby and thereby, and (b) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
purposes.
75
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
---------------------------------------------------------------------
with Bailees. Relocate the chief executive office of any Borrower to a new
------------
location without Administrative Borrower providing 30 days prior written
notification thereof to Agent and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected the Agent's Liens
and also provides to Agent a Collateral Access Agreement with respect to such
new location. The Inventory and Equipment shall not at any time now or hereafter
be stored with a bailee, warehouseman, or similar party without Agent's prior
written consent.
7.19 Securities Accounts. Establish or maintain any Securities Account of a
-------------------
Borrower unless Agent shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree to not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
-------- -------
and is continuing or would result therefrom, Borrowers may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 Financial Covenants.
-------------------
(a) Consolidated Tangible Net Worth. Parent and its Subsidiaries,
taken as a whole, shall not permit Consolidated Tangible Net Worth to be less
than Initial Consolidated Tangible Net Worth for the last day of the fiscal
months of August, September and October of 2001, and less than the required
amount set forth in the following table for November 30, 2001 and for the last
day of each fiscal quarter thereafter as set forth below, and for each month
following such quarter-end date until the next fiscal quarter-end calculation:
-------------------------------------------------------------------------
Applicable Amount Applicable Period
--------------------------------------------------------------------------
Initial Consolidated Tangible For fiscal months ended August,
Net Worth September and October, 2001.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Initial Consolidated Tangible
Net Worth, plus (a) 100% of the
gain or loss, if any, realized as
a result of forgiveness of any
Convertible Subordinated Debt Beginning with fiscal quarter ended
(after taxes), plus (b) 100% of November 30, 2001 through February
the additional paid-in capital 28, 2002.
resulting from the conversion of
the Convertible Subordinated Debt,
plus (c) 80% of net income of the
Parent and its Subsidiaries, on a
consolidated basis (without any
deduction for losses) on a cumulative
basis from September 1, 2001
for each quarter ended thereafter
through
--------------------------------------------------------------------------
76
--------------------------------------------------------------------------
such date of determination
--------------------------------------------------------------------------
Initial Consolidated Tangible
Net Worth, plus (a) 100% of the
gain or loss, if any, realized as
a result of forgiveness of any
Convertible Subordinated Debt Beginning with the fiscal quarter
(after taxes), plus (b) 100% of ended May 31, 2002 through the
the additional paid-in capital Maturity Date.
resulting from the conversion of
the Convertible Subordinated
Debt, plus (c) 80% of net income
of the Parent and its Subsidiaries
on a consolidated basis (without any
deduction for losses) on a
cumulative basis from
September 1, 2001 to, and
including February 28, 2002,
plus (d) 75% of net income of
the Parent and its Subsidiaries,
on a consolidated basis (without
any deduction for losses) on a
cumulative basis from March 1, 2002
for each quarter ended thereafter
through such date of determination
--------------------------------------------------------------------------
(b) Fixed Charge Coverage Ratio for Asia, Latin America and Europe. Fail to
maintain a Fixed Charge Coverage Ratio of at least the required ratio set forth
in the following table as of the last day of each fiscal quarter beginning
November 30, 2001, calculated for the immediately preceding four fiscal quarter
period for the applicable region, on an individual basis:
--------------------------------------------------------------------------
Required Ratio Applicable Region
--------------------------------------------------------------------------
2.0:1.0 Subsidiaries operating within the geographic
area comprising Asia
--------------------------------------------------------------------------
2.0:1.0 Subsidiaries operating within the geographic
area comprising Latin America
--------------------------------------------------------------------------
2.0:1.0 Subsidiaries operating within the geographic
area comprising Europe
--------------------------------------------------------------------------
77
Notwithstanding the foregoing, for any period in which a Fixed Charge
Coverage Ratio is calculated hereunder for the Asia, Latin America and Europe
regions, if, for any region on an individual basis, the result of the
calculation set forth in clause (b) of the definition of Fixed Charge Coverage
Ratio hereunder for the Asia, Latin America and Europe regions, respectively is
less than or equal to zero, no Fixed Charge Coverage Ratio will be tested
pursuant to this subsection (b).
