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EXHIBIT 10.1
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
PARADYNE NETWORKS, INC.,
AS PARENT,
AND
PARADYNE CORPORATION,
AS BORROWER,
AND
FOOTHILL CAPITAL CORPORATION,
AS LENDER
DATED AS OF JULY 16, 2001
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is
entered into as of July 16, 2001 by and among FOOTHILL CAPITAL CORPORATION, a
California corporation ("Lender"), PARADYNE NETWORKS, INC., a Delaware
corporation ("Parent"), and PARADYNE CORPORATION, a Delaware corporation
("Borrower").
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 Borrower's now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in
Section 4.4.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person; provided further, that, for purposes of clause (c)
of the definition of Eligible Accounts and Section 5.2(a), neither TPG Partners,
L.P., TPG Partners II, L.P. and TPG Partners III, L.P., nor any Affiliate of any
of them, will be an Affiliate of Borrower.
"Agreement" has the meaning set forth in the preamble hereto.
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"Applicable Cancellation Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of this Agreement up to the date that is the first anniversary of the
date of this Agreement, 3.0% times the Maximum Revolver Amount, (b) during the
period of time from and including the date that is the first anniversary of the
date of this Agreement up to the date that is the second anniversary of the date
of this Agreement, 2% times the Maximum Revolver Amount, and (c) during the
period of time from and including the date that is the second anniversary of the
date of this Agreement up to the Maturity Date, 1% times the Maximum Revolver
Amount; provided, however, that, if the Obligations are indefeasibly paid in
full in cash by an Affiliate or with the proceeds from any other source other
than a senior credit facility that refunds, refinances, or replaces the credit
facility under this Agreement, the Applicable Cancellation Premium shall be
reduced by fifty percent (50%).
"Authorized Person" means any officer or other employee of
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 Borrower is 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
Lender 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 11:00 a.m. (California 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 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.
"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 .75 percentage points.
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"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate
of Borrower has been an "employer" (as defined in Section 3(5) of ERISA) since
August 1, 1996.
"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 Guarantor's and Borrower's now owned
or hereafter acquired books and records (including all Records indicating,
summarizing, or evidencing its or their assets (including the Collateral) or
liabilities, all Records relating to its or their business operations or
financial condition, and all of its or their goods or General Intangibles
related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower Collateral" means all of 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) money or other assets of Borrower that now or
hereafter come into the possession, custody, or control of the Lender, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the 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.
"Borrower Stock Pledge Agreement" means a stock pledge
agreement, in form and substance satisfactory to Lender, executed and delivered
by Borrower to Lender with respect to the pledge of the Stock owned by Borrower
in its Subsidiaries.
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"Borrowing" means a borrowing hereunder consisting of Advances
made by the Lender to, or for the benefit of, 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.
"Business Plan" means the set of Projections of Borrower for
the 2 fiscal year period ending after the date of this Agreement (on a fiscal
year by fiscal year basis, and for the 1 fiscal year period ending after the
date of this Agreement, on a month by month basis), in form and substance
(including as to scope and underlying assumptions) satisfactory to Lender.
"Capital Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness
represented by obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Bank" has the meaning set forth in Section
2.7(a).
"Cash Management Account" has the meaning set forth in Section
2.7(a).
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"Cash Management Agreements" means those certain cash
management service agreements, in form and substance satisfactory to Lender,
each of which is among Borrower, Lender, and one of the Cash Management Banks.
"Change of Control" means (a) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30%, or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors, (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors, (c) Parent ceases to directly own and control
100% of the outstanding capital Stock of Borrower, or (d) Borrower ceases to
directly own and control 100% of the outstanding capital Stock of each of its
Subsidiaries extant as of the date of this Agreement.
"Closing Date" means the date of the making of the initial
Advance (or other extension of credit) hereunder or the date on which Lender
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.
"Code" means the California Uniform Commercial Code, as in
effect from time to time.
"Collateral" shall mean any and all assets and rights and
interests in or to property pledged from time to time as security for the
Obligations (or the Guarantied Obligations as that term is defined in the
Guaranty) pursuant to any pledge or security agreement that constitutes a Loan
Document.
"Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance reasonably satisfactory to Lender.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrower.
"Commitment" means $17,500,000.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 delivered by the chief financial officer of Parent to
Lender.
"Continuing Director" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent on the date of
this Agreement, and (b) any individual who becomes a member of the Board of
Directors after the date of this Agreement 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
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for election in opposition to the Board of Directors in office at the date of
this Agreement in an actual or threatened election contest relating to the
election of the directors (or comparable managers) of Parent (as such terms are
used in Rule 14a-11 under the Exchange Act) and whose initial assumption of
office resulted from such contest or the settlement thereof.
"Control Agreement" means a control agreement, in form and
substance satisfactory to Lender, executed and delivered by Borrower, Lender,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account.
"Copyright Security Agreement" means a copyright security
agreement executed and delivered by Borrower and Lender, the form and substance
of which is satisfactory to Lender.
"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.
"Daily Collections Amount" means, with respect to any date of
determination, the amount of the Collections received by Borrower.
"DDA" means any checking or other demand deposit account
maintained by Borrower.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 2149520002418 of
Borrower maintained with the Designated Account Bank, or such other deposit
account of Borrower (located within the United States) that has been designated
as such, in writing, by Borrower to Lender.
"Designated Account Bank" means First Union National Bank,
whose office is located at 000 X. Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000, and
whose ABA number is 000000000.
"Dilution" means, as of any date of determination, a
percentage, based upon the experience of the immediately prior 90 days, that is
the result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrower's Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 6%.
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"Disbursement Letter" means an instructional letter executed
and delivered by Borrower to Lender regarding the extensions of credit to be
made on the Closing Date, the form and substance of which is satisfactory to
Lender.
"Distribution" means, with respect to any Person, (a) the
declaration or payment of any dividend on or in respect of any shares of any
class of capital Stock of such Person, other than dividends payable solely in
shares of common Stock of such Person, (b) the purchase, redemption, or other
retirement of any shares of any class of capital Stock of such Person, directly
or indirectly, (c) the return of capital by such Person to its shareholders or
other interest holders, or (d) any other distribution on or in respect of any
shares of any class of capital Stock of such Person.
"Dollars" or "$" means United States dollars.
"Dormant Subsidiaries" means Ark Electronic Products, Inc., a
Florida corporation, Paradyne GmbH, a German corporation, and Communications
Equipment Corporation, a Delaware corporation.
"Due Diligence Letter" means the due diligence letter sent by
Lender's counsel to Borrower, together with Borrower's completed responses to
the inquiries set forth therein, the form and substance of such responses to be
satisfactory to Lender.
"EBITDA" means, with respect to any fiscal period, Parent's
and each of its Subsidiaries' consolidated net earnings (or loss), minus
extraordinary gains and plus extraordinary losses, plus interest expense, income
taxes, depreciation, and write-offs of capital assets, losses from the sale of
capital assets, amortization, write-offs of intangible assets, as determined in
accordance with GAAP.
"Eligible Accounts" means those Accounts (or rights to payment
under chattel paper) created by Borrower in the ordinary course of its business,
that arise out of its sale or lease of goods or rendition of services, that
comply with each of the representations and warranties respecting Eligible
Accounts made under the Loan Documents, and that are not excluded as ineligible
by virtue of one or more of the criteria set forth below; provided, however,
that such criteria may be fixed and revised from time to time by Lender in
Lender's Permitted Discretion to address the results of any audit performed by
Lender from time to time after the date of this Agreement. In determining the
amount to be included, Eligible Accounts shall be calculated net of customer
deposits and unapplied cash remitted to Borrower. Eligible Accounts shall not
include the following:
(a) Accounts (or rights to payment under chattel
paper) that the Account Debtor has failed to pay within 90 days of original
invoice date or Accounts (or rights to payment under chattel paper) with selling
terms of more than 60 days,
(b) Accounts (or rights to payment under chattel
paper) owed by an Account Debtor (or its Affiliates) where 50% or more of all
Accounts (or rights to payment
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under chattel paper) owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
(c) Accounts (or rights to payment under chattel
paper) with respect to which the Account Debtor is an employee, or Affiliate of
Borrower,
(d) Accounts (or rights to payment under chattel
paper) 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 (excluding Accounts arising from Borrower's stock
rotation plan for distributors),
(e) Accounts (or right to payment under chattel
paper) that are not payable in Dollars or Canadian dollars,
(f) Accounts (or rights to payment under chattel
paper) with respect to which the Account Debtor either (i) does not maintain its
chief executive office 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, in each case, (w) the
Account is domestically billed and collected, (x) the Account Debtor is
determined by Lender to be sufficiently creditworthy, (y) the Account (or rights
to payment under chattel paper) is supported by an irrevocable letter of credit
satisfactory to Lender (as to form, substance, and issuer or domestic confirming
bank), or (z) the Account (or rights to payment under chattel paper) is covered
by credit insurance in form, substance, and amount, and by an insurer,
satisfactory to Lender,
(g) Accounts (or rights to payment under chattel
paper) with respect to which the Account Debtor is either (i) the United States
or any department, agency, or instrumentality of the United States (exclusive,
however, of Accounts with respect to which Borrower has complied, to the
reasonable satisfaction of Lender, with the Assignment of Claims Act, 31 USC ss.
3727), or (ii) any state of the United States (exclusive, however, of (y)
Accounts (or rights to payment under chattel paper) owed by any state that does
not have a statutory counterpart to the Assignment of Claims Act or (z) Accounts
(or rights to payment under chattel paper) owed by any state that does have a
statutory counterpart to the Assignment of Claims Act as to which Borrower has
complied to Lender's satisfaction),
(h) Accounts (or rights to payment under chattel
paper) with respect to which the Account Debtor is a creditor of Borrower, has
or has asserted a right of setoff, has disputed its liability, or has made any
claim with respect to its obligation to pay the Account (or rights to payment
under chattel paper), to the extent of such claim, right of setoff, or dispute,
(i) Accounts (or rights to payment under chattel
paper) with respect to an Account Debtor whose total obligations owing to
Borrower exceed 10% of all Eligible
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Accounts, to the extent of the obligations owing by such Account Debtor in
excess of such percentage; provided, however, that with respect to an Account
Debtor having a rating of 5A-2 or better, from Dun & Bradstreet, the percentage
applicable to such Account Debtor shall be in excess of 15%,
(j) Accounts (or rights to payment under chattel
paper) 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 Borrower
has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor,
(k) Accounts (or rights to payment under chattel
paper) 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 business activity report or similar document in order to bring suit or
otherwise enforce its remedies against such Account Debtor in the courts or
through any judicial process of such state), unless Borrower has qualified to do
business in New Jersey, Minnesota, 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 (or rights to payment under chattel
paper), the collection of which Lender, in its Permitted Discretion, believes to
be doubtful by reason of the Account Debtor's financial condition,
(m) Accounts (or rights to payment under chattel
paper) that are not subject to a valid and perfected first priority Lender's
Lien,
(n) Accounts (or rights to payment under chattel
paper) with respect to which (i) the goods giving rise to such Account (or
rights to payment under chattel paper) 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,
(o) Accounts (or rights to payment under chattel
paper) that represent the right to receive progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Borrower of the
subject contract for goods or services, or
(p) Rights to payment under chattel paper (i) that
are not billed and due and payable, or (ii) that have not been the subject of an
audit satisfactory to Lender.
