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EXHIBIT 10.72
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
EPICOR SOFTWARE CORPORATION
AS BORROWER,
AND
FOOTHILL CAPITAL CORPORATION
AS LENDER
DATED AS OF JULY 26, 2000
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION........................................................1
1.1 Definitions................................................................1
1.2 Accounting Terms..........................................................19
1.3 Code......................................................................19
1.4 Construction..............................................................19
1.5 Schedules and Exhibits....................................................20
2. LOAN AND TERMS OF PAYMENT..........................................................20
2.1 Revolver Advances.........................................................20
2.2 Term Loan.................................................................21
2.3 Borrowing Procedures and Settlements......................................21
2.5 Overadvances..............................................................23
2.6 Interest Rates, Rates, Payments, and Calculations.........................23
2.7 Cash Management...........................................................25
2.8 Crediting Payments; Float Charge..........................................26
2.9 Designated Account........................................................26
2.10 Maintenance of Loan Account; Statements of Obligations....................26
2.11 Fees......................................................................27
2.12 [INTENTIONALLY DELETED]...................................................27
2.13 LIBOR Option..............................................................27
2.14 Capital Requirements......................................................29
3. CONDITIONS; TERM OF AGREEMENT......................................................30
3.1 Conditions Precedent to Initial Advance and Term Loan.....................30
3.2 Conditions Subsequent to the Initial Advance..............................32
3.3 Conditions Precedent to all Extensions of Credit..........................33
3.4 Term......................................................................33
3.5 Effect of Termination.....................................................34
3.6 Early Termination by Borrower.............................................34
4. CREATION OF SECURITY INTEREST......................................................34
4.1 Grant of Security Interest................................................34
4.2 Negotiable Collateral.....................................................35
4.3 Collection of Accounts, General Intangibles, and
Negotiable Collateral.....................................................35
4.4 Delivery of Additional Documentation Required.............................35
4.5 Power of Attorney.........................................................35
4.6 Right to Inspect..........................................................36
4.7 Control Agreements........................................................36
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5. REPRESENTATIONS AND WARRANTIES.....................................................36
5.1 No Encumbrances...........................................................37
5.2 Eligible Accounts.........................................................37
5.3 Inventory.................................................................37
5.4 Equipment.................................................................38
Location of Inventory and Equipment.......................................38
5.6 Inventory Records.........................................................38
5.7 Location of Chief Executive Office; FEIN..................................38
5.8 Due Organization and Qualification; Subsidiaries..........................38
5.9 Due Authorization; No Conflict............................................39
5.10 Litigation................................................................40
5.11 No Material Adverse Change................................................40
5.12 Fraudulent Transfer.......................................................40
5.13 Employee Benefits.........................................................40
5.14 Environmental Condition...................................................40
5.15 Brokerage Fees............................................................41
5.16 Intellectual Property.....................................................41
5.17 Leases....................................................................41
5.18 DDAs......................................................................41
5.19 Complete Disclosure.......................................................41
5.20 Indebtedness. ...........................................................41
6. AFFIRMATIVE COVENANTS..............................................................42
6.1 Accounting System.........................................................42
6.2 Collateral Reporting......................................................42
6.3 Financial Statements, Reports, Certificates...............................43
6.5 Return....................................................................45
6.6 Maintenance of Properties. ..............................................45
6.7 Taxes.....................................................................45
6.8 Insurance.................................................................46
6.9 Location of Inventory and Equipment.......................................46
6.10 Compliance with Laws......................................................46
6.11 Leases....................................................................47
6.12 Brokerage Commissions.....................................................47
6.13 Existence.................................................................47
6.14 Environmental.............................................................47
6.15 Disclosure Updates........................................................47
7. NEGATIVE COVENANTS.................................................................48
7.1 Indebtedness..............................................................48
7.2 Liens.....................................................................48
7.3 Restrictions on Fundamental Changes.......................................49
7.4 Disposal of Assets........................................................49
7.5 Change Name...............................................................49
7.6 Guarantee.................................................................49
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7.7 Nature of Business........................................................49
7.8 Prepayments and Amendments................................................49
7.9 Change of Control.........................................................49
7.10 Consignments..............................................................50
7.11 Distributions.............................................................50
7.12 Accounting Methods........................................................50
7.13 Investments...............................................................50
7.14 Transactions with Affiliates..............................................50
7.15 Suspension................................................................50
7.16 [INTENTIONALLY DELETED]...................................................50
7.17 Use of Proceeds...........................................................50
7.18 Change in Location of Chief Executive Office; Inventory
and Equipment with Bailees................................................50
7.19 Securities Accounts.......................................................51
7.20 Financial Covenants.......................................................51
8. EVENTS OF DEFAULT..................................................................52
9. LENDER'S RIGHTS AND REMEDIES.......................................................54
9.1 Rights and Remedies.......................................................54
9.2 Remedies Cumulative.......................................................56
10. TAXES AND EXPENSES.................................................................56
11. WAIVERS; INDEMNIFICATION...........................................................57
11.1 Demand; Protest...........................................................57
11.2 Lender's Liability for Collateral.........................................57
11.3 Indemnification...........................................................57
12. NOTICES............................................................................58
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.........................................59
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.........................................60
14.1 Assignments and Participations............................................60
14.2 Successors................................................................61
15. AMENDMENTS; WAIVERS................................................................61
15.1 Amendments and Waivers....................................................61
15.2 No Waivers; Cumulative Remedies...........................................62
16. GENERAL PROVISIONS.................................................................62
16.1 Effectiveness.............................................................62
16.2 Section Headings..........................................................62
16.3 Interpretation............................................................62
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16.4 Severability of Provisions................................................62
16.5 Withholding Taxes.........................................................62
16.6 [INTENTIONALLY DELETED]...................................................63
16.7 Counterparts; Telefacsimile Execution.....................................63
16.8 Revival and Reinstatement of Obligations..................................63
16.9 Integration...............................................................63
16.10 Confidentiality...........................................................63
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EXHIBITS AND SCHEDULES
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Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule E-1 Eligible Inventory Locations
Schedule O-1 Permitted Loans
Schedule P-1 Permitted Liens
Schedule 2.7(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrower
Schedule 5.8(c) Capitalization of Borrower's Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 Employee Benefits
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered
into as of July 26, 2000 between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Lender") and EPICOR SOFTWARE CORPORATION, a Delaware corporation
("Borrower").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"Accounts" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in Section 4.4.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person, (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person, and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Effective Date, 3% times the Maximum Revolver
Amount, (b) during the period of time from and including the date that is the
first anniversary of the Effective Date up to the date that is the second
anniversary of the Effective Date, 2% times the Maximum Revolver Amount, and (c)
during the period of time from and
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including the date that is the second anniversary of the Effective Date up to
the Maturity Date, 1% times the Maximum Revolver Amount.
"Assignee" has the meaning set forth in Section 14.1(a).
"Authorized Person" means any officer or other employee of
Borrower.
"Availability" means, as of any date of determination, if such
date is a Business Day, and determined at the close of business on the
immediately preceding Business Day, if such date of determination is not a
Business Day, the amount that Borrower is entitled to borrow as Advances under
Section 2.1 (after giving effect to all then outstanding Obligations and all
sublimits and reserves applicable hereunder).
"Bankruptcy Code" means the United States Bankruptcy Code, as in
effect from time to time.
"Base LIBOR Rate" means the rate per annum, determined by Lender
in accordance with its customary procedures, and utilizing such electronic or
other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/16%), on the basis of the rates at which Dollar
deposits are offered to major banks in the London interbank market on or about
11:00 a.m. (California time) 2 Business Days prior to the commencement of the
applicable Interest Period, for a term and in amounts comparable to the Interest
Period and amount of the LIBOR Rate Loan requested by Borrower in accordance
with this Agreement, which determination shall be conclusive in the absence of
manifest error.
"Base Rate" means, the rate of interest announced within 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.
"Base Rate Loan" means each portion of an Advance or the Term
Loan that bears interest at a rate determined by reference to the Base Rate.
"Base Rate Margin" means the percentage points set forth in the
following table for the applicable Twelve Month Trailing EBITDA set forth
opposite thereto:
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Twelve Month Trailing EBITDA Base Rate Margin
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$14,500,000 0.25%
$8,500,000 to $14,499,999 0.50%
$7,500,000 to $8,499,999 0.75%
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$6,500,000 to $7,499,999 1.00%
$4,500,000 to $6,499,999 1.25%
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The initial Base Rate Margin shall be 0.75% and may change
following the first anniversary of the Effective Date in accordance with the
reporting of the Twelve Month Trailing EBITDA pursuant to Section 6.3.
Notwithstanding anything to the contrary contained in this Agreement, under no
circumstances shall the Base Rate Margin in effect as of the date of the
occurrence of an Event of Default thereafter be reduced due to any subsequent
increase in the Twelve Month Trailing EBITDA.
"Base Rate Term Loan Margin" means 3 percentage points.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate
of Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"Board of Directors" means the board of directors (or comparable
managers) of Borrower or any committee thereof duly authorized to act on behalf
of the board.
"Books" means Borrower's now owned or hereafter acquired books
and records (including all of its Records indicating, summarizing, or evidencing
its assets (including the Collateral) or liabilities, all of its Records
relating to its business operations or financial condition, and all of its goods
or General Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrowing" means a borrowing hereunder of an Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit B-1.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term "Business Day" also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.
"Canadian Subsidiary" means Epicor Software Canada, Ltd., a
Canadian corporation.
"Capital Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented
by obligations under a Capital Lease.
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"Cash Equivalents" means (a) marketable direct obligations issued
or unconditionally guaranteed by the United States or issued by any agency
thereof and backed by the full faith and credit of the United States, in each
case maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody's, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Bank" has the meaning set forth in Section
2.7(a).
"Cash Management Account" has the meaning set forth in Section
2.7(a).
"Cash Management Agreements" means those certain cash management
service agreements, in form and substance satisfactory to Lender, each of which
is among Borrower, Lender, and one of the Cash Management Banks.
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20%, or more, of the Stock of Borrower having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors, or (c)
Borrower ceases to directly own and control 100% of the outstanding capital
Stock of each of its Subsidiaries extant as of the Effective Date.
"Closing Date" means the date of the making of the initial
Advance or the Term Loan (or other extension of credit) (but not the advance or
incurring of any fee due) hereunder.
"Code" means the California Uniform Commercial Code, as in
effect from time to time.
"Collateral" means all of Borrower's now owned or hereafter
acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
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(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) money or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Lender, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgment agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance satisfactory to Lender.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrower.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 delivered by the chief financial officer of Borrower to
Lender.
"Continuing Director" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Borrower on the
Effective Date, and (b) any individual who becomes a member of the Board of
Directors after the Effective Date if such individual was appointed or nominated
for election to the Board of Directors by a majority of the Continuing
Directors, but excluding any such individual originally proposed for election in
opposition to the Board of Directors in office at the Effective Date in an
actual or threatened election contest relating to the election of the directors
(or comparable managers) 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, substantially in
the form provided by Lender to Borrower prior to the Effective Date, executed
and delivered by Borrower, Lender, and the applicable securities intermediary
with respect to a Securities Account or bank with respect to a deposit account.
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"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 Borrower.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 4433-460433 of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) that has been designated
as such, in writing, by Borrower to Lender.
"Designated Account Bank" means Wells Fargo, whose office is
located at 2030 Main Street, Suite 900, Santa Ana, California 92614, and whose
ABA number is 121000248.
"Dilution" means, as of any date of determination, a percentage,
based upon the experience of the immediately prior 90 days, that is the result
of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrower's Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
"Dilution Reserve" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Lender regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is satisfactory to Lender.
