Loan and Security Agreement - Foothill Capital Corp. and The 3DO Co.
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
THE 3DO COMPANY, A CALIFORNIA CORPORATION,
THE 3DO COMPANY, A DELAWARE CORPORATION
AND
3DO EUROPE, LTD.
AS THE OBLIGORS,
AND
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS THE ARRANGER AND ADMINISTRATIVE AGENT,
DATED AS OF APRIL 6, 2000
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LOAN AND SECURITY AGREEMENT
THIS LOAN SECURITY AGREEMENT (this "AGREEMENT"), is entered
into as of April 6, 2000, by and among, on the one hand, the lenders
identified on the signature pages hereof (such lenders, together with their
respective successors and assigns, are referred to hereinafter each
individually as a "LENDER" and collectively as the "LENDERS"), FOOTHILL
CAPITAL CORPORATION, a California corporation, as the arranger and
administrative agent for the Lenders (in such capacity, together with its
successors, if any, "AGENT"), and, on the other hand, THE 3DO COMPANY, a
California corporation ("BORROWER") with its chief executive office located
at 600 Galveston Drive, Redwood City, California 94063, THE 3DO COMPANY, a
Delaware corporation ("PARENT") with its chief executive office located at
600 Galveston Drive, Redwood City, California 94063, and 3DO EUROPE, LTD., a
company incorporated under the laws of England ("UK SUB"), with its
registered office located at 21-23 Mossop Street, London, SW3 2LY, Great
Britain, and with its principal business office at 21-23 Mossop Street,
London, SW3 2LY, Great Britain.
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, a UK Sub
Account, a General Intangible, a UK General Intangible, or chattel paper.
"ACCOUNTS" means all of Borrower's "accounts" (as that term is
defined in the Code), and any and all credit insurance, guaranties, or
security therefor.
"ACQUIRED INDEBTEDNESS" means, with respect to any Permitted
Acquisition, Indebtedness of a Person existing at the time such Person
becomes a Subsidiary of Borrower, and not incurred in connection with, or in
anticipation of, such Person becoming a Subsidiary.
"ACQUISITION" means any purchase or other acquisition by Borrower of
the Assets or Stock of any other Person (including the formation or
capitalization of a Subsidiary), other than the purchase of Inventory or
Equipment in the ordinary course of business.
"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
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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 ten percent
(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 ten
percent (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 officer of a Person shall be deemed
to be an Affiliate of such Person; and (c) each partnership or joint venture
in which a Person is a partner or joint venturer shall be deemed to be an
Affiliate of such Person.
"AGENT" means Foothill in its capacity as agent for the Lenders
hereunder, and any successor thereto.
"AGENT'S ACCOUNT" shall mean an account at a bank designated by
Agent from time to time as the account into which Borrower shall make all
payments to Agent for the benefit of the Lender Group and into which the
Lender Group shall make all payments to Agent under this Agreement and the
other Loan Documents. Initially, until Agent notifies Borrower and the Lender
Group to the contrary, the Agent's Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Agent with The
Chase Manhattan Bank, N.A., 4 New York Plaza, 15th Floor, New York, New York
10004, ABA #021-000-021.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.4(e)(i).
"AGENT-RELATED PERSONS" means Agent together with its Affiliates,
officers, directors, employees, counsel, and agents.
"AGREED CURRENCY" means (i) Dollars, (ii) so long as such currencies
remain Eligible Currencies, the lawful currency of each Specified State and
the Euro, and (iii) any other Eligible Currency which the Borrower requests
the Agent to include as an Agreed Currency hereunder and which is acceptable
to the Agent.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"APPLICABLE BASE RATE MARGIN" means, subject to adjustment if and as
provided below, the following margin based upon Tangible Net Worth for the
applicable period ending with the most recently ended fiscal quarter (as
shown on the Compliance Certificate delivered pursuant to SECTION
6.3(a)(iii)) (for the fractional calendar commencing on the Closing Date and
ending on June 30, 2000, the Applicable Base Rate Margin shall be 0.75
percentage point):
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TANGIBLE NET WORTH FOR APPLICABLE BASE RATE MARGIN
PRIOR FISCAL QUARTER FOR CURRENT CALENDAR QUARTER
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equal to or greater than $63,000,000 0.25 percentage point
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equal to or greater than $48,000,000 0.75 percentage point
and less than $63,000,000
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less than $48,000,000 1.25 percentage points
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In the event of the delivery of a Compliance Certificate showing an increase
or decrease in Tangible Net Worth which requires a change in the Applicable
Base Rate Margin, the change in the Applicable Base Rate Margin shall be
effective from the first day of the calendar month immediately following
receipt of the Compliance Certificate (PROVIDED that the Compliance
Certificate is received by the Agent no later than 11:00 a.m., California
time, at least 1 Business Day prior to the first day of such calendar month)
until the next such date on which the Applicable Base Rate Margin is subject
to change following the delivery of (or failure to deliver) a Compliance
Certificate showing an increase or decrease in Tangible Net Worth which
requires a change in the Applicable Base Rate Margin. The failure to deliver
any Compliance Certificate by the date required hereunder (after giving
effect to any applicable grace period) shall automatically cause the
Applicable Base Rate Margin to be the maximum per annum rate described above,
effective as of the first day of the calendar month immediately following the
date on which the delivery of the Compliance Certificate was otherwise
required.
In the event that the annual audited financial statements delivered by
Borrower to Agent pursuant to SECTION 6.3(b)(i) reflect adjustments to the
financial statements delivered for prior periods, the effect of which
adjustments, had they been applied in the appropriate period, would have been
to decrease Tangible Net Worth for such period with a resulting increase in
the Applicable Base Rate Margin requiring a higher interest rate, Borrower
shall immediately pay to Agent for the benefit of the Lender Group an amount
equal to the difference between the amount of interest which would have been
payable had the appropriate Applicable Base Rate Margin been applied and the
amount of interest actually paid.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to (a) during the period of time from and
after the date of the execution and delivery of this Agreement and up to and
including the first anniversary date of the Closing Date, 2.00% TIMES the
Maximum Amount, and (b) during the period of time from and after the first
anniversary date of the Closing Date up to and including the day prior to the
Maturity Date, 1.00%; PROVIDED that, if the Obligations are prepaid in full
and this Agreement is terminated concurrent with the consummation of a
refinancing of the Obligations provided by a commercial banking unit of Wells
Fargo, the Applicable Prepayment Premium shall be zero.
"ASSET" means any interest in any kind of property or asset, whether
real, personal, or mixed, and whether tangible or intangible.
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"ASSIGNEE" has the meaning set forth in SECTION 14.1.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in
the form of EXHIBIT A-1 attached hereto.
"AUTHORIZED PERSON" means any officer or other employee of Borrower.
"AVAILABILITY" means, as of any date of determination, the aggregate
amount of Advances that Borrower is then entitled to obtain hereunder (after
giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder) MINUS the aggregate amount, if any, of all
trade payables of the Obligors in excess of 45 days past due (or, if the data
relative to the age thereof is not readily available, in excess of their
historical turnover) and all book overdrafts in excess of the Obligors'
historical practices with respect thereto, in each case as determined by
Agent in its Permitted Discretion.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as
amended, and any successor statute.
"BASE RATE" means, as of any date of determination, the rate of
interest announced within Wells Fargo at its principal office in San
Francisco as its "prime rate", with the understanding that the "prime rate"
is one of Wells 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 Wells Fargo may designate.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in SECTION
3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate
of such Borrower has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"BOARD OF DIRECTORS" means, as to any Person, the Board of Directors
of such Person.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER DILUTION RESERVE" means, as of any date of determination,
an amount sufficient to reduce the advance rate against Eligible Borrower's
Accounts by one percentage point for each percentage point by which Dilution
is in excess of 5%.
"BORROWER SEASONAL RESERVE" means, as of any date of determination,
an amount equal to 5% of the gross sales of Borrower for the 45 days
immediately preceding the date of determination (the percentage amount of the
Borrower Seasonal Reserve may be adjusted, at the election of the Agent in
its sole discretion, for the 2000/2001 season based upon the actual amount of
Borrower's Dilution during the 1999/2000 season).
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"BORROWER'S BOOKS" means all of Borrower's books and records
(including all of its records indicating, summarizing, or evidencing its
Assets (including the Borrower's Collateral) or liabilities, all of its
information relating to its business operations or financial condition, and
all of its computer programs, disks, files, printouts, runs, or other
computer prepared information).
"BORROWER'S COLLATERAL" means all of the Borrower's right, title,
and interest in and to each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) any money, or other Assets of Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, 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, Borrower's 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.
The foregoing notwithstanding, the "Borrower's Collateral" shall not include
any General Intangibles that are now or hereafter held by Borrower as
licensee, solely in the event and to the extent that: (a) as the proximate
result of the grant of a security interest, Borrower's rights in or with
respect to such item of General Intangibles would be forfeited or would
become terminable, or if Borrower would be deemed to have breached the
underlying license or other agreement that governs such item of General
Intangibles; (b) any such restriction is effective and enforceable under
applicable law, including Section 9318(4) of the Code; and (c) any such
forfeiture, terminability, or breach cannot be either prevented or promptly
remedied by Borrower using its commercially reasonable efforts (but without
any obligation to make any material expenditures of money or to commence
legal proceedings); PROVIDED, HOWEVER, that the grant of security interest
hereunder shall extend to, and the term "Borrower's Collateral" shall
include, (1) any and all proceeds of such item of General
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Intangibles, and (2) upon any such licensor's consent with respect to any
otherwise excluded item of General Intangibles being obtained, such item of
General Intangibles.
"BORROWER STOCK PLEDGE AGREEMENT" means a Stock Pledge Agreement
executed and delivered by Borrower to Agent with respect to the pledge of the
capital Stock of Borrower's Subsidiaries, the form and substance of which is
satisfactory to Agent.
"BORROWING" means a borrowing hereunder consisting of Advances made
on the same day by the Lenders, or Agent on behalf thereof, or by Swing
Lender in the case of a Swing Loan, or by Agent in the case of an Agent
Advance, in each case to 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.
"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of, or rights,
warrants, or options to purchase, corporate stock or any other equity
interest (however designated) of or in such Person.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness represented by
obligations under Capital Lease.
"CASH EQUIVALENTS" means and refers to: (a) marketable direct
obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one (1) year from
the date of acquisition thereof; (b) marketable direct obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within one (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 one (1) year from the date of acquisition thereof
and, at the time of acquisition, having a rating of A-2 or P-2, or better,
from S&P or Moody's; (d) certificates of deposit or bankers' acceptances
maturing within one (1) year from the date of acquisition thereof either (i)
issued by any bank organized under the laws of the United States of America
or any state thereof or the District of Columbia 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.
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"CHANGE OF CONTROL" means and refers to the occurrence of one or
more of the following events: (a) any Person, other than Permitted Holders,
or related group for purposes of Section 13(d) of the Exchange Act (a
"GROUP"), together with any Affiliates thereof, shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Parent representing more than 30% of the Voting
Stock of Parent, (b) the Permitted Institutional Investors, together with any
Affiliates thereof, shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Parent representing more than 49% of the Voting Stock of Parent, (c) a
majority of the members of the Board of Directors of Parent shall not
constitute continuing Directors, (d) Parent shall cease to hold beneficially
and of record 100% of the issued and outstanding Stock of Borrower, (e) a
majority of the members of the Board of Directors of Borrower shall not
constitute Continuing Directors, (f) Parent shall cease to hold, beneficially
and of record, 100% of the issued and outstanding Stock of UK Sub. For
purposes of this definition, "Board of Directors" does not include any
committee thereof.
"CLOSING DATE" means the date of the making of the initial Advance
(or other extension of credit) hereunder.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means, individually and collectively, as the context
requires, the Borrower's Collateral or the UK Sub Collateral.
"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 Borrower's Collateral or the UK Sub Collateral, in
each case, in form and substance reasonably satisfactory to Agent.
"COLLECTION ACCOUNT" has the meaning set forth in SECTION 2.8(b).
"COLLECTION ACCOUNT BANK" has the meaning set forth in
SECTION 2.8(b).
"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 the Obligors.
"COMMITMENT" means, with respect to each Lender, its Commitment, and
with respect to all Lenders, their Commitments, in such Dollar amounts as are
set forth beside such Lender's name on SCHEDULE C-1 attached hereto or on the
signature page of the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder in accordance with the provisions of SECTION 14.1.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of EXHIBIT C-1 delivered by the chief financial officer of Borrower to
Agent.
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"CONTINUING DIRECTOR" means and refers to (a) any member of the
Board of Directors who was a director of Borrower on the Closing Date, and
(b) any person who becomes a member of the Board of Directors after the
Closing Date if such person was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding
any such person originally proposed for election in opposition to the Board
of Directors in office at the Closing Date in an actual or threatened
election contest relating to the election of the directors of Borrower (as
such terms are used in Rule 14a-11 under the Exchange Act) and whose initial
assumption of office resulted from such contest or the settlement thereof.
"CONTROL AGREEMENT" means a control agreement, in form and substance
reasonably satisfactory to Agent, between Borrower, Agent, and the applicable
securities intermediary with respect to the applicable Securities Account and
related Investment Property.
"COPYRIGHT" shall have the meaning ascribed to such term in the
United States Copyright Act of 1976, as amended, and includes unregistered
copyrights.
"COPYRIGHT SECURITY AGREEMENT" means collectively, one or more
copyright security agreements executed and delivered by Borrower to Agent,
the form and substance of which is satisfactory to Agent.
"DAILY BALANCE" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained
by an Obligor.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any Advance
that it is required to make hereunder on any Funding Date and that has not
cured such failure by making such Advance within 1 Business Day after written
demand upon it by Agent to do so.
"DEFAULTING LENDER RATE" means the Base Rate for the first 3 days
from and after the date the relevant payment is due and, thereafter, at that
interest rate equal to the interest rate then applicable to Advances.
"DESIGNATED ACCOUNT" means account number 4518-094495 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 Agent.
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"DESIGNATED ACCOUNT BANK" means Wells Fargo, the applicable branch
office of which is located at 464 California Street, San Francisco,
California 94063, and whose ABA number is 121000248.
"DILUTION" means, in each case based upon the experience of the
immediately prior 180 days, the result of dividing the Dollar amount (or the
Dollar equivalent amount valued in Dollars at the applicable Exchange Rate
with respect to any other currency in the case of the UK Sub) of (a) bad debt
write-downs, discounts, advertising credits, returns, promotional credits,
other credits against the Dollar amount of the Accounts or the UK Sub
Accounts, as applicable, or other dilution with respect to the Accounts or
the UK Sub Accounts, as applicable, by (b) the Borrower's or UK Sub's gross
sales, as applicable (excluding extraordinary items).
"DILUTION RESERVES" means the Borrower Dilution Reserve and the UK
Sub Dilution Reserve.
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Borrower to Agent regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be reasonably
satisfactory to Agent.
"DISCLOSURE LETTER" means the disclosure letter dated of even date
herewith delivered by Borrower to Agent and attached hereto as EXHIBIT D-1.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC COLLECTIONS" means all Collections of the Obligors other
than Foreign Collections.
"ELIGIBLE ACCOUNTS" means Eligible Borrower Accounts or Eligible UK
Sub Accounts.
"ELIGIBLE BORROWER ACCOUNTS" means those Accounts created by
Borrower in the ordinary course of its business, that arise out of its sale
of goods or rendition of services, that comply with each and all of the
representations and warranties respecting Accounts made in the Loan
Documents, and that are not excluded as ineligible by virtue of one more of
the criteria set forth below. Eligible Accounts shall not include the
following:
(a) Accounts that are 60 days past due, PROVIDED that the due date
shall be within 30 days of original invoice date (60 days of original invoice
date with respect to invoices with original invoice dates occurring during
the months of November and December of each year),
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50%
or more of all Accounts and UK Sub Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (a) above or clause (a) of
the definition of Eligible UK Sub Accounts,
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(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower,
(d) Accounts arising in 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 bill and hold, or on any other terms by reason of which
the payment by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i)
does not maintain its chief executive office in the United States, (ii) is
not organized under the laws of the United States or any State thereof, or
(iii) is the government of any foreign country or sovereign state, or of any
state, province, municipality, or other political subdivision thereof, or of
any department, agency, public corporation, or other instrumentality thereof,
, unless (y) the Account is supported by an irrevocable letter of credit
reasonably satisfactory to Agent (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Agent and is directly
drawable by Agent, or (z) the Account is covered by credit insurance in form
and amount, and by an insurer, reasonably satisfactory to Agent,
(g) Accounts with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which the Borrower
has complied, to the reasonable satisfaction of Agent, with the Assignment of
Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act),
(h) Accounts with respect to which the Account Debtor is a creditor
of any Obligor, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to its obligation to pay the
Account, to the extent of such claim, right of offset, assertion, or dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to the Obligors exceed 20% of all Eligible Accounts (with
the exception of Walmart, for which the applicable concentration percentage
shall be 30%), to the extent of the obligations owing by such Account Debtor
in excess of such percentage,
(j) Accounts with respect to which the Account Debtor is subject to
an Insolvency Proceeding, is not Solvent, or goes out of business,
(k) Accounts, the collection of which, Agent, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's
financial condition,
(l) Accounts that represent the right to receive progress payments
or other advance billings that are due prior to the completion of performance
by the Borrower of the subject contract for goods or services, and
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(m) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and accepted by
the Account Debtor.
"ELIGIBLE CURRENCY" means any currency other than Dollars (i) that
is readily available, (ii) that is freely traded, (iii) in which deposits are
customarily offered to banks in an internationally recognized interbank
market such as London, (iv) which is convertible into Dollars in the
international interbank market, and (v) as to which an equivalent amount
valued in Dollars at the applicable Exchange Rate may be readily calculated.
If, after the designation by the Agent of any currency as an Agreed Currency,
(a) currency control or other exchange regulations are imposed in the country
in which such currency is issued with the result that different types of such
currency are introduced, (b) such currency is, in the determination of the
Agent, no longer readily available or freely traded or (c) in the
determination of the Agent, an equivalent amount of such currency valued in
Dollars at the applicable Exchange Rate is not readily calculable, Agent
shall promptly notify the Lenders and the Borrower, and such currency shall
no longer be an Agreed Currency until such time as the Agent agrees to
reinstate such currency as an Agreed Currency.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having total assets
in excess of $250,000,000, (b) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country
and which has total assets in excess of $250,000,000, provided that such bank
is acting through a branch or agency located in the United States, (c) a
finance company, insurance company, or other financial institution or fund
that is engaged in making, purchasing, or otherwise investing in commercial
loans in the ordinary course of its business and having (together with its
Affiliates) total assets in excess of $250,000,000, (d) any Affiliate (other
than individuals) of a pre-existing Lender, (e) so long as no Event of
Default has occurred and is continuing, any other Person approved by Agent
and Borrower (such approval by Borrower not to be unreasonably withheld,
conditioned or delayed), and (f) during the continuation of an Event of
Default, any other Person approved by Agent.
"ELIGIBLE UK SUB ACCOUNTS" means those Accounts created by UK Sub in
the ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each and all of the representations
and warranties respecting Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one more of the criteria set forth
below. Eligible Accounts shall not include the following:
(a) UK Sub Accounts that are 60 days past due, PROVIDED that the due
date shall be within 30 days of original invoice date (60 days of original
invoice date with respect to invoices with original invoice dates occurring
during the months of November and December of each year),
(b) UK Sub Accounts owed by an Account Debtor (or its
Affiliates) where 50% or more of all Accounts and UK Sub Accounts owed by that
Account Debtor (or its
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Affiliates) are deemed ineligible under clause (a) above or clause (a) of the
definition of Eligible Borrower Accounts,
(c) UK Sub Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of UK Sub,
(d) UK Sub Accounts arising in 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 bill and hold, or on any other terms by reason
of which the payment by the Account Debtor may be conditional,
(e) UK Sub Accounts that are not payable in an Agreed Currency or
with respect to which the Account Debtor: (i) does not maintain its chief
executive office in a Specified State, or (ii) is not organized under the
laws of a Specified State, or (iii) is the government of any 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,
(f) UK Sub Accounts with respect to which the Account Debtor is a
creditor of any Obligor, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to its obligation to pay
the Account, to the extent of such claim, right of offset, assertion, or
dispute,
(i) UK Sub Accounts with respect to an Account Debtor whose total
obligations owing to the Obligors exceed 20% of all Eligible Accounts (with
the exception of Walmart, for which the applicable concentration percentage
shall be 30%), to the extent of the obligations owing by such Account Debtor
in excess of such percentage,
(j) UK Sub Accounts with respect to which the Account Debtor is
subject to an Insolvency Proceeding, is not Solvent, or goes out of business,
(k) UK Sub Accounts, the collection of which, Agent, in its
Permitted Discretion, believes to be doubtful by reason of the Account
Debtor's financial condition,
(l) UK Sub Accounts that represent the right to receive progress
payments or other advance billings that are due prior to the completion of
performance by the UK Sub of the subject contract for goods or services, and
(m) UK Sub Accounts with respect to which (i) the goods giving rise
to such Account have not been shipped and billed to the Account Debtor, or
(ii) the services giving rise to such Account have not been performed and
accepted by the Account Debtor.