"Eligible Inventory" means Inventory of Borrower consisting of
finished goods held for sale or lease in the ordinary course of Borrower's
business, and raw materials for such finished goods, located at one of the
business locations of Borrower 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 in the Loan Documents, and that is
not excluded as ineligible by virtue of the one or more of the criteria set
forth
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below; provided, however, that such criteria may be fixed and revised from time
to time by Lender in Lender's Permitted Discretion to address the results of any
audit or appraisal performed by Lender from time to time after the date of this
Agreement. In determining the amount to be so included, Inventory shall be
valued at the lower of cost or market on a basis consistent with Borrower's
historical accounting practices. An item of Inventory shall not be included in
Eligible Inventory if:
(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 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,
(d) it is not subject to a valid and perfected first
priority Lender's Lien, or
(e) it consists of goods that are obsolete or slow
moving, restrictive or custom items, work-in-process, or goods that constitute
spare parts, packaging and shipping materials, supplies used or consumed in
Borrower's business, xxxx and hold goods, defective goods, "seconds," or
Inventory acquired on consignment.
"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 Borrower or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which received
Hazardous Materials generated by 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
Borrower, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC ss. 1251 et seq; the Toxic Substances Control Act, 15 USC, ss. 2601 et seq.;
the Clean Air Act, 42 USC ss. 7401 et seq.; the Safe Drinking Water Act, 42 USC.
ss. 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. ss. 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. ss.
11001 et seq.; the Hazardous Material Transportation Act, 49 USC ss. 1801 et
seq.; and the Occupational Safety and Health Act, 29 USC. ss. 651 et seq. (to
the
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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 Borrower's now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"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 Borrower aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Lender in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute thereto.
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"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a California
corporation.
"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 Borrower's now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"Guarantors" means Parent, UK Guarantor, Paradyne Worldwide
Corp., a Delaware corporation, and Paradyne Finance Corp., a Delaware
corporation.
"Guarantor Security Agreement" means a security agreement
executed and delivered by each Guarantor and Lender, the form and substance of
which is satisfactory to Lender.
"Guarantor Copyright Security Agreement" means a copyright
security agreement executed and delivered by Guarantors and Lender, the form and
substance of which is satisfactory to Lender.
"Guarantor Patent Security Agreement" means a patent security
agreement executed and delivered by Guarantors and Lender, the form and
substance of which is satisfactory to Lender.
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"Guarantor Trademark Security Agreement" means a trademark
security agreement executed and delivered by Guarantors and Lender, the form and
substance of which is satisfactory to Lender.
"Guaranty" means that certain general continuing guaranty
executed and delivered by each Guarantor in favor of Lender, for the benefit of
the Lender, in form and substance satisfactory to Lender.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means with respect to a Guarantor or Borrower
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations under Capital Leases,
(d) all obligations or liabilities of others secured by a Lien on any asset of a
Guarantor or Borrower, irrespective of whether such obligation or liability is
assumed, (e) all obligations for the deferred purchase price of assets (other
than trade debt incurred in the ordinary course of business and repayable in
accordance with customary trade practices), and (f) any obligation guaranteeing
or intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section
11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
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"Intercompany Advances" means loans or advances from Borrower
to Parent or any Guarantor or from Parent or Guarantor to Borrower, Parent, or
any Guarantor; provided, however, that, in the case of loans or advances to UK
Guarantors, the maximum amount advanced shall not exceed $400,000 per fiscal
quarter.
"Intercompany Subordination Agreement" means that certain
Intercompany Subordination Agreement, dated as of even date herewith, among
Lender, Parent, Borrower and each Guarantor, in form and substance satisfactory
to Lender.
"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, 3, or 6 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 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, 3, or 6 months
after the date on which the Interest Period began, as applicable, and (e)
Borrower may not elect an Interest Period which will end after the Maturity
Date.
"Inventory" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods
that are leased by Borrower as lessor, goods that are furnished by Borrower
under a contract of service, and raw materials, work in process, or materials
used or consumed in Borrower's business.
"Investment" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, non-cash stock purchase loans, and similar advances to directors,
officers, and employees of such Person made in the ordinary course of business,
(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 Borrower's now owned or
hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
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"IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.
"Issuing Lender" means Lender.
"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.
"L/C Undertaking" has the meaning set forth in Section
2.12(a).
"Lender's Account" means an account at a bank designated by
Lender from time to time as the account into which Borrower shall make all
payments to Lender; unless and until Lender notifies Borrower to the contrary,
Lender's Account shall be that certain deposit account bearing account number
323266193 and maintained by Lender with The Chase Manhattan Bank, 4 New York
Plaza, 15th Floor, New York, New York 10004, ABA #000000000.
"Lender Advances" has the meaning set forth in Section
2.3(e)(i).
"Lender Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by a Guarantor or Borrower
under any of the Loan Documents that are paid or incurred by Lender, (b) fees or
charges paid or incurred by Lender in connection with the Lender's transactions
with Guarantors or Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, or the copyright office), filing, recording,
publication, appraisal (including periodic Collateral appraisals to the extent
of the fees and charges (and up to the amount of any limitation contained in
this Agreement), real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) costs and expenses incurred by
Lender in the disbursement of funds to or for the account of Borrower (by wire
transfer or otherwise), (d) charges paid or incurred by Lender resulting from
the dishonor of checks, (e) reasonable costs and expenses paid or incurred by
Lender to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Lender related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation contained in
this Agreement), (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by Lender in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender's relationship with Borrower or any guarantor of the
Obligations, (h) Lender's reasonable out-of-pocket expenses (including
reasonable attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents; provided, however,
that in the case of any amendment, such attorneys fees shall not exceed $5,000
without the consent of
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Borrower, and (i) Lender's reasonable fees and expenses (including reasonable
attorneys fees) incurred in terminating, enforcing (including reasonable
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning 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's Liens" means the Liens granted by Guarantors or
Borrower to Lender for the benefit of the Lender under this Agreement or the
other Loan Documents.
"Lender-Related Persons" means Lender, Lender's Affiliates,
and the officers, directors, employees, and agents of Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.
"Letter of Credit Usage" means, as of any date of
determination, the aggregate undrawn amount of all outstanding Letters of Credit
plus 100% of the amount of outstanding time drafts accepted by an Underlying
Issuer as a result of drawings under Underlying Letters of Credit.
"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 Rate" means, for each Interest Period for each LIBOR
Rate Loan, the rate per annum determined by Lender (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 2.75 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.
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"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Cash Management
Agreements, the Control Agreements, the Copyright Security Agreement, the
Disbursement Letter, the Due Diligence Letter, the Guarantor Security Agreement,
the Parent Stock Pledge Agreement, the Guarantor Copyright Security Agreement,
the Guarantor Patent Security Agreement, the Guarantor Trademark Security
Agreement, the Guaranty, the Intercompany Subordination Agreement, the Letters
of Credit, the Patent Security Agreement, the Borrower Stock Pledge Agreement,
the Trademark Security Agreement, the UK Guaranty, any note or notes executed by
Borrower in connection with this Agreement and payable to Lender, and any other
agreement entered into, now or in the future, by Borrower and the Lender in
connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change
in the business prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Guarantors and Borrower
taken as a whole, (b) a material impairment of a Guarantor's or Borrower's
ability to perform its respective obligations under the Loan Documents to which
it is a party or of Lender's ability to enforce the Obligations or realize upon
the Collateral, or (c) a material impairment of the enforceability or priority
of the Lender's Liens with respect to the Collateral as a result of an action or
failure to act on the part of a Guarantor or Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $17,500,000.
"Negotiable Collateral" means all of Borrower's now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"Net Liquidation Percentage" means the percentage of the book
value of Borrower's Inventory that is estimated to be recoverable in an orderly
liquidation of such Inventory, such percentage to be as determined from time to
time by a qualified appraisal company selected by Lender.
"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 Borrower's Loan Account pursuant hereto), obligations, fees, charges,
costs, Lender Expenses (including any such 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 Borrower
to Lender pursuant to or evidenced by the Loan Documents and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become
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due, now existing or hereafter arising, and including all interest not paid when
due and all Lender Expenses that Borrower is required to pay or reimburse by the
Loan Documents, by law, or otherwise. Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
"Officers' Certificate" means the representations and
warranties of officers form submitted by Lender to Borrower, with Borrower's
completed responses to the inquiries set forth therein, the form and substance
of such responses to be satisfactory to Lender.
"Overadvance" has the meaning set forth in Section 2.5.
"Parent" has the meaning set forth in the preamble to this
Agreement.
"Parent Stock Pledge Agreement" means a stock pledge
agreement, in form and substance satisfactory to Lender, executed and delivered
by Parent to Lender with respect to the pledge of the Stock owned by Parent in
Borrower.
"Patent Security Agreement" means a patent security agreement
executed and delivered by Borrower and Lender, the form and substance of which
is satisfactory to Lender.
"Permitted Discretion" means a determination made in good
faith (meaning honesty in fact and the observance of reasonable commercial
standards of fair dealing) 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 Borrower of Equipment that is substantially worn, damaged, obsolete, excess,
or in the ordinary course of Borrower's business, (b) sales or leases by
Borrower of Inventory to buyers or lessees in the ordinary course of business,
(c) the use or transfer of money or Cash Equivalents by Borrower in a manner
that is not prohibited by the terms of this Agreement or the other Loan
Documents, (d) so long as no Triggering Event or Event of Default has occurred,
the sale or licensing by Borrower of patents, trademarks, copyrights, and other
intellectual property rights, (e) following the occurrence of a Triggering Event
or Event of Default, the sale or licensing by Borrower, on an exclusive basis,
of patents, trademarks, copyrights, and other intellectual property rights so
long as the consideration received by Borrower from such licensing does not
exceed $3,000,000 annually, (f) the licensing by Borrower, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights, and (g) the sale or licensing by Borrower, on an exclusive basis, of
patents, trademarks, copyrights, and other intellectual property so long as
Lender has consented thereto, such consent not to be unreasonably withheld or
delayed and such consent to be based upon the effect that the granting of such
proposed license would have on the value of the Collateral or the ability of
Lender to liquidate the Collateral.
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"Permitted Distributions" means (a) Distributions by Parent
(y) solely in shares of Parent's common stock, and (z) to purchase or otherwise
acquire shares of its Stock concurrently with and with the proceeds of the
issuance of new shares of its Stock, (b) so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, cash
Distributions by Borrower to Parent for the sole purpose of permitting Parent to
pay, and Parent shall pay, federal and state income taxes, (c) so long as no
Default or Event of Default has occurred and is continuing or would result
therefrom, Distributions by Borrower to Parent for customary and reasonable
out-of-pocket administrative expenses of Parent incurred in the ordinary course
of business and solely attributable to the business activities relating to its
ownership of Borrower but only to the extent that such Distributions are
promptly applied to pay such administrative expenses, and (d) so long as no
Default or Event of Default has occurred and is continuing or would result
therefrom, Distributions by Borrower to Parent to enable Parent to pay
directors' fees, expenses and indemnities owing to independent directors of
Parent.
"Permitted Holders" means Communication Genpar, Inc., TPG
Partners, L.P., TPG Parallel I, L.P., Xxxxx Investors, L.L.C., DLJ Capital
Corporation, Sprout Growth II, L.P., Sprout Growth VII, L.P., The Sprout CEO
Fund, L.P., Xxxxxxxx Family Trust, DLJ First ESC, L.L.C., Xxxxxx Xxxxx or
Xxxxxxx Xxxxxxxx, or any Affiliate thereof.
"Permitted Intercompany Advances" means Intercompany Advances
so long as (a) after giving effect to the making of such Intercompany Advance,
the Person making the Inter-Company Advance is Solvent, (b) the Intercompany
Subordination Agreement is in full force and effect with respect to the proposed
Intercompany Advance, and (c) Parent shall not have received a Default Notice
(as such term is defined in the Intercompany Subordination Agreement) which
Default Notice is still in effect.