"Dollars" or "$" means United States or Canadian dollars.
"EBITDA" means, with respect to any fiscal period, Borrower's and
its Subsidiaries' consolidated net earnings (or loss), minus extraordinary
gains, plus interest expense, income taxes, and depreciation and amortization
for such period, as determined in accordance with GAAP.
"Effective Date" means the date of the execution of this
Agreement.
"Effective Date Business Plan" means the set of Projections of
Borrower for the 3 year period following the Effective Date (on a year by year
basis, and for the 1 year period following the Effective Date, on a month by
month basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Lender.
"Eligible Accounts" means those Accounts created by Borrower (or
Canadian Subsidiary, where applicable) in the ordinary course of its business,
that arise out of Borrower's (or Canadian Subsidiary's, where applicable) sale
of goods or rendition of services, that comply
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with each of the representations and warranties respecting Eligible Accounts
made by Borrower (or Canadian Subsidiary, where applicable) in the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; provided, however, that such criteria may be fixed
and revised from time to time by Lender in Lender's Permitted Discretion to
address the results of any audit performed by Lender from time to time after the
Effective Date. In determining the amount to be included, Eligible Accounts
shall be calculated net of customer deposits and unapplied cash remitted to
Borrower (or Canadian Subsidiary, where applicable). Eligible Accounts shall not
include the following:
(a) Accounts that the Account Debtor has failed to pay
within 90 days of original invoice date or Accounts with selling terms of more
than 60 days,
(b) Accounts owed by an Account Debtor (or its Affiliates)
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is
an employee, Affiliate, or agent of Borrower (or Canadian Subsidiary, where
applicable),
(d) Accounts arising in a transaction wherein goods are
placed on consignment or are sold pursuant to a guaranteed sale, a sale or
return, a sale on approval, a bill and hold, or any other terms by reason of
which the payment by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor
either (i) does not maintain its chief executive office in the United States or
Canada, or (ii) is not organized under the laws of the United States or Canada
or any state or province thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, unless (y) the Account is supported by an
irrevocable letter of credit satisfactory to Lender (as to form, substance, and
issuer or domestic confirming bank) that has been delivered to Lender and is
directly drawable by Lender, or (z) the Account is covered by credit insurance
in form, substance, and amount, and by an insurer, satisfactory to Lender,
(g) 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
Borrower has complied, to the reasonable satisfaction of Lender, with the
Assignment of Claims Act, 31 USC " 3727), or (ii) any state of the United States
(exclusive, however, of (y) Accounts owed by any state that does not have a
statutory counterpart to the Assignment of Claims Act, or (z) Accounts owed by
any state that does have a statutory counterpart to the Assignment of Claims Act
as to which Borrower has complied to Lender's satisfaction),
(h) Accounts with respect to which the Account Debtor is a
creditor of Borrower (or Canadian Subsidiary, where applicable), has a right of
setoff or has asserted a right
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of setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account, to the extent of such claim, right of setoff, or
dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower (or Canadian Subsidiary, where applicable) exceed
10% of all Eligible Accounts, 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, has gone out of business,
or as to which Borrower (or Canadian Subsidiary, where applicable) has received
notice of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(k) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, or West Virginia (or any other
state that requires a creditor to file a business activity report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a business activities report with
the applicable division of taxation, the department of revenue, or with such
other state offices, as appropriate, for the then-current year, or is exempt
from such filing requirement,
(l) Accounts, the collection of which, Lender, in its
Permitted Discretion, believes to be doubtful by reason of the Account Debtor's
financial condition,
(m) Accounts that are not subject to a valid and perfected
first priority Lender's Lien,
(n) Accounts with respect to which (i) the goods giving
rise to such Account have not been shipped and billed to the Account Debtor, or
(ii) the services giving rise to such Account have not been performed and billed
to the Account Debtor,
(o) Accounts that represent the right to receive progress
payments or other advance billings that are due prior to the completion of
performance by Borrower of the subject contract for goods or services,
(p) Accounts arising from consulting services, or
(q) Accounts due Canadian Subsidiary at such time as
Borrower has not completed performance of the condition subsequent in Section
3.2(a).
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Borrower or any predecessor in interest, (b) from adjoining
properties
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or businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy, or
rule of common law now or hereafter in effect and in each case as amended, or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Borrower, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC " 1251 et seq; the Toxic Substances Control Act, 15 USC, " 2601 et seq; the
Clean Air Act, 42 USC " 7401 et seq.; the Safe Drinking Water Act, 42 USC. "
3803 et seq.; the Oil Pollution Act of 1990, 33 USC. " 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. " 11001
et seq.; the Hazardous Material Transportation Act, 49 USC " 1801 et seq.; and
the Occupational Safety and Health Act, 29 USC. "651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
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<PAGE> 16
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower aged in excess of historical
levels with respect thereto and all book overdrafts in excess of historical
practices with respect thereto, in each case as determined by Lender in its
Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in
effect from time to time.
"FEIN" means Federal Employer Identification Number.
"Financial Institution" means any Affiliate of Lender or any
Person whose primary business is making or acquiring loans.
"Funding Date" means the date on which a Borrowing occurs.
"Funding Losses" has the meaning set forth in Section
2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"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
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<PAGE> 17
to define, list, or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived substances,
natural gas, natural gas liquids, synthetic gas, drilling fluids, produced
waters, and other wastes associated with the exploration, development, or
production of crude oil, natural gas, or geothermal resources, (c) any flammable
substances or explosives or any radioactive materials, and (d) asbestos in any
form or electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of 50 parts per
million.
"Indebtedness" means (a) all obligations of Borrower for borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under Capital Leases,
(d) all obligations or liabilities of others secured by a Lien on any asset of
Borrower, irrespective of whether such obligation or liability is assumed, (e)
all obligations of Borrower for the deferred purchase price of assets (other
than trade debt incurred in the ordinary course of Borrower's business and
repayable in accordance with customary trade practices), and (f) any obligation
of Borrower guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse to
Borrower) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intellectual Property Security Agreement" means an intellectual
property security agreement executed and delivered by Borrower and Lender, the
form and substance of which is satisfactory to Lender.
"Interest Period" means, with respect to each LIBOR Rate Loan, a
period commencing on the date of the making of such LIBOR Rate Loan and ending
1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period
would end on a day that is not a Business Day, such Interest Period shall be
extended (subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
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<PAGE> 18
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrower may not elect an Interest Period which
will end after the Maturity Date.
"Inventory" means all Borrower's now owned or hereafter acquired
right, title, and interest with respect to inventory, including goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower as lessor, goods that are furnished by Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in Borrower's business.
"Investment" means, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), purchases or other acquisitions for
consideration of Indebtedness or Stock, and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means all of Borrower's now owned or
hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from
time to time.
"Lender" has the meaning set forth in the preamble to this
Agreement.
"Lender's Account" means an account at a bank designated by
Lender from time to time as the account into which Borrower shall make all
payments to Lender under this Agreement and the other Loan Documents; unless and
until Lender notifies Borrower to the contrary, Lender's Account shall be that
certain deposit account bearing account number 323-266193 and maintained by
Lender with The Chase Manhattan Bank, 4 New York Plaza, 15th Floor, New York,
New York 10004, ABA #021000021.
"Lender's Liens" means the Liens granted by Borrower to Lender
under this Agreement or the other Loan Documents.
"Lender Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by Lender, (b) reasonable fees or
charges paid or incurred by Lender in connection with Lender's transactions with
Borrower, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax lien,
litigation,
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<PAGE> 19
and UCC searches and including searches with the patent and trademark office,
the copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement), real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) costs and expenses
incurred by Lender in the disbursement of funds to Borrower (by wire transfer or
otherwise), (d) charges paid or incurred by Lender resulting from the dishonor
of checks, (e) reasonable costs and expenses paid or incurred by Lender to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Lender related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by Lender in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or Lender's relationship with Borrower or any guarantor of the
Obligations, (h) Lender's reasonable fees and expenses (including attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Lender's reasonable fees and expenses
(including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"Lender-Related Person" means Lender, Lender's Affiliates, and
the officers, directors, employees, and agents of Lender.
"LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate
Loan, the rate per annum determined by Lender (rounded upwards, if necessary, to
the next 1/16%) by dividing (a) the Base LIBOR Rate for such Interest Period, by
(b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.
"LIBOR Rate Margin" means the percentage points set forth in the
following table for the applicable Twelve Month Trailing EBITDA set forth
opposite thereto:
<TABLE>
<CAPTION>
Twelve Month Trailing EBITDA LIBOR Rate Margin
---------------------------- -----------------
<S> <C>
$14,500,000 2.50%
</TABLE>
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<PAGE> 20
<TABLE>
<S> <C>
$8,500,000 to $14,499,999 3.00%
$7,500,000 to $8,499,999 3.25%
$6,500,000 to $7,499,999 3.50%
$4,500,000 to $6,499,999 3.75%
</TABLE>
The initial LIBOR Rate Margin shall be 3.25% and may change
following the first anniversary of the Effective Date in accordance with the
reporting of the Twelve Month Trailing EBITDA pursuant to Section 6.3.
Notwithstanding anything to the contrary contained in this Agreement, under no
circumstances shall the LIBOR Rate Margin in effect as of the date of the
occurrence of an Event of Default thereafter be reduced due to any subsequent
increase in the Twelve Month Trailing EBITDA.
"Lien" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Cash Management
Agreements, the Control Agreements, the Intellectual Property Security
Agreement, the Disbursement Letter, the Officers' Certificate, the Stock Pledge
Agreement, any note or notes executed by Borrower in connection with this
Agreement and payable to Lender, and any other agreement entered into, now or in
the future, by Borrower and Lender in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, (b) a material impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of Lender's ability to enforce the Obligations or realize upon
the Collateral, or (c) a material impairment of the enforceability or priority
of the Lender's Liens with respect to the Collateral as a result of an action or
failure to act on the part of Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $30,000,000 minus the outstanding
principal balance of the Term Loan.
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<PAGE> 21
"Morgan Stanley" means Morgan Stanley Dean Witter.
"Negotiable Collateral" means all of Borrower's now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"Obligations" means all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), premiums, liabilities
(including all amounts charged to Borrower's Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrower
to Lender pursuant to or evidenced by the Loan Documents and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all interest not paid when due and all Lender Expenses that Borrower
is required to pay or reimburse by the Loan Documents, by law, or otherwise. Any
reference in this Agreement or in the Loan Documents to the Obligations shall
include all amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable, both prior and subsequent to any Insolvency Proceeding.
"Officers' Certificate" means the representations and warranties
of officers form submitted by Lender to Borrower, together with Borrower's
completed responses to the inquiries set forth therein, substantially in the
form provided by Lender to Borrower prior to the Effective Date.
"Originating Lender" has the meaning set forth in Section
14.1(d).
"Over advance" has the meaning set forth in Section 2.5.
"Participant" has the meaning set forth in Section 14.1(d).
"Permitted Discretion" means a determination made in good faith
and in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions by
Borrower of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of Borrower's business, (b) sales by Borrower of Inventory to
buyers in the ordinary course of business, (c) the use or transfer of money or
Cash Equivalents by Borrower in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, and (d) the licensing by Borrower,
on a non-exclusive basis, of patents, trademarks, copyrights, and other
intellectual property rights in the ordinary course of Borrower's business.
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<PAGE> 22
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) other investments not exceeding $100,000 in the
aggregate at any one time.