(c) Fixed Charge Coverage Ratio for the Domestic Business Unit. Fail to
maintain a Fixed Charge Coverage Ratio of at least the required ratio set forth
in the following table calculated as of August 31, 2001 for the three quarter
fiscal period then ended, and as of November 30, 2001 and each fiscal quarter
end thereafter, for the immediately preceding four fiscal quarter period, for
the Domestic Business Unit:
-------------------------- ---------------------------------- ------------------------------------
Required Ratio prior to Required Ratio after giving Test Date
giving effect to effect to conversion,
conversion, exchange, exchange, refinance, or
refinance, or extension extension of 80% of
of 80% of Convertible Convertible Subordinated
Subordinated Debt Debt pursuant to Section
pursuant to Section -------
------- 6.16(a)
6.16(a) -------
-------
-------------------------- ---------------------------------- ------------------------------------
1.10:1.0 1.10:1.0 August 31, 2001
-------------------------- ---------------------------------- ------------------------------------
1.10:1.0 1.25:1.0 November 30, 2001
-------------------------- ---------------------------------- ------------------------------------
1.10:1.0 1.25:1.0 February 28, 2002
-------------------------- ---------------------------------- ------------------------------------
1.10:1.0 1.25:1.0 May 31, 2002
-------------------------- ---------------------------------- ----------------------------------------
1.10:1.0 1.25:1.0 August 31, 2002
-------------------------- ---------------------------------- ------------------------------------
1.50:1.0 1.50:1.0 November 30, 2002 and each fiscal
quarter ended thereafter
-------------------------- ---------------------------------- ------------------------------------
Notwithstanding the foregoing, for any period in which a Fixed Charge
Coverage Ratio is calculated hereunder for the Domestic Business Unit, where the
result of the calculation set forth in clause (b) of the definition of Fixed
Charge Coverage Ratio hereunder for the Domestic Business Unit, taken as a
whole, is less than or equal to zero, no Fixed Charge Coverage Ratio will be
tested pursuant to this subsection (c).
(d) Capital Expenditures. Make capital expenditures in any fiscal year
in excess of the amount set forth in the following table for the applicable
period:
78
-------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2001 2002 2003 2004 2005 2006
-------------------------------------------------------------------------------------------
$8,000,000 $10,000,000 $12,500,000 $15,000,000 $15,000,000 $15,000,000
-------------------------------------------------------------------------------------------
7.21 Permitted Foreign Subsidiary Credit Facilities. Allow any
----------------------------------------------
Foreign Subsidiary to enter into any credit facility that is not a Permitted
Foreign Subsidiary Credit Facility.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
----------------
8.1 If Borrowers fail to pay when due and payable or when declared due
and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations); provided, however, that in the case of Overadvances that are
-------- -------
caused by the charging of interest, fees or Lender Group Expenses to the Loan
Account, such event shall not cause an Event of Default if, within 3 Business
Days of incurring such Overadvance, Borrowers repay or otherwise eliminate such
Overadvance;
8.2 (a) If Borrowers fail to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.2
------------
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.5
--- ---
(Returns), 6.9 (Location of Inventory and Equipment), or 6.10 (Compliance with
--- ----
Laws), and such failure continues for a period of 3 Business Days; (b) Borrowers
fail to perform, keep, or observe any term, provision, condition, covenant, or
agreement contained in Sections 6.1 (Accounting System), 6.6 (Maintenance of
------------ ---
Properties), or 6.11 (Leases), and such failure continues for a period of 10
----
Business Days; or (c) Borrowers fail 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 Borrower and any member of the Lender Group;
8.3 If any material portion of any Loan Party's assets is attached,
seized, subjected to a writ or distress warrant, levied upon, or comes into the
possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by any Loan Party;
8.5 If an Insolvency Proceeding is commenced against any Loan Party, and
any of the following events occur: (a) the applicable Loan Party consents to the
institution of the Insolvency Proceeding against it, (b) the petition commencing
the Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 60 calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Agent (including any successor agent) and each other member of the
Lender Group shall be relieved of their obligation to extend credit hereunder,
(d) an interim trustee is appointed
79
to take possession of all or any substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of, any Loan
Party, or (e) an order for relief shall have been entered therein;