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) investments resulting from Permitted Intercompany
Advances.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens
for unpaid taxes that either (i) are not yet delinquent, or (ii) do not
constitute an Event of Default hereunder and are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors
under operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (f) Liens arising by operation
of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, incurred in the ordinary course of Borrower's business
and not in connection with the borrowing of money, and which Liens either (i)
are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,
(g) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
Borrower's business and not in
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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 Borrower's business, (j) Liens resulting from any judgment or award that is
not an Event of Default hereunder, and (k) with respect to any Real Property,
easements, rights of way, and zoning restrictions that do not materially
interfere with or impair the use or operation thereof by Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), taxes, or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the Books in such amount as is required under GAAP, and (b) any
such protest is instituted promptly and prosecuted diligently by Borrower in
good faith.
"Permitted Purchase Money Indebtedness" means, as of any date
of determination, Purchase Money Indebtedness incurred after the date of this
Agreement in an aggregate amount outstanding at any one time not in excess of
$12,000,000.
"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.
"Projections" means Parent's consolidated 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.
"Purchase Money Indebtedness" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"Qualified Cash" means, as of any date of determination, cash
and Cash Equivalents of Guarantors or Borrower that is on deposit with banks, or
in Securities Accounts with securities intermediaries, or any combination
thereof, and which such deposit account or Securities Account is maintained by a
branch office located within the United States and is the subject of a Control
Agreement.
"Qualified Inventory" means Inventory of Borrower consisting
of finished goods held for sale or lease in the ordinary course of Borrower's
business, and raw materials for such finished goods.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by Borrower and the improvements
thereto.
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"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 cash and
Cash Equivalents in an amount of not less than $10,000,000.
"Reserve Percentage" means, on any day, for Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of Lender, but so long as
Lender is not required or directed under applicable regulations to maintain such
reserves, the Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the
sum of (a) the then extant principal 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 Borrower 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 Borrower, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.
"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).
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"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).
"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.
"Taxes" has the meaning set forth in Section 2.2.
"Total Warranty Obligations" means, as of any date of
determination, the estimated amount of potential liability of Borrower to its
customers based upon any express or implied warranty related to Borrower's
products and services.
"Trademark Security Agreement" means a trademark security
agreement executed and delivered by Borrower and Lender, the form and substance
of which is satisfactory to Lender.
"Triggering Event" means the date on which the outstanding
amount of Advances equals or exceeds $100,000 (other than on account of fees,
costs, interest, and expenses charged to the Loan Account).
"UK Guarantor" means Paradyne International, Ltd., a
corporation organized under the laws of the United Kingdom.
"UK Guaranty" means a guaranty executed and delivered by the
UK Guarantor to Lender, the form and substance of which is satisfactory to
Lender.
"Underlying Issuer" means a third Person which is the
beneficiary of an L/C Undertaking and which has issued a letter of credit at the
request of the Issuing Lender for the benefit of Borrower.
"Underlying Letter of Credit" means a letter of credit that
has been issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 16.7.
"Xxxxx Fargo" means Xxxxx Fargo Bank, National Association, a
national banking association.
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1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower", the term "Guarantors" or the term "Parent" is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Parent and its Subsidiaries on a consolidated basis unless the context
clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, Lender agrees to make advances ("Advances")
to Borrower in an aggregate amount at any one time outstanding not to exceed the
least of (i) the Maximum Revolver Amount less the Letter of Credit Usage, (ii)
the Borrowing Base less the Letter of Credit Usage, and (iii) 120% of Borrower's
Collections with respect to Accounts for the immediately preceding 60 day
period. 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
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(y) the least of
(i) (A) from and after the date of this
Agreement up to the date that is the first
anniversary of the date of this Agreement,
$2,000,000;
(B) from and including the date
that is the first anniversary of the date of this
Agreement up to the date that is the second
anniversary of the date of this Agreement,
$4,000,000; and
(C) from and including the date
that is the second anniversary of the date of
this Agreement up to the Maturity Date,
$6,000,000,
(ii) 35% of the value of Eligible
Inventory, and
(iii) (A) from and after the date of
this Agreement up to the date that is the first
anniversary of the date of this Agreement, 80%
of the then extant Net Liquidation Percentage
times the book value of Qualified Inventory, and
(B) from and including the date
that is the first anniversary of the date of this
Agreement up to the Maturity Date, 70% of the
then extant Net Liquidation Percentage times the
book value of Qualified Inventory, minus
(z) the aggregate amount of reserves, if any,
established by Lender under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, (ii) amounts owing by
Borrower to any Person to the extent secured by a Lien on, or trust over, any of
the Collateral (other than any existing Permitted Lien set forth on Schedule P-1
which is specifically identified thereon as entitled to have priority over
Lender's Liens), which Lien or trust, in the Permitted Discretion of Lender
likely would have a priority superior to Lender's Liens (such as Liens or trusts
in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers,
or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under
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applicable law) in and to such item of the Collateral, and (iii) an amount equal
to seven percent (7%) of Borrower's Total Warranty Obligations. In addition to
the foregoing, Lender shall have the right to have the Inventory reappraised by
a qualified appraisal company selected by Lender from time to time after the
date of this Agreement 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.
(c) Lender shall have no obligation to make additional
Advances hereunder at any time and 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.
(e) With the exception of the initial Advance, if there are no
Advances outstanding (other than on account of fees, costs, interest, and
expenses charged to the Loan Account) and Borrower desires Lender to make an
Advance to Borrower, Borrower must give written notification to Lender at least
30 days prior to any anticipated Advance.
2.2 [INTENTIONALLY OMITTED.]
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Subject to Section 2.1(e), each
Borrowing shall be made by an irrevocable written request by an Authorized
Person delivered to Lender (which notice must be received by Lender no later
than 1:00 p.m. (California time) on the Business Day prior to the date that is
the requested Funding Date specifying (i) the amount of such Borrowing, and (ii)
the requested Funding Date, which shall be a Business Day. At Lender's election
(which in lieu of delivering the above-described written request, any Authorized
Person may give Lender telephonic notice of such request by the required time,
with such telephonic notice to be confirmed in writing within 24 hours of the
giving of such notice.
(b) NOTATION. Lender shall record on its books and records the
principal amount of the Advances owing to Lender from time to time, such books
and records constituting conclusive evidence, absent manifest error, of the
accuracy of the information contained therein.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWER.
Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Lender's Account and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date
specified herein. Any payment received by Lender
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later than 11:00 a.m. (California time), shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
(b) APPORTIONMENT AND APPLICATION.
(i) Aggregate principal and interest payments (other than
payments received while no Default or Event of Default has occurred and
is continuing and which relate to the payment of principal or interest
of specific Obligations or which relate to the payment of specific
fees), and all proceeds of Accounts or other Collateral received by
Lender, shall be applied as follows:
A. first, to pay any Lender Expenses then due to
Lender under the Loan Documents, until paid in full,
B. second, to pay any fees then due to Lender under
the Loan Documents until paid in full,
C. third, to pay interest due in respect of all
Advances, until paid in full,
D. fourth, to pay the principal of all Advances
bearing interest at a rate determined by reference to the Base
Rate, until paid in full,
E. fifth, if an Event of Default has occurred and is
continuing to Lender, the principal of all Advances bearing
interest at a rate determined by reference to the LIBOR Rate,
until paid in full,
F. sixth, if an Event of Default has occurred and is
continuing to Lender, as cash collateral in an amount up to
105% of the then extant Letter of Credit Usage, until paid in
full,
G. seventh, to pay any other Obligations (other than
the principal of all Advances bearing interest at a rate
determined by reference to the LIBOR Rate) until paid in full,
and
H. eighth, to Borrower (to be wired to Borrower's
Designated Account) or such other Person entitled thereto
under applicable law.
(ii) 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.
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(iii) 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 Borrower to the Lender pursuant to Sections 2.1 and 2.12 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.12, (an "Overadvance"), Borrower immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrower hereby promises to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to Lender as
and when due and payable under the terms of this Agreement and the other Loan
Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below,
all Obligations (except for undrawn Letters of Credit) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof as follows (i) if the relevant Obligation is a 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.
The foregoing notwithstanding, at no time shall any portion of
the Obligations bear interest on the Daily Balance thereof at a per annum rate
less than 7.0%. To the extent that interest accrued hereunder at the rate set
forth herein would be less than the foregoing minimum daily rate, the interest
rate chargeable hereunder for such day automatically shall be deemed increased
to the minimum rate.
(b) LETTER OF CREDIT FEE. Borrower shall pay Lender, a Letter
of Credit fee (in addition to the charges, commissions, fees, and costs set
forth in Section 2.12(e)) which shall accrue at a rate equal to 1.75% 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 Lender,
(i) all Obligations (except for undrawn Letters of
Credit) that have been charged to the Loan Account pursuant to
the terms hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to 4 percentage points above
the per annum rate otherwise applicable hereunder, and
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(ii) the Letter of Credit fee provided for above
shall be increased to 4 percentage points above the per annum
rate otherwise applicable hereunder.
(d) PAYMENT. Interest, Letter of Credit fees, and all other
fees payable hereunder shall be due and payable, in arrears, on the first day of
each month at any time that Obligations or Commitments are outstanding. Borrower
hereby authorizes Lender, from time to time, without prior notice to Borrower,
to charge such interest and fees, all Lender Expenses (as and when incurred),
the charges, commissions, fees, and costs provided for in Section 2.12(e) (as
and when accrued or incurred), the fees and costs provided for in Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document to Borrower's 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 Borrower's 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. Borrower and Lender, in executing and delivering
this Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that, anything contained
herein to the contrary notwithstanding, if said rate or rates of interest or
manner of payment exceeds the maximum allowable under applicable law, then, ipso
facto, as of the date of this Agreement, Borrower is and shall be liable only
for the payment of such maximum as allowed by law, and payment received from
Borrower in excess of such legal maximum, whenever received, shall be applied to
reduce the principal balance of the Obligations to the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrower shall (i) establish on or before the Closing Date
and maintain thereafter cash management services of a type and on terms
satisfactory to Lender at one or more of the banks set forth on Schedule 2.7(a)
(each a "Cash Management Bank"), and shall request in writing and otherwise take
such reasonable steps to ensure that all of its Account Debtors forward payment
of the amounts owed by them directly to such Cash Management Bank, and (ii) on
and after the Closing Date, deposit or cause to be deposited promptly, and in
any event no later than the first Business Day after the date of receipt
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thereof, all Collections (including those sent directly by Account Debtors to a
Cash Management Bank) into a bank account in Lender's name (a "Cash Management
Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish on or before the
Closing Date and maintain thereafter Cash Management Agreements with Lender and
Borrower, in form and substance acceptable to Lender and Borrower. Each such
Cash Management Agreement shall provide, among other things, that from and after
receipt of written notice from Lender (i) all items of payment deposited in such
Cash Management Account and proceeds thereof are held by such Cash Management
Bank as Lender or bailee-in-possession for Lender, (ii) the Cash Management Bank
has no rights of setoff or recoupment or any other claim against the applicable
Cash Management Account, other than for payment of its service fees and other
charges directly related to the administration of such Cash Management Account
and for returned checks or other items of payment, and (iii) it immediately will
forward by daily sweep all amounts in the applicable Cash Management Account to
the Lender's Account. Anything contained herein to the contrary notwithstanding,
Lender agrees that it shall not provide the above-described notice to the Cash
Management Bank unless and until a Triggering Event has occurred. Once the
Triggering Event has occurred, Lender shall be free to exercise its right to
issue such notice and the subsequent elimination of the subject Triggering Event
shall not eliminate the effectiveness of such notice.