"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
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any judicial or administrative order, consent decree or judgment, to the
extent binding on the Obligors, 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 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.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts,
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 corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of an
Obligor 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 an Obligor 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 an Obligor 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 party subject to ERISA that is a party
to an arrangement with an Obligor and whose employees are aggregated with the
employees of an Obligor under IRC Section 414(o).
"EURO" means the euro referred to in Council Regulation (EC) No.
1103/97 dated June 17, 1997 passed by the Council of the European Union, or,
if different, the then lawful currency of the member states of the European
Union that participate in the third stage of Economic and Monetary Union.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"EXCHANGE RATE" means and refers to the nominal rate of exchange
(vis-a-vis Dollars) for a currency other than Dollars published in the Wall
Street Journal (Western Edition) on the date of determination (which shall be
a Business Day on which the Wall Street Journal (Western Edition) is
published), expressed as the number of units of such other currency per one
Dollar.
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"EXEMPT COPYRIGHT" means any Incipient Copyright or any Obsolete
Copyright.
"EXEMPT PATENTS" means any Incipient Patent or any Obsolete Patent.
"EXISTING LENDER" means Coast Business Credit, a Division of
Southern Pacific Bank.
"FAMILY MEMBER" means, with respect to any individual, any other
individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
"FAMILY TRUSTS" means, with respect to any individual, trusts or
other estate planning vehicles established for the benefit of Family Members
of such individual and in respect of which such individual serves as trustee
or in a similar capacity.
"FEE LETTER" means that certain fee letter, dated as of the date
hereof, between Agent and Borrower, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FOREIGN COLLECTIONS" means all Collections of the Obligors paid by
any Person that (i) does not maintain its chief executive office in the
United States, (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.
"FOREIGN CONCENTRATION ACCOUNT" has the meaning set forth in
SECTION 2.8(b).
"FOREIGN CONCENTRATION ACCOUNT AGREEMENTS" means, individually and
collectively, those certain concentration account agreements, each in form
and substance (including with respect to blocked account arrangements (if
any)) satisfactory to Agent, among Agent, UK Sub, and the applicable Foreign
Concentration Account Bank.
"FOREIGN CONCENTRATION ACCOUNT BANK" means, with respect to UK Sub,
as proposed by UK Sub and as agreed to by Agent in its Permitted Discretion.
"FOREIGN EXCHANGE RESERVE" means, as of any date of date of
determination, a reserve for foreign currency exchange rate risk with respect
to the UK Sub Collateral in such amount as shall be determined by Agent in
its Permitted Discretion from time to time on or after the Closing Date.
"FUNDING DATE" means the date on which a Borrowing occurs.
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"FUNDING LOSSES" has the meaning set forth in SECTION 2.15(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 general intangibles
and other personal property (including 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,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), 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" shall mean 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, individually and collectively, jointly and
severally, Parent and UK Sub; "GUARANTOR" means any one of them.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, or "EP 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.
"INCIPIENT COPYRIGHT" means any copyright that: (a) relates to
software of a Person under development (whether in the form of a new product,
a new version of a pre-existing product, an upgrade, add-on, or modification
to a pre-existing product, or otherwise) that has not yet become a completed
product, version, upgrade, add-on, or modification which is ready to be
marketed by or on behalf of such Person or which in fact is being marketed by
or on behalf of such Person; or (b) is not the subject of licenses thereof or
other dispositions by such Person giving rise to accounts, contract rights,
or other form of obligation.
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"INCIPIENT PATENT" means any patent that: (a) relates to a
patentable invention of a Person under development (whether in the form of a
new invention, a new version of a pre-existing invention, an upgrade, add-on,
or modification to a pre-existing invention, or otherwise) that has not yet
become a completed invention, upgrade, improvement, add-on, or modification
which is ready to be marketed by or on behalf of such Person or which in fact
is being marketed by or on behalf of such Person; or (b) is not the subject
of licenses thereof or other dispositions by such Person giving rise to
accounts, contract rights, or other form of obligation.
"INDEBTEDNESS" means (a) all obligations of an Obligor for borrowed
money, (b) all obligations of an Obligor evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other
obligations of an Obligor in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations of an Obligor under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any Asset of an Obligor,
irrespective of whether such obligation or liability is assumed, and (e) any
obligation of an Obligor or its Subsidiaries guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to an Obligor) 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 bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that portion
of the book value of all of such Person's Assets that would be treated as
intangibles under GAAP.
"INTELLECTUAL PROPERTY" means all patents, patent applications,
trademarks, trademark applications, tradenames, tradedress, copyrights,
copyright registrations, technology, know-how and processes used in or
necessary for the conduct of the business of the Obligors as currently
conducted that are material to the condition (financial or otherwise),
business or operations of an Obligor.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a Subordination
Agreement, dated as of even date herewith, between each Obligor and Agent, in
form and substance satisfactory to Agent.
"INTERNET GAMING PATENT" means that certain United States patent,
No. 6009458, issued to Borrower on December 28, 1999.
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"INVENTORY" means all inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract of
service and all of Borrower's raw materials, work in process, finished goods,
and packing and shipping materials, wherever located.
"INVESTMENT" means, with respect to any Person, any investment by
such Person in any other Person in the form of loans, guarantees, advances,
or capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course
of business, and (b) bona fide accounts receivable arising from the sale of
goods or 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 the Borrower's investment
property as defined in the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"ISSUING LENDER" means Agent or any other Lender that, at the
request of Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs
or LC Undertakings pursuant to SECTION 2.2.
"L/C DISBURSEMENT" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"L/C" has the meaning set forth in SECTION 2.2(a).
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.2(a).
"LENDER" and "LENDERS" have the respective meanings set forth in
the preamble to this Agreement and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 14.1
hereof.
"LENDER GROUP" means, individually and collectively, each of the
Lenders and Agent.
"LENDER GROUP EXPENSES" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by an Obligor under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) prior
to the occurrence and continuance of an Event of Default, fees or charges
paid or incurred by the Agent in connection with the Agent's transactions
with Obligors, and after the occurrence and during the continuance of an
Event of Default, fees or charges paid or incurred by the Lender Group in
connection with the Lender Group's transactions with Obligors, in each case
including,
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fees or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation,
and UCC searches and including searches with the patent and trademark office,
the copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including Collateral appraisals in
accordance with the provisions of this Agreement), and real estate title
policies and endorsements, (c) costs and expenses incurred by Agent in the
disbursement of funds to Borrower (by wire transfer or otherwise), (d)
charges paid or incurred by Agent resulting from the dishonor of checks, (e)
reasonable costs and expenses paid or incurred by the Lender Group to correct
any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated, (f) reasonable costs
and expenses paid or incurred by the Lender Group in examining the Borrower's
Books, or the UK Sub's Books, (g) reasonable costs and expenses of third
party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or the Lender Group's
relationship with any Obligor, except to the extent resulting from any
Lender's or the Agent's gross negligence or willful misconduct, and (h) prior
to the occurrence and continuance of an Event of Default, the Agent's, and
after the occurrence and during the continuance of an Event of Default, the
Lender Group's, reasonable fees and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning any Obligor), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.
"LENDER-RELATED PERSON" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, counsel, and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the
context requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination,
the aggregate undrawn amount of all outstanding Letters of Credit.
"LIEN" means any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, 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 2.11.
"LOAN DOCUMENTS" means this Agreement, any Control Agreement, the
Copyright Security Agreement, the Patent Security Agreement, the Trademark
Security Agreement, the Disbursement Letter, the Fee Letter, the Parent
Guaranty, the UK Sub Guaranty, the Parent Security Agreement, the UK Sub
Security Agreement, the Letters of Credit, the Lockbox Agreements, the
Intercompany Subordination Agreement, the Parent Stock Pledge Agreement, the
Borrower Stock Pledge Agreement, and any other agreement entered into, now or
in the future, by any Obligor and the Lender Group in connection with this
Agreement.
"LOCKBOX" has the meaning set forth in SECTION 2.8(a).
"LOCKBOX ACCOUNT" shall mean a depository account established
pursuant to one of the Lockbox Agreements.
"LOCKBOX AGREEMENTS" means those certain lockbox agreements and
those certain depository agreements, in form and substance reasonably
satisfactory to Agent, each of which is among Borrower, Agent, and one of the
Lockbox Banks.
"LOCKBOX BANKS" means Wells Fargo (or such other banks as may be
agreed to by Agent and Borrower from time to time).
"MANAGEMENT LETTER" means the narrative report prepared by a
Person's certified public accountants describing the operations of such
Person and its Subsidiaries in the form prepared for presentation to senior
management with respect to a given fiscal year.
"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 Borrower or Parent and
its Subsidiaries taken as a whole, (b) the material impairment of the ability
of Borrower or any other Obligor to perform their obligations under the Loan
Documents or of the Lender Group's ability to enforce the Obligations or
realize upon a material portion of the Collateral, or (c) a material
impairment of the priority of Agent's Liens with respect to a material
portion of the Collateral as a result of an action or failure to act on the
part of any Obligor.
"MATURITY DATE" has the meaning set forth in SECTION 3.5.
"MAXIMUM AMOUNT" means $50,000,000.
"NEGOTIABLE COLLATERAL" means all of Borrower's letters of credit,
notes, drafts, instruments, certificated securities, documents, and chattel
paper.
"NORWEST" means Norwest Bank Minnesota, N.A.
"OBLIGATIONS" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued),
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contingent reimbursement obligations with respect to Letters of Credit,
premiums, liabilities (including all amounts charged to the Borrower's Loan
Account pursuant hereto), obligations, fees, charges, costs, or Lender Group
Expenses (including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued), guaranties, covenants, and duties owing
by Obligors to the Lender Group of any kind and description pursuant to or
evidenced by the Loan Documents, irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid
when due and all Lender Group Expenses that Obligors are required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"OBLIGORS" means, individually and collectively, jointly and
severally, Borrower, Parent and the UK Sub, and "OBLIGOR" means any one of
them. For all purposes of this Agreement, UK Sub shall be deemed an Obligor,
but its accounts, contract rights and other forms of obligations shall not be
deemed Eligible Accounts until such time as it complies with the requirements
for accounts, contract rights and other forms of obligations to be deemed
Eligible UK Sub Accounts and the UK Sub has executed such UK Sub Security
Documents as Agent shall require in its Permitted Discretion.
"OBSOLETE COPYRIGHT" means any copyright that relates to software
of a Person that, in such Person's good faith determination: (a) is no longer
sold or marketed by such Person; (b) is not generating any material amount of
Accounts or revenues of such Person; or (c) does not have a material fair
market value.
"OBSOLETE PATENT" means any copyright that relates to an invention
of a Person that, in such Person's good faith determination: (a) is no longer
sold or marketed by such Person; (b) is not generating any material amount of
Accounts or revenues of such Person; or (c) does not have a material fair
market value.
"ORIGINATING LENDER" has the meaning set forth in SECTION 14.1(g).
"OVERADVANCE" has the meaning set forth in SECTION 2.6.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(g).
"PARENT" has the meaning set forth in the preamble to this Agreement.
"PARENT GUARANTY" means that certain General Continuing Guaranty,
dated as of even date herewith, by Parent in favor of Agent, in form and
content satisfactory to Agent.
"PARENT SECURITY AGREEMENT" means a Security Agreement executed and
delivered by the Parent to Agent, the form and substance of which is
satisfactory to Agent.
"PARENT STOCK PLEDGE AGREEMENT" means a Stock Pledge Agreement
executed and delivered by Parent to Agent with respect to the pledge of the
capital Stock of Borrower, the form and substance of which is satisfactory to
Agent.
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"PATENT" shall have the meaning ascribed to such term in Title
35 of the United States Code, and includes unregistered patents.
"PATENT SECURITY AGREEMENT" means a Patent Security Agreement
executed and delivered by Borrower and Agent, the form and substance of which
is satisfactory to Agent.
"PAY-OFF LETTER" means a letter, in form and substance reasonably
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of the Obligors owing to
Existing Lender and obtain a release of all of the Liens existing in favor of
Existing Lender in and to the Assets of the Obligors.
"PERMITTED ACQUISITION" means an Acquisition made by Borrower so
long as (a) no Default or Event of Default shall have occurred and be
continuing or would result from the consummation of the proposed Acquisition,
(b) the Assets being acquired, or the Person whose Stock is being acquired
(including the Stock of any Subsidiary), are useful in or engaged in, as
applicable, the business of Borrower as such business exists on the Closing
Date, (c) (i) with respect to any such Acquisition proposed to be consummated
during Borrower's fiscal year ending March 31, 2001, the aggregate
consideration, other than that which is payable in common Stock of Borrower
or Permitted Preferred Stock, paid or payable for such proposed Acquisition
and all other Permitted Acquisitions consummated during such fiscal year
(after giving effect to such proposed Acquisition), shall not exceed
$10,000,000, and (ii) with respect to any such Acquisition proposed to be
consummated during any fiscal year of Borrower thereafter, the aggregate
consideration, other than that which is payable in common Stock of Borrower
or Permitted Preferred Stock, paid or payable for such proposed Acquisition
and all other Permitted Acquisitions consummated during such fiscal year
(after giving effect to such proposed Acquisition) shall not to exceed such
Dollar amount as is established for such fiscal year by Agent in its
Permitted Discretion, with the consent of the Required Lenders, based upon
Agent's review of the annual financial projections for such fiscal year
delivered by Borrower to Agent in compliance with SECTION 6.3(c), (d) after
giving effect to the proposed Acquisition, Borrower shall have Availability
of not less than $10,000,000, and (e) Borrower shall have complied with
SECTION 6.21. Without determining whether or not an Acquisition shall
constitute a Permitted Acquisition, in the event that Borrower requests of
Agent that the Accounts being acquired through a Permitted Acquisition be
included in the Borrowing Base as Eligible Accounts, Agent shall have
completed its audit, appraisal, and standard due diligence review with
respect to the Assets or Person that is to be the subject of the proposed
Permitted Acquisition and the results thereof shall be satisfactory to Agent
in the exercise of its Permitted Discretion before such Accounts shall be
included in the Borrowing Base.
"PERMITTED DISCRETION" with respect to any determination by a
member of the Lender Group, means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
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"PERMITTED DISPOSITIONS" means (a) sales, exchanges, trade-ins, or
other dispositions of Equipment or UK Sub Equipment that is substantially
worn, damaged, or obsolete in the ordinary course of Borrower's or UK Sub's,
as applicable, business, as determined in good faith by Borrower or UK Sub,
as applicable, (b) sales of Inventory or UK Sub's Inventory to buyers in the
ordinary course of Borrower's or UK Sub's, as applicable, business, (c) the
use or transfer of money, or Cash Equivalents by the Obligors in a manner
that is not prohibited by the terms of this Agreement or the other Loan
Documents, (d) the sale, license, lease, exchange, transfer, or other
disposition for fair value of any or all of Borrower's right, title, or
interest in the Internet Gaming Patent, and (e ) the licensing by the
Obligors, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of the Obligors'
business.
"PERMITTED HOLDERS" means W. M. (Trip) Hawkins, William Jessee,
William Hall, Hugh Martin, the Family Members and Family Trusts of any of the
foregoing, and the Permitted Institutional Holders.
"PERMITTED INSTITUTIONAL HOLDERS" means J. & W. Seligman & Co.,
Inc., JDS Capital Management, J. P. Morgan Investment Mgmt., Inc., Rice,
Hall, James & Associates, Axe-Houghton Associates, Inc. and Scudder Kemper
Investments, Inc.
"PERMITTED INVESTMENTS" means (a) Investments in Cash Equivalents,
(b) loans and advances to officers and employees of Borrower in the ordinary
course of business, other than as provided for in clause (c), in an aggregate
amount at any one time outstanding not to exceed $500,000, (c) loans and
advances to officers and employees of Borrower in the ordinary course of
business to facilitate the purchase by such officers or employees of the
Stock of Borrower and the repayment of any such loans or advances is secured
by a first priority Lien on the Stock purchased thereby, in an aggregate
amount outstanding at any one time not to exceed $500,000, (d) Investments in
negotiable instruments for collection, (e) advances made in connection with
purchases of goods or services in the ordinary course of business, (f)
Permitted Acquisitions, (g) a Permitted Disposition of the Internet Gaming
Patent to the extent constituting an Investment, (h) Investments by Borrower
in UK Sub (i) from and after the date on which all of the conditions set
forth in SECTION 3.2(a), (b), (c), (d), and (e) have been satisfied or waived
by Agent in its sole discretion, in an aggregate amount not to exceed
$20,000,000 outstanding at any one time during Borrower's fiscal year ending
March 31, 2001, and for each succeeding fiscal year not to exceed such Dollar
amount outstanding at any one time as is established for such fiscal year by
Agent in its Permitted Discretion, with the consent of the Required Lenders,
based upon Agent's review of the annual financial projections for such fiscal
year delivered by Borrower to Agent in compliance with SECTION 6.3(c), and
(ii) from and after the date on which all of the conditions set forth in
SECTION 3.2, with the exception of clauses (f), (j), and (k) thereof, have
been satisfied or waived by Agent in its sole discretion, in an aggregate
amount not to exceed $30,000,000 outstanding at any one time during
Borrower's fiscal year ending March 31, 2001, and for each succeeding fiscal
year not to exceed such Dollar amount outstanding at any one time as is
established for such fiscal
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year by Agent in its Permitted Discretion, with the consent of the Required
Lenders, based upon Agent's review of the annual financial projections for
such fiscal year delivered by Borrower to Agent in compliance with SECTION
6.3(c), and (i) other Investments not constituting an Acquisition in an
aggregate amount not to exceed $4,000,000 outstanding at any one time during
Borrower's fiscal year ending March 31, 2001, and for each succeeding fiscal
year not to exceed such Dollar amount outstanding at any one time as is
established for such fiscal year by Agent in its Permitted Discretion, with
the consent of the Required Lenders, based upon Agent's review of the annual
financial projections for such fiscal year delivered by Borrower to Agent in
compliance with SECTION 6.3(c), PROVIDED, that after giving effect to the
proposed Investment, Borrower shall have Availability of not less than
$10,000,000.
"PERMITTED LIENS" means (a) Liens held by Agent for the benefit of
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are
the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1 to the
Disclosure Letter, (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 the 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 business of the Obligors 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
business of the Obligors and not in connection with the borrowing of money,
(i) Liens granted as security for surety or appeal bonds in connection with
obtaining such bonds in the ordinary course of business of the Obligors, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) with respect to any Real Property, easements, rights of way,
or zoning that do not materially interfere with or impair the use or
operation of the Real Property by the Obligors, and (l) Liens on specific
goods securing Acquired Indebtedness.
"PERMITTED PREFERRED STOCK" means and refers to Preferred Stock
issued by Borrower (and not by one or more of its Subsidiaries) that is not
Prohibited Preferred Stock.
"PERMITTED PROTEST" means the right of Obligors to protest any Lien
(other than any such Lien that secures the Obligations), tax (other than
taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the Books in such amount as is required under GAAP, (b) any
such protest is instituted and diligently prosecuted by the applicable
Obligor in good faith, and (c) Agent is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens granted to Agent under the Loan
Documents.
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"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate amount not to exceed $25,000,000 outstanding at any one time
during Borrower's fiscal year ending March 31, 2001, and for each succeeding
fiscal year not to exceed such Dollar amount outstanding at any one time as
is established for such fiscal year by Agent in its Permitted Discretion,
with the consent of the Required Lenders, based upon Agent's review of the
annual financial projections for such fiscal year delivered by Borrower to
Agent in compliance with SECTION 6.3(c).
"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.
"PREFERRED STOCK" means, as applied to the capital Stock of any
Person that is a corporation, the capital Stock of any class or classes
(however designated) that is preferred as to the payment of dividends, or as
to the distribution of Assets upon any voluntary or involuntary liquidation
or dissolution of such Person, over shares of capital Stock of any other
class of such Person.
"PROHIBITED PREFERRED STOCK" means and refers to any Preferred
Stock that by its terms is mandatorily redeemable or subject to any other
payment obligation (including any obligation to pay dividends, other than
dividends of shares of Preferred Stock of the same class and series payable
in kind or dividends of shares of common Stock), or is redeemable at the
option of the holder thereof for cash or Assets or securities (other than
distributions in kind of shares of Preferred Stock of the same class and
series or of shares of common Stock).
"PROJECTIONS" means Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Borrower's historical financial statements, together
with appropriate supporting details and a statement of underlying assumptions.