8.6 If any Loan Party is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
8.7 If a notice of Lien, levy, or assessment in excess of (a) with
respect to any Borrower, $1,000,000, and (b) with respect to any Loan Party that
is a Foreign Subsidiary, $2,500,000, either individually, or in the aggregate,
is filed of record with respect to any Loan Party's assets by the United States,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency (including a foreign governmental agency or
entity), 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 such
Person's assets and the same is not paid on the payment date thereof;
8.8 If a judgment or other claim in excess of (a) with respect to any
Borrower, $1,000,000, and (b) with respect to any Loan Party that is a Foreign
Subsidiary, $2,500,000, either individually, or in the aggregate, becomes a Lien
or encumbrance upon such Person's properties or assets;
8.9 If there is a default in any material agreement to which any (a)
Borrower is a party and such default (i) occurs prior to the final maturity of
the obligations thereunder, or (ii) results in a right by the other party
thereto, irrespective of whether exercised, to accelerate the maturity of the
applicable Borrower's obligations thereunder, to terminate such agreement, or to
refuse to renew such agreement pursuant to an automatic renewal right therein,
including, without limitation, the Convertible Subordinated Debt Documents, or
(b) Loan Party is a party and such default (i) occurs prior to the final
maturity of the obligations thereunder, or (ii) results in a right by the other
party thereto, irrespective of whether exercised, to accelerate the maturity of
the applicable Loan Party's obligations thereunder, to terminate such agreement,
or to refuse to renew such agreement pursuant to an automatic renewal right
therein, and such termination could be reasonably expected to result in a
Material Adverse Change;
8.10 If any Loan Party 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, including, without
limitation, the Convertible Subordinated Debt Documents;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to the
Lender Group by any Borrower, its Subsidiaries, or any officer, employee, agent,
or director of any Borrower or any of its Subsidiaries;
8.12 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent
80
permitted by the terms hereof or thereof, first priority Lien on or security
interest in the Collateral covered hereby or thereby;
8.13 Any provision of any Loan Document shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower, or a proceeding shall be commenced by any
Borrower, or by any Governmental Authority having jurisdiction over any
Borrower, seeking to establish the invalidity or unenforceability thereof, or
any Borrower shall deny that any Borrower has any liability or obligation
purported to be created under any Loan Document; or
8.14 If there shall occur a termination of a supply agreement with any
Material Vendor, or a termination, non-renewal or suspension of any Management
Agreement or any Subsidiary is enjoined, restrained or otherwise prevented from,
or fails or otherwise refuses to pay any Management Fees, unless such
termination, non-renewal, cancellation or non-payment could not reasonably be
expected to have a Material Adverse Effect.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
-------------------
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
instruct Agent to do any one or more of the following on behalf of the Lender
Group (and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrowers:
(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 Borrowers under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents as
to any future liability or obligation of the Lender Group, but without affecting
any of the Agent's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in such
cases, Agent will credit the Loan Account with only the net amounts received by
Agent in payment of such disputed Accounts after deducting all Lender Group
Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in trust for the
Lender Group, segregate all returned Inventory from all other assets of
Borrowers or in Borrowers' possession and conspicuously label said returned
Inventory as the property of the Lender Group;
81
(f) Without notice to or demand upon any Borrower, make such
payments and do such acts as Agent considers necessary or reasonable to protect
its security interests in the Collateral. Each Borrower agrees to assemble the
Personal Property Collateral if Agent so requires, and to make the Personal
Property Collateral available to Agent at a place that Agent may designate which
is reasonably convenient to both parties. Each Borrower authorizes Agent to
enter the premises where the Personal Property Collateral is located, to take
and maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Agent's
determination appears to conflict with the Agent's Liens and to pay all expenses
incurred in connection therewith and to charge Borrowers' Loan Account therefor.