(c) So long as no Default or Event of Default has occurred and
is continuing, Borrower may amend Schedule 2.7(a) to add or replace a Cash
Management Bank or Cash Management Account; provided, however, that (i) such
prospective Cash Management Bank shall be satisfactory to Lender and Lender
shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrower and such
prospective Cash Management Bank shall have executed and delivered to Lender a
Cash Management Agreement. Borrower shall close any of its Cash Management
Accounts (and establish replacement cash management accounts in accordance with
the foregoing sentence) promptly and in any event within 30 days of notice from
Lender that the creditworthiness of any Cash Management Bank is no longer
acceptable in Lender's Permitted Discretion, or as promptly as practicable and
in any event within 60 days of notice from Lender that the operating
performance, funds transfer, or availability procedures or performance of the
Cash Management Bank with respect to Cash Management Accounts or Lender's
liability under any Cash Management Agreement with such Cash Management Bank is
no longer acceptable in Lender's Permitted Discretion.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrower is hereby deemed to
have granted a Lien to Lender.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item
by Lender (whether from transfers to Lender by the Cash Management Banks
pursuant to the Cash
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Management Agreements or otherwise) shall not be considered a payment on account
unless such payment item is a wire transfer of immediately available federal
funds made to the Lender's Account or unless and until such payment item is
honored when presented for payment. Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Lender only if it is received into the Lender's Account in the form of
immediately available funds on a Business Day on or before 11:00 a.m.
(California time). If any payment item is received into the Lender's Account on
a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Lender as of the opening of business on
the immediately following Business Day. From and after the Closing Date, Lender
shall be entitled to charge Borrower for 1 Business Day of "clearance" or
"float" at the rate applicable to Base Rate Loans under Section 2.6 on all
Collections that are received by Borrower (regardless of whether forwarded by
the Cash Management Banks to Lender). This across-the-board 1 Business Day
clearance or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of the financing of Borrower and
shall apply irrespective of whether or not there are any outstanding monetary
Obligations; the effect of such clearance or float charge being the equivalent
of charging 1 Business Day of interest on such Collections. 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 Lender.
2.9 DESIGNATED ACCOUNT. Lender 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). Borrower agrees to establish and maintain its Designated Account
with Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Lender hereunder. Unless otherwise
agreed by Lender and the Borrower, any Advance requested by Borrower and made by
Lender hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender
shall maintain an account on its books in the name of Borrower (the "Loan
Account"), on which Borrower will be charged with all Advances made to Borrower
or for Borrower's account, the Letters of Credit issued by Issuing Lender for
Borrower's Account, and with all other payment Obligations of Borrower hereunder
or under the other Loan Documents, including, accrued interest, fees and
expenses, and Lender Expenses. In accordance with Section 2.8, Borrower's Loan
Account will be credited with all payments received by Lender from Borrower or
for Borrower's account, including all amounts received in the Lender's Account
from any Cash Management Bank attributable to Borrower. Lender shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and the Lender unless, within 30 days after receipt thereof
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by Borrower, Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Lender the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter):
(a) UNUSED LINE FEE. On the first day of each month,
commencing with the first day of the month immediately following the date of
this Agreement through the date on which all of the Obligations are paid in full
in accordance with the terms of this Agreement and Lender's obligation to
provide additional credit is hereby terminated, an unused line fee in the amount
equal to 0.375% per annum times the result of (a) the Maximum Revolver Amount,
less (b) the sum of (i) the average Daily Balance of Advances that were
outstanding during the immediately preceding month, plus (ii) the average Daily
Balance of the Letter of Credit Usage during the immediately preceding month,
(b) CLOSING FEE. On the date of this Agreement, a fee in the
amount of $150,000,
(c) SERVICING FEE. On the first day of each month, commencing
with the first day of the month immediately following the date of this Agreement
through the date on which all of the Obligations are paid in full in accordance
with the terms of this Agreement and Lender's obligation to provide additional
credit is hereby terminated, a servicing fee in an amount equal to $4,000, and
(d) AUDIT, APPRAISAL, AND VALUATION CHARGES. For the separate
account of Lender, audit, appraisal, and valuation fees and charges as follows,
(i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for each
financial audit of Borrower performed by personnel employed by Lender, (ii) if
implemented, a one time charge of $3,000 plus out-of-pocket expenses for
expenses for the establishment of electronic collateral reporting systems, (iii)
a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each
appraisal of the Collateral performed by personnel employed by Lender, and (iv)
the actual charges paid or incurred by Lender if it elects to employ the
services of one or more third Persons to perform financial audits of Borrower,
or to appraise the Collateral, or any portion thereof. Notwithstanding the
foregoing, so long as no Event of Default has occurred, Borrower shall not be
required to pay, for the separate account of Lender, the fees and charges of
more than (x) one financial audit of Borrower's assets per fiscal quarter and
(y) one appraisal of the Collateral per fiscal year.
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 Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be Xxxxx Fargo) for the
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account of Borrower. 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),
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 Lender (reasonably in advance of the requested
date of issuance, amendment, renewal, or extension) a notice requesting the
issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking
to be amended, renewed, or extended, the date of issuance, amendment, renewal,
or extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or of the Underlying Letter of Credit, as applicable), and such other
information as shall be necessary to prepare, amend, renew, or extend such L/C
or L/C Undertaking. If requested by the Issuing Lender, Borrower also shall be
an applicant under the application with respect to any Underlying Letter of
Credit that is to be the subject of an L/C Undertaking. 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 all outstanding Advances made to or for the account
of Borrower, or
(ii) the Letter of Credit Usage would exceed $2,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the then extant principal amount of outstanding
Advances.
Borrower and Lender acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the 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, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Lender an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Borrower shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day that Borrower
receives such notice, if such notice is received prior to 10:00 a.m., California
time, on the date of receipt, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans under Section 2.6. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower's obligation to
reimburse such L/C
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Disbursement shall be discharged and replaced by the resulting Advance. Promptly
following receipt by Lender of any payment from Borrower pursuant to this
paragraph, Lender shall distribute such payment to the Issuing Lender or, to the
extent that Lender has made payments pursuant to Section 2.12(c) to reimburse
the Issuing Lender, then to Lender and the Issuing Lender as their interest may
appear.
(b) Borrower hereby agrees to indemnify, save, defend, and
hold Lender harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; provided, however, that Borrower shall not be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of the Issuing Lender or the
Lender. 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 Borrower's
account, even though this interpretation may be different from Borrower's own,
and Borrower understands and agrees that the Lender shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that the
L/C Undertakings may require Issuing Lender to indemnify the Underlying Issuer
for certain costs or liabilities arising out of claims by Borrower against such
Underlying Issuer. Borrower hereby agrees to indemnify, save, defend, and hold
the Lender harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender under any L/C
Undertaking as a result of the Lender's indemnification of any Underlying
Issuer; provided, however, that Borrower shall not be obligated hereunder to
indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of the Issuing Lender, or the Lender.
(c) 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.
(d) Any and all charges, commissions, fees, and costs incurred
by the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Lender for the account of the Issuing Lender; it being acknowledged
and agreed by 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.
(e) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Underlying
Issuer or Lender with any direction, request,
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or requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or Lender
any other condition regarding any Underlying Letter of Credit or any
Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Parent,
and Borrower shall pay on demand such amounts as Lender may specify to be
necessary to compensate Lender for such additional cost or reduced receipt,
together with interest on such amount from the date of such demand until payment
in full thereof at the rate then applicable to Base Rate Loans hereunder. The
determination by Lender of any amount due pursuant to this Section, as set forth
in a certificate setting forth the calculation thereof in reasonable detail,
shall, in the absence of manifest or demonstrable error, be final and conclusive
and binding on all of the parties hereto.
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrower shall have the
option (the "LIBOR Option") to have interest on all or a portion of the Advances
be charged at a rate of interest based upon 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 Lender elects 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 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, Borrower no longer
shall have the option to request that Advances bear interest at the LIBOR Rate
and Lender 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) 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 the LIBOR Option by notifying Lender prior to 11:00 a.m.
(California time) at least 3 Business Days prior to the commencement of
the proposed Interest Period (the
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"LIBOR Deadline"). Notice of 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 Lender of a LIBOR Notice
received by Lender before the LIBOR Deadline, or by telephonic notice
received by Lender before the LIBOR Deadline (to be confirmed by
delivery to Lender of a LIBOR Notice received by Lender prior to 5:00
p.m. (California time) on the same day.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrower. In connection with each LIBOR Rate Loan, Borrower shall
indemnify, defend, and hold Lender harmless against any loss, cost, or
expense incurred by 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 be deemed to equal the amount determined by 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 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 Lender
delivered to Borrower setting forth any amount or amounts that Lender
is entitled to receive pursuant to this Section shall be conclusive
absent manifest error.