"Permitted Liens" means (a) Liens held by Lender, (b) Liens for
unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute
an Event of Default hereunder and are the subject of Permitted Protests, (c)
Liens set forth on Schedule P-1, (d) the interests of lessors under operating
leases, (e) purchase money Liens or the interests of lessors under Capital
Leases to the extent that such Liens or interests secure Permitted Purchase
Money Indebtedness and so long as such Lien attaches only to the asset purchased
or acquired and the proceeds thereof, (f) Liens arising by operation of law in
favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business of Borrower 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 Borrower
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 Borrower, (j) Liens resulting from any judgment
or award that is not an Event of Default hereunder, (k) [intentionally deleted],
and (l) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof by Borrower.
"Permitted Loans" means loans or advances made to the Persons
listed on Schedule O-1 or any other Person then employed by Borrower.
"Permitted Protest" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), taxes (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by
Borrower in good faith, and (c) Lender is satisfied that, while any such protest
is pending, there will be no impairment of the enforceability, validity, or
priority of any of the Lender's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Effective Date in
an aggregate principal amount outstanding at any one time not in excess of
$200,000.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Projections" means Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
basis consistent with Borrower's
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<PAGE> 23
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property
now owned or hereafter acquired by Borrower and the improvements 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.
"Remedial Action" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC " 9601.
"Required Availability" means Excess Availability and
unrestricted cash and Cash Equivalents in an amount of not less than
$20,000,000.
"Reserve Percentage" means, on any day, for Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of Lender, but so long as
Lender is not required or directed under applicable regulations to maintain such
reserves, the Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the then
extant amount of outstanding Advances.
"SEC" means the United States Securities and Exchange Commission
and any successor thereto.
"Securities Account" means a "securities account" as that term is
defined in the Code.
"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).
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<PAGE> 24
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in form
and substance satisfactory to Lender, executed and delivered by Borrower to
Lender with respect to the pledge of the Stock owned by Borrower.
"Subordinated Debt" means any Indebtedness incurred by Borrower
subordinated to the Obligations to Lender (and identified as subordinated by
Borrower and Lender) on terms satisfactory to Lender in its sole and absolute
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.
"Tangible Net Worth" means, as of any date of determination, the
result of (a) Borrower's total stockholder's equity, minus (b) the sum of (i)
all Intangible Assets of Borrower, (ii) all of Borrower's prepaid expenses, and
(iii) all amounts due to Borrower from Affiliates.
"Taxes" has the meaning set forth in Section 16.5.
"Term Loan" has the meaning set forth in Section 2.2.
"Term Loan Amount" means $10,000,000.
"Twelve Month Trailing EBITDA" means EBITDA for the immediately
preceding 4 complete fiscal quarters.
"Voidable Transfer" has the meaning set forth in Section 16.8.
"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 and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
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<PAGE> 25
1.4 CONSTRUCTION. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
20 LOAN AND TERMS OF PAYMENT
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, Lender agrees to make advances ("Advances")
to Borrower in an amount at any one time outstanding not to exceed an amount
equal to the lesser of (i) the Maximum Revolver Amount or (ii) the Borrowing
Base. For purposes of this Agreement, "Borrowing Base," as of any date of
determination, shall mean the result of:
(x) the least of
(i) 85% of the amount of Eligible Accounts, less
the amount, if any, of the Dilution Reserve,
(ii) an amount equal to Borrower's Collections
with respect to Accounts for the immediately preceding 20
day period, or
(iii) an amount equal to Borrower's Collections
with respect to Accounts for the immediately preceding 45
day period, minus the outstanding principal balance of the
Term Loan,
minus
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<PAGE> 26
(y) the aggregate amount of reserves, if any,
established by Lender under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrower to any Person to the extent secured by a Lien on, or trust over, any of
the Collateral (other than any existing Permitted Lien set forth on Schedule P-1
which is specifically identified thereon as entitled to have priority over the
Lender's Liens), which Lien or trust, in the Permitted Discretion of Lender,
likely would have a priority superior to the Lender's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral.
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 TERM LOAN.
(a) Subject to the terms and conditions of this Agreement, upon
satisfaction of the conditions set forth in Section 3.1, Lender agrees to make a
term loan (the "Term Loan") to Borrower in an amount equal to the Term Loan
Amount.
(b) The Term Loan shall be repaid in equal principal
installments of $277,777.77, commencing on September 1, 2000, and continuing on
the first day of each succeeding calendar month until the Term Loan has been
paid in full.
(c) In addition to the principal installments described in
Section 2.2(b) above, if Lender determines, following reasonable consultation
with Borrower, that Borrower is not in compliance with Section 7.20(c), then, in
addition to its other rights and remedies, Lender may demand that Borrower pay
Lender, as a principal payment, the amount by which Borrower is in
non-compliance with Section 7.20(c); and Borrower shall pay said amount no later
than 5 Business Days following Lender's demand.
(d) The outstanding unpaid principal balance and all accrued and
unpaid interest under the Term Loan shall be due and payable on the earlier of
(i) the Maturity Date or (ii)
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the date of termination of this Agreement, whether by its terms, by prepayment,
or by acceleration. All amounts outstanding under the Term Loan shall constitute
Obligations.
(e) Amounts borrowed pursuant to this Section may not be repaid
and reborrowed.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by a
request by an Authorized Person delivered to Lender (which notice must be
received by Lender no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business Day.
At Lender's election, in lieu of delivering the above-described request in
writing, any Authorized Person may give Lender telephonic notice of such request
by the required time, with such telephonic notice to be confirmed in writing
within 24 hours of the giving of such notice.
(b) MAKING OF ADVANCES. If Lender has received a timely request
for a Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein, Lender
shall make the proceeds of such Advance available to Borrower on the applicable
Funding Date by transferring immediately available funds equal to such proceeds
to Borrower's Designated Account.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Lender's Account and shall be made in
immediately available funds, no later than 11:00 a.m. (California time) on the
date specified herein. Any payment received by Lender later than 11:00 a.m.
(California time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.
(b) APPLICATION AND REVERSAL OF PAYMENTS.
(i) All payments shall be remitted to Lender and all such
payments (other than payments received while no Default or Event of Default has
occurred and is continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the payment of specific
fees), and all proceeds of Accounts or other Collateral received by Lender,
shall be applied as follows:
(A) first, to pay any Lender Expenses then due to
Lender under the Loan Documents, until paid in full,
(B) second, to pay any fees then due to Lender under
the Loan Documents, until paid in full,
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(C) third, ratably to pay interest due in respect of
the Advances and the Term Loan until paid in full,
(D) fourth, ratably to pay all principal amounts then
due and payable (other than as a result of an acceleration thereof) with respect
to the Term Loan until paid in full,
(E) fifth, to pay the principal of all Advances until
paid in full,
(F) sixth, if an Event of Default has occurred and is
continuing, to pay the outstanding principal balance of the Term Loan (in the
inverse order of the maturity of the installments due thereunder) until the Term
Loan is paid in full,
(G) seventh, to pay any other Obligations until paid in
full, and
(H) eighth, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law.
(ii) In each instance, so long as no Default or Event of
Default has occurred and is continuing, Section 2.4(b) shall not be deemed to
apply to any payment by Borrower specified by Borrower to be for the payment of
specific Obligations then due and payable (or prepayable) under any provision of
this Agreement.
(iii) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any Insolvency
Proceeding), default interest, interest on interest, and expense reimbursements,
whether or not the same would be or is allowed or disallowed in whole or in part
in any Insolvency Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 2.4 shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Lender pursuant to Sections 2.1 and 2.12 is
greater than either the Dollar or percentage limitations set forth in Sections
2.1 or 2.12 (an "Over advance"), Borrower immediately shall pay to Lender, in
cash, the amount of such excess, which amount shall be used by Lender to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrower hereby promises to pay the Obligations (including
principal, interest, fees, costs, and expenses) in United States Dollars in full
to Lender as and when due and payable under the terms of this Agreement and the
other Loan Documents.
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2.6 INTEREST RATES, RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows (i) if the
relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate
equal to the LIBOR Rate plus the LIBOR Rate Margin, (ii) if the relevant
Obligation is a portion of the Term Loan that is a Base Rate Loan, at a per
annum rate equal to the Base Rate plus the Base Rate Term Loan Margin, and (iii)
otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin.
The foregoing notwithstanding, at no time shall any portion of
the Obligations bear interest on the Daily Balance thereof at a per annum rate
less than 9.00%. To the extent that interest accrued hereunder at the rate set
forth herein would be less than the foregoing minimum daily rate, the interest
rate chargeable hereunder for such day automatically shall be deemed increased
to the minimum rate.
(b) [INTENTIONALLY DELETED]
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, all Obligations that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 4 percentage points above the per
annum rate otherwise applicable hereunder.
(d) PAYMENT. Interest and all other fees payable hereunder shall
be due and payable, in arrears, on the first day of each month at any time that
any Obligations or obligation to extend credit hereunder are outstanding.
Borrower hereby authorizes Lender, from time to time without prior notice to
Borrower, to charge such interest and fees, all Lender Expenses (as and when
incurred), the charges, commissions, fees, and costs provided for in Section
2.12(e) (as and when accrued or incurred), the fees and costs provided for in
Section 2.11 (as and when accrued or incurred), and all other payments as and
when due and payable under any Loan Document (including the installments due and
payable with respect to the Term Loan) to Borrower's Loan Account, which amounts
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrower's Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.
(e) COMPUTATION. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection
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herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.
Borrower and Lender, in executing and delivering this Agreement, intend legally
to agree upon the rate or rates of interest and manner of payment stated within
it; provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under applicable law, then, ipso facto, as of the date of
this Agreement, Borrower is and shall be liable only for the payment of such
maximum as allowed by law, and payment received from Borrower in excess of such
legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrower shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Lender at one or more of the
banks set forth on Schedule 2.7(a) (each, a "Cash Management Bank"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of its Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof, all Collections (including those sent directly by Account Debtors to a
Cash Management Bank) into a bank account in Lender's name (a "Cash Management
Account") at one of the Cash Management Banks. Lender agrees that at least one
of the Cash Management Banks shall be Wells Fargo.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrower, in form and substance acceptable
to Lender. Each such Cash Management Agreement shall provide, among other
things, that (i) all items of payment deposited in such Cash Management Account
and proceeds thereof are held by such Cash Management Bank as agent or
bailee-in-possession for Lender, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account as follows: (A)
until the earlier to occur of an Event of Default or the first date on which the
average aggregate Daily Balance of the Advances for the immediately preceding
ten Business Days exceeds $750,000, to the Designated Account; and (B)
thereafter, to the Lender's Account.
(c) So long as no Default or Event of Default has occurred and
is continuing, Borrower may amend Schedule 2.7(a) to add or replace a Cash
Management Bank or Cash Management Account; provided, however, that (i) such
prospective Cash Management Bank shall be satisfactory to Lender and Lender
shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrower and such
prospective Cash Management Bank shall have executed and delivered to Lender a
Cash Management Agreement. Borrower shall close any of its Cash Management
Accounts (and establish replacement cash management accounts in accordance with
the foregoing sentence) promptly and in any event within
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30 days of notice from Lender that the creditworthiness of any Cash Management
Bank is no longer acceptable in Lender's reasonable judgment, or as promptly as
practicable and in any event within 60 days of notice from Lender that the
operating performance, funds transfer, or availability procedures or performance
of the Cash Management Bank with respect to Cash Management Accounts or Lender's
liability under any Cash Management Agreement with such Cash Management Bank is
no longer acceptable in Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrower is hereby deemed to
have granted a Lien to Lender.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item
by Lender (whether from transfers to Lender by the Cash Management Banks
pursuant to the Cash Management Agreements or otherwise) shall not be considered
a payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Lender's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrower shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Lender only if it is received into the Lender's Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is
received into the Lender's Account on a non-Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received by
Lender as of the opening of business on the immediately following Business Day.