With respect to any of Borrowers' owned or leased premises, each Borrower hereby
grants Agent a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of the Lender Group's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of any Borrower held by the
Lender Group (including any amounts received in the Cash Management Accounts),
or (ii) Indebtedness at any time owing to or for the credit or the account of
any Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits of
any Borrower held by the Lender Group, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Each Borrower hereby grants to Agent a license or
other right to use, without charge, such Borrower's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and such Borrower's rights under all licenses and
all franchise agreements shall inure to the Lender Group's benefit;
(j) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrowers' premises)
as Agent determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Agent shall give Administrative Borrower (for the benefit
of the applicable Borrower) a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be
82
made of the Personal Property Collateral, the time on or after
which the private sale or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Administrative Borrower as provided in
Section 12, at least 10 days before the earliest time of
----------
disposition set forth in the notice; no notice needs to be given
prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized
market;
(l) Agent, on behalf of the Lender Group may credit bid and
purchase at any public sale;
(m) Agent may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents; and
(o) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above and the Real Property in
accordance with applicable law will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Administrative Borrower (for the benefit of the applicable
Borrower).
9.2 Remedies Cumulative. The rights and remedies of the Lender Group under
-------------------
this Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in
Borrowers' Loan Account as Agent deems necessary to protect the Lender Group
from the exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance policies of the
-----------
type described in Section 6.8 and take any action with respect
-----------
83
to such policies as Agent deems prudent. Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute an
agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice
--------------------
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which any such Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. Each Borrower hereby
-------------------------------------------
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under the Code, Agent shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrowers.
11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and
---------------
hold the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, agents, and attorneys-in-fact (each, an "Indemnified Person")
------------------
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, and damages, and
all reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event,
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
-----------------------
Borrowers shall have no obligation to any Indemnified Person under this Section
-------
11.3 with respect to any Indemnified Liability that a court of competent
----
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be
84
indemnified and reimbursed by Borrowers with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE
OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by Borrowers or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Administrative Borrower or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Agent, as the case may be, at its
address set forth below:
If to Administrative
Borrower: CELLSTAR CORPORATION
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxxxxx, Esq.
Fax No. (000) 000-0000
with copies to: Xxxxxx and Xxxxx, LLP
000 Xxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxx, Esq.
Fax No. (000) 000-0000
If to Agent: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxxx Xx., X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Business Finance Division Manager
Fax No. (000) 000-0000
with copies to: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000X
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Business Finance Division Manager
Fax No. (000) 000-0000
and copies to: PAUL, HASTINGS, XXXXXXXX & XXXXXX LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
85
Attn: Xxxxx X. X. Xxxxx, Esq.
Fax No. (000) 000-0000
Agent and Borrowers may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this Section 12,
----------
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF GEORGIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF XXXXXX,
STATE OF GEORGIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
-------- -------
ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
----- --- ----------
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
------------
BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND THE LENDER
86
GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
------------------------------
(a) Any Lender may, with the written consent of Agent (provided
that no written consent of Agent shall be required in connection with any
assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "Assignee") all, or any ratable part
--------
of all, of the Obligations, the Commitments and the other rights and obligations
of such Lender hereunder and under the other Loan Documents, in a minimum amount
of $5,000,000; provided, however, that Borrowers and Agent may continue to deal
-------- -------
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Administrative Borrower and Agent by such Lender
and the Assignee, (ii) such Lender and its Assignee have delivered to
Administrative Borrower and Agent an Assignment and Acceptance in form and
substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has
paid to Agent for Agent's separate account a processing fee in the amount of
$5,000. Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Administrative Borrower) that it has received an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(except with respect to Section 11.3 hereof) and be released from its
------------
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall affect
a novation between Borrowers and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance,
87
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other Loan Document furnished pursuant hereto, (2) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of Borrowers or the performance or observance by
Borrowers of any of their obligations under this Agreement or any other Loan
Document furnished pursuant hereto, (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (4) such Assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement, (5) such Assignee appoints and
authorizes Agent to take such actions and to exercise such powers under this
Agreement as are delegated to Agent, by the terms hereof, together with such
powers as are reasonably incidental thereto, and (6) such Assignee agrees that
it will perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance and receipt and acknowledgment by Agent of
such fully executed Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of Agent,
sell to one or more commercial banks, financial institutions, or other Persons
not Affiliates of such Lender (a "Participant") participating interests in its
-----------
Obligations, the Commitment, and the other rights and interests of that Lender
(the "Originating Lender") hereunder and under the other Loan Documents
------------------
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender shall remain a
-------- -------
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in
88
which such Participant is participating, (C) release all or a material portion
of the Collateral or guaranties (except to the extent expressly provided herein
or in any of the Loan Documents) supporting the Obligations hereunder in which
such Participant is participating, (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such Lender,
or (E) change the amount or due dates of scheduled principal repayments or
prepayments or premiums; and (v) all amounts payable by Borrowers hereunder
shall be determined as if such Lender had not sold such participation; except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement. The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections, the Collateral, or otherwise in
respect of the Obligations. No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrowers or
Borrowers' business.