(iii) Borrower shall have not more than 5 LIBOR Rate Loans in
effect at any given time. Borrower 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. Borrower 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 Lender of proceeds of Collections in accordance 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,
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Borrower shall indemnify, defend, and hold Lender 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 Lender on a prospective
basis to take into account any additional or increased costs to 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, Lender shall give Parent notice of such a
determination and adjustment and, upon its receipt of the notice from
Lender, Parent may, by notice to Lender (y) require Lender to furnish
to Parent 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 Lender, make it unlawful or
impractical for 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, Lender shall give notice of such
changed circumstances to Parent and (y) in the case of any LIBOR Rate
Loans that are outstanding, the date specified in 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 Lender thereafter
shall accrue interest at the rate then applicable to Base Rate Loans,
and (z) Borrower shall not be entitled to elect the LIBOR Option until
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, Lender is not 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 Lender 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, Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital
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requirements for banks or bank holding companies, or any change in the
interpretation or application thereof by any Governmental Authority charged with
the administration thereof, or (ii) compliance by Lender or its parent bank
holding company with any guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), the effect
of reducing the return on Lender's or such holding company's capital as a
consequence of such Lender's Commitments hereunder to a level below that which
Lender or such holding company could have achieved but for such adoption,
change, or compliance (taking into consideration Lender's or such holding
company's then existing policies with respect to capital adequacy and assuming
the full utilization of such entity's capital) by any amount deemed by Lender to
be material, then Lender may notify Parent thereof. Following receipt of such
notice, Borrower agrees to pay such Lender the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by Lender of a statement in the amount and setting forth
in reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining amount, such Lender may use any
reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to make the initial Advance (or otherwise to extend any
credit provided for hereunder), is subject to the fulfillment, to the
satisfaction of Lender, of each of the conditions precedent set forth below:
(a) [Intentionally omitted];
(b) Lender shall have received all financing statements
required by Lender, duly executed by Guarantors and Borrower, and Lender shall
have received searches reflecting the filing of all such financing statements;
(c) Lender shall have received each of the following
documents, in form and substance satisfactory to Lender, duly executed, and each
such document shall be in full force and effect:
(i) the Control Agreements,
(ii) the Copyright Security Agreement,
(iii) the Disbursement Letter,
(iv) the Due Diligence Letter,
(v) the Parent Stock Pledge Agreement, together with all
certificates, if any, representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto endorsed in
blank,
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(vi) the Guaranty,
(vii) the Intercompany Subordination Agreement,
(viii) the Patent Security Agreement,
(ix) the Guarantor Security Agreement,
(x) the Guarantor Copyright Security Agreement,
(xi) the Guarantor Patent Security Agreement,
(xii) the Guarantor Trademark Security Agreement,
(xiii) the UK Guaranty,
(xiv) the Borrower Stock Pledge Agreement, together with all
certificates representing the shares of Stock pledged thereunder, as
well as Stock powers with respect thereto endorsed in blank,
(xv) the Cash Management Agreements,
(xvi) the Officer's Certificate, and
(xvii) the Trademark Security Agreement;
(d) Lender shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(e) Lender shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the date of this Agreement,
certified by the Secretary of Borrower;
(f) Lender shall have received a certificate of status with
respect to Borrower, dated within 45 days of the date of this Agreement, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;
(g) Lender shall have received certificates of status with
respect to Borrower, each dated within 45 days of the date of this Agreement,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of Borrower) in which its failure
to be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that Borrower is in good standing in such
jurisdictions;
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(h) Lender shall have received a certificate from the
Secretary of each Guarantor attesting to the resolutions of such Guarantor's
Board of Directors authorizing its execution, delivery, and performance of the
Loan Documents to which such Guarantor is a party and authorizing specific
officers of such Guarantor to execute the same;
(i) Lender shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the date of this
Agreement, certified by the Secretary of such Guarantor;
(j) Lender shall have received a certificate of status with
respect to each Guarantor, dated within 45 days of the date of this Agreement,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Guarantor, which certificate shall indicate that such
Guarantor is in good standing in such jurisdiction;
(k) Lender shall have received certificates of status with
respect to each Guarantor, each dated within 45 days of the date of this
Agreement, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Guarantor) in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Guarantor is in good
standing in such jurisdictions;
(l) Lender shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be satisfactory to Lender;
(m) Lender shall have received Collateral Access Agreements
with respect to the following locations: 0000 000xx Xxxxxx X., Xxxxx, Xxxxxxx
00000;
(n) Lender shall have received opinions of domestic
Guarantors' and Borrower's counsel in form and substance reasonably satisfactory
to Lender;
(o) Lender shall have received satisfactory evidence
(including a certificate of the chief financial officer of Parent) that all tax
returns required to be filed by Borrower have been timely filed and all taxes
upon Borrower or its properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(p) Borrower shall have the Required Availability after giving
effect to the initial extension of credit hereunder;
(q) Lender shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrower's books and records and verification of Borrower's representations and
warranties to Lender, the results of which shall be satisfactory to Lender, and
(ii) an inspection of each of the locations where Inventory is located, the
results of which shall be satisfactory to Lender;
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(r) Lender shall have received completed reference checks with
respect to Borrower's senior management, the results of which are satisfactory
to Lender in its sole discretion;
(s) Lender shall have received an appraisal of the Net
Liquidation Percentage applicable to Borrower's Inventory, and an appraisal of
Borrower's trademarks and Equipment, the results of which shall be satisfactory
to Lender;
(t) Lender shall have received Borrower's Business Plan;
(u) Borrower shall pay all Lender Expenses incurred in
connection with the transactions evidenced by this Agreement;
(v) Borrower shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Borrower 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 Lender.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to continue to make Advances (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrower to so perform or cause to be performed constituting an Event of
Default):
(a) within 30 days of the Closing Date, deliver to Lender
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.8, the form and substance of which shall
be satisfactory to Lender and its counsel.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
Lender to make all 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;
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(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
Borrower, Lender, 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 Borrower and Lender and shall continue in full force and
effect for a term ending on July 16, 2004 (the "Maturity Date"). The foregoing
notwithstanding, Lender shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and Lender Liens in the Collateral shall
remain in effect until all Obligations have been fully and finally discharged
and Lender's obligations to provide additional credit hereunder have been
terminated. When this Agreement has been terminated and all of the Obligations
have been fully and finally discharged and Lender's obligations to provide
additional credit under the Loan Documents have been terminated irrevocably,
Lender will, at Borrower's sole expense, execute and deliver any UCC termination
statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, Lender's Liens and all notices of security interests
and liens previously filed by Lender with respect to the Obligations.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any time
upon 30 days prior written notice by Borrower to Lender, to terminate this
Agreement by paying to Lender, for the benefit of Lender, in cash, the
Obligations (including either (i) providing cash collateral to Lender in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender), in full.
If Borrower has sent a notice of termination pursuant to the provisions of this
Section, then the Commitment shall terminate and Borrower shall be obligated to
repay the Obligations (including either (i) providing cash collateral to Lender
in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender), in
full, 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 Lender to terminate after the
occurrence of an Event of Default, (b) foreclosure and sale of Collateral, (c)
sale of the Collateral in any Insolvency Proceeding, or (iv) restructure,
reorganization or compromise of the Obligations by the confirmation of a plan of
reorganization, or any other plan of compromise, restructure, or
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arrangement in any Insolvency Proceeding, then, in view of the impracticability
and extreme difficulty of ascertaining the actual amount of damages to Lender or
profits lost by Lender as a result of such early termination, and by mutual
agreement of the parties as to a reasonable estimation and calculation of the
lost profits or damages of Lender, Borrower shall pay the Applicable
Cancellation Premium to Lender and individual Lender, measured as of the date of
such termination.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Lender, a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Borrower 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 Borrower of each of their covenants and duties under the
Loan Documents. The Lender's Liens in and to the Borrower Collateral shall
attach to all Borrower Collateral without further act on the part of Lender or
Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, Borrower has no
authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Lender's security interest is
dependent on or enhanced by possession, Borrower, immediately upon the request
of Lender, shall endorse and deliver physical possession of such Negotiable
Collateral to Lender.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Lender's designee may (a) notify Account Debtors of Borrower
that the Accounts, chattel paper, or General Intangibles that have been assigned
to Lender have 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 Guarantor and Borrower agree that they will
hold in trust for Lender, as Lender's trustee, any Collections that they receive
and immediately will deliver said Collections to Lender or a Cash Management
Bank in their original form as received by them.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
(a) At any time upon the request of Lender, Borrower shall
execute and deliver to Lender, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of title
and all other documents (the "Additional Documents") that Lender may request in
its Permitted Discretion, in form and substance satisfactory to Lender, to
perfect and continue perfected or better perfect Lender's Liens in the
Collateral (whether now owned or hereafter arising or acquired), to create and
perfect Liens in favor of Lender in any Real Property acquired after the date of
this Agreement, and in order to fully
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consummate all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by applicable law, Borrower
authorizes Lender to execute any such Additional Documents in Borrower's name
and authorizes Lender to file such executed Additional Documents in any
appropriate filing office. In addition, on such periodic basis as Lender shall
require, Borrower shall cause to be prepared, executed, and delivered to Lender
supplemental schedules to the applicable Loan Documents to identify material
patents, copyrights, and trademarks as being subject to the security interests
created thereunder.
(b) Parent and Borrower each agree to cause:
(i) each Subsidiary of Parent not in existence on the date of
this Agreement to execute and deliver to Lender promptly and in any event within
3 Business Days after the formation, acquisition or change in status thereof (A)
a joinder to the Guaranty, (B) a joinder to the Parent Security Agreement, (C)
if such Subsidiary has any Subsidiaries, a joinder to the Parent Stock Pledge
Agreement together with (y) certificates evidencing all of the Stock of any
Person owned by such Subsidiary, and (z) undated stock powers executed in blank,
(D) one or more mortgages regarding any owned Real Property, to the extent that
the difference between the then current fair market value of such Real Property
and the amount of all Liens with respect to such Real Property (as determined by
Lender in its sole discretion) is in excess of $1,000,000, and (E) such other
agreements, instruments, approvals, or other documents reasonably requested by
Lender in order to create, perfect, establish the first priority (other than
Permitted Liens) of or otherwise protect any Lien purported to be covered by any
such Parent Security Agreement, Parent Stock Pledge Agreement or mortgage or
otherwise to make such Subsidiary a party to and bound by all of the terms,
covenants and agreements contained in the Loan Documents and that all or
substantially all of the property and assets of such Subsidiary shall become
Collateral for the Obligations; and
(ii) each owner of the Stock of any such Subsidiary to execute
and deliver promptly and in any event within 3 Business Days after the formation
or acquisition of such Subsidiary a supplement to the Borrower Stock Pledge
Agreement or Parent Stock Pledge Agreement, as applicable, together with (A)
certificates evidencing all of the Stock of such Subsidiary, (B) undated stock
powers or other appropriate instruments of assignment executed in blank, and (C)
such other agreements, instruments, approvals, or other documents reasonably
requested by Lender.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes,
and appoints Lender (and any of Lender's officers, employees, or agents
designated by Lender) as Borrower's true and lawful attorney, with power to (a)
if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower on any of the
documents described in Section 4.4, (b) at any time that an Event of Default has
occurred and is continuing, sign 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
Borrower's name on any
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Collection item that may come into Lender's possession, (e) at any time that an
Event of Default has occurred and is continuing, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (f) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts, chattel paper, or General Intangibles
directly with Account Debtors, for amounts and upon terms that Lender determines
to be reasonable, and Lender may cause to be executed and delivered any
documents and releases that Lender determines to be necessary. The appointment
of Lender as Borrower's attorney, and each and every one of its rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Lender's
obligations to extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Lender (through its officers, employees, or
agents) shall have the right from time to time hereafter to inspect the Books
and to check, test, and appraise the Collateral in order to verify Borrower's
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral; provided, however, that Lender shall give
Borrower reasonable notice prior to conducting any such inspection.
Notwithstanding the foregoing, Lender need not provide such notice to Borrower
following the occurrence of an Event of Default.
4.7 CONTROL AGREEMENTS. Parent and Borrower agree that they will not
transfer assets out of any Securities Accounts other than as permitted under
Section 7.18 and, if to another securities intermediary, unless each of Parent,
or Borrower, Lender, and the substitute securities intermediary have entered
into a Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Parent, or Borrower without the prior written consent of
Lender. Upon the occurrence and during the continuance of a Default or Event of
Default, Lender may notify any securities intermediary to liquidate the
applicable Securities Account or any related Investment Property maintained or
held thereby and remit the proceeds thereof to Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, each
of Parent, and Borrower make the following representations and warranties to
Lender which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of the date of the making of
each Advance (or other extension of credit) made thereafter, as though made on
and as of the date of such Advance (or other extension of credit) (except to the
extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each of Parent and Borrower has good and
indefeasible title to its properties and assets, free and clear of Liens except
for Permitted Liens.
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5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery or lease
of Inventory or the rendition of services to such Account Debtors in the
ordinary course of Borrower's business, owed to Borrower without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. As to
each Eligible Account, such Account (or rights to payment under chattel paper)
is not:
(a) owed by an employee, or Affiliate of Borrower,
(b) on account of a transaction wherein goods were placed on
consignment or were sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a xxxx and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional, (excluding Accounts (or rights
to payment under chattel paper) arising from Borrower's stock rotation plan for
distributors),
(c) payable in a currency other than Dollars or Canadian
Dollars,
(d) owed by an Account Debtor that has or has asserted a right
of setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account (or rights to payment under chattel paper),
(e) owed by an Account Debtor that is subject to any
Insolvency Proceeding or is not Solvent or as to which Borrower has received
notice of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(f) on account of a transaction as to which the goods giving
rise to such Account (or rights to payment under chattel paper) have not been
shipped and billed to the Account Debtor or the services giving rise to such
Account (or right to payment under chattel paper) have not been performed and
accepted by the Account Debtor,
(g) a right to receive progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Borrower of the
subject contract for goods or services, and
(h) an Account (or rights to payment under chattel paper) that
has not been billed to the customer.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects. As to each item of Eligible Inventory,
such Inventory is
(a) owned by Borrower free and clear of all Liens other than
Liens in favor of Lender,
(b) either located at one of the locations set forth on
Schedule E-1 or in transit from one such location to another such location,
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(c) not located on real property leased by Borrower or in a
contract warehouse, in each case, unless subject to a Collateral Access
Agreement executed by the lessor, warehouseman, or other third party, as the
case may be, and unless segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises, and
(d) not goods that are obsolete or slow moving, restrictive or
custom items, work-in-process, or that constitute spare parts, packaging and
shipping materials, supplies used or consumed in Borrower's business, xxxx and
hold goods, defective goods, or Inventory acquired on consignment.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party and are located
only at the locations identified on Schedule 5.5.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
offices of Parent, and Borrower are located at the address indicated in Schedule
5.7 and Parent's, and Borrower's FEIN is identified in Schedule 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Parent and Borrower are duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of Parent and Borrower, by class,
and, as of the date of this Agreement, 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 Borrower's capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Neither any Guarantor nor Borrower is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.