From and after the Effective Date, Lender shall be entitled to charge Borrower
for one Business Day of `clearance' or `float' at the rate applicable to Base
Rate Loans under Section 2.6 on all Collections that are received by Borrower
(regardless of whether forwarded by the Cash Management Banks to Lender). This
across-the-board one 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 one Business Day of interest on
such Collections.
2.9 DESIGNATED ACCOUNT. Lender is authorized to make the Advances and
the Term Loan under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Person, or without
instructions if pursuant to Section 2.6(d). Borrower agrees to establish and
maintain the Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Advances requested by Borrower and made by
Lender hereunder. Unless otherwise agreed by Lender and Borrower, any Advance
requested by Borrower and made by Lender hereunder shall be made to the
Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with the Term Loan, all Advances
made by Lender to Borrower or for Borrower's account, and with all other payment
Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Expenses. In accordance with Section
2.8, the Loan Account will be credited with all payments received by Lender from
Borrower or for Borrower's account, including all amounts received in the
Lender's Account from any Cash
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<PAGE> 32
Management Bank. Lender shall render statements regarding the Loan Account to
Borrower, including principal, interest, fees, and including an itemization of
all charges and expenses constituting Lender Expenses owing, and such statements
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Lender unless, within 30 days after receipt
thereof by Borrower, Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Lender the following fees and
charges, which fees and charges shall be non-refundable when paid (irrespective
of whether this Agreement is terminated thereafter):
(a) UNUSED LINE FEE. On the first day of each month following
the Closing Date, an unused line fee in an amount equal to 0.375% per annum
times the result of (a) the Maximum Revolver Amount, less (b) the average Daily
Balance of Advances that were outstanding during the immediately preceding
month,
(b) FACILITY FEE. A facility fee of $275,000, which shall be
fully earned on the Effective Date, payable $150,000 on the Closing Date,
$62,500 on the first anniversary of the Effective Date and $62,500 on the second
anniversary of the Effective Date.
(c) SERVICING FEE. On the first day of each month during the
term of this Agreement, commencing with the first month following the Closing
Date, and thereafter so long as any Obligations are outstanding, a servicing fee
in an amount equal to $2,000.
(d) FEE LETTER FEES. As and when due and payable under the
terms of the Fee Letter, Borrower shall pay to Lender the fees set forth in the
Fee Letter, and
(e) AUDIT, APPRAISAL, AND VALUATION CHARGES. Audit, appraisal,
and valuation fees and charges as follows (i) a fee of $750 per day, per
auditor, plus out-of-pocket expenses for each financial audit of Borrower
performed by personnel employed by Lender, (ii) if implemented, a one time
charge of $3,000 plus out-of-pocket expenses for expenses for the establishment
of electronic collateral reporting systems, (iii) [intentionally deleted], and
(iv) the actual charges paid or incurred by Lender if it elects to employ the
services of one or more third Persons to perform financial audits of Borrower,
to appraise the Collateral, or any portion thereof, or to assess Borrower's
business valuation.
2.12 [INTENTIONALLY DELETED]
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrower shall have the
option (the "LIBOR Option") to have interest on all or a portion of the Advances
be charged at the LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on
the earliest of (i) the last day of the Interest Period applicable thereto, (ii)
the occurrence of an Event of Default in consequence of which Lender has elected
to accelerate the maturity of the Obligations, (iii) termination of this
Agreement pursuant to the terms
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hereof, or (iv) the first day of each month that such LIBOR Rate Loan is
outstanding. On the last day of each applicable Interest Period, unless Borrower
properly has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any
time that an Event of Default has occurred and is continuing, Borrower no longer
shall have the option to request that Advances bear interest at the LIBOR Rate
and Lender shall have the right to convert the interest rate on all outstanding
LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.
(b) LIBOR ELECTION.
(i) Borrower may, at any time and from time to time, so
long as no Event of Default has occurred and is continuing, elect to exercise
the LIBOR Option by notifying Lender prior to 11:00 a.m. (California time) at
least 3 Business Days prior to the commencement of the proposed Interest Period
(the "LIBOR Deadline"). Notice of Borrower's election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Lender of a LIBOR Notice received by Lender
before the LIBOR Deadline, or by telephonic notice received by Lender before the
LIBOR Deadline (to be confirmed by delivery to Lender of a LIBOR Notice received
by Lender prior to 5:00 p.m. (California time) on the same day.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrower. In connection with each LIBOR Rate Loan, Borrower shall indemnify,
defend, and hold Lender and its Participants harmless against any loss, cost, or
expense incurred by Lender as a result of (a) the payment of any principal of
any LIBOR Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of
any LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any LIBOR
Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto
(such losses, costs, and expenses, collectively, "Funding Losses"). Funding
Losses shall be deemed to equal the amount determined by Lender to be the
excess, if any, of (i) the amount of interest that would have accrued on the
principal amount of such LIBOR Rate Loan had such event not occurred, at the
LIBOR Rate that would have been applicable thereto, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert, or continue, for the period that
would have been the Interest Period therefor), minus (ii) the amount of interest
that would accrue on such principal amount for such period at the interest rate
which Lender would be offered were it to be offered, at the commencement of such
period, Dollar deposits of a comparable amount and period in the London
interbank market. A certificate of Lender delivered to Borrower setting forth
any amount or amounts that Lender is entitled to receive pursuant to this
Section shall be conclusive absent manifest error.
(iii) Borrower shall have not more than 5 LIBOR Rate Loans
in effect at any given time. Borrower only may exercise the LIBOR Option for
LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000 in
excess thereof.
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(c) PREPAYMENTS. Borrower may prepay LIBOR Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Lender of proceeds of Collections in accordance with Section
2.4(b) or for any other reason, including early termination of the term of this
Agreement or acceleration of the Obligations pursuant to the terms hereof,
Borrower shall indemnify, defend, and hold Lender and its Participants harmless
against any and all Funding Losses in accordance with clause (b)(ii) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Lender on a
prospective basis to take into account any additional or increased costs to
Lender of maintaining or obtaining any eurodollar deposits or increased costs
due to changes in applicable law occurring subsequent to the commencement of the
then applicable Interest Period, including changes in tax laws (except changes
of general applicability in corporate income tax laws) and changes in the
reserve requirements imposed by the Board of Governors of the Federal Reserve
System (or any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing interest at the
LIBOR Rate. In any such event, Lender shall give Borrower notice of such a
determination and adjustment and, upon its receipt of the notice from Lender,
Borrower may, by notice to Lender (y) require Lender to furnish to Borrower a
statement setting forth the basis for adjusting such LIBOR Rate and the method
for determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans
with respect to which such adjustment is made (together with any amounts due
under clause (b)(ii) above).
(ii) In the event that any change in market conditions or
any law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date hereof,
in the reasonable opinion of Lender, make it unlawful or impractical for Lender
to fund or maintain LIBOR Advances or to continue such funding or maintaining,
or to determine or charge interest rates at the LIBOR Rate, Lender shall give
notice of such changed circumstances to Borrower and (y) in the case of any
LIBOR Rate Loans that are outstanding, the date specified in Lender's notice
shall be deemed to be the last day of the Interest Period of such LIBOR Rate
Loans, and interest upon the LIBOR Rate Loans thereafter shall accrue interest
at the rate then applicable to Base Rate Loans, and (z) Borrower shall not be
entitled to elect the LIBOR Option until Lender determines that it would no
longer be unlawful or impractical to do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the contrary
contained herein notwithstanding, neither Lender, nor any of its Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section shall apply as if Lender or its Participants had
match funded any Obligation as to which interest is accruing at the LIBOR Rate
by acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for
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<PAGE> 35
banks or bank holding companies, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by Lender or its parent bank holding
company with any guideline, request, or directive of any such entity regarding
capital adequacy (whether or not having the force of law), has the effect of
reducing the return on Lender's or such holding company's capital as a
consequence of Lender's obligations hereunder to a level below that which Lender
or such holding company could have achieved but for such adoption, change, or
compliance (taking into consideration Lender's or such holding company's then
existing policies with respect to capital adequacy and assuming the full
utilization of such entity's capital) by any amount deemed by Lender to be
material, then Lender may notify Borrower thereof. Following receipt of such
notice, Borrower agrees to pay Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by Lender of a statement in the amount and setting forth
in reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error). In determining such amount, Lender may use any
reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE AND TERM LOAN. The
obligation of Lender to make the initial Advance or the Term Loan (or otherwise
to extend any credit provided for hereunder), is subject to the fulfillment, to
the satisfaction of Lender, of each of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before August 7, 2000;
(b) Lender shall have received all financing statements required
by Lender, duly executed by Borrower;
(c) Lender shall have received each of the following documents,
in form and substance satisfactory to Lender, duly executed, and each such
document shall be in full force and effect:
(i) [INTENTIONALLY DELETED],
(ii) the Intellectual Property Security Agreement,
(iii) the Disbursement Letter,
(iv) [INTENTIONALLY DELETED],
(v) [INTENTIONALLY DELETED],
(vi) [INTENTIONALLY DELETED],
(vii) the Cash Management Agreements,
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(viii) the Officers' Certificate,
(ix) the Stock Pledge Agreement, together with
certificates representing the shares of Stock pledged thereunder and designated
with an asterisk on Schedule 5.8(c), as well as Stock powers with respect to all
certificates representing the shares of Stock pledged hereunder and endorsed in
blank,
(x) [INTENTIONALLY DELETED], and
(xi) [INTENTIONALLY DELETED];
(d) Lender shall have received a certificate from the Secretary
of Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(e) Lender shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Effective Date,
certified by the Secretary of Borrower;
(f) Lender shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Effective 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;
(g) Lender shall have received certificates of status with
respect to Borrower, each dated within 30 days of the Effective Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of Borrower) in which its failure to be
duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;
(h) [INTENTIONALLY DELETED];
(i) [INTENTIONALLY DELETED];
(j) [INTENTIONALLY DELETED];
(k) [INTENTIONALLY DELETED];
(l) Lender shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be satisfactory to Lender;
(m) [INTENTIONALLY DELETED];
(n) Lender shall have received an opinion of Borrower's counsel
in form and substance satisfactory to Lender;
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(o) Lender shall have received satisfactory evidence (including
a certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(p) Borrower shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(q) Lender shall have completed its business, legal, and
collateral due diligence, including a collateral audit and review of Borrower's
books and records and verification of Borrower's representations and warranties
to Lender, the results of which shall be satisfactory to Lender;
(r) Lender shall have received completed reference checks with
respect to Borrower's senior management, the results of which are satisfactory
to Lender in its sole discretion;
(s) [INTENTIONALLY DELETED];
(t) Lender shall have received Borrower's Effective Date
Business Plan;
(u) Borrower shall pay all Lender Expenses incurred in
connection with the transactions evidenced by this Agreement;
(v) [INTENTIONALLY DELETED];
(w) [INTENTIONALLY DELETED];
(x) Borrower shall have delivered to Lender certified copies of
copyright registrations with the U.S. Copyright Office with respect to software
satisfactory to Lender;
(y) Borrower shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Borrower of this Agreement or any other Loan
Document or with the consummation of the transactions contemplated hereby and
thereby; and
(z) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Lender.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL ADVANCE. The obligation of
Lender to continue to make Advances (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of each of
the conditions subsequent set forth below (the failure by Borrower to so perform
or cause to be performed constituting an Event of Default):
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(a) within 10 days of the Effective Date, Borrower shall deliver
to Lender executed documents required by Lender in order to comply with Canadian
law respecting the grant and perfection of the security interest in favor of
Lender in Accounts whose Account Debtors are located or organized in Canada;
(b) within 30 days of the Effective Date, Borrower shall deliver
to Lender certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and substance of
which shall be satisfactory to Lender and its counsel;
(c) within 30 days of the Effective Date, Borrower shall deliver
to Lender fully executed Collateral Access Agreements with respect to the
following locations: 195 Technology Drive, Irvine, California 92618; and 5010
Woodbridge Vista Drive, San Diego, California 92121;
(d) within 30 days of the Effective Date, Borrower shall deliver
to Lender a fully executed Control Agreement among Lender, Borrower and Morgan
Stanley with respect to Borrower's Investment Property maintained at Morgan
Stanley; and
(e) within 60 days of the Effective Date, Borrower shall have
segregated, for financial reporting purposes, Accounts derived from maintenance
contracts from Accounts derived from licensing, in form and substance
satisfactory to Lender.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation
of Lender to make all Advances or the Term Loan (or to extend any other credit
hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date),
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof,
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
Borrower, Lender, or any of their Affiliates.