(g) Any other provision in this Agreement notwithstanding, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of the
----------
respective successors and assigns of each of the parties; provided, however,
-------- -------
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release any Borrower from its Obligations. A Lender may assign this Agreement
and the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 14.1 hereof and, except as expressly required pursuant to
------------
Section 14.1 hereof, no consent or approval by any Borrower is required in
------------
connection with any such assignment.
14.3 Additional Commitments. Upon the request of Administrative Borrower
----------------------
from time to time after the Closing Date and in accordance with Section 15.1,
------------
Additional Commitments hereunder may be issued to Lenders or New Lenders;
provided, however, that Administrative Borrower may not request Additional
-------- -------
Commitments be issued during the continuance of a Default or Event of Default;
and provided, further, that Administrative Borrower may not request Additional
-------- -------
Commitments which exceed $25,000,000 in the aggregate. Persons not then Lenders
may be included as New Lenders having Additional Commitments
89
with the written approval of the Agent, in its sole discretion. Prior to the
effectiveness of any Additional Commitments, Administrative Borrower shall (a)
provide revised projections to Agent and Lenders, which shall be in form and
substance satisfactory to the Agent and which shall demonstrate Borrowers'
ability to timely repay all Obligations hereunder after the issuance of such
Additional Commitments and to comply with the covenants contained in Section
7.20 hereof, (b) provide Agent with all other information that it may reasonably
request, and (c) pay to Agent, for its own account or the account of the New
Lender, as may be determined by Agent, such arrangement and upfront fees as may
be required by Agent in connection with the issuance of the Additional
Commitment. Each Lender or New Lender issuing an Additional Commitment shall
execute and deliver to Agent an Assumption Agreement prior to the effectiveness
of such Additional Commitment. Funds advanced under any Additional Commitments
shall for all purposes constitute Advances and be Obligations hereunder and
under the Loan Documents.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Administrative Borrower (on behalf of all
Borrowers) and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however, that no such waiver, amendment, or consent shall, unless in writing and
-------
signed by all of the Lenders affected thereby and Administrative Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender or issue
Additional Commitments,
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any loan or
other extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is required to take
any action hereunder,
(e) amend this Section or any provision of the Agreement providing for
consent or other action by all Lenders,
(f) release Collateral other than as permitted by Section 16.12,
-------------
(g) change the definition of "Required Lenders",
90
(h) contractually subordinate any of the Agent's Liens,
(i) release any Borrower from any obligation for the payment of money,
or
(j) change the definition of Borrowing Base or the definitions of
Eligible Accounts, Eligible Inventory, Maximum Revolver Amount, or change
Section 2.1(b); or
--------------
(k) amend any of the provisions of Section 16.
----------
and, provided further, however, that no amendment, waiver or consent shall,
-------- ------- -------
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers.
15.2 Replacement of Holdout Lender. If any action to be taken by the Lender
-----------------------------
Group or Agent hereunder requires the unanimous consent, authorization, or
agreement of all Lenders, and a Lender ("Holdout Lender") fails to give its
--------------
consent, authorization, or agreement, then Agent, upon at least 5 Business Days
prior irrevocable notice to the Holdout Lender, may permanently replace the
Holdout Lender with one or more substitute Lenders (each, a "Replacement
-----------
Lender"), and the Holdout Lender shall have no right to refuse to be replaced
------
hereunder. Such notice to replace the Holdout Lender shall specify an effective
date for such replacement, which date shall not be later than 15 Business Days
after the date such notice is given.
