Exhibit 2.5
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CREDIT AGREEMENT
Dated as of June 27, 2003
among
MINDSPEED TECHNOLOGIES, INC.,
as Borrower,
THE SUBSIDIARY GUARANTORS PARTY HERETO,
as Guarantors,
and
CONEXANT SYSTEMS, INC.,
as Lender
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TABLE OF CONTENTS
Page
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ARTICLE I Defined Terms; Rules of Construction......................................................... 1
SECTION 1.01. Defined Terms............................................................ 1
SECTION 1.02. Rules of Construction.................................................... 1
ARTICLE II The Loans................................................................................... 1
SECTION 2.01. Commitment............................................................... 1
SECTION 2.02. Loans.................................................................... 1
SECTION 2.03. Borrowing Procedure...................................................... 2
SECTION 2.04. Repayment of Loans; Evidence of Debt..................................... 2
SECTION 2.05. Interest on Loans........................................................ 3
SECTION 2.06. Termination and Reduction of Commitment.................................. 4
SECTION 2.07. Optional and Mandatory Prepayments of Loans.............................. 4
SECTION 2.08. Payments Generally....................................................... 5
SECTION 2.09. Taxes.................................................................... 5
ARTICLE III Representations and Warranties............................................................. 7
SECTION 3.01. Organization; Powers..................................................... 7
SECTION 3.02. Authorization; Enforceability............................................ 7
SECTION 3.03. Governmental Approvals; No Conflicts..................................... 8
SECTION 3.04. Financial Statements..................................................... 8
SECTION 3.05. Properties............................................................... 9
SECTION 3.06. Equity Interests and Subsidiaries; Consent............................... 10
SECTION 3.07. No Event of Default...................................................... 10
SECTION 3.08. Agreements............................................................... 11
SECTION 3.09. No Material Misstatements................................................ 11
SECTION 3.10. Solvency................................................................. 11
SECTION 3.11. Security Documents....................................................... 11
SECTION 3.12. Representations and Warranties Concerning Collateral..................... 12
ARTICLE IV Conditions of Lending....................................................................... 14
SECTION 4.01. All Loans................................................................ 14
SECTION 4.02. Closing Date Items....................................................... 15
ARTICLE V Affirmative Covenants........................................................................ 18
SECTION 5.01. Financial Statements, Reports, Etc....................................... 18
SECTION 5.02. Litigation and Other Notices............................................. 20
SECTION 5.03. Existence; Businesses and Properties..................................... 20
SECTION 5.04. Insurance................................................................ 21
SECTION 5.05. Taxes.................................................................... 22
SECTION 5.06. Maintaining Records; Access to Properties and Inspections................ 22
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SECTION 5.07. Use of Proceeds.......................................................... 22
SECTION 5.08. Payment of Obligations................................................... 23
SECTION 5.09. Compliance with Laws..................................................... 23
SECTION 5.10. Additional Collateral; Additional Guarantors............................. 23
SECTION 5.11. Security Interests; Further Assurances................................... 28
SECTION 5.12. Post-Closing Matters..................................................... 29
ARTICLE VI Negative Covenants.......................................................................... 29
SECTION 6.01. Indebtedness............................................................. 29
SECTION 6.02. Liens.................................................................... 30
SECTION 6.03. Investments, Loans and Advances.......................................... 33
SECTION 6.04. Mergers, Consolidations, Asset Sales and Purchases of Assets............. 34
SECTION 6.05. Dividends................................................................ 36
SECTION 6.06. Transactions with Affiliates............................................. 36
SECTION 6.07. Limitation on Capital Expenditures....................................... 36
SECTION 6.08. Limitation on Modifications of Indebtedness; Modifications of
Certificate of Incorporation, Other Constitutive Documents or Bylaws and
Certain Other Agreements, Etc. .......................................... 36
SECTION 6.09. Limitation on Certain Restrictions on Subsidiaries....................... 37
SECTION 6.10. Limitation on Issuance of Capital Stock.................................. 37
SECTION 6.11. Limitation on Creation of Subsidiaries................................... 38
SECTION 6.12. Sale and Leaseback Transactions.......................................... 38
SECTION 6.13. Limitation on Lease Obligations.......................................... 38
SECTION 6.14. Business................................................................. 38
SECTION 6.15. Limitation on Accounting Changes......................................... 38
SECTION 6.16. Restricted Payments...................................................... 38
SECTION 6.17. Fiscal Year.............................................................. 39