"PRO RATA SHARE" means:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with
respect thereto, the percentage obtained by dividing (i) such Lender's
Commitment, by (ii) the aggregate Commitments of all Lenders; and
(b) with respect to all other matters (including the
indemnification obligations arising under SECTION 17.7), the percentage
obtained by dividing (i) such Lender's Commitments, by (ii) the aggregate
Commitments of all Lenders; PROVIDED, HOWEVER, that, in each case, in the
event all Commitments have been terminated, Pro Rata Share shall be
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determined according to the Commitments in effect immediately prior to such
termination and otherwise as set forth above.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 90 days after, the acquisition of any fixed Assets for the
purpose of financing all or any part of the acquisition cost thereof.
"PURCHASE MONEY LIEN" means a Lien upon fixed Assets that secures
Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed Assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such
Lien.
"REAL PROPERTY" means any estates or interests in real property now
owned or hereafter acquired by an Obligor, and the improvements related
thereto.
"RECORD" means information that is inscribed on a tangible medium
or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"REQUIRED AVAILABILITY" means Availability and unrestricted
cash and Cash Equivalents in an amount of not less than $20,000,000.
"REQUIRED LENDERS" means, at any time, (a) Agent, and (b) Lenders
whose Pro Rata Shares aggregate 66-2/3% of the Total Commitments, or if the
Total Commitments have been terminated irrevocably, 66-2/3% of the
Obligations then outstanding.
"RESERVES" means all Foreign Exchange Reserves, Dilution Reserves
(if any), Seasonal Reserves, and any other reserves that may be established
under this Agreement.
"REVOLVER FACILITY" means the credit facility provided for under
SECTIONS 2.1 AND 2.2 hereof.
"REVOLVER USAGE" means, as of any date of determination, the sum of
(a) the then extant amount of outstanding Advances, PLUS (b) the then extant
amount of the Letter of Credit Usage.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of Credit,
all reimbursement obligations of Borrower to the issuer of an L/C or to the
issuer of a letter of credit with respect to the transaction for which an L/C
Undertaking was executed and delivered (to the extent such reimbursement
obligations are subject to such L/C Undertaking), consisting of (a) the
amount available to be drawn or which may become available to be drawn under
the Letter of Credit, (b) all amounts that have been paid and made available
by the issuing bank 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, to the extent they are
payable or reimbursable by Borrower hereunder.
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"SEASONAL RESERVES" means the Borrower Seasonal Reserve and the UK
Sub Seasonal Reserve.
"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 Section 8-501 of the Code.
"SETTLEMENT" has the meaning set forth in SECTION 2.4(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION 2.4(f)(i).
"SOLVENT" means, with respect to any Person on a particular date,
that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
"SPECIFIED STATE" means, England, Scotland, Wales, Ireland,
Australia, France, Germany, Italy, New Zealand, Canada, Norway, Finland,
Switzerland, Sweden, Belgium, Japan, Singapore, the Netherlands, or any other
State approved by Agent.
"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).
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of Borrower that
contains terms and conditions (including subordination terms) acceptable to
Agent in the exercise of its Permitted Discretion.
"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.
"SWING LENDER" means any Lender appointed by Agent in writing, and
which appointment has been accepted by such Lender in writing, as the "Swing
Lender".
"SWING LOAN" has the meaning set forth in SECTION 2.4(d)(i).
"TANGIBLE NET WORTH" means, as of any date of determination, the
difference of (a) Parent's total consolidated stockholder's equity, MINUS (b)
the sum of: (i) all Intangible Assets of Parent and its Subsidiaries, (ii)
all prepaid expenses of Parent and its Subsidiaries, and (iii) all amounts
due to Parent and its Subsidiaries from Affiliates except to the extent
already deducted in consolidation. The foregoing to the contrary
notwithstanding, if the condition set forth in SECTION 3.3(d) shall not be
fulfilled within the time period set
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forth therein, then from and after the last day of such time period, Tangible
Net Worth shall be determined without regard to UK Sub or Parent's interest
in UK Sub.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement
executed and delivered by Borrower to Agent, the form and substance of which
is satisfactory to Agent.
"UK SUB" has the meaning set forth in the preamble to this Agreement.
"UK SUB ACCOUNTS" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing
to UK Sub arising out of the sale or lease of goods or the rendition of
services by UK Sub, irrespective of whether earned by performance, and any
and all credit insurance, guaranties, or security therefor.
"UK SUB CLOSING DATE" means the date of the satisfaction, in full,
of each of the conditions precedent set forth in SECTION 3.2 hereof.
"UK SUB COLLATERAL" means the UK Sub Accounts, the UK Sub
Equipment, the UK Sub General Intangibles, the UK Sub Inventory, the UK Sub
Negotiable Collateral, the UK Sub's Books and all of the other items of
collateral in which a Lien is granted by UK Sub to Agent for the benefit of
the Lender Group pursuant to the UK Sub Security Documents.
The foregoing notwithstanding, the "UK Sub Collateral" shall not include any
UK Sub General Intangibles that are now or hereafter held by UK Sub as
licensee, solely in the event and to the extent that: (a) as the proximate
result of the grant of a security interest, UK Sub's rights in or with
respect to such item of UK Sub General Intangibles would be forfeited or
would become terminable or if UK Sub would be deemed to have breached the
underlying license or other agreement that governs such item of UK Sub
General Intangibles; (b) any such restriction is effective and enforceable
under applicable law, including Section 9318(4) of the Code; and (c) any such
forfeiture, terminability, or breach cannot be remedied by UK Sub using its
best efforts (but without any obligation to make any material expenditures of
money or to commence legal proceedings); PROVIDED, HOWEVER, that the grant of
security interest hereunder shall extend to, and the term "UK Sub's
Collateral" shall include, (1) any and all proceeds of such item of UK Sub
General Intangibles, and (2) upon any such licensor's consent with respect to
any otherwise excluded item of UK Sub General Intangibles being obtained,
such item of UK Sub General Intangibles.
"UK SUB DILUTION RESERVE" means, as of any date of determination,
an amount sufficient to reduce the advance rate against Eligible UK Sub's
Accounts by one percentage point for each percentage point by which Dilution
is in excess of 5%.
"UK SUB EQUIPMENT" means all of UK Sub's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts,
goods (other than consumer goods, farm
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products, or UK Sub Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"UK SUB GENERAL INTANGIBLES" means all of UK Sub's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates,
tax refunds, and tax refund claims), other than goods, UK Sub Accounts, and
UK Sub Negotiable Collateral.
"UK SUB GUARANTY" means that certain General Continuing Guaranty,
dated as of even date herewith, by UK Sub in favor of Agent, in form and
content satisfactory to Agent.
"UK SUB INVENTORY" means all present and future inventory in which
UK Sub has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of UK Sub's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"UK SUB NEGOTIABLE COLLATERAL" means all of UK Sub's present and
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases, and chattel paper.
"UK SUB SEASONAL RESERVE" means, as of any date of determination,
an amount equal to 5% of the gross sales of the UK Sub for the 45 days
immediately preceding the date of determination (the percentage amount of the
UK Sub Seasonal Reserve may be adjusted, at the election of the Agent, for
the 2000/2001 season based upon the actual amount of the UK Sub's Dilution
during the 1999/2000 season).
"UK SUB SECURITY AGREEMENT" means a Security Agreement executed and
delivered by the UK Sub to Agent, the form and substance of which is
satisfactory to Agent.
"UK SUB SECURITY DOCUMENTS" means certain security and guaranty
documents that by their respective terms provide that they are governed by
the laws of England, including a debenture between UK Sub and Agent, in each
case in form and substance satisfactory to Agent.
"UK SUB'S BOOKS" means all of UK Sub's books and records including:
ledgers; records indicating, summarizing, or evidencing UK Sub's Assets
(including the UK Sub Collateral) or liabilities; all information relating to
UK Sub's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
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"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"VOTING STOCK" means, with respect to any Person, Capital Stock of
any class or classes if the holders of such Capital Stock are ordinarily, in
the absence of contingencies, entitled to vote for the election of the
directors (or other persons performing similar functions) of such Person even
if the right to so vote has been suspended by the happening of such a
contingency.
"WELLS FARGO" means Wells Fargo Bank, National Association, a
national banking association.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
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 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 ADVANCES.
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(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender agrees (severally, not jointly
or jointly and severally) to make advances ("ADVANCES") to Borrower in an
amount at any one time outstanding not to exceed such Lender's Pro Rata Share
of an amount equal to THE LESSER OF (i) the Maximum Amount LESS the then
extant Letter of Credit Usage, and (ii) the Borrowing Base LESS the then
extant Letter of Credit Usage. For purposes of this Agreement, "BORROWING
BASE," as of any date of determination, shall mean the result of:
(x) the result of 85% of Eligible Borrower Accounts, MINUS the
amount, if any, of the Borrower Dilution Reserve, MINUS, during the
periods from November 15 to December 31 and February 15 to March 31, the
amount, if any, of the Borrower Seasonal Reserve, PLUS
(y) on and after the UK Sub Closing Date, THE LEAST OF
(i) the result of 75% of the amount of Eligible UK Sub
Accounts, MINUS the amount, if any, of the UK Sub Dilution
Reserve, MINUS, during the periods from November 15 to
December 31 and February 15 to March 31, the amount, if any,
of the UK Sub Seasonal Reserve, and
(ii) an amount equal to 20% of the Availability provided by
SUBSECTION (x) above, and
(iii) $10,000,000, MINUS
(z) the aggregate amount of reserves, if any, established by
Agent pursuant to SECTION 2.1(b) or SECTION 10.
For purposes of determining the Borrowing Base, any amount that is
denominated in a currency other than Dollars shall be valued in Dollars based
on the applicable Exchange Rate for such other currency as of the date of
determination.
(b) Anything to the contrary in this SECTION 2.1 notwithstanding,
Agent shall have the right to establish reserves in such amounts, and with
respect to such matters, as Agent in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves with
respect to (i) sums that the Obligors are required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and have failed to pay under any
Section of this Agreement or any other Loan Document, (ii) the Foreign
Exchange Reserve, and (iii) amounts owing by an Obligor to any Person to the
extent secured by a Lien (other than Liens securing Permitted Purchase Money
Indebtedness or any existing Permitted Lien set forth on SCHEDULE P-1 to the
Disclosure Letter which is specifically identified thereon as entitled to
have priority over the Liens granted to Agent under the Loan Documents) on,
or trust over, any of the Collateral, which Lien or trust, in the Permitted
Discretion of Agent, would be
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likely to have a priority superior to the Liens of Agent, for the benefit of
the Lender Group (such as landlord liens, ad valorem taxes, property taxes,
or sales taxes where given priority under applicable law) in and to such item
of the Collateral.
(c) The Lenders shall have no obligation to make additional
Advances hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the Maximum Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 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 issuing bank (as of the Closing
Date, such issuing bank to be Norwest) for the 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 Agent (reasonably in advance of the requested date of
issuance, amendment, renewal, or extension) a notice requesting the issuance
of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be
amended, renewed, or extended, the date of issuance, amendment, renewal, or
extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the
beneficiary thereof, 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, the Borrower also shall be an applicant under the letter
of credit application of any letter of credit that is to be the subject of an
L/C Undertaking. The Issuing Bank shall have no obligation to issue a Letter
of Credit if any of the following would result after giving effect to the
requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing Base
LESS the amount of outstanding Advances, LESS the aggregate amount of
reserves established hereunder (including under SECTION 2.1(b)); or
(ii) the Letter of Credit Usage would exceed the Maximum Amount
LESS the amount of outstanding Advances, LESS the aggregate amount of
reserves established hereunder (including under SECTION 2.1(b)); or
(iii) the Letter of Credit Usage would exceed $7,500,000; or
(iv) the outstanding Obligations would exceed the Maximum Amount.
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Borrower and Agent acknowledge and agree that certain of the letters of
credit that are to be the subject of Letters of Credit may be outstanding on
the Closing Date. Each Letter of Credit shall have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters 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 Agent 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 (i) 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 under
SECTION 2.7. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrower's obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt
by Agent of any payment from Borrower pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to SECTION 2.2(c) to reimburse the Issuing
Lender, then to such Lenders and the Issuing Lender as their interest may
appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to SECTION 2.2(a), each Lender with a Commitment agrees to fund its
Pro Rata Share of any Advance deemed made pursuant to the foregoing
subsection on the same terms and conditions as if Borrower had requested such
Advance and Agent shall promptly pay to Issuing Lender the amounts so
received by it from the Lenders. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Lender or the Lenders, the
Issuing Lender shall be deemed to have granted to each Lender, and each
Lender shall be deemed to have purchased, a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit, and each such Lender agrees to pay to
Agent such Lender's Pro Rata Share of any payments made by Agent under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to Agent, for the
account of the Agent, such Lender's Pro Rata Share of each L/C Disbursement
made by the Issuing Lender and not reimbursed by Borrower on the date due as
provided in paragraph (a) of this Section, or of any reimbursement payment
required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to deliver to Agent an amount
equal to its respective Pro Rata Share pursuant to this SECTION 2.2(b) shall
be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in SECTION 3
hereof. If any such Lender fails to make available to Agent the amount of
such Lender's Pro Rata Share of any payments made by Agent in respect of such
Letter of Credit as provided in
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this Section, Agent shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Defaulting Lender Rate
until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; PROVIDED, HOWEVER, that 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 any member of the Lender Group. Borrower agrees to be bound
by the issuing bank's regulations and interpretations of any letter of credit
that is the subject of an L/C Undertaking and opened to or for Borrower's
account or by Agent's interpretations of any L/C issued by Agent 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 Group
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 Agent to indemnify the issuing bank for certain costs or liabilities
arising out of claims by Borrower against such issuing bank. Borrower hereby
agrees to indemnify, save, defend, and hold the Lender Group harmless with
respect to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by the Lender Group under any L/C Undertaking as a result
of the Lender Group's indemnification of any such issuing bank; 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 any member of the Lender Group.
(d) Borrower hereby authorizes and directs any bank that issues a
letter of credit that is the subject of an L/C Undertaking to deliver to
Agent all instruments, documents, and other writings and property received by
the issuing bank pursuant to such letter of credit, and to accept and rely
upon Agent's instructions with respect to all matters arising in connection
with such letter of credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by
Agent relating to the letters of credit that are the subject of an L/C
Undertaking shall be considered Lender Group Expenses for purposes of this
Agreement and immediately shall be reimbursable by Borrower to Agent.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the issuing bank
or the Lender Group with any direction, request, or requirement (irrespective
of whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time
to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letters of Credit issued
hereunder, or
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(ii) there shall be imposed on the issuing bank or the Lender
Group any other condition regarding any Letter of Credit issued pursuant
hereto;
and the result of the foregoing is to increase, directly or indirectly,
the cost to the Lender Group of issuing, making, guaranteeing, or maintaining
any Letter of Credit or to reduce the amount receivable in respect thereof by
the Lender Group, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts Agent may specify to be necessary to compensate the Lender Group for
such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at the rate
then applicable to Advances hereunder. The determination by Agent of any
amount due pursuant to this Section shall treat Borrower the same as all
similarly situated borrowers from Agent, as determined by Agent in its
Permitted Discretion, and, 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.
2.3 [INTENTIONALLY OMITTED].
2.4 BORROWING PROCEDURES AND SETTLEMENTS
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time)
on the Business Day prior to the date that is the requested Funding Date in
the case of a request for an Advance specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day; PROVIDED, HOWEVER, that in the case of a request for Swing Loan in an
amount of $5,000,000, or less, such notice will be timely received if it is
received by Agent no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date) specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day. At Agent's election, in lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such
request by the required time, with such telephonic notice to be confirmed in
writing within 24 hours of the giving of such notice.
(b) AGENT'S ELECTION. Promptly after receipt of a request for a
Borrowing pursuant to SECTION 2.4(a), Agent shall (i) for so long as Foothill
is the sole Lender hereunder, request Swing Lender to make a Swing Loan
pursuant to the terms of SECTION 2.4(d) in the amount of the requested
Borrowing and the Swing Lender shall make a Swing Loan pursuant to SECTION
2.4(d), or (ii) from and after such date as Foothill ceases to be the sole
Lender hereunder, elect, in its discretion, (A) to have the terms of SECTION
2.4(c) apply to such requested Borrowing, or (B) to request Swing Lender to
make a Swing Loan pursuant to the terms of SECTION 2.4(d) in the amount of
the requested Borrowing; PROVIDED, HOWEVER, that if Swing Lender declines in
its sole discretion to make a Swing Loan pursuant
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to SECTION 2.4(d), Agent shall elect to have the terms of SECTION 2.4(c)
apply to such requested Borrowing.
(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have the terms of this
SECTION 2.4(c) apply to a requested Borrowing as described in SECTION
2.4(b), then promptly after receipt of a request for a Borrowing
pursuant to SECTION 2.4(a), Agent shall notify the Lenders, not later
than 1:00 p.m. (California time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy, telephone,
or other similar form of transmission, of the requested Borrowing. Each
Lender shall make the amount of such Lender's Pro Rata Share of the
requested Borrowing available to Agent in immediately available funds,
to such account of Agent as Agent may designate, not later than 10:00
a.m. (California time) on the Funding Date applicable thereto. After
Agent's receipt of the proceeds of such Advances, upon satisfaction of
the applicable conditions precedent set forth in SECTION 3 hereof, Agent
shall make the proceeds of such Advances available to Borrower on the
applicable Funding Date by transferring same day funds equal to the
proceeds of such Advances received by Agent to Borrower's Designated
Account; PROVIDED, HOWEVER, that, subject to the provisions of SECTION
2.4(i), Agent shall not request any Lender to make, and no Lender shall
have the obligation to make, any Advance if Agent shall have received
written notice from any Lender, or otherwise has actual knowledge, that
(1) one or more of the applicable conditions precedent set forth in
SECTION 3 will not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or (2) the
requested Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date,
at least 1 Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to Agent
for the account of Borrower the amount of that Lender's Pro Rata Share
of the Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available funds on
the Funding Date and Agent may (but shall not be so required), in
reliance upon such assumption, make available to Borrower on such date a
corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds
and Agent in such circumstances has made available to Borrower such
amount, that Lender shall on the Business Day following such Funding
Date make such amount available to Agent, together with interest at the
Defaulting Lender Rate for each day during such period. A notice
submitted by Agent to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such
amount is so
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made available, such payment to Agent shall constitute such Lender's
Advance on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to Agent on the Business Day following
the Funding Date, Agent will notify Borrower of such failure to fund
and, upon demand by Agent, Borrower shall pay such amount to Agent for
Agent's account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on any Funding
Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible
for the failure of any other Lender to make the Advance to be made by
such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to, and without
Borrower's prior written consent shall not, transfer to a Defaulting
Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit, and in the absence of such consent Agent shall
transfer any such payments to each other non-Defaulting Lender member of
the Lender Group ratably in accordance with their Commitments (but only
to the extent that such Defaulting Lenders Advance was funded by the
other members of the Lender Group) or, if so directed by Borrower and if
no Default or Event of Default has occurred and is continuing (and to
the extent such Defaulting Lender's Advance was not funded by the Lender
Group), retain same to be re-advanced to Borrower as if such Defaulting
Lender had made Advances to Borrower. Subject to the foregoing, Agent
may hold and, in its Permitted Discretion, re-lend to Borrower for the
account of such Defaulting Lender the amount of all such payments
received and retained by it for the account of such Defaulting Lender.
Solely for the purposes of voting or consenting to matters with respect
to the Loan Documents, such Defaulting Lender shall be deemed not to be
a "Lender" and such Lender's Commitment shall be deemed to be zero. This
section shall remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or shall have
become immediately due and payable, (y) the non-Defaulting Lenders,
Agent, and Borrower shall have waived such Lender's default in writing,
or (z) the Defaulting Lender makes its Pro Rata Share of the applicable
Advance and pays to Agent all amounts owing by Defaulting Lender in
respect thereof. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, to relieve or
excuse the performance by such Defaulting Lender or any other Lender of
its duties and obligations hereunder or to relieve or excuse the
performance by Borrower of its duties and obligations hereunder to Agent
or to Lenders other than such Defaulting Lender. Any such failure to
fund by any Defaulting Lender shall constitute a material breach by such
Defaulting Lender of this Agreement and shall entitle Borrower at its
option, upon written notice to Agent, to arrange for a substitute Lender
to assume the Commitment of such Defaulting Lender, such substitute
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Lender to be acceptable to Agent. In connection with the arrangement of
such a substitute Lender, the Defaulting Lender shall have no right to
refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance Agreement in favor of the
substitute Lender (and agrees that it shall be deemed to have executed
and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (including an assumption
of its Pro Rata Share of the Risk Participation Liability) without any
premium or penalty of any kind whatsoever; PROVIDED FURTHER, HOWEVER,
that any such assumption of the Commitment of such Defaulting Lender
shall not be deemed to constitute a waiver of any of the Lender Groups'
or Borrower's rights or remedies against any such Defaulting Lender's
arising out of or in relation to such failure to fund.