(c) Set forth on Schedule 5.8(c), is a complete and accurate
list of each Guarantor's and 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
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Guarantor or Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Guarantor's or Borrower's Subsidiaries' capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Neither any Guarantor nor Borrower nor any of their respective Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of any Guarantor's or Borrower's Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Guarantor and Borrower, the execution,
delivery, and performance by such Guarantor and 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 Guarantor and Borrower.
(b) As to each Guarantor and Borrower, the execution,
delivery, and performance by such Guarantor and Borrower of this Agreement and
the Loan Documents to which it is a party do not and will not (i) violate in any
material respect any provision of federal, state, or local law or regulation
applicable to any Guarantor or Borrower, the Governing Documents of any
Guarantor and Borrower, or any material order, judgment, or decree of any court
or other Governmental Authority binding on any Guarantor or Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation of any
Guarantor or Borrower, (iii) result in or require the creation or imposition of
any Lien of any nature whatsoever upon any properties or assets of any Guarantor
or Borrower, other than Permitted Liens, or (iv) require any approval of any
Guarantor's or Borrower's interestholders or any approval or consent of any
Person under any material contractual obligation of any Guarantor or Borrower.
(c) Other than the filing of financing statements, fixture
filings, and Mortgages, the execution, delivery, and performance by each
Guarantor and Borrower of this Agreement and the Loan Documents to which such
Guarantor or Borrower is a party do not and will not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
Governmental Authority or other Person.
(d) As to each Guarantor and Borrower, this Agreement and the
other Loan Documents to which such Guarantor and Borrower is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Guarantor and Borrower will be the legally valid and binding obligations of
such Guarantor and Borrower, enforceable against such Guarantor and Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
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(e) The Lender's Liens are validly created, perfected, and
first priority Liens, subject only to Permitted Liens.
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
Guarantors and Borrower, threatened against Guarantors or Borrower, 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 date of this Agreement that, if decided adversely to Borrower or any
Guarantor, 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 annual and quarterly financial
statements relating to Guarantors or Borrower that have been delivered by
Guarantors or Borrower to Lender have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly in
all material respects, Borrower's or Guarantors', as applicable, 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 Borrower or
any Guarantor, as applicable, since the date of the latest financial statements
submitted to Lender on or before the date of this Agreement.
5.12 FRAUDULENT TRANSFER.
(a) Each Guarantor and Borrower are Solvent.
(b) No transfer of property is being made by any Guarantor or
Borrower and no obligation is being incurred by any Guarantor or Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any of the Guarantors or Borrower.
5.13 EMPLOYEE BENEFITS. None of any Guarantor, Borrower, 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 Parent's and Borrower's knowledge, none of Borrower's or any Guarantor's
properties or assets has ever been used by any Guarantor or Borrower or by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials, where such production,
storage, handling, treatment, release or transport was in violation, in any
material respect, of applicable Environmental Law, (b) to Parent's and
Borrower's knowledge, none of Borrower's or any Guarantor's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, (c)
none of Borrower or any Guarantor has received notice that a Lien arising under
any Environmental Law has attached to any revenues or to any Real Property owned
or operated by Borrower or any Guarantor, and (d) none of Borrower or any
Guarantor has received a summons, citation, notice, or directive from the
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Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower or any Guarantor resulting
in the releasing or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. None of Guarantors or Borrower have utilized the
services of any broker or finder in connection with Borrower's obtaining
financing from Lender under this Agreement and no brokerage commission or
finders fee is payable by any Guarantor or Borrower in connection herewith.
5.16 INTELLECTUAL PROPERTY. Borrower and each Guarantor own, or hold
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of such Person's 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
Borrower or any Guarantor is the owner or is an exclusive licensee.
5.17 LEASES. Borrower and each Guarantor enjoy peaceful and undisturbed
possession under all leases material to the business of Borrower and each
Guarantor and to which they are a party or under which they are operating. All
of such leases are valid and subsisting and no material default by Borrower or
any Guarantor exists under any of them.
5.18 DDAS. Set forth on Schedule 5.18 are all of the DDAs of Borrower
and each Guarantor, 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 Borrower or any Guarantor in writing to Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrower or any Guarantor in writing to Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided. On the date of this Agreement, the Projections represent, and as of
the date on which any other Projections are delivered to Lender, such additional
Projections represent Parent's and Borrower's 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 Borrower and each Guarantor outstanding immediately
prior to the date of this Agreement that is to remain outstanding after the date
of this Agreement and such Schedule accurately reflects the aggregate principal
amount of such Indebtedness and the principal terms thereof.
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5.21 REAL PROPERTY. As of the date of this Agreement, neither any
Guarantor nor Borrower nor any of their Subsidiaries owns any fee interest in
any Real Property.
5.22 DORMANT SUBSIDIARY. Each of the Dormant Subsidiaries do not have
any material assets or liabilities or engage in any business activity.
6. AFFIRMATIVE COVENANTS.
Parent and Borrower, jointly and severally, covenant and agree
that, so long as any credit hereunder shall be available and until full and
final payment of the Obligations, they 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
Parent and Borrower to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by Lender. Borrower also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Lender with the following documents
at the following times in form reasonably satisfactory to Lender:
--------------------------------------------------------------------------------
Daily (but only if a (a) a summary sales journal, summary
Triggering Event has collection journal, and summary credit
occurred) register since the last such schedule and a
calculation of the Borrowing Base as of such
date, and (b) notice of all returns,
disputes, or claims.
--------------------------------------------------------------------------------
Weekly (but only if a (b) Inventory reports specifying Borrower's
Triggering Event has cost and the wholesale market value of its
occurred) Inventory, by category, with additional
detail showing additions to and deletions
from the Inventory.
--------------------------------------------------------------------------------
Monthly (not later than (c) a detailed calculation of the Borrowing
the 10th Business Day of Base (including detail regarding those
each month) Accounts that are not Eligible Accounts),
(d) a detailed aging, by total, of the
Accounts, together with a reconciliation to
the detailed calculation of the Borrowing
Base previously provided to Lender,
(e) a summary aging, by vendor, of Parent's
and Borrower's accounts payable and any book
overdraft,
(f) a calculation of Dilution for the prior
month, and
(g) a summary sales journal, summary
collection journal, summary credit register,
and other supporting ledgers since the last
such report.
--------------------------------------------------------------------------------
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Upon request by Lender (h) a detailed list of Borrower's customers,
(but only if a
Triggering Event has (i) a report regarding Borrower's accrued, but unpaid,
occurred) ad valorem taxes,
(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 Borrower, purchase orders and invoices,
and
(k) such other reports as to the Collateral, or the
financial condition of Borrower or any Guarantor as
Lender may request.
--------------------------------------------------------------------------------
In addition, Borrower agrees to cooperate fully with Lender to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Lender:
(a) as soon as available, but in any event within 45 days (30
days in the case of a month that is the first month of any fiscal quarter) after
the end of each month during each of Parent's fiscal years,
(i) a company prepared consolidated and consolidating balance
sheet and income statement, and consolidated statement of cash flow
covering Parent's and its Subsidiaries' operations during such period,
(ii) a statement signed by the chief financial officer of
Parent to the effect that:
A. the financial statements delivered hereunder
(except for the first month of each quarter) 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 Parent and
Borrower contained in this Agreement and the other Loan
Documents are true and correct in all material respects on and
as of the date of such certificate, as though made on and as
of such date (except to the extent that such representations
and warranties relate solely to an earlier date), 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
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knowledge and what action Parent or Borrower has taken, are
taking, or propose to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.19 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
7.19, and
(b) as soon as available, but in any event within 90 days
after the end of each of Parent's fiscal years,
(i) consolidated financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Lender and
certified, without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow
and, if prepared, such accountants' letter to management),
(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence of
any Default or Event of Default under Section 7.19,
(c) as soon as available, but in any event prior to the start
of each of Parent's fiscal years,
(i) copies of Parent's Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory to
Lender, in its sole discretion, for the forthcoming 2 years, year by
year, and for the forthcoming fiscal year, month by month, accompanied
by a statement from the chief financial officer of Parent as being such
officer's good faith best estimate of the financial performance of
Parent and its Subsidiaries during the period covered thereby,
(d) if and when filed by Parent,
(i) notice of Form 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports (if available online, no hard
copies need be provided),
(ii) notice of any other filings made by Borrower with the SEC
(if available online, no hard copies need be provided),
(iii) copies of Parent's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service, and
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(iv) notice of any other information provided by Parent to its
shareholders generally (if not available online, hard copies shall be
provided),
(e) if and when filed by any Guarantor or Borrower and as
requested by Lender, satisfactory evidence of payment of applicable excise taxes
in each jurisdictions in which (i) any Guarantor or Borrower conducts business
or is required to pay any such excise tax, (ii) where the failure to pay any
such applicable excise tax would result in a Lien on the properties or assets of
any Guarantor or Borrower, or (iii) where any Guarantor's or 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 Parent or Borrower has knowledge of any event
or condition that constitutes a Default or Event of Default notice thereof and a
statement of the curative action that Guarantors or Borrower propose to take
with respect thereto, and
(g) upon the request of Lender, any other report reasonably
requested relating to the financial condition of Borrower or any Guarantor.
Parent agrees that neither Borrower, nor any Subsidiary of
Parent, will have a fiscal year different from that of Parent. Parent and
Borrower agree that their independent certified public accountants are
authorized to communicate with Lender and to release to Lender whatever
financial information concerning Borrower and any Guarantor that Lender
reasonably may request. Parent and Borrower waive the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to or in accordance with this Agreement, and agree that Lender may contact
directly any such accounting firm or service bureau in order to obtain such
information.
6.4 [INTENTIONALLY OMITTED.]
6.5 RETURN. Cause returns and allowances as between Borrower and its
Account Debtors, to be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower
(excluding a return under Borrower's stock rotation plan), Borrower promptly
shall determine the reason for such return and, if Borrower accepts such return,
issue a credit memorandum (with a summary credit register to be sent to Lender
if a Triggering Event has occurred) in the appropriate amount to such Account
Debtor. If, at a time when an Event of Default has occurred and is continuing,
any Account Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Lender consents (which consent
shall not be unreasonably withheld or delayed), issue a credit memorandum (with
a summary credit register to be sent to Lender if a Triggering Event has
occurred) in the appropriate amount to such Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct to its business
in good working order and
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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 Borrower
or any Guarantor 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.
Borrower and each Guarantor will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Lender with proof
satisfactory to Lender indicating that the Borrower has made such payments or
deposits. Borrower and each Guarantor shall, upon request, deliver satisfactory
evidence of payment of applicable excise taxes in each jurisdictions in which
Borrower or any Guarantor is required to pay any such excise tax.
6.8 INSURANCE.
(a) At Borrower's or a Guarantor's expense, maintain insurance
respecting their properties 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.