Prior to the effective date of such replacement, the Holdout Lender
and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
------------
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.
15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
-------------------------------
exercise any right, remedy, or option under this Agreement or, any other Loan
Document, or
91
delay by Agent or any Lender in exercising the same, will operate as a waiver
thereof. No waiver by Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by Agent or
any Lender on any occasion shall affect or diminish Agent's and each Lender's
rights thereafter to require strict performance by Borrowers of any provision of
this Agreement. Agent's and each Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 Appointment and Authorization of Agent. Each Lender hereby designates
--------------------------------------
and appoints Foothill as its representative under this Agreement and the other
Loan Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 16. The
----------
provisions of this Section 16 are solely for the benefit of Agent, and the
----------
Lenders, and Borrowers shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Foothill
is merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections, and related matters, (b) execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections as provided in the Loan Documents, (e) open and maintain such
bank accounts and cash management accounts as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrowers, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents, and (g)
92
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.
16.2 Delegation of Duties. Agent may execute any of its duties under this
--------------------
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
------------------
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrowers or the books or
records or properties of any of Borrowers' Subsidiaries or Affiliates.
16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
-----------------
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrowers
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5 Notice of Default or Event of Default. Agent shall not be deemed to
-------------------------------------
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders, except
with respect to Events of Default of which Agent has actual
93
knowledge, unless Agent shall have received written notice from a Lender or
Administrative Borrower referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has actual knowledge. If any Lender obtains
actual knowledge of any Event of Default, such Lender promptly shall notify the
other Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 16.4, Agent shall take such action with respect to such Default or Event
------------
of Default as may be requested by the Required Lenders in accordance with
Section 9; provided, however, that unless and until Agent has received any such
--------- -------- -------
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
16.6 Credit Decision. Each Lender acknowledges that none of the
---------------
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrowers
and their Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
-----------------------------------
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including court costs, reasonable attorneys fees
and expenses, costs of collection by outside collection agencies and auctioneer
fees and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
received by Agent to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses from Collections received by Agent,
94
each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrowers and without limiting the obligation of Borrowers to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
-------- -------
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8 Agent in Individual Capacity. Foothill and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrowers and their
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though Foothill were not Agent hereunder, and, in
each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, Foothill or its Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.
16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
---------------
Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers, and duties as Agent shall be terminated. After any
95
retiring Agent's resignation hereunder as Agent, the provisions of this Section
-------
16 shall inure to its benefit as to any actions taken or omitted to be taken by
--
it while it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
16.10 Lender in Individual Capacity. Any Lender and its respective
-----------------------------
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with
Borrowers and their Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though such Lender were not a
Lender hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrowers or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11 Withholding Taxes.
-----------------
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent and
Administrative Borrower:
(i) if such Lender claims an exemption from withholding tax
pursuant to its portfolio interest exception, (a) a statement of the
Lender, signed under penalty of perjury, that it is not a (I) a
"bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10%
shareholder (within the meaning of Section 881(c)(3)(B) of the IRC),
or (III) a controlled foreign corporation described in Section
881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form
W-8BEN, before the first payment of any interest under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(ii) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
IRS Form W-8BEN before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or
Administrative Borrower;
96
(iii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form W-8ECI before the
first payment of any interest is due under this Agreement and at any
other time reasonably requested by Agent or Administrative Borrower;
(iv) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form W-8BEN and such
Lender sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of Borrowers to such Lender, such Lender agrees to
notify Agent of the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrowers to such Lender. To the extent of such
percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no longer
valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that Agent did not properly withhold tax
from amounts paid to or for the account of any Lender (because the appropriate
form was not delivered, was not properly executed, or because such Lender failed
to notify Agent of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify and hold Agent harmless for all amounts paid, directly or
indirectly, by Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section, together with all costs and expenses (including attorneys
fees and expenses). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.
(e) All payments made by Borrowers hereunder or under any note or other
Loan Document will be made without setoff, counterclaim, or other defense,
except as required by applicable law other than for Taxes (as defined below).