(d) MAKING OF SWING LOANS.
(i) In the event of either (a) Agent's and Swing Lender's
agreement to provide Swing Loans for so long as Foothill is the sole
Lender hereunder, or (b) Agent's election, with the consent of Swing
Lender, as a Lender, to have the terms of this SECTION 2.4(d) apply to a
requested Borrowing as described in SECTION 2.4(b), Swing Lender as a
Lender shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this SECTION
2.4(d) being referred to as a "SWING LOAN" and such Advances being
referred to collectively as "SWING LOANS") available to Borrower on the
Funding Date applicable thereto by transferring same day funds to
Borrower's Designated Account. Each Swing Loan is an Advance hereunder
and shall be subject to all the terms and conditions applicable to other
Advances, except that all payments thereon shall be payable to Swing
Lender as a Lender solely for its own account (and for the account of
the holder of any participation interest with respect to such Advance).
Subject to the provisions of SECTION 2.4(i), Agent shall not request
Swing Lender as a Lender to make, and Swing Lender as a Lender shall not
make, any Swing Loan if Agent shall have received written notice from
any Lender, or otherwise has actual knowledge, that (1) one or more of
the applicable conditions precedent set forth in SECTION 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date. Swing Lender as a
Lender shall not otherwise be required to determine whether the
applicable conditions precedent set forth in SECTION 3 have been
satisfied on the Funding Date applicable thereto prior to making, in its
sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Liens granted to Agent
under the Loan Documents and shall constitute Advances and Obligations
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hereunder, and shall bear interest at the rate applicable from time to
time to Advances.
(e) AGENT ADVANCES.
(i) Agent hereby is authorized by Borrower and the Lenders, from
time to time in Agent's sole discretion, (1) after the occurrence and
during the continuance of a Default or an Event of Default, or (2) at
any time that any of the other applicable conditions precedent set forth
in SECTION 3 have not been satisfied, to make Advances to Borrower on
behalf of the Lenders that Agent, in its reasonable business judgment,
deems necessary or desirable (a) to preserve or protect the Collateral,
or any portion thereof, (b) to enhance the likelihood of repayment of
the Obligations, or (c) to pay any other amount chargeable to Borrower
pursuant to the terms of this Agreement, including Lender Group Expenses
and the costs, fees, and expenses described in SECTION 10 (any of the
Advances described in this SECTION 2.4(e) shall be deemed to be Advances
hereunder and shall be referred to as "AGENT ADVANCES").
(ii) Agent Advances shall be repayable on demand and secured by the
Liens granted to Agent under the Loan Documents, shall constitute
Advances and Obligations hereunder, and shall bear interest at the rate
applicable from time to time to Advances.
(f) SETTLEMENT. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not
be for the benefit of or enforceable by Borrower) that in order to facilitate
the administration of this Agreement and the other Loan Documents, settlement
among them as to the Advances, the Swing Loans, and the Agent Advances shall
take place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("SETTLEMENT") with the Lenders
on a weekly basis, or on a more frequent basis if so determined by
Agent, (1) on behalf of Swing Lender, with respect to each outstanding
Swing Loan, (2) for itself, with respect to each Agent Advance, and (3)
with respect to Collections received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of transmission,
of such requested Settlement, no later than 2:00 p.m. (California time)
on the Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the "SETTLEMENT
DATE"). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Agent
Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each
Lender of the interest, fees, and other charges for such period. Subject
to the terms and conditions contained herein (including
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SECTION 2.4(c)(iii)): (y) if a Lender's balance of the Advances, Swing
Loans, and Agent Advances exceeds such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date, then
Agent shall by no later than 12:00 p.m. (California time) on the
Settlement Date transfer in immediately available funds to the account
of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and
Agent Advances; and (z) if a Lender's balance of the Advances, Swing
Loans, and Agent Advances is less than such Lender's Pro Rata Share of
the Advances, Swing Loans, and Agent Advances as of a Settlement Date,
such Lender shall no later than 12:00 p.m. (California time) on the
Settlement Date transfer in immediately available funds to such account
of Agent as Agent may designate, an amount such that each such Lender
shall, upon transfer of such amount, have as of the Settlement Date, its
Pro Rata Share of the Advances, Swing Loans, and Agent Advances. Such
amounts made available to Agent under clause (z) of the immediately
preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the portion of
such Swing Loan or Agent Advance representing Swing Lender's Pro Rata
Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to Agent by any Lender on the Settlement
Date applicable thereto to the extent required by the terms hereof,
Agent shall be entitled to recover for its account such amount on demand
from such Lender together with interest thereon at the Defaulting
Lenders Rate.
(ii) In determining whether a Lender's balance of the Advances,
Swing Loans, and Agent Advances is less than, equal to, or greater than
such Lender's Pro Rata Share of the Advances, Swing Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually
received in good funds by Agent or Swing Lender with respect to
principal, interest, fees payable by Borrower and allocable to the
Lenders hereunder, and proceeds of Collateral. To the extent that a net
amount is owed to any such Lender after such application, such net
amount shall be distributed by Agent or Swing Lender to that Lender as
part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent
Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to Swing Lender's Pro Rata Share of the Advances. If, as of
any Settlement Date, Collections received since the then immediately
preceding Settlement Date have been applied to Swing Lender's Pro Rata
Share of the Advances other than to Swing Loans or Agent Advances, as
provided for in the previous sentence, Swing Lender shall pay to Agent
for the accounts of the Lenders,
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and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Swing
Lender with respect to Swing Loans, Agent with respect to Agent
Advances, and each Lender with respect to the Advances other than Swing
Loans and Agent Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the daily
amount of funds employed by Swing Lender, Agent, or the Lenders, as
applicable.
(g) NOTATION. Agent shall record on its books the principal amount
of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at
such Lender's option, to note the date and amount of each payment or
prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting conclusive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(h) LENDERS' FAILURE TO PERFORM. All Advances (other than Swing
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligation to make any Advances hereunder, and (ii) no
failure by any Lender to perform its obligation to make any Advances
hereunder shall excuse any other Lender from its obligation to make any
Advances hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary provision of this Agreement
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally continue to make Advances
(including Swing Loans) to Borrower, notwithstanding that an Overadvance
exists or thereby would be created, so long as, at any time, (i) the
outstanding Revolver Usage does not exceed the Borrowing Base by more than
the lesser of (a) $5,000,000, and (b) 10% of the Borrowing Base then in
effect, and (ii) the outstanding Revolver Usage (except for and excluding
amounts charged to the Loan Account for interest, fees, or Lender Group
Expenses) does not exceed the Maximum Amount. The foregoing provisions are
for the sole and exclusive benefit of Agent, Swing Lender, and the Lenders
and are not intended to benefit Borrower in any way. The Advances and Swing
Loans, as applicable, that are made pursuant to this SECTION 2.4(i) shall be
subject to the same terms and conditions as any other Advance or Swing Loan,
as applicable, except that the rate of interest applicable thereto shall be
the rate applicable to Advances under SECTION 2.7(c) hereof without regard to
the presence or absence of a Default or Event of Default.
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(i) In the event Agent obtains actual knowledge that the Revolver
Usage exceeds the amounts permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall
notify Lenders as soon as practicable (and prior to making any (or any
further) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group
Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders thereupon
shall, together with Agent, jointly determine the terms of arrangements
that shall be implemented with Borrower intended to reduce, within a
reasonable time, the outstanding principal amount of the Advances to
Borrower to an amount permitted by the preceding paragraph. In the event
Agent or any Lender disagrees over the terms of reduction or repayment
of any Overadvance, the terms of reduction or repayment thereof shall be
implemented according to the determination of the Required Lenders.
(ii) Each Lender shall be obligated to settle with Agent as
provided in SECTION 2.4(f) for the amount of such Lender's Pro Rata
Share of any unintentional Overadvances by Agent reported to such
Lender, any intentional Overadvances made as permitted under this
SECTION 2.4(i), and any Overadvances resulting from the charging to the
Loan Account of interest, fees, or Lender Group Expenses.
2.5 PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) All payments to be made by Borrower shall be made without
set-off, recoupment, deduction, or counterclaim, except as otherwise
required by law. Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Agent's Account for the account of
the Lender Group and shall be made in immediately available funds, no
later than 11:00 a.m. (California time) on the date specified herein.
Any payment received by Agent later than 11:00 a.m. (California time),
at the option of Agent, shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day,
and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior to the
date on which any payment is due to the Lenders that Borrower will not
make such payment in full as and when required, Agent may assume that
Borrower have made (or will make) such payment in full to Agent on such
date in
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immediately available funds and Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Lender
on such due date an amount equal to the amount then due such Lender. If
and to the extent Borrower does not make such payment in full to Agent
on the date when due, each Lender severally shall repay to Agent on
demand such amount distributed to such Lender, together with interest
thereon at the Defaulting Lender Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
(b) APPORTIONMENT, APPLICATION, AND REVERSAL OF PAYMENTS. Except
as otherwise provided with respect to Defaulting Lenders and except as
otherwise provided in the Loan Documents, aggregate principal and interest
payments shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Obligations to which such payments relate
held by each Lender) and payments of fees (other than fees designated for an
Agent's sole and separate account) shall be apportioned among the Lenders
based upon their Pro Rata Shares. All payments shall be remitted to Agent and
all such payments (other than payments received while no Default or Event of
Default has occurred and is continuing and which relate to principal or
interest of specific Obligations or which relate to specific fees), and all
proceeds of Accounts or other Collateral received by Agent, shall be applied
as follows:
(A) FIRST, to pay any Lender Group Expenses then due to Agent
under the Loan Documents, until paid in full,
(B) SECOND, to pay any Lender Group Expenses then due to the
Lenders under the Loan Documents, on a ratable basis, until paid in full,
(C) THIRD, to pay any fees then due to Agent (for its
separate account) under the Loan Documents, until paid in full,
(D) FOURTH, to pay any fees then due to any or all the
Lenders under the Loan Documents, on a ratable basis, until paid in full,
(E) FIFTH, to pay interest due in respect of all outstanding
Advances (including Swing Loans and Agent Advances), until paid in full,
(F) SIXTH, to pay fees, charges, commissions, and costs in
respect of all outstanding Letters of Credit, until paid in full,
(G) SEVENTH, to pay or prepay principal of Agent Advances,
until paid in full,
(H) EIGHTH, to pay principal of all outstanding Advances
(other than Agent Advances), such prepayment to be made, first, to the
outstanding Swing Loans and, second, to all other outstanding Advances,
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(I) NINTH, if an Event of Default has occurred and is
continuing, to provide cash collateral to be held by Agent, for the ratable
benefit of those Lenders having a Pro Rata Share of the Letters of Credit, in
an amount equal to 105% of the maximum amount of the Lender Group's
obligations under outstanding Letters of Credit, until paid in full,
(K) TENTH, ratably to pay any other Obligations due to Agent,
or any Lender by Borrower, until paid in full, and
(L) ELEVENTH, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law.
(ii) Agent shall promptly distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in writing, such
funds as it may be entitled to receive, subject to a Settlement delay as
provided in SECTION 2.4(h).
(iv) In each instance, so long as no Default or Event of Default
has occurred and is continuing, SECTION 2.5(b) shall not be deemed to apply
to any payment by Borrower specified by Borrower to be for the payment of
specific Obligations then due and payable under any provision of this
Agreement.
(v) 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.
(vi) In the event of a direct conflict between the priority
provisions of this SECTION 2.5 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 2.5 shall control and govern.
2.6 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to the Lender Group pursuant to SECTIONS 2.1 OR
2.2 is greater than either the Dollar or percentage limitations set forth in
SECTIONS 2.1 OR 2.2, (an "OVERADVANCE"), Borrower immediately shall pay to
Agent, in cash, the amount of such excess, which amount shall be used by
Agent to reduce the Obligations in accordance with the priorities set forth
in SECTION 2.5(b). In addition, Borrower hereby promises to pay the
Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group as and when due and payable under the
terms of this Agreement and the other Loan Documents.
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2.7 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the
Daily Balance thereof at a per annum rate equal to the Base Rate plus the
Applicable Base Rate Margin.
(b) LETTER OF CREDIT FEE. Borrower shall pay Agent (for the ratable
benefit of the Lenders based upon their Pro Rata Share of the Commitments), a
Letter of Credit fee (in addition to the charges, commissions, fees, and
costs set forth in SECTION 2.2(e)) which shall accrue at a rate equal to
1.50% per annum times the aggregate undrawn amount of all outstanding Letters
of Credit during the month preceding the date such Letter of Credit fee is
due and payable in accordance with SECTION 2.7(d) hereof.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default (and at the election of the Required
Lenders),
(i) all Obligations (except for undrawn Letters of Credit)
that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per
annum rate equal to 2 percentage points above the per annum rate
otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 2 percentage points above the per annum rate
otherwise applicable hereunder.
(d) PAYMENTS. 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 during the term hereof. Borrower hereby authorizes Agent, without
prior notice to such Borrower, to charge such interest and fees, all Lender
Group Expenses (as and when incurred), the charges, commissions, fees, and
costs provided for in SECTION 2.12 (as and when accrued or incurred), the
charges, commissions, fees, and costs provided for in SECTION 2.2 (as and
when accrued or incurred), and all other payments due under any Loan Document
to Borrower's Loan Account, which amounts thereafter shall accrue interest at
the rate then applicable to Advances hereunder. Any interest not paid when
due shall be compounded and shall thereafter accrue interest at the rate then
applicable to Advances hereunder. Agent shall deliver to Borrower on a
monthly basis such documents as shall be reasonably necessary to support any
Lender Group Expenses charged to Borrower's Loan Account.
(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
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connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; PROVIDED, HOWEVER, that, anything
contained herein to the contrary notwithstanding, if said rate or rates of
interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, each 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.
2.8 CASH MANAGEMENT.
(a) Borrower shall at all times maintain lockboxes (the "Lockboxes")
and, immediately after the Closing Date, shall instruct all Account Debtors
to remit all amounts owed by them to one of such Lockboxes. Borrower, Agent,
and the Lockbox Banks shall enter into the Lockbox Agreements, which among
other things shall provide for the opening of a Lockbox Account for the
deposit of all Domestic Collections at the applicable Lockbox Bank. Borrower
agrees that all Domestic Collections received by Borrower from any Account
Debtor or any other source immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or other arrangement contemplated
thereby shall be modified by Borrower without the prior written consent of
Agent. Upon the terms and subject to the conditions set forth in the Lockbox
Agreements, all amounts received in each Lockbox Account shall be wired
directly each Business Day into the Agent's Account.
(b) On or before the UK Sub Closing Date and at all times
thereafter, UK Sub shall maintain with a Foreign Concentration Account Bank
set forth on SCHEDULE 2.8(b) to the Disclosure Letter a Dollar-denominated
concentration account (a "FOREIGN CONCENTRATION ACCOUNT") and from and after
such date the UK Sub promptly shall deposit or cause to be deposited into
such Foreign Concentration Account ALL Foreign Collections payable in Dollars
immediately upon receipt thereof. On or before the UK Sub Closing Date, Agent
and UK Sub shall enter into a Foreign Concentration Account Agreement with
the Foreign Concentration Account Bank. Once established, neither the Foreign
Concentration Account Agreement nor the arrangements contemplated thereby
shall be modified by the UK Sub without the prior written consent of Agent.
Upon the terms and subject to the conditions set forth in the Foreign
Concentration Account Agreement, all amounts received in each such Foreign
Concentration Account shall be wired each Business Day into the Agent's
Account.
(c) Each Lockbox Bank and Foreign Concentration Account Bank shall
establish and maintain tri-party blocked account agreements with the Agent
and the applicable Obligor, in form and substance reasonably acceptable to
the Agent. Each such blocked account agreement shall provide, among other
things, that (i) all items of payment deposited in such accounts and proceeds
thereof are held by such banks as agent or bailee-in-possession for Agent,
(ii) the bank executing such agreement has no rights of setoff or
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recoupment or any other claim against such account, as the case may be, other
than for payment of its service fee and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) the bank executing the agreement agrees immediately to
forward by daily sweep all amounts received in the applicable account to the
Agent's Account. No Obligor shall, or shall cause or permit any Subsidiary
thereof to, accumulate or maintain cash in disbursement or payroll accounts
as of any date of determination in excess of checks outstanding against such
accounts as of that date and amounts necessary to meet minimum balance
requirements.
(d) So long as no Default or Event of Default has occurred and is
continuing, the Obligors may amend SCHEDULE 2.8(b) to the Disclosure Letter
to add or replace a Foreign Concentration Account or a Foreign Concentration
Account Bank, or add or replace a Lockbox, a Lockbox Bank, the Designated
Account, or the Designated Account Bank; PROVIDED, HOWEVER, that (i) such
bank shall be reasonably satisfactory to Agent and Agent shall have consented
in writing in advance to the opening of such account or Lockbox with the
relevant bank and (ii) prior to the time of the opening of such account or
Lockbox, the applicable Obligor and such bank shall have executed and
delivered to Agent a tri-party blocked account agreement, in form and
substance reasonably satisfactory to Agent. The Obligors shall close any of
their accounts (and establish replacement accounts in accordance with the
foregoing sentence) promptly and in any event within 30 days of notice from
Agent that the creditworthiness of any bank holding an account is no longer
acceptable in Agent's reasonable judgment, or as promptly as practicable and
in any event within 60 days of notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts or Lockboxes of the bank holding such accounts or Agent's
liability under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent's reasonable judgment.
(e) The Lockbox Accounts and Foreign Concentration Accounts shall be
cash collateral accounts, with all cash, checks and similar items of payment
in such accounts securing payment of the Advances and all other Obligations,
and in which each Obligor shall have granted a Lien to Agent pursuant to this
Agreement.
2.9 CREDITING PAYMENTS. The receipt of any payment by Agent (whether from
transfers to Agent by the Lockbox Account Banks, Foreign Concentration
Account Banks or otherwise) shall not be considered a payment on account
unless such Collection item is a wire transfer of immediately available
federal funds made to the Agent's Account or unless and until such payment
item is honored when presented for payment. Should any payment item not be
honored when presented for payment, then 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 Agent's Account on
a Business Day on or before 11:00 a.m. (California time). If any Collection
item is received into the Agent's Account on or after 11:00 a.m. (California
time) on a Business Day, it shall be deemed to have been received by Agent as
of the opening of business on the immediately following Business Day. From
and after the Closing Date, Agent shall be entitled to charge the Obligors
for 1 Business Day of
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`clearance' or `float' at the rate applicable to Advances set forth in
SECTION 2.7(a) or SECTION 2.7(c)(i), as applicable, on all Collections that
are received by Agent (regardless of whether forwarded by the Lockbox Banks
or Foreign Concentration Account Banks to Agent, whether provisionally
applied to reduce the Obligations under SECTION 2.1, or otherwise). 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 further acknowledge and agree that
the economic benefit of the foregoing provisions of this SECTION 2.9 shall
accrue to the sole and exclusive benefit of Agent.
2.10 DESIGNATED ACCOUNT. Agent is authorized to make the Advances, and
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 2.7(d). Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances
requested by Borrower and made by Agent or the Lenders hereunder. Unless
otherwise agreed by Agent and Borrower, any Advance, Agent Advance, or Swing
Loan requested by Borrower and made by Agent or the Lenders hereunder shall
be made to the Designated Account.
2.11 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent 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 by Agent or the
Lenders to Borrower's or for Borrower's account, including, accrued interest,
Lender Group Expenses, and any other payment Obligations of Borrower. In
accordance with SECTION 2.9, the Loan Account will be credited with all
payments received by Agent from Borrower or for Borrower's account, including
all amounts received in the Agent's Account from any Lockbox Bank or the
Foreign Concentration Account Banks. Agent shall render statements regarding
the Loan Account to Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender
Group Expenses owing, and such statements shall be conclusively presumed to
be correct and accurate and constitute an account stated between Borrower and
the Lender Group unless, within 30 days after receipt thereof by Borrower,
Borrower shall deliver to Agent written objection thereto describing the
error or errors contained in any such statements.
2.12 FEES. Borrower shall pay to Agent the following fees, which fees
shall be non-refundable when paid (irrespective of whether this Agreement is
terminated thereafter):
(a) FEE LETTER FEES. As and when due and payable under the terms of
the Fee Letter, Borrower shall pay to Agent the fees set forth in the Fee
Letter and, as and when due thereunder, such fees shall constitute
Obligations hereunder.