Borrower and Guarantors 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
satisfactory to Lender. Parent and Borrower shall deliver copies of all such
policies to Lender with a satisfactory lender's loss payable endorsement naming
Lender as sole loss payee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
(b) Parent and Borrower shall give Lender prompt notice of any
loss in excess of $250,000 covered by such insurance. Lender shall have the
exclusive right to adjust any losses payable under such insurance policies in
excess of $250,000, without any liability to Borrower or any Guarantor
whatsoever in respect of such adjustments. After a Triggering Event has
occurred, any monies received as payment for any loss under any insurance policy
mentioned above (other than liability insurance policies) or as payment of any
award or compensation for condemnation or taking by eminent domain, shall be
paid over to Lender and Lender shall disburse such monies to Parent or Borrower
under staged payment terms reasonably satisfactory to Lender for application to
the cost of repairs, replacements, or restorations; provided, however, that if
an Event of Default has occurred and is continuing or an Overadvance has
occurred and has not been eliminated in accordance with Section 2.4, Lender may,
in its sole discretion, use such monies for prepayment of the Obligations. Any
repairs, replacements, or restorations made pursuant to this Section 6.8(b)
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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) Borrower and the Guarantors shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 6.8, unless Lender is included
thereon as named insured with the loss payable to Lender under a lender's loss
payable endorsement or its equivalent. Parent and Borrower immediately shall
notify Lender whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Lender.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that Borrower may amend Schedule 5.5 so long as such amendment occurs by written
notice to Lender not less than 30 days prior to the date on which the Inventory
or Equipment is moved to such new location, so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, Borrower provides any financing statements, fixture
filings or PPSA filings necessary to perfect and continue perfected Lender Liens
on such assets and also provides to Lender a Collateral Access Agreement.
6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 LEASES. Pay when due all rents and other amounts payable under any
leases to which Borrower or any Guarantor is a party or by which Borrower's or
any Guarantor'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 Borrower's obtaining
financing from Lender under this Agreement. Borrower and each Guarantor, jointly
and severally, agree and acknowledge that payment of all such brokerage
commissions or finders fees shall be the sole responsibility of Borrower and
each Guarantor, and Borrower and each Guarantor, jointly and severally, agree to
indemnify, defend, and hold Lender harmless from and against any claim of any
broker or finder arising out of Borrower's obtaining financing from Lender under
this Agreement.
6.13 EXISTENCE. At all times preserve and keep in full force and effect
Borrower's and each Guarantor's valid existence and good standing and any rights
and franchises material to their businesses.
6.14 ENVIRONMENTAL.
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(a) Keep any property either owned or operated by Borrower or
any Guarantor 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 respects, with Environmental Laws and
provide to Lender documentation of such compliance which Lender requests, (c)
promptly notify Lender of any release of a Hazardous Material of any reportable
quantity from or onto property owned or operated by Borrower or any Guarantor
and take any Remedial Actions required to xxxxx said release or otherwise to
come into compliance with applicable Environmental Law, and (d) promptly provide
Lender with written notice within 10 days of the receipt of any of the
following: (i) notice that an Environmental Lien has been filed against any of
the real or personal property of Borrower or any Guarantor, (ii) commencement of
any Environmental Action or notice that an Environmental Action will be filed
against Borrower or any Guarantor, 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.
(a) Promptly and in no event later than 5 Business Days after
senior management of Parent or Borrower obtaining knowledge thereof, (a) notify
Lender if any written information, exhibit, or report furnished to Lender
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which made, and (b) correct any defect or error
that may be discovered therein or in any Loan Document or in the execution,
acknowledgment, filing, or recordation thereof.
6.16 DORMANT SUBSIDIARIES. Cause the Dormant Subsidiaries not to have
any material assets or liabilities or engage in any business activity.
7. NEGATIVE COVENANTS.
Parent and Borrower each covenant and agree that, so long as
any credit hereunder shall be available and until full and final payment of the
Obligations, Parent and Borrower will not and will not permit any of their
respective Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other
Loan Documents, together with Indebtedness owed to Underlying Issuers with
respect to Underlying Letters of Credit;
(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness;
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(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Lender's
judgment, materially impair the prospects of repayment of the Obligations by
Borrower or materially impair Borrower's creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to Borrower, and (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that are at least
as favorable to Lender as those that were applicable to the refinanced, renewed,
or extended Indebtedness;
(e) Indebtedness of Borrower resulting from Permitted
Intercompany Advances;
(f) Indebtedness of a Guarantor or Borrower resulting from a
guaranty of Indebtedness of a Subsidiary of Parent that is permitted under this
Agreement; and
(g) Subordinated Indebtedness on terms and conditions,
including subordination provisions, satisfactory to Lender.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution); provided, however, that Paradyne Canada, Ltd., a
corporation organized under the laws of Canada, Paradyne International Sales,
Ltd., a corporation organized under the laws of the Barbados, and the Dormant
Subsidiaries may liquidate, wind up, or dissolve themselves at any time.
(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.
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7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of the
assets of Borrower or any Guarantor.
7.5 CHANGE NAME. Change Borrower's or any Guarantor's name, FEIN,
corporate structure or identity, or add any new fictitious name; provided,
however, that Borrower or any Guarantor may change its name upon at least 30
days prior written notice by Parent to Lender of such change and so long as, at
the time of such written notification, Parent or any Guarantor provides any
financing statements, fixture filings or PPSA filings necessary to perfect and
continue perfected Lender's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person, except by endorsement of
instruments or items of payment for deposit to the account of Parent or Borrower
or which are transmitted or turned over to Lender.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's or any Guarantor's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
Section 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower or any Guarantor, other than the Obligations in
accordance with this 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, sale or return, sale on approval, or other conditional terms of sale.
7.11 DISTRIBUTIONS. Other than Permitted Distributions, make any
Distribution (in cash or other property).
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 Borrower's or any Guarantor's accounting records without said
accounting firm or service bureau agreeing to provide Lender information
regarding the Collateral or Borrower's or any Guarantor's financial condition.
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7.13 INVESTMENTS. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrower and each Guarantor shall not have Permitted Investments
(other than in the Cash Management Accounts) in excess of $5,000,000 outstanding
at any one time unless Borrower or a Guarantor and the applicable securities
intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Lender shall determine in
its Permitted Discretion, to perfect (and further establish) Lender's Liens in
such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Except for Permitted Intercompany
Advances and except for Permitted Distributions, directly or indirectly enter
into or permit to exist any transaction with any Affiliate of Parent except for
transactions that are in the ordinary course of Borrower's or the applicable
Guarantor's business, upon fair and reasonable terms, that are fully disclosed
to Lender, and that are no less favorable to Borrower or the applicable
Guarantor than would be obtained in an arm's length transaction with a
non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business; provided, however, that Paradyne Canada, Ltd., a corporation organized
under the laws of Canada, Paradyne International Sales, Ltd., a corporation
organized under the laws of the Barbados, and the Dormant Subsidiaries may
suspend or go out of a substantial portion of their respective businesses at any
time.
7.16 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the date of this Agreement, to pay transactional fees, costs,
and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without Borrower or a Guarantor, as applicable, providing 30 days prior written
notification thereof to Lender and so long as, at the time of such written
notification, Borrower or a Guarantor, as applicable, provides any financing
statements, fixture filings or PPSA filings necessary to perfect and continue
perfected the Liens of Lender in and to the Collateral and also provides to
Lender a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Lender's prior written consent.
7.18 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Parent and Borrower agree not to transfer, and not to permit
any of Parent's Subsidiaries to 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, Borrower and the
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applicable Guarantor may use such assets (and the proceeds thereof) to the
extent not prohibited by this Agreement.
7.19 FINANCIAL COVENANTS.
(a) Fail to maintain:
(i) MINIMUM EBITDA. EBITDA, measured on a fiscal quarter end
basis, of not less than the required amount set forth in the following
table for the applicable period set forth opposite thereto:
-------------------------------------------------------------------------
Applicable Amount Applicable Period
-------------------------------------------------------------------------
($8,578,000) For the 3 month period ending June 30, 2001*
-------------------------------------------------------------------------
($17,032,000) For the 6 month period ending September 30, 2001*
-------------------------------------------------------------------------
($27,042,000) For the 9 month period ending December 31, 2001*
-------------------------------------------------------------------------
($26,893,000) For the 12 month period ending March 31, 2002*
-------------------------------------------------------------------------
($18,065,000) For the 12 month period ending June 30, 2002
-------------------------------------------------------------------------
($9,203,000) For the 12 month period ending September 30, 2002
-------------------------------------------------------------------------
$1,278,000 For the 12 month period ending December 31, 2002
and the last day of each fiscal quarter thereafter
-------------------------------------------------------------------------
* Excluding any inventory reserves recorded by Borrower for the
period ending June 30, 2001.
(b) Make:
(i) CAPITAL EXPENDITURES. Capital expenditures in any fiscal
year in excess of the amount set forth in the following table for the
applicable period:
-------------------------------------------------------------------------
Applicable Amount Applicable Period
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Applicable Amount Applicable Period
-------------------------------------------------------------------------
$1,500,000 For the 3 month period ending June 30, 2001
-------------------------------------------------------------------------
$3,700,000 For the 6 month period ending September 30, 2001
-------------------------------------------------------------------------
$6,200,000 For the 9 month period ending December 31, 2001
-------------------------------------------------------------------------
$8,600,000 For the 12 month period ending March 31, 2002
-------------------------------------------------------------------------
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-------------------------------------------------------------------------
$9,500,000 For the 12 month period ending June 30, 2002
-------------------------------------------------------------------------
$9,600,000 For the 12 month period ending September 30, 2002
-------------------------------------------------------------------------
$9,600,000 For the 12 month period ending December 31, 2002
-------------------------------------------------------------------------
$10,800,000 For the 12 month period ending March 31, 2003
-------------------------------------------------------------------------
$12,000,000 For the 12 month period ending June 30, 2003
-------------------------------------------------------------------------
$13,200,000 For the 12 month period ending September 30, 2003
-------------------------------------------------------------------------
$14,400,000 For the 12 month period ending December 31, 2003
-------------------------------------------------------------------------
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 if it occurs
on or after the making of the initial Advance (or other extension of credit)
hereunder:
8.1 If Borrower or any Guarantor fails to pay when due and payable, or
when declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Lender, reimbursement of Lender Expenses, or other amounts constituting
Obligations) and such failure continues for a period of 5 Business Days;
8.2 If any Guarantor or Borrower or any of their Subsidiaries fails or
neglects to perform, keep, or observe (a) any term, provision, covenant,
condition, or agreement applicable to it (i) contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.10
(Compliance with Laws), or 6.11 (Leases) of this Agreement and such failure
continues for a period of 5 Business Days; (ii) contained in Sections 6.1
(Accounting System), 6.6 (Maintenance of Properties), or 6.9 (Location of
Inventory and Equipment) of this Agreement and such failure continues for a
period of 15 Business Days; or (b) any other term, provision, condition,
covenant, or agreement contained in this Agreement or in any of the other Loan
Documents (giving effect to any grace periods, cure periods, or required
notices, if any, expressly provided for in such other Loan Documents; in each
case, other than any term, provision, condition, covenant, or agreement that is
the subject of another provision of this Section 8, in which event such other
provision of this Section 8 shall govern);
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8.3 If any material portion of Borrower's or any Guarantor's or any of
their Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any
Guarantor or any of its or their Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower or any
Guarantor, or any of their Subsidiaries, and any of the following events occur:
(a) Borrower or any Guarantor or the Subsidiary, as applicable, consents to the
institution of such Insolvency Proceeding against it, (b) the petition
commencing the Insolvency Proceeding is not timely controverted, (c) the
petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; provided, however, that, during
the pendency of such period, Lender shall be relieved of its obligations to
extend credit hereunder, (d) an interim trustee is appointed to take possession
of all or any substantial portion of the properties or assets of, or to operate
all or any substantial portion of the business of, Borrower or any Guarantor or
any of their Subsidiaries, or (e) an order for relief shall have been entered
therein;
8.6 If Borrower or any Guarantor or any of their Subsidiaries is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;
8.7 [Intentionally omitted.]