(d) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Lender and shall continue in full force and
effect for a term ending on August 1, 2003 (the "Maturity Date"). The foregoing
notwithstanding, Lender shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
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3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of its duties, Obligations, or covenants hereunder, and the
Lender's Liens in the Collateral shall remain in effect until all Obligations
have been fully and finally discharged and Lender's obligations to provide
additional credit hereunder have been terminated. When this Agreement has been
terminated and all of the Obligations have been fully and finally discharged and
Lender's obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, Lender will, at Borrower's sole expense, execute
and deliver any UCC termination statements, lien 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 Lender's Liens and all notices of security interests and liens
previously filed by Lender with respect to the Obligations.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any
time upon 90 days prior written notice to Lender, to terminate this Agreement by
paying to Lender, in cash, the Obligations in full, together with the Applicable
Prepayment Premium. If Borrower has sent a notice of termination pursuant to the
provisions of this Section, then Lender's obligations to extend credit hereunder
shall terminate and Borrower shall be obligated to repay the Obligations in
full, together with the Applicable Prepayment Premium, on the date set forth as
the date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of Lender to terminate after the occurrence of an Event of Default, (b)
foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (iv) restructure, reorganization, or compromise of the
Obligations by the confirmation of a plan of reorganization or any other plan of
compromise, restructure, or arrangement in any Insolvency Proceeding, then, in
view of the impracticability and extreme difficulty of ascertaining the actual
amount of damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of Lender, Borrower
shall pay the Applicable Prepayment Premium to Lender, measured as of the date
of such termination. Notwithstanding any provision to the contrary herein
provided, Borrower shall not be liable for any Applicable Prepayment Premium if
this Agreement is terminated as a direct result of Borrower's refinancing the
Obligations through a commercial banking unit of Wells Fargo.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Lender a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all of the Obligations in accordance with the
terms and conditions of the Loan Documents and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. The Lender's Liens in and to the Collateral shall attach to all
Collateral without further act on the part of Lender or Borrower (or Canadian
Subsidiary, where applicable). Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrower (or Canadian Subsidiary, where applicable) has no
authority, express or implied, to dispose of any item or portion of the
Collateral.
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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 Lender's security interest is
dependent on or enhanced by possession, Borrower, immediately upon the request
of Lender, shall endorse and deliver physical possession of such Negotiable
Collateral to Lender.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors of
Borrower (or Canadian Subsidiary, where applicable) that the Accounts, chattel
paper, or General Intangibles have been assigned to Lender or that Lender has a
security interest therein, or (b) collect the Accounts, chattel paper, or
General Intangibles directly and charge the collection costs and expenses to the
Loan Account. Each of Borrower and Canadian Subsidiary agrees that it will hold
in trust for Lender, as Lender's trustee, any Collections that it receives and
immediately will deliver said Collections to Lender or a Cash Management Bank in
their original form as received by Borrower (or Canadian Subsidiary, where
applicable).
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Lender, each of Borrower and Canadian Subsidiary shall execute
and deliver to Lender, any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of title, and all
other documents (the "Additional Documents") that Lender may request in its
Permitted Discretion, in form and substance satisfactory to Lender, to perfect
and continue perfected or better perfect the Lender's Liens in the Collateral
(whether now owned or hereafter arising or acquired), and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by applicable law, Borrower (or
Canadian Subsidiary, where applicable) authorizes Lender to execute any such
Additional Documents in Borrower's (or Canadian Subsidiary's, where applicable)
name and authorizes Lender to file such executed Additional Documents in any
appropriate filing office. In addition, on such periodic basis as Lender shall
require, Borrower shall (a) provide Lender with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by Borrower
during the prior period, (b) cause all patents, copyrights, and trademarks
acquired or generated by Borrower that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrower's ownership thereof,
and (c) cause to be prepared, executed, and delivered to Lender supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each of Borrower and Canadian Subsidiary
hereby irrevocably makes, constitutes, and appoints Lender (and any of Lender's
officers, employees, or agents designated by Lender) as Borrower's and Canadian
Subsidiary's true and lawful attorney, with power to (a) if Borrower or Canadian
Subsidiary refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower or Canadian
Subsidiary on any of the documents described in Section 4.4, (b) at any time
that an Event of
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Default has occurred and is continuing, sign Borrower's (or Canadian
Subsidiary's, where applicable) name on any invoice or bill of lading relating
to the Collateral, drafts against Account Debtors, or notices to Account
Debtors, (c) send requests for verification of Accounts, (d) endorse Borrower's
(or Canadian Subsidiary's, where applicable) name on any Collection item that
may come into Lender's possession, (e) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (f) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Lender determines to be reasonable, and Lender
may cause to be executed and delivered any documents and releases that Lender
determines to be necessary. The appointment of Lender as Borrower's and
Canadian's Subsidiary's attorney, and each and every one of its rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Lender's
obligations to extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Lender and its officers, employees, or agents
shall have the right, during customary business hours, from time to time
hereafter to inspect the Books and to check, test, and appraise the Collateral
in order to verify Borrower's (or Canadian Subsidiary's, where applicable)
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Borrower agrees that it will not transfer
assets out of any Securities Accounts other than as permitted under Section 7.19
and, if to another securities intermediary, unless each of Borrower, Lender, and
the substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other Investment Property shall be modified by Borrower
without the prior written consent of Lender. Upon the occurrence and during the
continuance of a Default or Event of Default, Lender may notify any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof to
the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement, Borrower makes
the following representations and warranties to Lender which shall be true,
correct, and complete, in all material respects, as of the date hereof, and
shall be true, correct, and complete, in all material respects, as of the
Effective Date, and at and as of the date of the making of each Advance and the
Term Loan (or other extension of credit) made thereafter, as though made on and
as of the date of such Advance or the Term Loan (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each of Borrower and Canadian Subsidiary has
good and indefeasible title to the Collateral, free and clear of Liens except
for Permitted Liens.
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5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide existing
payment obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the ordinary
course of Borrower's (or Canadian Subsidiary's, where applicable) business, owed
to Borrower (or Canadian Subsidiary, where applicable) without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. As to
each Eligible Account, such Account is not:
(a) owed by an employee, Affiliate, or agent of Borrower (or
Canadian Subsidiary, where applicable),
(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 in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a right
of setoff, has disputed its liability, or has made any claim with respect to its
obligation to pay the Account,
(e) owed by an Account Debtor that is subject to any Insolvency
Proceeding or is not Solvent or as to which Borrower (or Canadian Subsidiary,
where applicable) has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(f) on account of a transaction as to which the goods giving
rise to such Account have not been shipped and billed to the Account Debtor or
the services giving rise to such Account have not been performed and accepted by
the Account Debtor,
(g) a right to receive progress payments or other advance
billings that are due prior to the completion of performance by Borrower (or
Canadian Subsidiary, where applicable) of the subject contract for goods or
services, and
(h) an Account that has not been billed to the customer.
5.3 INVENTORY. All Inventory is of good and merchantable quality,
free from defects. As to each item of Inventory, such Inventory is:
(a) owned by Borrower free and clear of all Liens other than
Liens in favor of Lender,
(b) either located at one of the locations set forth on Schedule
5.5 or in transit from one such location to another such location,
(c) not located on real property leased by Borrower or in a
contract warehouse, in each case, unless subject to a Collateral Access
Agreement executed by the lessor, the warehouseman, or other third party, as the
case may be, and unless segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises,
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(d) not goods that have been returned or rejected by Borrower's
customers, and
(e) not goods that are obsolete or slow moving, restrictive or
custom items, work-in-process, or that constitute spare parts, packaging and
shipping materials, supplies used or consumed in Borrower's business, bill and
hold goods, defective goods, "seconds," or Inventory acquired on consignment.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party and are located
only at the locations identified on Schedule 5.5.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in Schedule 5.7 and
Borrower's FEIN is identified in Schedule 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Effective Date, a description of the number of shares of each such class
that are issued and outstanding. Other than as described on Schedule 5.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower 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(c), is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization, (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries, and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower. All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
Subsidiaries' capital Stock, including any
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right of conversion or exchange under any outstanding security or other
instrument. Neither Borrower nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of Borrowers' Subsidiaries' capital Stock or any security
convertible into or exchangeable for any such capital Stock.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation of Borrower,
(iii) result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Borrower, other than Permitted
Liens, or (iv) require any approval of Borrower's interest holders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the filing of financing statements and fixture
filings, the execution, delivery, and performance by Borrower of this Agreement
and the Loan Documents to which Borrower is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents to which
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Lender's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
(f) [INTENTIONALLY DELETED]
(g) [INTENTIONALLY DELETED]
(h) [INTENTIONALLY DELETED]
(i) [INTENTIONALLY DELETED]
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5.10 LITIGATION. Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower, or any of its Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), and (b) matters arising after the Effective Date
that, if decided adversely to Borrower, or any of its Subsidiaries, as
applicable, reasonably could not be expected to result in a Material Adverse
Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower that have been delivered by Borrower to Lender have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrower's financial condition as of
the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrower since the date of
the latest financial statements submitted to Lender on or before the Effective
Date.
5.12 FRAUDULENT TRANSFER.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on Schedule 5.14,
(a) to Borrower's knowledge, none of Borrower's assets has ever been used by
Borrower or by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of applicable Environmental Law, (b) to Borrower's
knowledge, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) Borrower has not received notice that a
Lien arising under any Environmental Law has attached to any revenues or to any
Real Property owned or operated by Borrower, and (d) Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
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omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 BROKERAGE FEES. Borrower has not utilized the services of any
broker or finder in connection with Borrower's obtaining financing from Lender
under this Agreement and no brokerage commission or finders fee is payable by
Borrower in connection herewith.
5.16 INTELLECTUAL PROPERTY. Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which Borrower is the owner or is an exclusive
licensee.
5.17 LEASES. Borrower enjoys peaceful and undisturbed possession under
all leases material to the business of Borrower 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 Borrower exists under any of them.
5.18 DDAs. Set forth on Schedule 5.18 are all of Borrower's DDAs,
including, with respect to each depository (i) the name and address of such
depository, and (ii) the account numbers of the accounts maintained with such
depository.
5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents,
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrower
in writing to Lender will be, true and accurate, in all material respects, on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided. On the Effective Date,
the Effective Date Business Plan represents, and as of the date on which any
other Projections are delivered to Lender, such additional Projections represent
Borrower's good faith best estimate of its future performance for the periods
covered thereby.