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(b) FINANCIAL EXAMINATION, VALUATION, AND APPRAISAL FEES. For the
sole and separate account of Agent, (i) a separate fee of $750 pay day, per
examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by personnel employed by
Agent; PROVIDED, HOWEVER, that so long as no Event of Default has occurred
and is continuing, Borrower shall not be obligated to reimburse Agent for
more than 4 such audits or more than one collateral appraisal during any 12
month period; (ii) a one time charge of $3,000 plus out-of-pocket expenses
for expenses for the establishment of electronic collateral reporting
systems; and (iii) the actual charges paid or incurred by Agent if it elects
to employ the services of one or more third Persons to appraise the
Collateral, or any portion thereof, or to assess the Obligors' business
valuation.
2.13 CAPITAL REQUIREMENTS. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies,
or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (ii)
compliance by such Lender or its parent bank holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), the effect of reducing the return
on such Lender's or such holding company's capital as a consequence of such
Lender's Commitment to make Advances hereunder or its obligations in respect
of any Letter of Credit to a level below that which such Lender or such
holding company could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such holding company's
then existing policies with respect to capital adequacy and assuming the full
utilization of such entity's capital) by any amount deemed by such Lender to
be material, than such Lender may notify Borrower and the Agent thereof. In
making such determination, such Lender shall treat Borrower the same as all
similarly situated borrowers from Agent, as determined by such Lender in its
Permitted Discretion. Borrower agrees to pay such Lender on demand the amount
of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by such Lender of a
statement in the amount and setting forth in reasonable detail such Lender's
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error). In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
2.14 JOINT AND SEVERAL LIABILITY OF THE OBLIGORS.
(a) Each of the Obligors is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under
this Agreement, for the mutual benefit, directly and indirectly, of each of
the Obligors and in consideration of the undertakings of the other Obligors
to accept joint and several liability for the Obligations.
(b) Each of the Obligors, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Obligors, with respect to the
payment and performance of all of the
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Obligations (including, without limitation, any Obligations arising under
this SECTION 2.14), it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each Person
composing the Obligors without preferences or distinction among them.
(c) If and to the extent that any of the Obligors shall fail to make
any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Persons composing the Obligors will make such
payment with respect to, or perform, such Obligation.
(d) The Obligations of each Person composing the Obligors under the
provisions of this SECTION 2.14 constitute the absolute and unconditional,
full recourse Obligations of each Person composing the Obligors enforceable
against each such Obligor to the full extent of its Assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Person composing the Obligors hereby waives notice of acceptance of its joint
and several liability, notice of any Advances or Letters of Credit issued
under or pursuant to this Agreement, notice of the occurrence of any Default,
Event of Default, or of any demand for any payment under this Agreement,
notice of any action at any time taken or omitted by Agent or Lenders under
or in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with
this Agreement (except as otherwise provided in this Agreement). Each Person
composing the Obligors hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence
by Agent or Lenders at any time or times in respect of any default by any
Person composing the Obligors in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the
Obligations, and the taking, addition, substitution or release, in whole or
in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Person
composing the Obligors. Without limiting the generality of the foregoing,
each of the Obligors assents to any other action or delay in acting or
failure to act on the part of Agent or any Lender with respect to the failure
by any Person composing the Obligors to comply with any of its respective
Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, which might, but for the
provisions of this SECTION 2.14 afford grounds for terminating, discharging
or relieving any Person composing the Obligors, in whole or in part, from any
of its Obligations under this SECTION 2.14, it being the intention of each
Person composing the Obligors that, so long as any of the Obligations
hereunder remain unsatisfied, the Obligations of such Person composing the
Obligors under this SECTION 2.14 shall not be discharged except by
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performance and then only to the extent of such performance. The Obligations
of each Person composing the Obligors under this SECTION 2.14 shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect
to any Person composing the Obligors or Agent or any Lender. The joint and
several liability of the Persons composing the Obligors hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, constitution or
place of formation of any of the Persons composing the Obligors or Agent or
any Lender.
(f) The provisions of this SECTION 2.14 are made for the benefit of
the Agent, the Lenders and their respective successors and assigns, and may
be enforced by it or them from time to time against any or all of the Persons
composing the Obligors as often as occasion therefor may arise and without
requirement on the part of Agent, any such Lender, successor or assign first
to marshal any of its or their claims or to exercise any of its or their
rights against any of the other Persons composing the Obligors or to exhaust
any remedies available to it or them against any of the other Persons
composing the Obligors or to resort to any other source or means of obtaining
payment of any of the Obligations hereunder or to elect any other remedy. The
provisions of this SECTION 2.14 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully satisfied. If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by Agent
or any Lender upon the insolvency, bankruptcy or reorganization of any of the
Persons composing the Obligors, or otherwise, the provisions of this SECTION
2.14 will forthwith be reinstated in effect, as though such payment had not
been made.
(g) Each of the Persons composing the Obligors hereby agrees that it
will not enforce any of its rights of contribution or subrogation against the
other Persons composing the Obligors with respect to any liability incurred
by it hereunder or under any of the other Loan Documents, any payments made
by it to the Agent or the Lenders with respect to any of the Obligations or
any collateral security therefor until such time as all of the Obligations
have been paid in full in cash. Any claim which any Obligor may have against
any other Obligor with respect to any payments to Agent or any Lender
hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any
insolvency, bankruptcy, receivership, liquidation, reorganization or other
similar proceeding under the laws of any jurisdiction relating to any
Obligor, its debts or its Assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or distribution
of any character, whether in cash, securities or other property, shall be
made to any other Obligor therefor.
(h) Each of the Persons composing the Obligors hereby agrees that,
after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness
owing by any Obligor to any other Obligor is hereby subordinated to the prior
payment in full in cash of the Obligations. Each
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Obligor hereby agrees that after the occurrence and during the continuance of
any Default or Event of Default, such Obligor will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Obligor owing to
such Obligor until the Obligations shall have been paid in full in cash. If,
notwithstanding the foregoing sentence, such Obligor shall collect, enforce
or receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Obligor as trustee for the Agent,
and such Obligor shall deliver any such amounts to the Agent for application
to the Obligations in accordance with SECTION 2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is
subject to the fulfillment, to the reasonable satisfaction of Agent, of each
of conditions precedent set forth below:
(a) the Closing Date shall occur on or before April 7, 2000;
(b) Agent shall have received all financing statements
required by Agent, duly executed by the Borrower, and Agent shall have
received searches reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following documents,
in form and substance satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:
(i) this Agreement;
(ii) tri-party blocked account agreements governing the Lockbox
Accounts;
(iii) the Control Agreement(s);
(iv) the Disbursement Letter;
(v) the Borrower Stock Pledge Agreement, together with all
certificates representing shares of Stock of Borrower's
Subsidiaries, as well as Stock powers with respect to the foregoing
endorsed in blank;
(vi) the Trademark Security Agreement;
(vii) the Patent Security Agreement;
(viii) the Copyright Security Agreement;
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(ix) the Fee Letter;
(x) the Parent Guaranty;
(xi) the Parent Security Agreement;
(xii) the Parent Stock Pledge Agreement, together with all
certificates representing shares of Stock of the Borrower, as well
as Stock powers with respect to the foregoing endorsed in blank;
(xiii) the UK Sub Guaranty;
(xiv) the UK Sub Security Agreement;
(xv) the Intercompany Subordination Agreement;
(xvi) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by
Existing Lender of its Liens in and to the Assets of the Obligors;
(xvii) Agent 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;
(d) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
(e) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, 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;
(f) Agent shall have received certificates of status with
respect to Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions 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;
(g) Agent shall have received a certificate from the Secretary
of Parent attesting to the resolutions of Parent's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and
the other Loan Documents to which Parent is a party and authorizing specific
officers of Parent to execute the same;
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(h) Agent shall have received copies of Parent's Governing
Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Parent;
(i) Agent shall have received a certificate of status with
respect to Parent, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization
of Parent, which certificate shall indicate that Parent is in good standing
in such jurisdiction;
(j) Agent shall have received certificates of status with
respect to Parent, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that Parent is in
good standing in such jurisdictions;
(k) Agent shall have received a certificate from the Secretary
of UK Sub attesting to the resolutions of UK Sub's Board of Directors
authorizing its execution, delivery, and performance of the Loan Documents to
which UK Sub is a party (other than the UK Sub Security Documents) and
authorizing specific officers of UK Sub to execute the same;
(l) Agent shall have received copies of UK Sub's Governing
Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of UK Sub;
(m) Agent shall have received a certificate of status with
respect to UK Sub (or the equivalent), dated within 10 Business Days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of UK Sub, which certificate shall indicate that
UK Sub is in good standing in such jurisdiction;
(n) Agent shall have received certificates of status (or the
equivalent) with respect to UK Sub, each dated within 30 Business Days of the
Closing Date, such certificates to be issued by the appropriate officer of
the jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
UK Sub is in good standing in such jurisdictions;
(o) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.10, the
form and substance of which shall be satisfactory to Agent and its counsel;
(p) Agent shall have received an opinion of Obligors' counsel
in form and substance satisfactory to Agent;
(q) Agent shall have received opinions of counsel to UK Sub
with respect to the due authorization, execution and delivery by UK Sub of
this Agreement and the other Loan Documents to which it is a party other than
the UK Sub Security Documents,
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the enforceability of such documents against the UK Sub, and such other
matters as Agent may request in its Permitted Discretion, in form and
substance satisfactory to Agent in its sole discretion;
(r) Agent shall have received Collateral Access Agreements from
lessors, warehousemen, bailees, and other third Persons as Agent may require;
(s) Borrower shall have the Required Availability after giving
effect to the initial extensions of credit;
(t) Agent shall have completed its business, legal, and
collateral due diligence, including but not limited to, an updated collateral
audit and review of the Obligors' books and records, including such shipping
tests as Agent may require, and verification of Obligors' representations and
warranties in the Loan Documents, the results of which shall be satisfactory
to each Lender;
(u) Agent shall have reviewed, to its satisfaction, Borrower's
license agreements with Sony and Nintendo;
(v) Borrower shall have paid all Lender Group Expenses incurred
by Agent or any other Lender in connection with the transactions evidenced by
this Agreement; and
(w) All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Agent and its counsel.
3.2 CONDITIONS PRECEDENT TO INCLUSION OF THE UK SUB ACCOUNTS IN THE
BORROWING BASE. The following shall be conditions precedent to the inclusion
of the UK Sub Accounts in the Borrowing Base:
(a) Agent shall have received a certificate from the Secretary
of UK Sub attesting to the resolutions of UK Sub's Board of Directors
authorizing its execution, delivery, and performance of the UK Sub Security
Documents and the other Loan Documents to which UK Sub is a party that are to
be executed in connection with the UK Sub Security Documents and authorizing
specific officers of UK Sub to execute the same;
(b) Agent shall have received copies of UK Sub's Governing
Documents, as amended, modified, or supplemented to the UK Sub Closing Date,
certified by the Secretary of UK Sub;
(c) Agent shall have received a certificate of status (or the
equivalent) with respect to UK Sub, dated within 10 days of the UK Sub
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of UK Sub, which certificate shall indicate that
UK Sub is in good standing in such jurisdiction;
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(d) Agent shall have received certificates of status with
respect to UK Sub, each dated within 15 days of the UK Sub Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that UK Sub is in
good standing in such jurisdictions;
(e) Agent shall have received satisfactory evidence that UK Sub
has instructed in writing all of its Account Debtors to remit all Collections
payable in Dollars into the applicable Foreign Concentration Account;
(f) UK Sub shall have executed and delivered each of the UK Sub
Security Documents and such agreements, where appropriate, shall have been
filed or recorded with the applicable Governmental Authority;
(g) Agent shall have received (i) duly executed originals of
the UK Sub Security Documents, in form and substance satisfactory to Agent in
its sole and absolute discretion, and (ii) satisfactory evidence that the
security interests granted in favor of Agent pursuant to the UK Sub Security
Documents have been duly perfected and are senior in priority to all other
liens, claims, security interests, or encumbrances, except for Permitted
Liens;
(h) Agent shall have received an opinion of UK Sub's counsel
with respect to the due authorization, execution and delivery by UK Sub of
the UK Sub Security Documents, the enforceability of such documents against
the UK Sub, and such other matters as Agent may request in its Permitted
Discretion, in form and substance satisfactory to Agent in its sole
discretion;
(i) Agent, the UK Sub, and each of the UK Sub's depositary
banks shall have entered into such lockbox agreements or blocked account
agreements (including agreements in respect of the Foreign Concentration
Accounts) as Agent shall require, the form and substance thereof to be
satisfactory to Agent in its sole discretion; and
(j) Agent shall have completed its business, legal, and
collateral due diligence, including but not limited to, a collateral audit
and review of the UK Sub's Books and verification of the UK Sub's
representations and warranties contained in the Loan Documents, the results
of which shall be satisfactory to Agent in its sole discretion.
3.3 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to continue to make
Advances or to issue Letters Of Credit 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 Agent copies
of the policies of insurance, together with the endorsements thereto, as are
required by SECTION 6.10, the form and substance of which shall be
satisfactory to Agent and its counsel;
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(b) within 60 days of the Closing Date, either (i) deliver to
Agent satisfactory evidence that all existing copyrights of Borrower (other
than Exempt Copyrights) that are capable of being registered pursuant to
Section 6(a) of the Copyright Security Agreement have been registered with
the United States Copyright Office and that all such copyrights and any
proceeds thereof are specifically encumbered by the Copyright Security
Agreement, or (ii) establish to the reasonable satisfaction of the Agent that
Borrower's failure to comply with clause (i) is due solely to the failure of
the United States Copyright Office to timely return endorsed filed copies of
Borrower's copyright office filings;
(c) within 120 days of the Closing Date, (i) deliver to Agent
satisfactory evidence that a patent application with respect to all existing
inventions of Borrower (other than Exempt Patents) for which a patent is
capable of being granted, pursuant to the Patent Security Agreement, has been
filed with the United States Patent and Trademark Office, and that all such
patents and any proceeds thereof are specifically encumbered by the Patent
Security Agreement, or (ii) establish to the reasonable satisfaction of the
Agent that Borrower's failure to comply with clause (i) is due solely to the
failure of the United States Patent and Trademark Office to timely return
endorsed filed copies of Borrower's patent office filings
(d) within 90 days of the Closing Date, Borrower shall have
satisfied the conditions set forth in clauses (a) through (e), (g), (h), and
(i) of SECTION 3.2 above.
3.4 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
the Lender Group (or any member thereof) to make all Advances (or to make any
other extensions of credit provided for hereunder) shall be subject to the
following conditions precedent:
(a) the representations and warranties of the Obligors
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 (i) to the extent that
such representations and warranties relate solely to an earlier date, and
(ii) with respect to the UK Sub, representation made in SECTION 5.12(a)(ii)
and (iii) shall be deemed made only as of the end of each fiscal year of
Borrower),
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result
from the making thereof,
(c) no Material Adverse Change shall have occurred since the
date of the latest financial statements submitted to the Lender Group on or
before the Closing Date, and
(d) 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, Agent, any Lender, or any of their Affiliates.
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The foregoing conditions precedent are not conditions to each Lender
(i) participating in or reimbursing Agent for such Lenders' Pro Rata Share of
any drawings under Letters of Credit as provided herein, or (ii)
participating in or reimbursing Swing Lender or the Agent for such Lenders'
Pro Rata Share of any Swing Loan or Agent Advance as provided herein.
3.5 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on April 6, 2002 (the "MATURITY DATE").
The foregoing notwithstanding, the Lender Group, upon the election of the
Required Lenders, shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during
the continuation of an Event of Default.
3.6 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 or any other Obligor of its
duties, Obligations, or covenants hereunder and continuing security interests
in the Collateral, for the benefit of the Lender Group, shall remain in
effect until all Obligations have been fully and finally discharged and the
Lender Group's obligations to provide additional credit hereunder have been
terminated. When this Agreement has been terminated and all of the
Obligations have been fully and finally discharged and the Lender Group's
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Borrower's sole expense, execute and
deliver any lien releases, mortgage releases, discharges of security
interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Liens granted by the Obligors to Agent for the benefit of the
Lender Group with respect to the Obligations.
3.7 EARLY TERMINATION BY BORROWER. Borrower has the option, at any time
upon 90 days prior written notice to Agent, to terminate this Agreement by
paying to Agent, for the benefit of the Lender Group, in cash, the
Obligations (including either (i) providing cash collateral to be held by
Agent for the benefit of the Lenders in an amount equal to 105% of the
maximum amount of such Lenders' obligations under outstanding Letters of
Credit, or (ii) causing the original Letters of Credit to be returned to
Agent) in full, together with the Applicable Prepayment Premium. If Borrower
has sent a notice of termination pursuant to the provisions of this Section,
but fails to pay the Obligations in full on the date set forth in said
notice, then Agent, acting upon the instructions of the Required Lenders,
shall have the election, to be made by a notice in writing sent by Agent to
Borrower within 60 Business Days after the date that Borrower had scheduled
as the early termination date, either to (a) require Borrower to repay the
Obligations in full on a date that is 10 days after the date on which such
notice is sent, (b) renew this Agreement for an additional term of 1 year, or
(c) continue the terms of this Agreement as if no such early termination
notice had been sent. In the event of the termination of this Agreement at
any time prior to the Maturity Date, for any other reason, including: (i)
termination upon the election of the Lender Group to terminate
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after the occurrence of an Event of Default, (ii) foreclosure and sale of
Collateral resulting in repayment of the Obligations in full, (iii) sale of
the Collateral in any insolvency proceeding resulting in repayment of the
Obligations in full, or (iv) restructure, reorganization and/or compromise of
the Obligations by the confirmation of a plan of reorganization, plan or
arrangement, or any other plan of compromise, restructure or arrangement in
any insolvency proceeding, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group
and/or profits lost by the Lender Group as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits and/or damages of the Lender
Group, Borrower shall pay the Applicable Prepayment Premium to the Lender
Group measured as of the date of such termination.
4. SECURITY INTERESTS.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Agent, for the
benefit of the Lender Group a continuing security interest in all of its
right, title, and interest in all currently existing and hereafter acquired
or arising Borrower's Collateral in order to secure prompt repayment of all
of the Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents to which it is a
party. The Agent's Liens in and to the Borrower's Collateral shall attach to
all Borrower's Collateral without further act on the part of the Lender Group
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 Borrower's Collateral. UK Sub hereby grants to Agent, for the benefit of
the Lender Group a continuing security interest in all of its right, title,
and interest in all currently existing and hereafter acquired or arising UK
Sub's Collateral in order to secure prompt repayment of all of the
Obligations and in order to secure prompt performance by UK Sub of each of
its covenants and duties under the Loan Documents to which it is a party. The
Agent's Liens in and to the UK Sub's Collateral shall attach to all UK Sub's
Collateral without further act on the part of the Lender Group or UK Sub.
Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, UK Sub has no
authority, express or implied, to dispose of any item or portion of the UK
Sub's 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 of priority of Agent's Liens therein is dependent
on possession, the applicable Obligor, immediately upon the request of Agent,
shall endorse and deliver physical possession of such Negotiable Collateral
to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of
an Event of Default, Agent or Agent's designee may (a) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent for the benefit of the
Lender Group or that Agent for the benefit of the Lender Group has a security
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interest therein, or (b) collect the Accounts, General Intangibles, and
Negotiable Collateral directly and charge the collection costs and expenses
to the Loan Account. Borrower agrees that it will hold in trust for the
Lender Group, as the Lender Group's trustee, any Collections that it receives
and immediately will deliver said Collections to Agent in their original form
as received by Borrower. At any time after the occurrence and during the
continuation of an Event of Default, Agent or Agent's designee may (a) notify
customers or Account Debtors of UK Sub that the UK Sub Accounts, UK Sub
General Intangibles, or UK Sub Negotiable Collateral have been assigned to
Agent for the benefit of the Lender Group or that Agent for the benefit of
the Lender Group has a security interest therein, or (b) collect the UK Sub
Accounts, UK Sub General Intangibles, and UK Sub Negotiable Collateral
directly and charge the collection costs and expenses to the Loan Account. UK
Sub agrees that it will hold in trust for the Lender Group, as the Lender
Group's trustee, any Collections that it receives and immediately will
deliver said Collections to Agent in their original form as received by UK
Sub.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the
request of Agent, each Obligor shall execute and deliver to Agent all
financing statements, fixture filings, security agreements, Control
Agreements, pledges, assignments, endorsements of certificates of title, and
all other documents that Agent reasonably may deem necessary, in form and
substance satisfactory to Agent, to perfect and continue perfected the Liens
granted to Agent under the Loan Documents in the Collateral (whether now
owned or hereafter arising or acquired), and in order to fully consummate all
of the transactions contemplated hereby and under the other the Loan
Documents.