8.8 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of Borrower's, any Guarantor's, or any of their Subsidiaries'
properties or assets;
8.9 If there is a default in any material agreement to which Borrower
or any Guarantor or any of their Subsidiaries is a party and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in a
right by the other party thereto, irrespective of whether exercised, to
accelerate the maturity of Borrower's or any Guarantor's or their Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.10 If Borrower or any Guarantor or any of their Subsidiaries makes
any payment on account of Indebtedness that has been contractually subordinated
in right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Borrower, any Guarantor, or their Subsidiaries, or any officer, employee,
Lender, or director of Borrower, or any Guarantor or any of their Subsidiaries;
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8.12 If the obligation of any Guarantor or Borrower under the Guaranty
is limited or terminated by operation of law or by any Guarantor or Borrower
thereunder;
8.13 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.14 Any provision of any Loan Document shall at any time for any
reason be declared by Borrower, Parent, or any other Guarantor to be null and
void, or the validity or enforceability thereof shall be contested by Borrower
or any Guarantor, or a proceeding shall be commenced by Borrower or any
Guarantor, or by any Governmental Authority having jurisdiction over Borrower or
any Guarantor, seeking to establish the invalidity or unenforceability thereof,
or Borrower or any Guarantor shall deny that Borrower or any Guarantor has any
liability or obligation purported to be created under any Loan Document.
9. THE LENDER'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, Lender may do any one or more of the
following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Lender;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender, but without
affecting any of Lender's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit the Loan Account with only the net amounts received by
Lender in payment of such disputed Accounts after deducting all Lender Expenses
incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon Borrower or any
Guarantor, make such payments and do such acts as Lender considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Borrower Collateral
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if Lender so requires, and to make the Borrower Collateral available to Lender
at a place that Lender may designate which is reasonably convenient to both
parties. Borrower authorizes Lender to enter the premises where the Borrower
Collateral is located, to take and maintain possession of the Borrower
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
Lien that in Lender's determination appears to conflict with Lender's Liens and
to pay all expenses incurred in connection therewith and to charge Borrower's
Loan Account therefor. With respect to any of Borrower's owned or leased
premises, Borrower hereby grants Lender a license to enter into possession of
such premises and to occupy the same, without charge, in order to exercise any
of Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to 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 Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Lender, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Borrower Collateral. Borrower hereby grants to Lender a license or
other right to use, without charge, 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 Borrower Collateral,
in completing production of, advertising for sale, and selling any Borrower
Collateral and Borrower's rights under all licenses and all franchise agreements
shall inure to Lender's benefit;
(j) Sell the Borrower Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Lender determines is commercially reasonable. It is not necessary that the
Borrower Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the
Borrower Collateral as follows:
(i) Lender shall give Borrower a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the
Borrower 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 Borrower as provided in Section 12, at least 10
days before the
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earliest time of disposition set forth in the notice; no notice needs
to be given prior to the disposition of any portion of the Borrower
Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market;
(l) Lender may credit bid and purchase at any public sale;
(m) Lender may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available
to it at law or in equity pursuant to any other Loan Document; and
(o) Any deficiency that exists after disposition of the
Borrower Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Lender to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and with prior notice to 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 Borrower's
Loan Account as Lender deems necessary to protect Lender from the exposure
created by such failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the type described
in Section 6.8 and take any action with respect to such policies as Lender deems
prudent. Any such amounts paid by Lender shall constitute Lender Expenses and
any such payments shall not constitute an agreement by Lender to make similar
payments in the future or a waiver by Lender of any Event of Default under this
Agreement. Lender need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
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11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which Borrower may in any way be liable.
11.2 THE LENDER'S LIABILITY FOR COLLATERAL. Borrower hereby agrees
that: (a) so long as Lender complies with its obligations, if any, under the
Code, Lender shall not in any way or manner be liable or responsible for: (i)
the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
Lender-Related Persons 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 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,
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
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.
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12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Parent or Borrower, on the one hand, and Lender, on the other hand,
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 Parent, Borrower, or Lender, as applicable, may designate to each other in
accordance herewith), or telefacsimile to the applicable address set forth
below:
If to Parent or
Borrower: PARADYNE CORPORATION
0000 000xx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax No.: 000.000.0000
with copies to: XXXXX, XXXX & XXXXXXX, P.C.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Phone No.: 000.000.0000
Fax No.: 000.000.0000
If to Lender: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Business Finance Division Manager
Fax No.: 000.000.0000
with copies to: XXXXXXX, XXXXXXX & XXXXXXXX LLP
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx Hilson, Esq.
Fax No. 000.000.0000
Lender, Parent, and Borrower may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other parties. All notices or demands sent in accordance
with this Section 12, other than notices by Lender in connection with
enforcement rights against the Collateral under the provisions of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3
Business
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Days after the deposit thereof in the mail. Parent and Borrower acknowledge and
agree that notices sent by Lender in connection with the exercise of enforcement
rights against Collateral under the provisions of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND
LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING BROUGHT IN LOS ANGELES, CALIFORNIA IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13(B).
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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14. SUCCESSORS
14.1 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 14.1 hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by Borrower is required in connection with any
such assignment. Lender shall provide Borrower written notice of any such
assignment as promptly as reasonably possible after any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Parent (on behalf of itself and Borrower) and
then any such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
16. GENERAL PROVISIONS.
16.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Parent, Borrower, and Lender.
16.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
16.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
16.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
16.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a
writing in accordance with Section 15.1.
16.6 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,
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when taken together, shall constitute but one and the same Agreement. Delivery
of an executed counterpart of this Agreement by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement. The foregoing
shall apply to each other Loan Document mutatis mutandis.
16.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or any Guarantor or the transfer to
Lender of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower or any Guarantor automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
16.8 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.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
PARADYNE NETWORKS, INC.
a Delaware corporation
By:
----------------------------------------
Title:
PARADYNE CORPORATION
a Delaware corporation
By:
----------------------------------------
Title:
FOOTHILL CAPITAL CORPORATION
a California corporation
By:
----------------------------------------
Title:
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TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION......................................................1
1.1 Definitions..............................................................1
1.2 Accounting Terms........................................................23
1.3 Code....................................................................23
1.4 Construction............................................................23
1.5 Schedules and Exhibits..................................................23
2. LOAN AND TERMS OF PAYMENT........................................................23
2.1 Revolver Advances.......................................................23
2.2 [Intentionally Omitted.]................................................25
2.3 Borrowing Procedures and Settlements....................................25
2.4 Payments................................................................25
2.5 Overadvances............................................................27
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations............................................................27
2.7 Cash Management.........................................................28
2.8 Crediting Payments; Float Charge........................................29
2.9 Designated Account......................................................30
2.10 Maintenance of Loan Account; Statements of Obligations..................30
2.11 Fees....................................................................31
2.12 Letters of Credit.......................................................31
2.13 LIBOR Option............................................................34
2.14 Capital Requirements....................................................36
3. CONDITIONS; TERM OF AGREEMENT....................................................37
3.1 Conditions Precedent to the Initial Extension of Credit.................37
3.2 Conditions Subsequent to the Initial Extension of Credit................40
3.3 Conditions Precedent to all Extensions of Credit........................40
3.4 Term....................................................................41
3.5 Effect of Termination...................................................41
3.6 Early Termination by Borrower...........................................41
4. CREATION OF SECURITY INTEREST....................................................42
4.1 Grant of Security Interest..............................................42
4.2 Negotiable Collateral...................................................42
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral..42
4.4 Delivery of Additional Documentation Required...........................42
4.5 Power of Attorney.......................................................43
4.6 Right to Inspect........................................................44
4.7 Control Agreements......................................................44
5. REPRESENTATIONS AND WARRANTIES...................................................44
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5.1 No Encumbrances.........................................................44
5.2 Eligible Accounts.......................................................45
5.3 Eligible Inventory......................................................45
5.4 Equipment...............................................................46
5.5 Location of Inventory and Equipment.....................................46
5.6 Inventory Records.......................................................46
5.7 Location of Chief Executive Office; FEIN................................46
5.8 Due Organization and Qualification; Subsidiaries........................46
5.9 Due Authorization; No Conflict..........................................47
5.10 Litigation..............................................................48
5.11 No Material Adverse Change..............................................48
5.12 Fraudulent Transfer.....................................................48
5.13 Employee Benefits.......................................................48
5.14 Environmental Condition.................................................48
5.15 Brokerage Fees..........................................................49
5.16 Intellectual Property...................................................49
5.17 Leases..................................................................49
5.18 DDAs....................................................................49
5.19 Complete Disclosure.....................................................49
5.20 Indebtedness............................................................49
5.21 Real Property...........................................................50
5.22 Dormant Subsidiary......................................................50
6. AFFIRMATIVE COVENANTS............................................................50
6.1 Accounting System.......................................................50
6.2 Collateral Reporting....................................................50
6.3 Financial Statements, Reports, Certificates.............................51
6.4 [Intentionally omitted.]................................................53
6.5 Return..................................................................53
6.6 Maintenance of Properties...............................................53
6.7 Taxes...................................................................54
6.8 Insurance...............................................................54
6.9 Location of Inventory and Equipment.....................................55
6.10 Compliance with Laws....................................................55
6.11 Leases..................................................................55
6.12 Brokerage Commissions...................................................55
6.13 Existence...............................................................55
6.14 Environmental...........................................................55
6.15 Disclosure Updates......................................................56
6.16 Dormant Subsidiaries. Cause the Dormant Subsidiaries not to have
any material assets or liabilities or engage in any business activity...56
7. NEGATIVE COVENANTS...............................................................56
7.1 Indebtedness............................................................56
7.2 Liens...................................................................57
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7.3 Restrictions on Fundamental Changes.....................................57
7.4 Disposal of Assets......................................................58
7.5 Change Name.............................................................58
7.6 Guarantee...............................................................58
7.7 Nature of Business......................................................58
7.8 Prepayments and Amendments..............................................58
7.9 Change of Control.......................................................58
7.10 Consignments............................................................58
7.11 Distributions...........................................................58
7.12 Accounting Methods......................................................58
7.13 Investments.............................................................59
7.14 Transactions with Affiliates............................................59
7.15 Suspension..............................................................59
7.16 Use of Proceeds.........................................................59
7.17 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees..................................................59
7.18 Securities Accounts.....................................................59
7.19 Financial Covenants.....................................................60
8. EVENTS OF DEFAULT................................................................61
9. THE LENDER'S RIGHTS AND REMEDIES.................................................63
9.1 Rights and Remedies.....................................................63
9.2 Remedies Cumulative.....................................................65
10. TAXES AND EXPENSES...............................................................65
11. WAIVERS; INDEMNIFICATION.........................................................66
11.1 Demand; Protest; etc....................................................66
11.2 The Lender's Liability for Collateral...................................66
11.3 Indemnification.........................................................66
12. NOTICES..........................................................................67
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................................68
14. Successors.......................................................................69
14.1 Successors..............................................................69
15. AMENDMENTS; WAIVERS..............................................................69
15.1 Amendments and Waivers..................................................69
16. GENERAL PROVISIONS...............................................................69
16.1 Effectiveness...........................................................69
16.2 Section Headings........................................................69
16.3 Interpretation..........................................................69
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16.4 Severability of Provisions..............................................69
16.5 Amendments in Writing...................................................69
16.6 Counterparts; Telefacsimile Execution...................................69
16.7 Revival and Reinstatement of Obligations................................70
16.8 Integration.............................................................70
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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 E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 2.8(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization
Schedule 5.8(c) Capitalization of Subsidiaries
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
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SCHEDULE C-1
COMMITMENTS
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LENDER COMMITMENT
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Foothill Capital Corporation 17,500,000
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All Lender $17,500,000
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