5.20 INDEBTEDNESS. Set forth on Schedule 5.20 is a true and complete
list of all Indebtedness of Borrower outstanding immediately prior to the
Effective Date that is to remain outstanding after the Effective Date; such
Schedule accurately reflects the aggregate principal amount of such
Indebtedness, and Borrower has delivered to Lender complete and accurate copies
of all agreements (and amendments thereto) evidencing such Indebtedness.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall and shall cause each of its Subsidiaries to do all of the following:
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6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. Borrower also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Lender with the following documents
at the following times in form satisfactory to Lender:
<TABLE>
<S> <C>
Weekly until the (a) a sales journal, collection journal, and credit register since the
first Advance is last such schedule and a calculation of the Borrowing Base as of such date, and
made, and
thereafter daily (b) notice of all returns, disputes, or claims.
Monthly (not (c) Inventory reports specifying Borrower's cost, by category, with
later than the additional detail showing additions to and deletions from the Inventory.
15th day of each
month) (d) a detailed calculation of the Borrowing Base (including
detail regarding those Accounts that are not Eligible
Accounts),
(e) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the
Borrowing Base previously provided to Lender,
(f) a summary aging, by vendor, of Borrower's accounts
payable and any book overdraft, and
(g) a calculation of Dilution for the prior month.
Quarterly (h) a detailed list of Borrower's and Canadian Subsidiary's customers,
(i) a report regarding Borrower's accrued, but unpaid, ad valorem taxes,
Upon request by (j) copies of invoices in connection with the Accounts,
Lender credit memos, remittance advices, deposit slips, shipping
and delivery documents in connection with the Accounts and,
for Inventory and Equipment acquired by Borrower, purchase
orders and invoices, and
(k) such other reports as to the Collateral, or the
financial condition of Borrower and Canadian Subsidiary, as
Lender may request.
</TABLE>
In addition, and subject to Section 2.11(e)(ii), Borrower agrees
to cooperate fully with Lender to facilitate and implement a system of
electronic collateral reporting in order to provide electronic reporting of each
of the items set forth above.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Lender:
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(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Borrower's
fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and its Subsidiaries'
operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present in all material
respects the financial condition of Borrower and its Subsidiaries,
(B) the representations and warranties of
Borrower and Canadian Subsidiary contained in this Agreement and the other Loan
Documents are true and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date), and
(C) there does not exist any condition or event
that constitutes a Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is taking, or proposes to take
with respect thereto),
(iii) for each month that is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such period with
the applicable financial covenants contained in Section 7.20, and
(iv) within 30 days after the end of each fiscal quarter
during each of Borrower's fiscal years, a Compliance Certificate setting forth,
in reasonable detail, the Twelve Month Trailing EBITDA, and
(b) as soon as available, but in any event within 90 days after
the end of each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries
for each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Lender (and Ernst & Young and any other nationally
recognized public accounting firm shall be deemed reasonably acceptable to
Lender) and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow and, if
prepared, such accountants' letter to management),
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(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default under Sections 7.20(a) and 7.20(b),
(c) as soon as available, but in any event within 30 days prior
to the start of each of Borrower's fiscal years,
(i) copies of Borrower's Projections, in form, substance
(including as to scope and underlying assumptions) and detail comparable to
Projections either previously delivered to Lender and/or otherwise reasonably
acceptable to Lender for the forthcoming three 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 Borrower during the period covered thereby,
(d) if and when filed by Borrower, and to the extent not already
delivered,
(i) Form 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and
any amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Borrower to
its shareholders generally,
(e) if and when filed by Borrower and as requested by Lender,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) Borrower conducts business or is required to pay any
such excise tax, (ii) where Borrower's failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of Borrower, or (iii)
where Borrower's failure to pay any such applicable excise tax reasonably could
be expected to result in a Material Adverse Change,
(f) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrower proposes to take with respect
thereto, and
(g) upon the request of Lender, any other report reasonably
requested relating to the financial condition of Borrower and Canadian
Subsidiary.
In addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on both a consolidated
and consolidating basis and agrees that no Subsidiary of Borrower will have a
fiscal year different from that of Borrower. Borrower agrees that its
independent certified public accountants are authorized to communicate with
Lender and to release to Lender whatever financial information concerning
Borrower Lender reasonably may request. Borrower waives the right to assert a
confidential relationship, if any, it may have with
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any accounting firm or service bureau in connection with any information
requested by Lender pursuant to or in accordance with this Agreement, and agrees
that Lender may contact directly any such accounting firm or service bureau in
order to obtain such information.
6.4 [INTENTIONALLY DELETED]
6.5 RETURN. Cause returns and allowances, as between Borrower (or
Canadian Subsidiary, where applicable) and its Account Debtors, to be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. If, at a
time when no Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to Borrower (or Canadian Subsidiary, where applicable),
Borrower (or Canadian Subsidiary, where applicable) promptly shall determine the
reason for such return and, if Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Lender) in the appropriate amount to such
Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to Borrower (or Canadian
Subsidiary, where applicable), Borrower (or Canadian Subsidiary, where
applicable) promptly shall determine the reason for such return and, if Lender
consents (which consent shall not be unreasonably withheld), issue a credit
memorandum (with a copy to be sent to Lender) in the appropriate amount to such
Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee
so as to prevent any loss or forfeiture thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its assets to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that Borrower has made such payments or deposits. Upon Lender's request,
Borrower shall deliver satisfactory evidence of payment of applicable excise
taxes in each jurisdictions in which Borrower is required to pay any such excise
tax.
6.8 INSURANCE.
(a) At Borrower's expense, maintain insurance respecting its
assets wherever located, covering loss or damage by fire, theft, explosion, and
all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrower also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such
policies of insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to Lender. Borrower shall deliver copies of all
such policies to Lender with a satisfactory lender's loss payable endorsement
naming Lender as sole loss payee or additional
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<PAGE> 51
insured, as appropriate. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Lender in the event of cancellation of the policy for any reason whatsoever.
(b) Borrower shall give Lender prompt notice of any loss covered
by such insurance. Lender shall have the exclusive right to adjust any losses
payable under any such insurance policies in excess of $100,000, without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Lender to be applied at the option of Lender either to the prepayment of the
Obligations or shall be disbursed to Borrower under staged payment terms
reasonably satisfactory to Lender for application to the cost of repairs,
replacements, or restorations. Any such repairs, replacements, or restorations
shall be effected with reasonable promptness and shall be of a value at least
equal to the value of the items of property destroyed prior to such damage or
destruction.
(c) Borrower 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 6.8, unless Lender is included thereon as named insured with
the loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Borrower immediately shall notify Lender whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Lender.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that Borrower may amend Schedule 5.5 so long as such amendment occurs by written
notice to Lender not less than 30 days prior to the date on which Inventory or
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Lender's Liens on such assets
and also provides to Lender a Collateral Access Agreement.
6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 LEASES. Pay when due all rents and other amounts payable under
any leases to which Borrower is a party or by which Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from Lender under this Agreement. Borrower agrees and acknowledges
that payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Borrower, and Borrower agrees to
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indemnify, defend, and hold Lender harmless from and against any claim of any
broker or finder arising out of Borrower's obtaining financing from Lender under
this Agreement.
6.13 EXISTENCE. At all times preserve and keep in full force and
effect Borrower's valid existence and good standing and any rights and
franchises material to Borrower's businesses.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by Borrower free
of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens,
(b) comply, in all material respects, with Environmental Laws
and provide to Lender documentation of such compliance which Lender reasonably
requests,
(c) promptly notify Lender of any release of a Hazardous
Material in any reportable quantity from or onto property owned or operated by
Borrower and take any Remedial Actions required to abate said release or
otherwise to come into compliance with applicable Environmental Law, and
(d) promptly provide Lender with written notice within 10 days
of the receipt of any of the following:
(i) notice that an Environmental Lien has been filed
against any of the real or personal property of Borrower,
(ii) commencement of any Environmental Action or notice
that an Environmental Action will be filed against Borrower, and
(iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (a) notify Lender if any
written information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgment,
filing, or recordation thereof.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not and will not permit any of its Subsidiaries to do any of the following:
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7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents,
(b) Indebtedness set forth on Schedule 5.20,
(c) Permitted Purchase Money Indebtedness,
(d) Subordinated Debt owed to any Affiliate of Borrower in an
aggregate amount not to exceed $50,000 outstanding at any one time;
(e) Subordinated Debt not otherwise permitted under this Section
7.1 in an aggregate amount not to exceed $250,000 outstanding at any one time;
and
(f) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), and (c), (d) and (e) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not, in Lender's judgment, materially impair the prospects of repayment of the
Obligations by Borrower or materially impair Borrower's creditworthiness, (ii)
such refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or restrictive
to Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or
extended was subordinated in right of payment to the Obligations, then the terms
and conditions of the refinancing, renewal, or extension Indebtedness must
include subordination terms and conditions that are at least as favorable to
Lender as those that were applicable to the refinanced, renewed, or extended
Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
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(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
(d) Make any material change in the timing of billing for any
maintenance contract included in the Collateral.
7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of
Borrower's assets.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure,
or identity, or add any new fictitious name; provided, however, that Borrower
may change its name upon at least 30 days prior written notice to Lender of such
change and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Lender's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Lender.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
its business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by Section
7.1(f), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Borrower, other than the Obligations in accordance with this Agreement, and
(b) Except in connection with a refinancing permitted by Section
7.1(f), 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), (c), (d) or (e).
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.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock or securities
convertible into common Stock) on, or purchase, acquire, redeem, or retire any
of Borrower'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 enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Borrower's accounting records without authorizing said
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accounting firm or service bureau to communicate with and provide information to
Lender in accordance with Section 6.3.
7.13 INVESTMENTS. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrower shall not have Permitted Investments (other than in the
Cash Management Accounts) in excess of $50,000 outstanding at any one time
unless Borrower and the applicable securities intermediary or bank have entered
into Control Agreements governing such Permitted Investments, as Lender shall
determine in its Permitted Discretion, to perfect (and further establish) the
Lender's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any transaction with any Affiliate of Borrower except for
transactions that are in the ordinary course of Borrower's business, upon fair
and reasonable terms, that are fully disclosed to Lender, and that are no less
favorable to Borrower 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 DELETED]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the Term
Loan for any purpose other than (a) on the Closing Date, to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, the other
Loan Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Lender and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Lender's Liens and also provides to Lender a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Lender's prior written consent.
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account.
7.20 FINANCIAL COVENANTS.
(a) Fail to maintain:
(i) MINIMUM EBITDA. EBITDA, measured on a fiscal
quarter-end basis, of not less than the required amount set forth in the
following table for the applicable period set forth opposite thereto;
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<PAGE> 56
<TABLE>
<S> <C>
Applicable Amount Applicable Period
$0 For the 3 month period
ending September 30, 2000
$250,000 For the 6 month period
ending December 31, 2000
$500,000 For the 9 month period
ending March 31, 2001
$1,500,000 For the 12 month period
ending June 30, 2001
$5,500,000 For the 12 month period
ending September 30, 2001
$8,500,000 For the 12 month period
ending December 31, 2001
$8,500,000 For the 12 month period
ending March 31, 2002
$10,000,000 For the 12 month period
ending each fiscal quarter thereafter
</TABLE>
(ii) TANGIBLE NET WORTH. Tangible Net Worth of at least the
required amount set forth in the following table as of the applicable date set
forth opposite thereto:
<TABLE>
<S> <C>
Applicable Amount Applicable Date
$30,000,000 September 30, 2000
$33,000,000 December 31, 2000
$34,000,000 March 31, 2001
$36,000,000 June 30, 2001
$38,000,000 September 30, 2001
$43,000,000 December 31, 2001
$55,000,000 March 31, 2002
$60,000,000 The last date of any fiscal
quarter thereafter
</TABLE>
(b) CAPITAL EXPENDITURES. Make Capital expenditures in any
fiscal year (or portion thereof, as applicable) in excess of the amount set
forth in the following table for the applicable period:
<TABLE>
<CAPTION>
Second Half of
Fiscal Year 2000 Fiscal Year 2001 Fiscal Year 2002
<S> <C> <C>
$3,600,000 $9,600,000 $14,400,000
</TABLE>
(c) COLLECTIONS. Permit the outstanding principal balance of the
Term Loan, calculated on the first day of each month during the term of this
Agreement, to be greater than:
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(i) for the first year of the term of this Agreement, 40%
of Collections derived from maintenance agreements during the immediately
preceding twelve-month period;
(ii) for the second year of the term of this Agreement, 30%
of Collections derived from maintenance agreements during the immediately
preceding twelve-month period; and
(iii) for the third year of the term of this Agreement, 20%
of Collections derived from maintenance agreements during the immediately
preceding twelve-month period.