4.5 POWER OF ATTORNEY. Each Obligor hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Obligor's true and lawful attorney, with
power to (a) if such Obligor refuses to, or fails timely to execute and
deliver any of the documents described in SECTION 4.1, sign the name of such
Obligor on any of the documents described in SECTION 4.1, (b) at any time
that an Event of Default has occurred and is continuing, sign such Obligor's
name on any drafts against Account Debtors and notices to Account Debtors,
(c) send requests for verification of Accounts, which requests, at any time
an Event of Default shall not have occurred and be continuing, shall not
indicate that they are being made by a secured lender to Borrower, (d)
endorse such Obligor's name on any Collection item that may come into the
Lender Group's possession, (e) at any time that an Event of Default has
occurred and is continuing, notify the post office authorities to change the
address for delivery of such Obligor's mail to an address designated by
Agent, to receive and open all mail addressed to such Obligor, and to retain
all mail relating to the Collateral and forward all other mail to such
Obligor, (f) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Obligor's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting
the Accounts directly with Account Debtors, for amounts and upon terms that
Agent determines to be reasonable, and Agent may cause to be executed and
delivered any documents and releases that Agent determines to be necessary.
The appointment of Agent as such Obligor's attorney, and each
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and every one of its rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid
and performed and the Lender Group's obligations to extend credit hereunder
are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify the Obligors' financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral, PROVIDED that prior to the occurrence and continuance of an Event
of Default, such inspections, checks, tests, and appraisals shall occur only
during Borrower's normal business hours.
4.7 CONTROL AGREEMENTS. Each Obligor agrees that it will not transfer
Assets out of any Securities Accounts other than as permitted under SECTION
7.21 and, if to another securities intermediary, unless each of such Obligor,
Agent, and the substitute securities intermediary have entered into a Control
Agreement. No arrangement contemplated hereby or by any Control Agreement in
respect of any Securities Accounts or other investment property shall be
modified by an Obligor without the prior written consent of Agent. Upon the
occurrence and during the continuance of a Default or Event of Default, Agent
may notify any securities intermediary to liquidate or transfer the
applicable Securities Account or any related investment property maintained
or held thereby and remit the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
each Obligor makes the following representations and warranties to the Lender
Group which shall be true, correct, and complete, in all material respects,
as of the date hereof, and shall be true, correct, and complete in all
material respects as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as
though made on and as of the date of such Advance (or other extension of
credit) (except to the extent that such representations and warranties relate
solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement. Notwithstanding the
foregoing, to the extent that Borrower provides Agent 45 days prior written
notice in respect of events or facts occurring or arising after the Closing
Date that would render the following Schedules inaccurate, incomplete, or
misleading and the fact or event so disclosed by Borrower is not otherwise
prohibited by this Agreement or any other Loan Document, and Borrower shall
have delivered to Agent such financing statements, amendments to financing
statements, or other documents as Agent shall reasonably request in order to
perfect or continue the perfection of the Liens granted herein, then the
applicable Schedule shall be deemed to be amended to include and reflect such
disclosed event or fact: SCHEDULES 5.7, 5.8, 5.16, 5.18, and 6.12 to the
Disclosure Letter.
5.1 NO ENCUMBRANCES. Each Obligor has good and indefeasible title to its
Collateral and the Real Property, free and clear of Liens except for
Permitted Liens.
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5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts of each Obligor are bona
fide existing payment obligations of Account Debtors created by the sale and
delivery of Inventory or the rendition of services to such Obligor's
customers in the ordinary course of such Obligor's business, owed to such
Obligor without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. Any goods giving rise to such Eligible Accounts have
been delivered to the customer, or to the customer's agent for immediate
shipment to and unconditional acceptance by the customer, and any services
giving rise to such Eligible Accounts have been fully performed. As to each
Eligible Account (which term includes that portion of an Account deemed
eligible), such right to payment is not, unless an exception to any of the
following has been consented to in writing by Agent:
(a) owed by an employee, Affiliate, or agent of an Obligor,
(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 bill and hold, or on any other terms by reason of which
the payment by the Account Debtor may be conditional,
(c) payable, with respect to Eligible Borrower Accounts, in a
currency other than Dollars, and, with respect to Eligible UK Sub Accounts,
in a currency other than in an Agreed Currency,
(d) owed by an Account Debtor that has or has asserted a right
of setoff, has disputed its liability, or has made any claim with respect to
its obligation to honor the applicable Obligor's right to payment, to the
extent of such claim, right of offset, assertion, or dispute,
(e) owed by an Account Debtor that is subject to any Insolvency
Proceeding or is not Solvent and no Obligor has received notice of an
imminent Insolvency Proceeding involving the Account Debtor or a material
impairment of the financial condition of the applicable Account Debtor,
(f) on account of a transaction as to which the goods, the sale
of which gives rise to such right to payment, have not been shipped and
billed to an Obligor's customer or the services giving rise to such right to
payment have not been performed and accepted by an Obligor's customer,
(g) a right to receive progress payments or other advance
billings that are due prior to the completion of performance by an Obligor of
the subject contract for goods or services,
(h) on account of a transaction that has not yet been billed to
the customer, and
(i) otherwise not in compliance with any other criteria for
eligibility established from time to time by Agent in its Permitted
Discretion.
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5.3 [INTENTIONALLY OMITTED].
5.4 EQUIPMENT. Except for obsolete Equipment, all of the Equipment is
used or held for use in the Obligors' 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 6.12 to the Disclosure Letter.
5.6 INVENTORY RECORDS. Each Obligor keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
its cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office
of each of the Obligors is located at the address indicated in SCHEDULE 5.7
to the Disclosure Letter and each Obligor's FEIN is identified in SCHEDULE
5.7 to the Disclosure Letter.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Obligor is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified
to do business in any state where the failure to be so qualified reasonably
could be expected to have a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8 to the Disclosure Letter, is a
complete and accurate description of the authorized capital Stock of Parent,
by class, and, as of the Closing Date, a description of the number of shares
of each such class that are issued and outstanding. As of the Closing Date,
other than as described on SCHEDULE 5.8 to the Disclosure Letter, there are
no subscriptions, options (but excluding employee stock options issued under
employee stock option plans), warrants, or calls relating to any shares of
the capital Stock of Parent, including any right of conversion or exchange
under any outstanding security or other instrument. Parent is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8 to the Disclosure Letter, is a
complete and accurate list of Parent's direct and indirect Subsidiaries,
showing: (i) the jurisdiction of their incorporation; (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 Parent. 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 to the Disclosure
Letter, no capital Stock (or any securities, instruments, warrants, options,
purchase rights, conversion or exchange rights, calls, commitments or claims
of any character convertible into or exercisable for Stock) of any direct or
indirect Subsidiary of Parent is subject to the issuance
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of any security, instrument, warrant, option, purchase right, conversion or
exchange right, call, commitment or claim of any right, title, or interest
therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by each Obligor of
the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of such Obligor.
(b) The execution, delivery, and performance by each Obligor of
the Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to such
Obligor, the Governing Documents of such Obligor, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Obligor,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
such Obligor, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any Assets of such Obligor, other than
Permitted Liens, or (iv) require any approval of stockholders or any approval
or consent of any Person under any material contractual obligation of such
Obligor.
(c) Other than the filing of financing statements, fixture
filings, and the Copyright Security Agreement, the execution, delivery, and
performance by each Obligor of the Loan Documents to which such Obligor 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) The Loan Documents to which each Obligor is a party, and
all other documents contemplated hereby and thereby, when executed and
delivered by such Obligor will be the legally valid and binding obligations
of such Obligor, enforceable against such Obligor in accordance with their
respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by the Obligors to Agent, for the benefit
of the Lender Group, in and to their Assets pursuant to this Agreement and
the other Loan Documents are validly created, perfected, and first priority
Liens, subject only to Permitted Liens which are specifically identified on
Schedule P-1 to the Disclosure Letter as being entitled to have priority over
the Liens granted to Agent under the Loan Documents and Liens to secure
Permitted Purchase Money Indebtedness.
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE 5.10 to
the Disclosure Letter, there are no actions, suits, or proceedings pending
or, to the best knowledge of Borrower, threatened against any Obligor, except
for (a) matters that are fully covered by insurance (subject to customary
deductibles), and (b) matters arising after the Closing Date that, if decided
adversely to Borrower, or any of their Subsidiaries, reasonably could not be
expected to result in a Material Adverse Change.
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5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to the
Obligors that have been delivered by Borrower to the Lender Group in
connection with this Agreement 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 fairly present
such Obligor's financial condition as of the date thereof and results of
operations for the period then ended. There has not been a Material Adverse
Change with respect to any Obligor since the date of the latest financial
statements submitted to the Lender Group on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) (i) Parent, (ii) UK Sub, and (iii) Parent and its
Subsidiaries taken as a whole, are each Solvent.
(b) No transfer of property is being made by an Obligor and no
obligation is being incurred by an Obligor 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
such Obligor.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its 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 to the
Disclosure Letter, (a) to Borrower's knowledge, none of the Obligors' Assets
has ever been used by an Obligor or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in
violation of applicable Environmental Law in a manner that reasonably is
likely, individually or in the aggregate, to result in a Material Adverse
Change, (b) to Borrower's knowledge, none of the Obligors' Assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site (where the effect
that reasonably could be expected to result from such designation or
identification reasonably could be expected to result in a Material Adverse
Change, or as a candidate for closure pursuant to any environmental
protection statute, (c) no Obligor has received notice that a Lien arising
under any Environmental Law has attached to any revenues or to any real or
personal property owned or operated by an Obligor, and (d) no Obligor has
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency
concerning any action or omission by such Obligor resulting in the releasing
or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. No Obligor has utilized the services of any broker
or finder in connection with Borrower's obtaining financing from the Lender
Group under this Agreement and no brokerage commission or finders fee is
payable in connection herewith.
5.16 INTELLECTUAL PROPERTY. Each Obligor owns, or holds licenses in, all
Intellectual Property. Attached hereto as SCHEDULE 5.16 to the Disclosure
Letter is a true,
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correct, and complete listing of all Intellectual Property as to which an
Obligor is the owner or a licensee.
5.17 LEASES. Each Obligor enjoys peaceful and undisturbed possession
under all leases material to the business of such Obligor and to which it is
a party or under which it is operating. All of such leases are valid and
subsisting and no material default by such Obligor exists under any of them.
5.18 DDAS. Set forth on SCHEDULE 5.18 to the Disclosure Letter are all of
the Obligors' DDAs, including, with respect to each depository (i) the name
and address of that depository; and (ii) the account number(s) of the
account(s) maintained with such depository.
5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of the Obligors in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished
by or on behalf of the Obligors in writing to the Agent or any Lender, will
be true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which
such information was provided.
5.20 INDEBTEDNESS. Set forth on SCHEDULE 7.1 to the Disclosure Letter is
a true and complete list of all (a) Indebtedness of the Obligors outstanding
immediately prior to the Closing Date that is to remain outstanding after the
Closing Date, and (b) agreements existing immediately prior to the Closing
Date that are to remain outstanding after the Closing Date pursuant to which
the Obligors are entitled to incur Indebtedness, in each case showing the
aggregate principal amount thereof and the name of the Obligor which directly
or indirectly is obligated on account of such Indebtedness.
5.21 IMMATERIAL SUBSIDIARIES.
The Parent does not own any material Assets, other than Stock of
Borrower, and does not engage in any business activity whatsoever.
6. AFFIRMATIVE COVENANTS.
Each of the Obligors covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, each Obligor and its Subsidiaries shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables each
Obligor to produce financial statements in accordance with GAAP (or in the
case of foreign Subsidiaries, the local equivalent), and maintain records
pertaining to the Collateral, including filed copyrights and patents,
copyright or patent applications under prosecution and
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copyrightable or patentable material, and all service and maintenance
contracts and agreements, that contain information as from time to time
reasonably may be requested by Agent. Each Obligor also shall keep an
inventory reporting system that shows all additions, sales, claims, returns,
and allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Agent (with copies for each Lender)
with the following documents at the following times in form reasonably
satisfactory to Agent:
<TABLE>
========================== ===========================================================================================
<S> <C>
Daily (a) a sales journal, collection journal, and credit
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.
-------------------------- -------------------------------------------------------------------------------------------
Monthly (not later than (d) a detailed calculation of the Borrowing Base,
the 10th day of each
month) (e) a detailed aging, by total, of the Accounts, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Agent,
(f) a summary and detailed listing, by vendor, of the Obligors' accounts payable and any
book overdraft,
(g) a report of all new copyrightable or patentable
materials generated by the Obligors during the prior
month identifying all such copyrightable materials
that are required to be registered pursuant to
SECTION 6.19, and patentable materials with respect
to which applications are required to by filed
pursuant to SECTION 6.20
(h) a detailed listing of all copyright applications
filed and all copyrights granted since the date of
the last report provided in compliance with this
subsection, and
(i) a calculation of Dilution for the prior month.
-------------------------- -------------------------------------------------------------------------------------------
Quarterly (h) a detailed list of Borrower's customers,
-------------------------- -------------------------------------------------------------------------------------------
Upon request by Agent (i) 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 an Obligor, purchase orders and
invoices,
(j) such information to implement and continue
Agent's electronic collateral reporting system, and
(k) such other reports as to the Collateral, or the
financial condition of an
========================== ===========================================================================================
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========================== ===========================================================================================
Obligor, as Agent may reasonably request.
========================== ===========================================================================================
</TABLE>
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent, with
sufficient copies for each Lender:
(a) as soon as available, but in any event within 45 days after
the end of each month during each of Parent's fiscal years,
(i) a company prepared consolidated and consolidating
balance sheet, income statement, and statement of cash
flow covering Parent's and its Subsidiaries operations
during such period,
(ii) a certificate signed by the chief financial officer
of Parent to the effect that:
(A) the financial statements delivered hereunder have
been prepared in accordance with GAAP (except for the
lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material
respects the financial condition of Parent and its
Subsidiaries,
(B) the representations and warranties of the
Obligors 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),
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such
non-compliance as to which he or she may have
knowledge and what action the applicable Obligor has
taken, is taking, or proposes 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 or for which a
determination of Tangible Net Worth is required to
redetermine the Applicable Margin, a Compliance
Certificate demonstrating, in reasonable detail,
compliance at the end of such period with the applicable
financial covenants contained in SECTION 7.19, or the
calculation of Tangible Net Worth, as the case may be, and
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(b) as soon as available, but in any event within 90 days after
the end of each of Parent's fiscal years,
(i) consolidated and consolidating financial statements
of Parent and its Subsidiaries for each such fiscal year,
audited by independent certified public accountants
reasonably acceptable to Agent and certified, without any
qualifications, by such accountants to have been prepared
in accordance with GAAP (such audited financial statements
to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants'
letter to management),
(ii) a certificate of such accountants addressed to Agent
and the Lenders 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 no later than 30
days prior to the beginning of each of its fiscal years, consolidated and
consolidating financial projections for the immediately succeeding Fiscal
Year for Parent and each of its Subsidiaries, prepared on a monthly basis,
and otherwise in form and substance satisfactory to the Required Lenders, all
such financial projections to be reasonable, to be prepared on a reasonable
basis and in good faith, and to be based on assumptions believed by Borrower
to be reasonable at the time made and from the best information then
available to Borrower;
(d) if and when filed by Parent,
(i) 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other filings made by Parent with the SEC, and
(iii) any other information that is provided by Parent to
its shareholders generally,
(e) if and when filed by Borrower and as requested by Agent,
satisfactory evidence of payment of applicable excise taxes in each
jurisdiction in which (i) any Obligor conducts business or is
required to pay any such excise tax, (ii) where an Obligor's failure
to pay any such applicable excise tax would result in a Lien on the
Assets of such Obligor, or (iii) where such Obligor's failure to pay
any such applicable excise tax would constitute a Material Adverse
Change,
(f) upon the reasonable request of Agent, any other report
relating to the financial condition of Borrower or any of the other Obligors.
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In addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on both a consolidated and
consolidating basis and that no Obligor will have a fiscal year different
from that of Borrower.
6.4 GUARANTOR REPORTS. Cause each Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent and, upon the request of Agent, copies of all federal
income tax returns as soon as the same are available and in any event no
later than 30 days after the same are required to be filed by law.
6.5 TAX RETURNS. Deliver to Agent copies of each of the Obligors' future
U.S. federal and applicable foreign jurisdiction income tax returns, and any
amendments thereto, within 30 days of the filing thereof with the Internal
Revenue Service or other applicable taxing authority.
6.6 RETURN. Cause returns and allowances, if any, as between Obligors and
their Account Debtors to be on the same basis and in accordance with the
usual customary practices of the Obligors, 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 an Obligor, such Obligor promptly shall determine the reason for
such return and, if such Obligor accepts such return, issue a credit
memorandum (with a copy to be sent to Agent) 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 an Obligor, such
Obligor promptly shall determine the reason for such return and, if Agent
consents (which consent shall not be unreasonably withheld), issue a credit
memorandum (with a copy to be sent to Agent) in the appropriate amount to
such Account Debtor.
6.7 CERTIFICATES OF TITLE. Upon Agent's request, promptly deliver to
Agent, properly endorsed, any and all certificates of title to any items of
Equipment.
6.8 MAINTENANCE OF PROPERTIES. Maintain or cause to be maintained in good
operating condition and repair (ordinary wear and tear and obsolescence
excepted) all material properties used or useful in the business of the
Obligors (including Intellectual Property) and from time to time will make or
cause to be made all appropriate repairs, renewals, and replacements thereof
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Other than those items that constitute fixtures on
the Closing Date, no Obligor shall permit any item of Equipment to become a
fixture to real estate or an accession to other property, and such Equipment
shall at all times remain personal property.
6.9 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against any
Obligor or any of its property 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. The Obligors will make timely payment or deposit of all tax payments
and withholding taxes required of it by applicable laws, including those laws
concerning
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F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Agent with proof satisfactory to Agent
indicating that each Obligor has made such payments or deposits. Upon the
request of Agent, each Obligor shall deliver satisfactory evidence of payment
of applicable excise taxes in each jurisdictions in which (a) such Obligor
conducts business or is required to pay any such excise tax, (b) where such
Obligor's failure to pay any such applicable excise tax would result in a
Lien on the Assets of such Obligor, or (c) where such Obligor's failure to
pay any such applicable excise tax would constitute a Material Adverse Change.
6.10 INSURANCE.
(a) At Obligor's expense, maintain insurance respecting the
Collateral, wherever located, and with respect to the Obligors' business,
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. The Obligors also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation All
such policies of insurance shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Agent. The Obligors shall deliver
copies of all such policies to Agent with 438 BFU lender's loss payable
endorsements or other reasonably satisfactory lender's loss payable
endorsements, naming Agent 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
Agent in the event of cancellation of the policy for any reason whatsoever.
If the Obligors fail to provide and pay for such insurance, Agent may, at its
option, but shall not be required to, procure the same and charge Borrower's
Loan Account therefor.
(b) At Borrower's expense, obtain and maintain (i) insurance of
the type necessary to insure the Collateral for the full replacement cost
thereof, against any loss by fire, lightning, windstorm, hail, explosion,
aircraft, smoke damage, vehicle damage, earthquakes, and other risks from
time to time included under "extended coverage" policies, in such amounts as
Agent may require, but in any event in amounts sufficient to prevent the
Obligors from becoming a co-insurer under such policies, (ii) combined single
limit bodily injury and property damages insurance against any loss,
liability, or damages on, about, or relating to each parcel of Real Property,
in an amount of not less than $1,000,000; and (iii) insurance for such other
risks as Agent may require in its Permitted Discretion.
(c) Borrower shall give Agent prompt notice of any material
loss covered by such insurance. Agent shall have the exclusive right to
adjust any losses payable under any such insurance policies, without any
liability to any Obligor whatsoever in respect of such adjustments; PROVIDED,
HOWEVER, prior to the occurrence and during the continuance of an Event of
Default, Borrower shall have the right to adjust any losses payable under any
such insurance policies. 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 Agent
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to be applied at the option of the Required Lenders either to the prepayment
of the Obligations without premium, in such order or manner as the Required
Lenders may elect, or at Borrower's request shall be disbursed to Borrower
under staged payment terms reasonably satisfactory to the Required Lenders
for application to the cost of repairs, replacements, or restorations. All
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items
or property destroyed prior to such damage or destruction. Upon the
occurrence of an Event of Default, Agent shall have the right to apply all
prepaid premiums to the payment of the Obligations in such order or form as
Agent shall determine in its Permitted Discretion.
(d) The Obligors will not take out separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained under this SECTION 6.10, unless Agent is included thereon as
named insured with the loss payable to Agent under a standard 438BFU
endorsement or its equivalent. Borrower immediately shall notify Agent
whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the same, and
copies of such policies immediately shall be provided to Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under the
other Loan Documents by or on behalf of the Obligors without setoff or
counterclaim and free and clear of, and without deduction or withholding for
or on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.12 to the Disclosure
Letter; PROVIDED, HOWEVER, that the Obligors may amend SCHEDULE 6.12 so long
as such amendment occurs by written notice to Agent not less than 30 days
prior to the date on which the Inventory or Equipment is moved to such new
location, so long as, at the time of such written notification, the
applicable Obligor provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent's Liens on such Assets.