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed
97
by any jurisdiction (other than the United States) or by any political
subdivision or taxing authority thereof or therein (other than of the United
States) with respect to such payments (but excluding, any tax imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein (i) measured by or based on the net income or net profits of a Lender,
or (ii) to the extent that such tax results from a change in the circumstances
of the Lender, including a change in the residence, place of organization, or
principal place of business of the Lender, or a change in the branch or lending
office of the Lender participating in the transactions set forth herein) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "Taxes"). If any Taxes are so levied or
imposed, each Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any note, including any amount paid pursuant to
this Section 16.11(e) after withholding or deduction for or on account of any
----------------
Taxes, will not be less than the amount provided for herein; provided, however,
-------- -------
that Borrowers shall not be required to increase any such amounts payable to
Agent or any Lender (i) that is not organized under the laws of the United
States, if such Person fails to comply with the other requirements of this
Section 16.11, or (ii) if the increase in such amount payable results from
-------------
Agent's or such Lender's own willful misconduct or gross negligence. Borrowers
will furnish to Agent as promptly as possible after the date the payment of any
Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by Borrowers.
16.12 Collateral Matters.
------------------
(a) The Lenders hereby irrevocably authorize Agent, at its option
and in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrowers
of all Obligations, (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Administrative
Borrower certifies to Agent that the sale or disposition is permitted under
Section 7.4 of this Agreement or the other Loan Documents (and Agent may rely
-----------
conclusively on any such certificate, without further inquiry), (iii)
constituting property in which no Borrower owned any interest at the time the
security interest was granted or at any time thereafter, or (iv) constituting
property leased to a Borrower under a lease that has expired or is terminated in
a transaction permitted under this Agreement. Except as provided above, Agent
will not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders.
Upon request by Agent or Administrative Borrower at any time, the Lenders will
confirm in writing Agent's authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 16.12; provided, however,
------------- -------- -------
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Borrowers in respect of) all interests retained by Borrowers, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
98
(b) Agent shall have no obligation whatsoever to any of the Lenders
to assure that the Collateral exists or is owned by Borrowers or is cared for,
protected, or insured or has been encumbered, or that the Agent's Liens have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
16.13 Restrictions on Actions by Lenders; Sharing of Payments.
-------------------------------------------------------
(a) Each of the Lenders agrees that it shall not, without the express
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the request of Agent, set off against the Obligations, any amounts
owing by such Lender to Borrowers or any deposit accounts of Borrowers now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take or cause to
be taken any action, including, the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders with respect to
the Collateral.
(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations arising under, or relating to, this Agreement or
the other Loan Documents, except for any such proceeds or payments received by
such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender's ratable portion of all such distributions
by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
16.14 Agency for Perfection. Agent hereby appoints each other Lender as its
---------------------
agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent's
99
Liens in assets which, in accordance with Article 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
16.15 Payments by Agent to the Lenders. All payments to be made by
--------------------------------
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
16.16 Concerning the Collateral and Related Loan Documents. Each member
----------------------------------------------------
of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents relating to the Collateral, for the benefit of the
Lender Group. Each member of the Lender Group agrees that any action taken by
Agent in accordance with the terms of this Agreement or the other Loan Documents
relating to the Collateral and the exercise by Agent of its powers set forth
therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
16.17 Field Audits and Examination Reports; Confidentiality;
------------------------------------------------------
Disclaimers by Lenders; Other Reports and Information. By becoming a party to
-----------------------------------------------------
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by Agent, and
------ -------
Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrowers
and will rely significantly upon the Books, as well as on representations of
Borrowers' personnel,
(d) agrees to keep all Reports and non-public information
regarding Borrowers and their Subsidiaries and their operations, assets, and
existing and contemplated business plans in a confidential manner; it being
understood and agreed by Borrowers that in any event such Lender may make
disclosures (a) to counsel for and other advisors, accountants, and auditors to
such Lender, (b) reasonably required by any bona fide potential or actual
Assignee or Participant in connection with any contemplated or actual assignment
or transfer by such Lender of an interest herein or any participation interest
in such Lender's rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or Participants, or (d) as required or requested by any court,
100
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order; provided, however,
-------- -------
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify Administrative Borrower of any request by any court,
governmental or administrative agency, or pursuant to any subpoena or other
legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or conclusion the indemnifying Lender may reach or draw from any Report
in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrowers; and (ii) to pay and protect, and indemnify, defend and hold
Agent, and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including, attorneys fees and costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrowers, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Administrative
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.