7.21 PERMITTED LOANS. Except for Permitted Loans, directly or
indirectly, make or acquire any loans or any advances to any Person, provided,
however, that Borrower shall not have Permitted Loans (other than Permitted
Loans listed on Schedule O-1) in excess of $500,000 outstanding at any one time.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable, or when declared
due and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Lender,
reimbursement of Lender Expenses, or other amounts constituting Obligations);
8.2 (a) If Borrower (or Canadian Subsidiary, where applicable) 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 Borrower fails or neglects to perform, keep, or observe any
covenant or other provision contained in Sections 6.1, 6.7 or 6.11 hereof and
such failure or neglect is not cured within 15 days after the date on which such
failure or neglect first occurs, or (c) if Borrower (or Canadian Subsidiary,
where applicable) fails or neglects to perform, keep, or observe any other
covenant or other provision contained in any Section of this Agreement (other
than a Section that is expressly dealt with elsewhere in this Section 8) or the
other Loan Documents (other than a Section of such other Loan Document dealt
with elsewhere in this Section 8); provided that, during any period of time that
any such failure or neglect of Borrower (or Canadian Subsidiary, where
applicable) referred to in this paragraph exists, even if such failure or
neglect is not yet an Event of Default by virtue of the existence of a grace or
cure period or the pre-condition of the giving of a notice, Lender shall be
relieved of its obligation to extend credit hereunder;
8.3 If any material portion of Borrower's or any of its Subsidiaries'
assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person;
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<PAGE> 58
8.4 If an Insolvency Proceeding is commenced by Borrower or any of
its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower, or any
of its Subsidiaries, and any of the following events occur: (a) Borrower or the
Subsidiary consents to the institution of such Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 60 calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Lender shall be relieved of
its obligations to extend credit hereunder, (d) an interim trustee is appointed
to take possession of all or any substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of, Borrower or
any of its Subsidiaries, or (e) an order for relief shall have been entered
therein;
8.6 If Borrower or any of its Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any of its Subsidiaries' assets by the United
States, or any department, agency, or instrumentality thereof, or by any state,
county, municipal, or governmental agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a Lien, whether
choate or otherwise, upon any of Borrower's or any of its Subsidiaries' assets
and the same is not paid before such payment is delinquent;
8.8 If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of Borrower's or any of its Subsidiaries' assets;
8.9 If there is a default in any material agreement to which Borrower
or any of its Subsidiaries is a party and such default (a) occurs at the final
maturity of the obligations thereunder, or (b) results in a right by the other
party thereto, irrespective of whether exercised, to accelerate the maturity of
Borrower's or its Subsidiaries' obligations thereunder, to terminate such
agreement, or to refuse to renew such agreement pursuant to an automatic renewal
right therein;
8.10 If Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Borrower, its Subsidiaries, or any officer, employee, agent, or director of
Borrower or any of its Subsidiaries;
8.12 [INTENTIONALLY DELETED]; or
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8.13 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.14 Any material provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower, or a proceeding shall be commenced by
Borrower, or by any Governmental Authority having jurisdiction over Borrower,
seeking to establish the invalidity or unenforceability thereof, or Borrower
shall deny that Borrower has any liability or obligation purported to be created
under any Loan Document.
9. LENDER'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, Lender (at its election but without notice
of its election and without demand) may do any one or more of the following, all
of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Lender;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit Borrower's Loan Account with only the net amounts
received by Lender in payment of such disputed Accounts after deducting all
Lender Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;
(f) Without notice to or demand upon Borrower or Canadian
Subsidiary, make such payments and do such acts as Lender considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Collateral if Lender so requires, and to make the Collateral
available to Lender at a place that Lender may designate which is reasonably
convenient to both parties. Borrower authorizes Lender to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
Lien that in Lender's determination appears to
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conflict with the Lender's Liens and to pay all expenses incurred in connection
therewith and to charge Borrower's Loan Account therefor. With respect to any of
Borrower's owned or leased premises, Borrower hereby grants Lender a license to
enter into possession of such premises and to occupy the same, without charge,
in order to exercise any of Lender's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Without notice to Borrower or Canadian Subsidiary (such
notice being expressly waived), and without constituting a retention of any
collateral in satisfaction of an obligation (within the meaning of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower or Canadian Subsidiary held by Lender (including any amounts received
in the Cash Management Accounts), or (ii) Indebtedness at any time owing to or
for the credit or the account of Borrower held by Lender;
(h) Hold, as cash collateral, any and all balances and deposits
of Borrower or Canadian Subsidiary held by Lender, and any amounts received in
the Cash Management Accounts, to secure the full and final repayment of all of
the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Borrower hereby grants to Lender a license or other
right to use, without charge, Borrower's labels, patents, copyrights, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Lender'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 Lender
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Lender shall give notice of the disposition of the
Collateral as follows:
(i) Lender shall give Borrower (or Canadian Subsidiary,
where applicable) 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; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower (or Canadian Subsidiary, where applicable) as
provided in Section 12, at least 10 days before the earliest time of disposition
set forth in the notice; no notice needs to be given prior to the disposition of
any portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market;
(l) Lender may credit bid and purchase at any public sale; and
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(m) Lender may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available at
law or in equity or pursuant to any other Loan Document; and
(o) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Lender to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Lender, in its sole discretion
and without prior notice to Borrower, may do any or all of the following: (a)
make payment of the same or any part thereof, (b) set up such reserves in
Borrower's Loan Account as Lender deems necessary to protect Lender from the
exposure created by such failure, or (c) in the case of the failure to comply
with Section 6.8 hereof, obtain and maintain insurance policies of the type
described in Section 6.8 and take any action with respect to such policies as
Lender deems prudent. Any such amounts paid by Lender shall constitute Lender
Expenses and any such payments shall not constitute an agreement by Lender to
make similar payments in the future or a waiver by Lender of any Event of
Default under this Agreement. Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION
11.1 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by
Lender on which Borrower may in any way be liable.
11.2 LENDER'S LIABILITY FOR COLLATERAL. Borrower hereby agrees that:
(a) so long as Lender complies with its obligations, if any, under the Code,
Lender shall not in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral, (ii) any loss or damage
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thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
the Lender-Related Persons, each Participant, and each of their respective
officers, directors, employees, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration of this Agreement, any of the other Loan
Documents, or the transactions contemplated hereby or thereby, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The
foregoing to the contrary notwithstanding, Borrower shall have no obligation to
any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION,
THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
Borrower or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
E-mail addresses as Borrower or Lender, as applicable, may designate to each
other in accordance herewith), or telefacsimile to Borrower or Lender, as the
case may be, at its address set forth below:
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If to Borrower (or
Canadian Subsidiary): EPICOR SOFTWARE CORPORATION
195 Technology Drive
Irvine, California 92618
Attn: Lee Kim, Chief Financial Officer
Fax No. (949) 585-4412
with copies to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive
Newport Beach, California 92660
Attn: K.C. Schaaf, Esq.
Fax No. (949) 725-4100
If to Lender: FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404
Attn: Business Finance Division Manager
Fax No. (310) 478-9788
with copies to: Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, California 90067
Attn: Joel J. Berman, Esq.
Fax No. (310) 203-5067
Lender and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 12,
other than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or three Business Days after the deposit
thereof in the mail. Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED
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BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND
LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
(c) BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Lender may assign and delegate to one or more assignees (each
an "Assignee") all, or any ratable part of all, of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents;
provided, however, that so long as there has not occurred any Event of Default,
any such assignment to an Assignee which is not a Financial Institution may be
made only with Borrower's written consent, which shall not be unreasonably
withheld; provided, further however, that Borrower may continue to deal solely
and directly with Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Borrower by Lender and the Assignee, and (ii) Lender and its
Assignee have delivered to Borrower an appropriate assignment and acceptance
agreement.
(b) From and after the date that Lender provides Borrower with
such written notice and executed assignment and acceptance agreement, (i) the
Assignee thereunder shall be a
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party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment and acceptance agreement, shall have
the assigned and delegated rights and obligations of Lender under the Loan
Documents, and (ii) Lender shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned and delegated by
it pursuant to such assignment and acceptance agreement, relinquish its rights
(except with respect to Section 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an assignment and
acceptance covering all or the remaining portion of Lender's rights and
obligations under this Agreement and the other Loan Documents, Lender shall
cease to be a party hereto and thereto), and such assignment shall affect a
novation between Borrower and the Assignee.
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the rights and duties of Lender
arising therefrom.
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of such Lender (a
"Participant") participating interests in the Obligations and the other rights
and interests of Lender hereunder and under the other Loan Documents; provided,
however, that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and interests of
Lender shall not constitute a "Lender" hereunder or under the other Loan
Documents and Lender's obligations under this Agreement shall remain unchanged,
(ii) Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower and Lender shall continue to deal solely and
directly with each other in connection with Lender's rights and obligations
under this Agreement and the other Loan Documents, (iv) Lender shall not
transfer or grant any participating interest under which the Participant has the
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such Participant is participating, (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrower hereunder shall be determined
as if Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as
Lender under this Agreement. The rights of any Participant only shall be
derivative through Lender and no Participant shall have any rights under this
Agreement or the other Loan Documents or any direct rights as to Borrower, the
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Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by Lender.
(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(f) Any other provision in this Agreement notwithstanding,
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR "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 Borrower may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by Lender shall release
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 14.1 hereof and, except as expressly required pursuant to Section 14.1
hereof, no consent or approval by Borrower is required in connection with any
such assignment.
15. AMENDMENTS; WAIVERS
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by Lender and Borrower and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
15.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Lender to exercise
any right, remedy, or option under this Agreement or any other Loan Document, or
delay by Lender in exercising the same, will operate as a waiver thereof. No
waiver by Lender will be effective unless it is in writing, and then only to the
extent specifically stated. No waiver by Lender on any occasion shall affect or
diminish Lender's rights thereafter to require strict performance by Borrower of
any provision of this Agreement. Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.
16. GENERAL PROVISIONS
16.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Lender.
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16.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
16.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
16.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
16.5 WITHHOLDING TAXES. All payments made by Borrower hereunder or
under any note will be made without setoff, counterclaim, or other defense,
except as required by applicable law other than for Taxes (as defined below).
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of Lender, or (ii) to the extent
that such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Borrower shall not be required to
increase any such amounts payable to Lender if the increase in such amount
payable results from Lender's own willful misconduct or gross negligence.
Borrower will furnish to Lender as promptly as possible after the date the
payment of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by Borrower.
16.6 [INTENTIONALLY DELETED]
16.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement
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by telefacsimile also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement. The
foregoing shall apply to each other Loan Document mutatis mutandis.