6.13 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.
6.14 LEASES. Pay when due all rents and other amounts payable under any
leases to which each Obligor is a party or by which an Obligor's Assets are
bound, unless such payments are the subject of a Permitted Protest, or, with
the exception of Borrower's headquarter facilities in Redwood City, where the
failure to make such payment would not result or be expected to result in a
Material Adverse Change. To the extent that an Obligor fails timely to make
payment of such rents and other amounts payable when due under its leases,
Agent shall be entitled, in its discretion, to reserve an amount equal to
such unpaid amounts against the Borrowing Base.
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6.15 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 the Lender Group under this Agreement, if any. Each
Obligor agrees and acknowledges that payment of all such brokerage
commissions or finders fees shall be the sole responsibility of such Obligor
and each Obligor agrees to indemnify, defend, and hold Agent and the Lender
Group harmless from and against any claim of any broker or finder arising out
of Borrower's obtaining financing from the Lender Group under this Agreement.
6.16 PROJECTIONS. Not later than 30 days prior to the end of each fiscal
year of Borrower, deliver to Agent Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory to Agent, in
its Permitted Discretion, for the forthcoming 3 years, year by year, and for
the forthcoming fiscal year, month by month, certified by the chief financial
officer of Borrower as being such officer's good faith best estimate of the
financial performance of the Obligors during the period covered thereby.
Nothing herein or in the Projections shall be deemed a representation or
warranty that any stated result will, in fact, be achieved.
6.17 EXISTENCE. At all time preserve and keep in full force and effect
each Obligor's valid existence and good standing and any rights and
franchises material to the Obligors' businesses.
6.18 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (i) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (ii) correct any defect or error that
may be discovered therein or in any Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.
6.19 COPYRIGHT REGISTRATIONS.
No less frequently than monthly, unless the Agent shall otherwise
agree in writing, Borrower shall (a) cause all copyrights generated by the
Obligors (other than Exempt Copyrights) that are, in any way, related to
goods or services giving rise to Eligible Accounts and that are not already
the subject of a registration with the United States Copyright Office (or an
application therefor diligently prosecuted) to be registered with the United
States Copyright Office in a manner sufficient to impart constructive notice
of Borrower's or such other Obligor's ownership thereof, and (b) cause to be
prepared, executed, and delivered to Agent, with sufficient time to permit
Agent to record no later than the last Business Day within 10 days following
the date that such copyrights have been registered or an application for
registration has been filed, a Copyright Security Agreement or supplemental
schedules to the Copyright Security Agreement reflecting the security
interest of Agent for the benefit of the Lenders in such new copyrights
(other than Exempt Copyrights, which, although subject to the security
interest of the Agent, shall not be required to be registered until 60 days
after such time, if any, as they cease to be Incipient
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Copyrights), which supplemental schedules shall be in form and content
suitable for registration with the United States Copyright Office so as to
give constructive notice, when so registered, of the transfer by Borrower or
such Obligor to Agent of a security interest in such copyrights. The Obligors
shall also maintain copies of all source and object code for all software
utilized in their business operations at safe and secure offsite locations
reasonably acceptable to Agent, and shall, at the request of Agent, advise
the operators of such locations of Agent's security interest in such
software, shall keep Agent fully informed of each such location, and shall
maintain the currency of all such software stored offsite.
6.20 PATENT FILINGS.
No less frequently than monthly, unless the Agent shall otherwise
agree in writing, Borrower shall (a) cause, with respect to all patents
generated by the Obligors (other than exempt patents) that are, in any way,
related to goods or services giving rise to Eligible Accounts and that are
not already the subject of a registration with the United States Patent and
Trademark Office (or an application therefor diligently prosecuted), an
application to be filed with the United States Patent and Trademark Office in
a manner sufficient to impart constructive notice of Borrower's or such other
Obligor's ownership thereof, and (b) cause to be prepared, executed, and
delivered to Agent, with sufficient time to permit Agent to record no later
than the last Business Day within 10 days following the date that such patent
applications have been filed, a Patent Security Agreement or supplemental
schedules to the Patent Security Agreement reflecting the security interest
of Agent for the benefit of the Lenders in such new patents, which
supplemental schedules shall be in form and content suitable for registration
with the United States Patent and Trademark Office so as to give constructive
notice, when so registered, of the transfer by Borrower or such Obligor to
Agent of a security interest in such patent.
6.21 PERMITTED ACQUISITIONS. In connection with any Permitted Acquisition
involving the acquisition of the Stock of another Person by Borrower
(including the formation or capitalization of a Subsidiary), Borrower shall
execute and deliver to Agent such amendments, modifications, or supplements
to the Loan Documents as Agent may request in the exercise of its Permitted
Discretion, including an amendment to the Stock Pledge Agreement to pledge
all of the issued and outstanding Stock of such acquired Person thereunder
together with the delivery of certificates (if any) representing such shares
of Stock with attached stock powers endorsed in blank, and shall cause the
Person that is the subject of the Permitted Acquisition to execute and
deliver to Agent all appropriate joinder documents (including a guaranty and
security agreement, in each case, in form and substance satisfactory to
Agent) to make it an Obligor party to the Loan Documents, and appropriate
UCC-1 financing statements, fixture filings, Collateral Access Agreements,
mortgages or deeds of trust, security agreements, and any other documents,
instruments, or Agreements that Agent may request in the exercise of its
Permitted Discretion.
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7. NEGATIVE COVENANTS.
Each Obligor covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, no
Obligor nor any of their Subsidiaries shall 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, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Undertakings;
(b) Indebtedness set forth on SCHEDULE 7.1 to the Disclosure
Letter;
(c) Permitted Purchase Money Indebtedness;
(d) Subordinated Indebtedness in an aggregate amount not to
exceed $20,000,000 outstanding at any one time during Borrower's fiscal year
ending March 31, 2001, and for each succeeding fiscal year not to exceed such
Dollar amount outstanding at any one time as is established for such fiscal
year by Agent in its Permitted Discretion, with the consent of the Required
Lenders, based upon Agent's review of the annual financial projections for
such fiscal year delivered by Borrower to Agent in compliance with SECTION
6.3(c);
(e) unsecured Indebtedness not otherwise permitted under this
SECTION 7.1 in an aggregate amount not to exceed $5,000,000 outstanding at
any one time during Borrower's fiscal year ending March 31, 2001, and for
each succeeding fiscal year not to exceed such Dollar amount outstanding at
any one time as is established for such fiscal year by Agent in its Permitted
Discretion, with the consent of the Required Lenders, based upon Agent's
review of the annual financial projections for such fiscal year delivered by
Borrower to Agent in compliance with SECTION 6.3(c);
(f) Indebtedness owed:
(i) by Borrower to its Subsidiaries,
(ii) by UK Sub to Borrower (A) from and after the date on which
all of the conditions set forth in SECTION 3.2(a), (b), (c), (d),
and (e) have been satisfied or waived by Agent in its sole
discretion, in an aggregate amount not to exceed $20,000,000
outstanding at any one time during Borrower's fiscal year ending
March 31, 2001, and for each succeeding fiscal year not to exceed
such Dollar amount outstanding at any one time as is established for
such fiscal year by Agent in its Permitted Discretion, with the
consent of the Required Lenders, based upon Agent's review of the
annual financial projections for such fiscal year delivered by
Borrower to Agent in compliance with SECTION 6.3(c), and (b) from
and after the date on which all of the conditions set forth in
SECTION 3.2, with the exception of clauses (f), (j), and (k)
thereof, have been
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satisfied or waived by Agent in its sole discretion, in an aggregate
amount not to exceed $30,000,000 outstanding at any one time during
Borrower's fiscal year ending March 31, 2001, and for each
succeeding fiscal year not to exceed such Dollar amount outstanding
at any one time as is established for such fiscal year by Agent in
its Permitted Discretion, with the consent of the Required Lenders,
based upon Agent's review of the annual financial projections for
such fiscal year delivered by Borrower to Agent in compliance with
SECTION 6.3(c),
(iii) by any other Subsidiary to Borrower in an aggregate
amount not to exceed $5,000,000 outstanding at any one time during
Borrower's fiscal year ending March 31, 2001, and for each
succeeding fiscal year not to exceed such Dollar amount outstanding
at any one time as is established for such fiscal year by Agent in
its Permitted Discretion, with the consent of the Required Lenders,
based upon Agent's review of the annual financial projections for
such fiscal year delivered by Borrower to Agent in compliance with
SECTION 6.3(c), PROVIDED, that after giving effect to the incurrence
by a Subsidiary of a tranche of Indebtedness composing Indebtedness
designated by Borrower to be permitted Indebtedness under this
CLAUSE (iii), Borrower shall have Availability of not less than
$10,000,000, and PROVIDED, HOWEVER, that no Indebtedness shall be
incurred under this CLAUSE (iii) without the prior written consent
of Agent (which consent shall not unreasonably be withheld), and
(iv) by Borrower to Parent, PROVIDED, that the terms of such
Indebtedness shall have a maturity date that is not less than 1 year
after the Maturity Date and shall not require any payments of
principal or interest on or before the date that is 1 year after the
Maturity Date and such Indebtedness shall be subject to the
Intercompany Subordination Agreement;
(g) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(h) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) through (f) of this SECTION 7.1 (and continuance
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do
not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the subordination terms and conditions of the refinancing, renewal, or
extended Indebtedness must be at least as favorable to the Lender Group as
those applicable to the refinanced, renewed, or extended Indebtedness, and
(v) such refinancing, renewal, or
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extension shall not obligate any Obligor which was not previously obligated
with the Indebtedness that is the subject of such refinancing, renewal, or
extension.
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
under SECTION 7.1(h) and so long as the replacement Liens only encumber those
Assets that secured the original 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),
(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its Assets; PROVIDED, HOWEVER, that nothing contained in
this SECTION 7.3 shall be construed to restrict or limit (i) any offering,
issuance, or sale by Borrower, in one or more transactions, public or
private, of its Stock (including any concomitant increase in the number of
authorized shares of Stock of Borrower), so long as such offerings,
issuances, and sales are made in compliance with all applicable laws and
regulations and would not, individually or collectively, result in a Change
of Control, (ii) the merger or consolidation of a wholly owned Solvent
Subsidiary into another wholly owned Solvent Subsidiary or a wholly owned
Solvent Subsidiary with and into Borrower, (iii) Permitted Dispositions, or
(iv) Permitted Investments.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of any of the Obligors' Assets, other than pursuant to Permitted
Dispositions.
7.5 CHANGE NAME. Any Obligor's name, FEIN, corporate structure (within
the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name, except that any Obligor may do so upon at least 30 days
prior written notice to Agent of such change and so long as, at the time of
such written notification, such Obligor provides any financing statements or
fixture filings necessary to perfect and continue perfected Agent's Liens in
the Collateral.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any Person (other than an Obligor) except by
endorsement of instruments or items of payment for deposit to the account of
an Obligor or which are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of an
Obligor's business.
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7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(h) or conversion of Indebtedness into equity (including cash
payment to reflect fractional shares) and other than with respect to
Indebtedness permitted under SECTION 7.1(f)(ii), prepay, redeem, retire,
defease, purchase, or otherwise acquire any Indebtedness owing to any Person,
other than the Obligations in accordance with this Agreement,
(b) Except in connection with a refinancing permitted by
SECTION 7.1(g), 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 bill
and hold, sale or return, sale on approval, or other conditional terms of
sale, or have possession of any property on consignment to an Obligor,
unless, at such time, Borrower is currently reporting to Agent on a daily
basis such information that is determined by Agent in its Permitted
Discretion to be sufficient for Agent to verify the removal by Borrower of
any Account generated by the sale of such Inventory on conditional terms from
the total of Eligible Borrower Accounts or Eligible UK Sub Accounts, as
applicable.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any dividends
(in cash or other property, other than Stock) on, or purchase, acquire,
redeem, or retire any of any Obligor's Stock, of any class, whether now or
hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting (other
than as may be required to conform to GAAP or the local equivalent with
respect to foreign Subsidiaries) 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 Obligors' accounting records without said accounting firm or service
bureau agreeing to provide Agent information regarding the Collateral or the
Obligors' financial condition.
7.13 INVESTMENTS. Except for Permitted Investments, directly or
indirectly make, acquire, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; PROVIDED, HOWEVER,
that at no time shall the amount of Permitted Investments by Obligors in
respect of Cash Equivalents outstanding (other than in the Lockbox Accounts,
the Foreign Concentration Accounts, or the Designated Account, or that are
governed by Control Agreements or similar arrangements) exceed $2,000,000, in
the aggregate outstanding at any one time without the prior written consent
of Agent, which consent may be conditioned, at Agent's election, on such
Obligor entering into Control Agreements or similar arrangements governing
such Permitted Investments, as Agent shall
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determine in its Permitted Discretion, to perfect (and further establish)
Agent's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of any Obligor
except for transactions that are in the ordinary course of such Obligor's
business, upon fair and reasonable terms, (including not being subject to
transfer pricing detrimental to Borrower), that are fully disclosed to Agent,
and that are no less favorable to such Obligor than would be obtained in an
arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 [INTENTIONALLY OMITTED.]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to the
Existing Lender, and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, and (b) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted corporate
purposes. The foregoing to the contrary notwithstanding, in no event shall
the proceeds of the Advances be used (y) by UK Sub for the purchase of its
own Stock or the Stock of Parent, or (z) by Parent for the purchase of the
Stock of UK Sub.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Agent and so
long as, at the time of such written notification, such Obligor provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens. The Inventory, the UK Sub Inventory, Equipment,
and the UK Sub Equipment shall not at any time now or hereafter be stored
with a bailee, warehouseman, or similar party without a Collateral Access
Agreement being provided to Agent.
7.19 FINANCIAL COVENANTS. Fail to maintain Tangible Net Worth of not
less than $40,000,000 measured on a fiscal month-end basis.
7.20 CAPITAL EXPENDITURES. Make capital expenditures in an aggregate
amount in excess of $25,000,000 during Borrower's fiscal year ending March
31, 2001, and for each succeeding fiscal year in an aggregate Dollar amount
as is established for such fiscal year by Agent in its Permitted Discretion,
with the consent of the Required Lenders, based upon Agent's review of the
annual financial projections for such fiscal year delivered by Borrower to
Agent in compliance with SECTION 6.3(c).
7.21 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Agent shall have received a Control Agreement, duly executed and in
full force and effect, in respect of such Securities Account. Each Obligor
agrees that it will not transfer Assets out of any Securities Accounts;
PROVIDED, HOWEVER, that, so long as no Event of Default has o
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ccurred and is continuing or would result therefrom, such Obligor may use
such Assets to the extent permitted by this Agreement.
7.22 PARENT.
Permit Parent to (a) own any material Assets other than the Stock of
Borrower, or (b) engage in any business activity whatsoever.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
8.1 If any Obligor, or any of its Subsidiaries, fails to pay when due
and payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees
and charges due the Lender Group, reimbursement of Lender Group Expenses, or
other amounts constituting Obligations); PROVIDED, HOWEVER, that in the case
of Overadvances that are caused by the charging of interest, fees, or Lender
Group Expenses to Borrower's Loan Account, such event shall not constitute an
Event of Default if, within 3 Business Days of incurring such Overadvance,
Borrower repays, or otherwise eliminates, such Overadvance;
8.2 (a) If any Obligor fails or neglects to perform, keep, or observe
any covenant or other provision contained in SECTIONS 6.2 or 6.3 hereof and
such failure or neglect continues for a period of 5 days after the date on
which such failure or neglect first occurs, or (b) If any Obligor fails or
neglects to perform, keep, or observe any covenant or other provision
contained in SECTIONS 6.1, 6.4, 6.5, 6.6, 6.9, or 6.14 hereof and such
failure or neglect is not cured within 15 days after the date on which such
failure or neglect first occurs, or (c) If any Obligor fails or neglects to
perform, keep, or observe any other covenant or other provision contained in
any Section of this Agreement (other than a Section that is expressly dealt
with elsewhere in this SECTION 8) or the other Loan Documents (other than a
Section of such other Loan Document dealt with elsewhere in this SECTION 8);
PROVIDED that, during any period of time that any such failure or neglect of
any such Obligor referred to in this paragraph exists, even if such failure
or neglect is not yet an Event of Default by virtue of the existence of a
grace or cure period or the pre-condition of the giving of a notice, the
Lender Group shall be relieved of its obligation to extend credit hereunder;
8.3 [Intentionally Omitted];
8.4 If any material portion of any Obligor's Assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Obligor;
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8.6 If an Insolvency Proceeding is commenced against Obligor and any of
the following events occur: (a) such Obligor consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 45 calendar days of the
date of the filing thereof; PROVIDED, HOWEVER, that, during the pendency of
such period, each member of the Lender Group shall be relieved of its
obligation to extend credit hereunder; (d) an interim trustee is appointed to
take possession of all or a substantial portion of the Assets of, or to
operate all or any substantial portion of the business of, such Obligor; or
(e) an order for relief shall have been issued or entered therein;
8.7 If any Obligor is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its
business affairs;
8.8 (a) If a notice of Lien, levy, or assessment is filed of record with
respect to any of an Obligor's Assets by the United States Government, or any
department, agency, or instrumentality thereof, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a
Lien, whether choate or otherwise, upon any of an Obligor's Assets and the
same is not paid on the payment date thereof, or (b) if notices of Lien,
levy, or assessment in an aggregate amount in excess of $250,000 are filed of
record with respect to any of an Obligor's Assets by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien exceeding the
foregoing aggregate limitation, whether choate or otherwise, upon any of an
Obligor's Assets and the same is not paid on the payment date thereof
(PROVIDED that Agent may maintain reserves with respect to all such notice of
Lien, levies, or assessments that affect any Collateral included in the
Borrowing Base without regard to whether an Event of Default exists under
this SECTION 8.8);
8.9 If a judgment or other claim in an amount, individually or in the
aggregate, in excess of $1,000,000, becomes a Lien or encumbrance upon any
material portion of any Obligor's Assets and such judgment or claim is not
removed or released or stayed within 15 days of the entry of such judgment
(PROVIDED that Agent may maintain reserves with respect to all such Liens
that affect any Collateral included in the Borrowing Base without regard to
whether an Event of Default exists under this SECTION 8.9);
8.10 If there is a default (after giving effect to all waivers of and
cure periods under such material agreements) in any material agreement to
which any Obligor or any of its Subsidiaries is a party with one or more
third Persons involving claims, Indebtedness, or other obligations in excess
of $100,000, and such default (a) occurs at the final maturity of the
obligations thereunder, or (b) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of any
Obligor's or any of its Subsidiaries' obligations thereunder to terminate
such agreement, or to refuse to renew such agreement pursuant to an automatic
renewal right therein;
8.11 If any Obligor makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to
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the extent such payment is permitted by the terms of the subordination
provisions applicable to such Indebtedness; or
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by any Obligor.
8.13 If the obligation of any Guarantor under its guaranty under any Loan
Document is limited or terminated by operation of law or by such Guarantor
thereunder, or any such Guarantor becomes the subject of an Insolvency
Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group
(and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by each
Obligor:
(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 or UK Sub under this Agreement, under any of the Loan
Documents, or under any other agreement between an Obligor and the Lender
Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of
the Lender Group, in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in
such cases, Agent will credit Borrower's Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;
(e) Cause Borrower or UK Sub to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
property of Borrower or UK Sub, as applicable, or in Borrower's or UK Sub's
possession, as applicable, and conspicuously label said returned Inventory as
the property of the Lender Group;
(f) Without notice to or demand upon any Obligor or any
guarantor, make such payments and do such acts as Agent considers necessary
or reasonable to protect its security interests in the Collateral. Each
Obligor agrees to assemble the Collateral if Agent so requires, and to make
the Collateral available to Agent as Agent may designate.
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Each Obligor authorizes Agent to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
Lien that in Agent's determination appears to conflict with the Agent's Liens
and to pay all expenses incurred in connection therewith. With respect to any
of an Obligor's owned or leased premises, each Obligor hereby grants Agent a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of the Lender
Group's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Obligor (such notice being expressly
waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of any Obligor held by the Lender Group (including any amounts
received in the Lockbox Accounts), or (ii) indebtedness at any time owing to
or for the credit or the account of any Obligor held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits
of any Obligor held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Each Obligor hereby grants to Agent a license or
other right to use, without charge, such Obligor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and each such Obligor's
rights under all licenses and all franchise agreements shall inure to the
Lender Group's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Agent
determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Collateral as follows:
(i) Agent shall give Borrower and each holder of a security
interest in the Collateral who has filed with Agent a written
request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or
other disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least 10
days before the date
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fixed for the sale, or at least 10 days before the date on or after
which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market.