16.18 Several Obligations; No Liability. Notwithstanding that certain
---------------------------------
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 16.7, no member of the Lender Group shall
------------
have any liability for the acts or any other member of the Lender
101
Group. No Lender shall be responsible to any Borrower or any other Person for
any failure by any other Lender to fulfill its obligations to make credit
available hereunder, nor to advance for it or on its behalf in connection with
its Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
16.19 Legal Representation of Agent. In connection with the
-----------------------------
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
Paul, Hastings, Xxxxxxxx & Xxxxxx, LLP ("Xxxx Xxxxxxxx") only has represented
and only shall represent Foothill in its capacity as Agent and as a Lender. Each
other Lender hereby acknowledges that Xxxx Xxxxxxxx does not represent it in
connection with any such matters.
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed
-------------
effective when executed by Borrowers, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
17.2 Section Headings. Headings and numbers have been set forth herein
----------------
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
17.3 Interpretation. Neither this Agreement nor any uncertainty or
--------------
ambiguity herein shall be construed or resolved against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
17.5 Amendments in Writing. This Agreement only can be amended by a
---------------------
writing in accordance with Section 15.1.
------------
17.6 Counterparts; Telefacsimile Execution. This Agreement may be
-------------------------------------
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
102
17.7 Revival and Reinstatement of Obligations. If the incurrence or
----------------------------------------
payment of the Obligations by any Borrower or the transfer to the Lender Group
of any property should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Lender Group 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 the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrowers
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
17.8 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.
17.9 Parent as Agent for Borrowers. Each Borrower hereby irrevocably
-----------------------------
appoints Parent as the borrowing agent and attorney-in-fact for all Borrowers
(the "Administrative Borrower") which appointment shall remain in full force and
-----------------------
effect unless and until Agent shall have received prior written notice signed by
each Borrower that such appointment has been revoked and that another Borrower
acceptable to Agent has been appointed Administrative Borrower. Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative Borrower
deems appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce the Lender Group to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender Group
and hold each member of the Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) the Lender Group's relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 17.9 with respect to any liability that has been finally
------------
103
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.
[Signature page to follow]
104
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
CELLSTAR CORPORATION,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
--------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR, LTD.,
a Texas limited partnership
By: National Auto Center, Inc.
its General Partner
/s/ Xxxxxx Xxxx Xxxxxxxxx
--------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
NATIONAL AUTO CENTER, INC.,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
---------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR AIR SERVICES, INC.,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
---------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR TELECOM, INC.,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR FINANCO, INC.,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
A&S AIR SERVICE, INC.,
a Delaware Corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR INTERNATIONAL C
ORPORATION/SA,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR FULFILLMENT, INC.,
a Delaware corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR INTERNATIONAL CORPORATION/ASIA,
a Delaware Corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
AUDIOMEX EXPORT CORP.,
a Texas corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
NAC HOLDINGS, INC.,
a Nevada corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: President
CELLSTAR GLOBAL SATELLITE SERVICES, LTD.,
a Texas limited partnership
By: National Auto Center, Inc.
its General Partner
/s/ Xxxxxx Xxxx Xxxxxxxxx
---------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
CELLSTAR FULFILLMENT LTD.,
a Texas limited partnership
By: CellStar Fulfillment, Inc.
its General Partner
/s/ Xxxxxx Xxxx Xxxxxxxxx
---------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
FLORIDA PROPERTIES, INC.,
a Texas corporation
/s/ Xxxxxx Xxxx Xxxxxxxxx
------------------------------------------
By: Xxxxxx Xxxx Xxxxxxxxx
Title: Sr. VP and General Counsel
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent
and as a Lender
/s/ Xxxxx Xxxxxx
-----------------------------------
By: Xxxxx Xxxxxx
Title: Senior Vice President