16.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or the transfer to Lender of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Lender is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
16.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
16.10 CONFIDENTIALITY. In handling any confidential information so
designated in writing as such by Borrower, Lender will use good faith efforts to
exercise substantially the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (i) to
Lender's Subsidiaries or Affiliates in connection with their present or
prospective business relations with Borrower; (ii) to prospective or actual
transferees or purchasers of any interest in the Obligations; (iii) as required
by law, regulation, subpoena, or other order; (iv) as required in connection
with Lender's examination or audit; and (v) as Lender considers appropriate in
exercising rights and remedies under this Agreement. Confidential information
includes the lists of Borrower's customers to be delivered to Lender pursuant to
Section 6.2, but does not include information that either: (a) is in the public
domain or in Lender's possession when disclosed to Lender, or becomes part of
the public domain after disclosure to Lender; or (b) is disclosed to Lender by a
third party, if Lender does not know that the third party is prohibited from
disclosing the information.
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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.
EPICOR SOFTWARE CORPORATION,
a Delaware corporation
By: /s/ LEE KIM
----------------------------
Title: Vice President, Chief
Financial Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ BRIAN DUFFY
----------------------------
Title: Vice President
CONSENTED AND AGREED TO:
EPICOR SOFTWARE CANADA, LTD.,
a Canadian corporation
By: /s/ LEE KIM
----------------------------
Title: Vice President, Chief
Financial Officer
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July 26, 2000
Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, CA 90404
Attention: Mr. Brian Duffy, Vice President
Re: Amendment to Loan and Security Agreement
Dear Mr. Duffy:
Reference is made to that certain Loan and Security Agreement (the "Loan
Agreement"), dated as of July 26, 2000, by and between Foothill Capital
Corporation ("Lender") and Epicor Software Corporation ("Borrower"). Capitalized
terms, which are used herein but not defined herein, shall have the meanings
ascribed to them in the Loan Agreement.
The parties hereto agree as follows:
1. Section 3.1(x) of the Loan Agreement will be considered satisfied if
Borrower shall have delivered to Lender certified copies of copyright
registrations with the U.S. Copyright Office for software which has generated no
less than 70% of the revenues of Borrower during the three-month period ending
June 30, 2000.
2. If Borrower has not complied with Section 1 of this letter agreement
by August 7, 2000, then Borrower shall commence paying interest at six percent
(6%) per annum on a notional amount equal to the Term Loan, on the terms set
forth in Loan Agreement as though the Term Loan were made on August 7, 2000.
3. If Borrower has not complied with all provisions of Section 3.1 of
the Loan Agreement by September 15, 2000 (the "Cut-Off Date") then: (a) Lender's
commitment to make any Advances or the Term Loan under the Loan Agreement shall
immediately terminate; and (b) on the Cut-Off Date Borrower shall pay Lender the
entire fee due under Section 2.11(b) of the Loan Agreement, all of Lender's
Expenses, and all interest due under Section 2 of this letter agreement through
the Cut-Off Date.
4. Lender acknowledges that the following subsections of Section 3.1 of
the Loan Agreement have been completed: (b), (c)(other than delivery of the
Disbursement Letter and the stock certificates described in clause (c)(ix)),
(d), (e), (f), (g), (l), (n), (o), (q), (r), (t) and (y).
<PAGE> 71
This letter agreement constitutes an amendment to the Loan Agreement.
Except as expressly set forth herein, the Loan Documents are ratified and
affirmed.
Please indicate your agreement to the foregoing by executing a copy of
this letter agreement in the space below.
Sincerely,
EPICOR SOFTWARE CORPORATION
By /s/ LEE KIM
---------------------------------
Lee Kim, Chief Financial Officer
CONSENTED AND AGREED TO
FOOTHILL CAPITAL CORPORATION
By /s/ BRIAN DUFFY
--------------------------------
Brian Duffy, Vice President
<PAGE> 72
August 8, 2000
Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, CA 90404
Attention: Mr. Brian Duffy, Vice President
Re: Amendment to Loan and Security Agreement
Dear Mr. Duffy:
Reference is made to that certain Loan and Security Agreement, dated as
of July 26, 2000, by and between Foothill Capital Corporation ("Lender") and
Epicor Software Corporation ("Borrower"), as amended by letter agreement dated
July 28, 2000 (as so amended, the "Loan Agreement"). Capitalized terms, which
are used herein but not defined herein, shall have the meanings ascribed to them
in the Loan Agreement.
The parties hereto agree as follows:
1. Lender has not delivered to Borrower the documents which would be
required by Lender for Borrower to comply with Section 3.2(a) of the Loan
Agreement. Accordingly, Borrower has not complied with Section 3.2(a) of the
Loan Agreement, which non-compliance Lender hereby waives. Until such time as
Borrower has complied with Section 3.2(a) of the Loan Agreement, no Accounts
whose Account Debtors are located or organized in Canada or which are payable in
Canadian dollars shall be considered Eligible Accounts.
2. Borrower has advised Lender that Borrower wishes to establish at
Wells Fargo the investment account in which its Investment Property is
maintained. Accordingly, Section 3.2(d) of the Loan Agreement is hereby deleted
and replaced by the following:
"within 30 days of the Effective Date, Borrower shall deliver to Lender
a fully executed Control Agreement among Lender, Borrower and Wells
Fargo with respect to Borrower's Investment Property maintained at Wells
Fargo."
3. In accordance with Section 3.1(c)(ix) of the Loan Agreement, Borrower
has delivered to Lender certain of the original stock certificates described
therein. However, the certificates described below (collectively, the "UK
Certificates") and which have been delivered to Lender are deficient in numerous
respects, and Lender wishes to have replacement certificates issued so that the
authenticity and validity of the stock certificates held by Lender are not
questioned. Accordingly, Borrower agrees that within 60 days of the Effective
Date, Borrower shall deliver to Lender stock certificates reasonably acceptable
to Lender which are replacements for the UK Certificates. The UK Certificates
are as follows:
<PAGE> 73
<TABLE>
<CAPTION>
Issuer Certificate No. No. of Shares
------ --------------- -------------
<S> <C> <C>
Epicor Software (UK) Corporation 8 319,000
Epicor Software (UK) Corporation 9 79,750
</TABLE>
In addition, Borrower agrees that within 60 days of the Effective Date, Borrower
shall deliver to Lender stock certificates (or equivalents thereof) reasonably
acceptable to Lender for the following Subsidiaries of Borrower: Cypher Business
Systems, Ltd., a company organized under the laws of the United Kingdom, Epicor
Software BVI, Ltd., a company organized under the laws of the British Virgin
Islands, Epicor Software (Holdings) Ltd., a company organized under the laws of
Ireland, Epicor Software (Ireland), Ltd., a company organized under the laws of
Ireland, Epicor Software Asia PTE, Ltd., a company organized under the laws of
Singapore, DataWorks International Export Corp., a company organized under the
laws of Barbados, Epicor Nederland B.V., a company organized under the laws of
Netherlands, Epicor Nordic A.B., a company organized under the laws of Sweden,
Epicor France S.A., a company organized under the laws of France, and Evosoft
(Epicor) Software GMBH, a company organized under the laws of Germany.
Borrower acknowledges that its obligations under this Section 3 shall constitute
a condition subsequent pursuant to Section 3.2 of the Loan Agreement.
4. In accordance with Section 3.1(ix) of the Loan Agreement,
Borrower shall deliver to Lender, within 30 days of the Effective Date,
certified copies of copyright registrations with the U.S. Copyright Office with
respect to the following software:
VISTA 4.3
PFW 4.8a
This letter agreement constitutes an amendment to the Loan Agreement.
Except as expressly set forth herein, the Loan Documents are ratified and
affirmed.
Please indicate your agreement to the foregoing by executing a copy of
this letter agreement in the space below.
Sincerely,
EPICOR SOFTWARE CORPORATION
By /s/ JOHN D. IRELAND
-----------------------------
Its General Counsel/Secretary
<PAGE> 74
CONSENTED AND AGREED TO
FOOTHILL CAPITAL CORPORATION
By /s/ BRIAN DUFFY
----------------------------------
Brian Duffy, Vice President
<PAGE> 75
September 27, 2000
Foothill Capital Corporation
2450 Colorado Avenue
Suite 3000 West
Santa Monica, CA 90404
Attention: Mr. Trent Smart, Account Executive
Re: Amendment to Loan and Security Agreement
Dear Mr. Smart:
Reference is made to that certain Loan and Security Agreement, dated as
of July 26, 2000, by and between Foothill Capital Corporation ("Lender") and
Epicor Software Corporation ("Borrower"), as amended by letter agreement dated
July 26, 2000 and August 8, 2000 (as so amended, the "Loan Agreement").
Capitalized terms, which are used herein but not defined herein, shall have the
meanings ascribed to them in the Loan Agreement.
The parties hereto agree as follows:
1. In accordance with Section 3.1(c)(ix) of the Loan Agreement,
Borrower has delivered to Lender certain of the original stock certificates
described therein. However, the certificates described below (collectively, the
"UK Certificates") and which have been delivered to Lender are deficient in
numerous respects, and Lender wishes to have replacement certificates issued so
that the authenticity and validity of the stock certificates held by Lender are
not questioned. Accordingly, Borrower agrees that within 90 days of the
Effective Date, Borrower shall deliver to Lender stock certificates reasonably
acceptable to Lender which are replacements for the UK Certificates. The UK
Certificates are as follows:
<TABLE>
<CAPTION>
Issuer Certificate No. No. of Shares
------ --------------- -------------
<S> <C> <C>
Epicor Software (UK) Corporation 8 319,000
Epicor Software (UK) Corporation 9 79,750
</TABLE>
In addition, Borrower agrees that within 90 days of the Effective Date,
Borrower shall deliver to Lender stock certificates or, if unavailable,
reasonable country equivalents thereof reasonably acceptable to Lender for the
following Subsidiaries of Borrower: Cypher Business Systems, Ltd., a company
organized under the laws of the United Kingdom, Epicor Software BVI, Ltd., a
company organized under the laws of the British Virgin Islands, Epicor Software
(Holdings) Ltd., a company
1
<PAGE> 76
organized under the laws of Ireland, Epicor Software (Ireland), Ltd., a company
organized under the laws of Ireland, Epicor Software Asia PTE, Ltd., a company
organized under the laws of Singapore, DataWorks International Export Corp., a
company organized under the laws of Barbados, Epicor Nederland B.V., a company
organized under the laws of Netherlands, Epicor Nordic A.B., a company organized
under the laws of Sweden, Epicor France S.A., a company organized under the laws
of France, and Evosoft (Epicor) Software GMBH, a company organized under the
laws of Germany.
Borrower acknowledges that its obligations under this Section 1 shall
constitute a condition subsequent pursuant to Section 3.2 of the Loan Agreement.
2. In accordance with Section 3.1 of the Loan Agreement, Borrower
shall deliver to Lender, within 90 days of the Effective Date, certified copies
of copyright registrations with the U.S. Copyright Office with respect to the
following software:
VISTA 4.3
PFW 4.8a
This letter agreement constitutes an amendment to the Loan Agreement.
Except as expressly set forth herein, the Loan Documents are ratified and
affirmed.
Please indicate your agreement to the foregoing by executing a copy of
this letter agreement in the space below.
Sincerely,
EPICOR SOFTWARE CORPORATION
By /s/ JOHN D. IRELAND
-----------------------------
Its General Counsel/Secretary
CONSENTED AND AGREED TO
FOOTHILL CAPITAL CORPORATION
By /s/ TRENT SMART
Trent Smart, Account Executive
2