Notice to Persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to
Agent;
(iii) If the sale is to be a public sale, Agent also shall give
notice of the time and place by publishing a notice one time at
least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) The Lender Group may credit bid and purchase at any public
sale; and
(m) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents; and
(n) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by the Obligors. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be
deemed an election, and no waiver by the Lender Group of any Event of Default
shall be deemed a continuing waiver. No delay by the Lender Group shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Obligor fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or Assets, rents or
other amounts payable under such leases) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its discretion
and without prior notice to the Obligors, 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 Agent deems necessary to protect the Lender Group
from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in SECTION 6.10 and take any action
with respect to such policies as Agent deems prudent. Any such amounts paid
by Agent shall constitute Lender Group Expenses. Any such payments made by
Agent shall not constitute an agreement by the Lender Group to make similar
payments in the future or a waiver by the Lender Group of any Event of
Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the
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receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Obligor 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 accounts, documents, instruments, chattel paper, and guarantees at
any time held by the Lender Group on which such Borrower may in any way be
liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each Obligor hereby
agrees that: (a) so long as Agent complies with its obligations, if any,
under Section 9-207 of the Code, the Lender Group 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 the Obligors.
11.3 INDEMNIFICATION. Each Obligor shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "INDEMNIFIED
PERSON") harmless (to the fullest extent permitted by law) from and against
any and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs
and expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein and 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, each such Obligor 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 for
which the Obligors were required to indemnify the Indemnified Person
receiving such payment, the Indemnified Person making such payment is
entitled to be indemnified and reimbursed by the Obligors with respect
thereto.
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12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document
shall be in writing and shall be personally delivered or sent by registered
or certified mail (postage prepaid, return receipt requested), overnight
courier, electronic mail (at such email addresses as the parties may
designate to each other in accordance herewith), or telefacsimile to the
Borrower or the Agent, as the case may be, at its address set forth below:
If to an Obligor:
THE 3DO COMPANY
600 Galveston Drive
Redwood City, California 9406663
Attn: Chief Financial Officer
Fax No. 650.261.3151
with copies to: WILSON SONSINI GOODRICH & ROSATI
650 Page Mill Road
Palo Alto, California 94304
Attn: Kathleen Bloch, Esq.
Fax No. 650.496.4088
to Agent: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.745.3345
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given
to all other parties. All notices or demands sent in accordance with this
SECTION 12 shall be deemed received on the earlier of the date of actual
receipt or 3 Business Days after the deposit thereof in the mail.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
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
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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.
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 THE
REQUIRED LENDERS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE THE
REQUIRED LENDERS ELECT TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH OBLIGOR AND THE LENDER GROUP WAIVE, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
EACH OBLIGOR AND THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OBLIGOR AND THE
LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent and,
unless an Event of Default has occurred and is continuing with the written
consent of the Borrower (such consent of the Borrower not to be unreasonably
withheld, conditioned, or delayed), assign and delegate to one or more
assignees (provided that no written consent of Agent shall be required in
connection with any assignment and delegation by a Lender to an Eligible
Transferee) (each an "ASSIGNEE") all, or any ratable part of all, of the
Obligations, the
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Commitments and the other rights and obligations of such Lender hereunder and
under the other Loan Documents, in a minimum amount of $5,000,000; PROVIDED,
HOWEVER, that the Obligors and Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to an Assignee
until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to Borrower and Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to Borrower and Agent
an Assignment and Acceptance in form and substance satisfactory to Agent; and
(iii) the assignor Lender or Assignee has paid to Agent for Agent's sole and
separate account a processing fee in the amount of $5,000. Anything contained
herein to the contrary notwithstanding, the consent of Agent shall not be
unreasonably withheld if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the
assignor Lender (with a copy to Borrower) that it has received an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to SECTION 11.3 hereof) and be released from
its obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement and the other Loan Documents,
such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between the Obligors and the Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(1) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document furnished pursuant hereto; (2) such assigning Lender
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Obligors or the performance or
observance by the Obligors of any of their obligations under this Agreement
or any other Loan Document furnished pursuant hereto; (3) such Assignee
confirms that it has received a copy of this Agreement, together with such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(4) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (5)
such Assignee appoints
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and authorizes Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to Agent, by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (6) such Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance,
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent
of Agent, sell to one or more commercial banks, financial institutions, or
other Persons not Affiliates of such Lender (a "PARTICIPANT") participating
interests in the Obligations, the Commitment, and the other rights and
interests of that Lender (the "ORIGINATING LENDER") hereunder and under the
other Loan Documents (provided that no written consent of Agent shall be
required in connection with any sale of any such participating interests by a
Lender to an Eligible Transferee); PROVIDED, HOWEVER, that (i) the
Originating Lender shall remain a "Lender" for all purposes of this Agreement
and the other Documents and the Participant receiving the participating
interest in the Obligations, the Commitment and the other rights and
interests of the Originating Lender hereunder shall not constitute a "Lender"
hereunder or under the Loan Documents and the Originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such
obligations, (iii) the Obligors, Agent, and the other Lenders shall continue
to deal solely and directly with the Originating Lender in connection with
the Originating Lender's rights and obligations under this Agreement and the
other Loan Documents, (iv) no Lender shall transfer or grant any
participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent
or waiver with respect to this Agreement or of any other Loan Document would
(a) extend the final maturity date of the Obligations hereunder in which such
Participant is participating; (b) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating; (c) release
all or a material portion of the Collateral or guaranties (except to the
extent expressly provided herein or in any of the Loan Documents) supporting
the Obligations hereunder in which such Participant is participating; (d)
postpone the payment of, or reduce the amount of, the interest or fees
payable to such Participant through such Lender; or (e) change the amount or
due dates of scheduled principal repayments or prepayments or premiums; and
(v) all amounts payable by the Obligors hereunder shall be determined as if
such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest
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in amounts owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the
Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to the Obligors or
the Obligors' business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the other Loan
Documents in favor of any Federal Reserve Bank in accordance with Regulation
A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR ss.203.14,
and such Federal Reserve Bank may enforce such pledge or security interest in
any manner permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; PROVIDED,
HOWEVER, that no Obligor may assign this Agreement or any other Loan Document
or any rights or duties hereunder or thereunder without the prior written
consent of Agent and all Lenders and any prohibited assignment shall be
absolutely void AB INITIO. No consent to assignment by Agent and the Lenders
shall release any Borrower or any other Obligor from its Obligations. A
Lender may assign this Agreement and the other Loan Documents and its rights
and duties hereunder and thereunder pursuant to SECTION 14.1 hereof and,
except as expressly required pursuant to SECTION 14.1 hereof, no consent or
approval by any Borrower or any other Obligor is required in connection with
any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders (or by Agent at the written
request of the Required Lenders) and Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; PROVIDED, HOWEVER, that no such waiver, amendment,
or consent shall, unless in writing and signed by all the Lenders affected
thereby and Borrower (on behalf of all Obligors) and acknowledged by Agent,
do any of the following:
(a) increase or extend the Commitment of any Lender;
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(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts
due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under
any other Loan Document;
(d) change the percentage of the Commitments that is required for
the Lenders or any of them to take any action hereunder; (e) amend this
Section or any provision of the Agreement providing for consent or other
action by all Lenders;
(f) release Collateral other than as permitted by SECTION 16.12;
(g) change the definition of "Required Lenders";
(h) subordinate any Lien held by Agent for the benefit of the
Lender Group;
(i) release any Obligor or any guarantor from any obligation for
the payment of money; or
(j) amend any of the provisions of SECTION 16.
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination,
or release of or with respect to any provision of this Agreement or any other
Loan Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of any
Obligor, shall not require consent by or the agreement of any Obligor.
15.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any Lender
to exercise any right, remedy, or option under this Agreement, any other Loan
Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among any Obligor and Agent or any Lender, or
delay by Agent or any Lender in exercising the same, will operate as a waiver
thereof. No waiver by Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by Agent
or the Lenders on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by any Obligor of
any provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclof any
other right or remedy which Agent or any Lender may have.
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16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill as its agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to Agent by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental
thereto. Agent agrees to act as such on the express conditions contained in
this SECTION 16. The provisions of this SECTION 16 are solely for the benefit
of Agent, and the Lenders, and no Obligor shall have any rights as a third
party beneficiary of any of the provisions contained herein; PROVIDED,
HOWEVER, that certain of the provisions of SECTION 16.11 hereof also shall be
for the benefit of the Obligors. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding,
Agent shall not have any duties or responsibilities, except those expressly
set forth herein, nor shall Agent have or be deemed to have any fiduciary
relationship with each other or any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against
Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience only, that Foothill is merely the representatives
of the Lenders, and has only the contractual duties set forth herein. Except
as expressly otherwise provided in this Agreement, Agent shall have and may
use its sole discretion with respect to exercising or refraining from
exercising any discretionary rights or taking or refraining from taking any
actions which Agent is expressly entitled to take or assert under or pursuant
to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have
the right to exercise the following powers as long as this Agreement remains
in effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Advances, the Collateral,
the Collections, and related matters; (b) execute or file any and all
financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other
written agreements with respect to the Loan Documents; (c) make Advances, for
itself or on behalf of Lenders as provided in the Loan Documents; (d)
exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (e) open and maintain such bank accounts and lock boxes as
Agent deems necessary and appropriate in accordance with the Loan Documents
for the foregoing purposes with respect to the Collateral and the
Collections; (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to the Obligors, the Obligations,
the Collateral, the Collections, or otherwise related to any of same as
provided in the Loan Documents; and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.
16.2 DELEGATION OF DUTIES. Except as otherwise provided in this section,
Agent may execute any of its duties under this Agreement or any other Loan
Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel
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concerning all matters pertaining to such duties. Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made in compliance with this
section and without gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for
any recital, statement, representation or warranty made by any Obligor or any
Subsidiary or Affiliate of any Obligor, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document,
or for any failure of any Obligor or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
books or properties of the Obligors or the books or records or properties of
any of any Affiliate of any Obligor.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to any Obligor or counsel to any Lender), independent accountants and
other experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders as
it deems appropriate and until such instructions are received, Agent shall
act, or refrain from acting, as it deems advisable. If Agent so requests, it
shall first be indemnified to its reasonable satisfaction by Lenders against
any and all liability and expense that may be incurred by it by reason of
taking or continuing to take any such action. Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Lenders and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of
the Lenders, except with respect to Events of Default of which Agent has
actual knowledge, unless Agent shall have received written notice from a
Lender or Borrower referring to this Agreement, describing such Default or
Event of Default,
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and stating that such notice is a "notice of default." Agent promptly will
notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the
other Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
SECTION 16.4, Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Lenders in accordance
with SECTION 9; PROVIDED, HOWEVER, that unless and until Agent has received
any such request, Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable.
16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by Agent hereinafter taken, including any review of the affairs of
Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender.
Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower, the UK Sub, and any
other Person (other than the Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower. Each Lender also represents that it will, independently
and without reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower, the UK Sub, and any other Person (other than
the Lender Group) party to a Loan Document. Except for notices, reports and
other documents expressly herein required to be furnished to the Lenders by
Agent, Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
the Obligors and any other Person party to a Loan Document that may come into
the possession of any of the Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay Lender
Group Expenses to the extent Agent reasonably deems necessary or appropriate
for the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including without limiting the generality of
the foregoing, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral,
whether or not the Obligors are obligated to reimburse Agent or Lenders for
such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from
Collections to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event
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Agent is not reimbursed for such costs and expenses from Collections, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not
the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed
by or on behalf of Borrower and without limiting the obligation of the
Obligors to do so), according to their Pro Rata Shares, from and against any
and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be
liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse Agent upon demand for such Lender's ratable share of any costs or
out-of-pocket expenses (including attorneys fees and expenses) incurred by
Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this Agreement, any other Loan Document,
or any document contemplated by or referred to herein, to the extent that
Agent is not reimbursed for such expenses by or on behalf of the Obligors.
The undertaking in this section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Obligors
and their Subsidiaries and Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents as though Foothill were not Agent
hereunder, and, in each case, without notice to or consent of the Lenders.
The Lenders acknowledge that, pursuant to such activities, Foothill or its
Affiliates may receive information regarding the Obligors or their Affiliates
and any other Person (other than the Lender Group) party to any Loan
Documents that is subject to confidentiality obligations in favor of the
Obligors or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to
obtain), Agent shall not be under any obligation to provide such information
to them. The terms "Lender" and "Lenders" include Foothill in its individual
capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice to
the Lenders. If Agent resigns under this Agreement, the Required Lenders
shall appoint a successor Agent for the Lenders. If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, and Borrower, a successor Agent.
If Agent has materially breached or failed to perform any material provision
of this Agreement or of applicable law, the Required Lenders may agree in
writing to remove and replace Agent with a successor Agent from among the
Lenders. In any such event, upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall
mean such successor Agent and the retiring Agent's appointment,
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powers and duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this SECTION 16 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of
the duties of Agent hereunder until such time, if any, as the Lenders appoint
a successor Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business
with the Obligors and their Subsidiaries and Affiliates and any other Person
(other than the Lender Group) party to any Loan Documents as though such
Lender were not the agent of Agent hereunder without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities, such
Lender and its respective Affiliates may receive information regarding the
Obligors or their Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of the Obligors or such other Person and that prohibit
the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of
such confidentiality obligations, which waiver such Lender will use its
reasonable best efforts to obtain), such Lender not shall be under any
obligation to provide such information to them. With respect to the Swing
Loans and Agent Advances, Swing Lender shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though
it were not the sub-agent of the Agent.
16.11 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC,
such Lender agrees with and in favor of Agent and Borrower, to deliver to
Agent and Borrower:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable
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year of such Lender and in each succeeding taxable year of such Lender
during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of the Obligors to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Obligors to such Lender. To
the extent of such percentage amount, Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Obligors to
such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because
the appropriate form was not delivered, was not properly executed, or because
such Lender failed to notify Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Lender shall indemnify Agent fully for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction
on the amounts payable to Agent under this Section, together with all costs
and expenses (including attorneys fees and expenses). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations
and the resignation or replacement of Agent.
16.12 COLLATERAL MATTERS.
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(a) The Lenders hereby irrevocably authorize Agent, at its option
and in its sole discretion, to release any Lien on any Collateral (i) upon
the termination of the Commitments and payment and satisfaction in full by
the Borrower of all Obligations; (ii) constituting property being sold or
disposed of if a release is required or desirable in connection therewith and
if Borrower certifies to Agent that the sale or disposition is permitted
under SECTION 7.4 of this Agreement or the other Loan Documents (and Agent
may rely conclusively on any such certificate, without further inquiry);
(iii) constituting property in which the Obligors owned no interest at the
time the security interest was granted or at any time thereafter; or (iv)
constituting property leased to an Obligor under a lease that has expired or
is terminated in a transaction permitted under this Agreement. Except as
provided above, Agent will not execute and deliver a release of any Lien on
any Collateral without the prior written authorization of (y) if the release
is of all or substantially all of the Collateral, all of the Lenders, or (z)
otherwise, the Required Lenders. Upon request by Agent or Borrower at any
time, the Lenders will confirm in writing Agent's authority to release any
such Liens on particular types or items of Collateral pursuant to this
SECTION 16.12; provided, however, that (1) Agent shall not be required to
execute any document necessary to evidence such release on terms that, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Obligors in respect of)
all interests retained by the Obligors, including, the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders
to assure that the Collateral exists or is owned by the Obligors or is cared
for, protected, or insured or has been encumbered, or that the Liens granted
to Agent under the Loan Documents have been properly or sufficiently or
lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or
under any duty of care, disclosure or fidelity, or to continue exercising,
any of the rights, authorities and powers granted or available to Agent
pursuant to any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto,
subject to the terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its sole discretion given Agent's own
interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to
any of the foregoing, except as otherwise provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to the Obligors or any accounts
of the Obligors now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do
so by Agent, take or cause to be taken any action, including, the
commencement of any legal or
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equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or
payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1)
turn the same over to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in same day funds, as applicable,
for the account of all of the Lenders and for application to the Obligations
in accordance with the applicable provisions of this Agreement, or (2)
purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such
excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if all or part
of such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in
whole or in part, as applicable, and the applicable portion of the purchase
price paid therefor shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is required to pay
interest in connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Agent's Liens in
Assets which, in accordance with Article 9 of the UCC can be perfected only
by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by Agent
to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as
each party may designate for itself by written notice to Agent. Concurrently
with each such payment, Agent shall identify whether such payment (or any
portion thereof) represents principal, premium or interest on Advances or
otherwise.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each member
of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents relating to the Collateral, for the benefit of
the Lender Group. Each member of the Lender Group agrees that any action
taken by Agent or all Lenders, as applicable, in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent or all Lenders, as applicable, of their respective powers
set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
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16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS
BY LENDERS; OTHER REPORTS AND INFORMATION.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or
examination report (each a "REPORT" and collectively, "REPORTS") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent does not (i) make
any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing
any audit or examination will inspect only specific information regarding the
Obligors and will rely significantly upon the Borrower's Books, as well as on
representations of the Obligors' personnel;
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
Assets, and existing and contemplated business plans in a confidential
manner; it being understood and agreed by each Obligor that in any event such
Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee, transferee, or Participant in connection
with any contemplated or actual assignment or transfer by such Lender of an
interest herein or any participation interest in such Lender's rights
hereunder, (c) of information that has become public by disclosures made by
Persons other than such Lender, its Affiliates, assignees, transferees, or
participants, or (d) as required or requested by any court, governmental or
administrative agency, pursuant to any subpoena or other legal process, or by
any law, statute, regulation, or court order; provided, however, that, unless
prohibited by applicable law, statute, regulation, or court order, such
Lender shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or
where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from
any Report in connection with any loans or other credit accommodations that
the indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan
or loans of Borrower; and (ii) to pay and protect, and indemnify, defend and
hold Agent, and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses and other
amounts
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(including, attorney costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third
parties who might obtain all or part of any Report through the indemnifying
Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by either Obligor to Agent that has not been
contemporaneously provided by such Obligor to such Lender, and, upon receipt
of such request, Agent shall provide a copy of same to such Lender promptly
upon receipt thereof from the Obligor; (y) To the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from the Obligors, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of the Obligors the
additional reports or information specified by such Lender, and, upon receipt
thereof from the Obligors, Agent promptly shall provide a copy of same to
such Lender; and (z) Any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any
interest in, or subject any Lender to any liability for, or in respect of,
the business, Assets, profits, losses, or liabilities of any other Lender.
Each Lender shall be solely responsible for notifying its Participants of any
matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any
Participant of any other Lender. Except as provided in SECTION 16.7, no
member of the Lender Group shall have any liability for the acts or any other
member of the Lender Group. No Lender shall be responsible to the Obligors or
any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by the Obligors and each member of the Lender Group whose
signature is provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
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17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
the Obligors, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a
writing signed by Agent, on behalf of the Lenders, and the Obligors.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to
be an original, and all of which, when taken together, shall constitute but
one and the same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. The foregoing shall apply to each other
Loan Document mutatis mutandis.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. ` If the incurrence or
payment of the Obligations by the Obligors or the transfer by the Obligors to
the Lender Group of any property should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable
payments of money or transfers of property (collectively, a "VOIDABLE
TRANSFER"), and if the Lender Group is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or
the amount thereof that the Lender Group is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Lender Group related thereto, the liability of the Obligors automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.
17.9 CONFIDENTIALITY. Each Lender agrees to hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders
and their respective Affiliates, (ii) to legal
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counsel, accountants, and other professional advisors to such Lender or to an
Assignee or Participant, (iii) to regulatory officials, (iv) to any Person as
requested pursuant to or as required by law, regulation, or legal process,
(v) to any Person in connection with any legal proceeding to which such
Lender is a party, and (vi) to such Lender's direct or indirect contractual
counterparties in swap agreements or to legal counsel, accountants and other
professional advisors to such counterparties.
[Signature pages 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.
THE 3DO COMPANY,
a California corporation
By: /s/ John Adams
-------------------------------
Title: CFO
THE 3DO COMPANY,
a Delaware corporation
By: /s/ Trip Hawkins
-------------------------------
Title: CEO
3DO EUROPE, LTD.,
a company incorporated under the laws of England
By: James Alan Cook
-------------------------------
Title: Director
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and a Lender
By: /s/ Janice Dorris
-------------------------------
Title: Vice President
S-1
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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 D-1 Disclosure Letter
Schedule C-1 Commitments
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SCHEDULE C-1
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COMMITMENTS
<TABLE>
<CAPTION>
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LENDER TOTAL COMMITMENT
---------------------------------------------------- -------------------------------------------------------------
<S> <C>
---------------------------------------------------- -------------------------------------------------------------
Foothill Capital Corporation $50,000,000.00
---------------------------------------------------- -------------------------------------------------------------
---------------------------------------------------- -------------------------------------------------------------
---------------------------------------------------- -------------------------------------------------------------
==================================================== =============================================================
All Lenders $50,000,000.00
---------------------------------------------------- -------------------------------------------------------------
</TABLE>