SECTION 6.18. Foreign Subsidiaries..................................................... 39
ARTICLE VII Guarantee.................................................................................. 39
SECTION 7.01. The Guarantee............................................................ 39
SECTION 7.02. Obligations Unconditional................................................ 40
SECTION 7.03. Reinstatement............................................................ 42
SECTION 7.04. Subrogation; Subordination............................................... 42
SECTION 7.05. Remedies................................................................. 42
SECTION 7.06. Instrument for the Payment of Money...................................... 43
SECTION 7.07. General Limitation on Guarantee Obligations.............................. 43
SECTION 7.08. Continuing Guarantee..................................................... 43
SECTION 7.09. Release of Guarantors.................................................... 43
ARTICLE VIII Events of Default......................................................................... 44
ARTICLE IX Miscellaneous............................................................................... 47
SECTION 9.01. Notices.................................................................. 47
SECTION 9.02. Waivers; Amendment....................................................... 48
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SECTION 9.03. Expenses; Indemnity...................................................... 49
SECTION 9.04. Successors and Assigns................................................... 50
SECTION 9.05. Survival of Agreement.................................................... 51
SECTION 9.06. Counterparts; Integration; Effectiveness................................. 51
SECTION 9.07. Severability............................................................. 52
SECTION 9.08. Right of Set-off......................................................... 52
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process............... 52
SECTION 9.10. WAIVER OF JURY TRIAL..................................................... 53
SECTION 9.11. Confidentiality.......................................................... 53
Exhibit A Defined Terms; Rules of Construction A-1
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ANNEXES
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Annex I Limitations on Guarantees and Indemnities Under Applicable Foreign Laws
Annex II Lenders' Notice Information and Commitments
Annex III Foreign Subsidiary Pledge and Guarantee Documentation
SCHEDULES
Schedule 1.01(a) Immaterial Subsidiaries
Schedule 1.01(b) Subsidiary Guarantors
Schedule 1.01(d) Certain Foreign Subsidiary Guarantors
Schedule 3.03 Governmental Approvals; Compliance with Laws
Schedule 3.05(b) Leased Properties
Schedule 3.06(a) Subsidiaries; Non-Guarantor Subsidiaries
Schedule 3.12(a) Material Items of Collateral
Schedule 3.12(b) Location of Certain Collateral
Schedule 3.12(c) Location of Loan Parties
Schedule 4.02(n) Landlord Lien Waiver and Access Agreement Properties
Schedule 5.10(b) Section 5.10(b) Listed Subsidiaries
Schedule 5.12 Post-Closing Matters
Schedule 6.01 Existing Indebtedness
Schedule 6.02 Certain Permitted Liens
Schedule 6.03 Existing Investments
Schedule 6.13 Existing Lease Obligations
EXHIBITS
Exhibit A Defined Terms; Rules of Construction
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Monthly Cash Balance Report
Exhibit E-1 Form of Agreement and Estoppel Certificate
Exhibit E-2 Form of Landlord Lien Waiver and Access Agreement
Exhibit F Form of U.S. Security Agreement
Exhibit G Form of Intercompany Note
Exhibit H Form of Joinder Agreement
Exhibit I-1 Form of Perfection Certificate
Exhibit I-2 Form of Perfection Certificate Supplement
Exhibit J Form of Note
Exhibit K Form of Financial Officer's Compliance Certificate
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CREDIT AGREEMENT
AGREEMENT, dated as of June 27, 2003 among MINDSPEED TECHNOLOGIES, INC.,
a Delaware corporation ("BORROWER"); and EACH OF THE SUBSIDIARY GUARANTORS
LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME BECOMING A PARTY
HERETO BY EXECUTION OF A JOINDER AGREEMENT (together with each other Subsidiary
Guarantor from time to time executing a Guarantee (defined herein) as required
hereunder, "GUARANTORS"); and CONEXANT SYSTEMS, INC. ("CONEXANT" or "LENDER").
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
SECTION 1.01 DEFINED TERMS. In this Agreement, terms defined in
Exhibit A shall have the meanings set forth therein, terms defined in the
preamble or other sections of this Agreement shall have the meanings set forth
therein, terms defined in the UCC and not otherwise defined in this Agreement or
the Security Documents shall have the meanings set forth in the UCC, and
capitalized terms used but not otherwise defined in this Agreement which are
defined in the Security Documents shall have the meanings set forth in the
Security Documents.
SECTION 1.02. RULES OF CONSTRUCTION. The rules of construction set
forth in Exhibit A shall apply to this Agreement and the other Loan Documents.
ARTICLE II
THE LOANS
SECTION 2.01. COMMITMENT. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, Lender agrees
to make Loans to Borrower, at any time and from time to time during the
Availability Period, in an aggregate principal amount at any time outstanding
that will not result in Lender's Exposure exceeding its Commitment. Within the
limits set forth above and subject to the terms, conditions and limitations set
forth herein, Borrower may borrow, pay or prepay and reborrow Loans.
SECTION 2.02. LOANS.
(a) Each Loan shall be in an aggregate principal amount
that is (i) an integral multiple of $1.0 million and not less than $2.0
million or (ii) equal to the remaining available balance of the
Commitment.
(b) Lender shall make each Loan to be made by it
hereunder not later than 11:00 a.m., Pacific time on the proposed date
thereof by wire transfer of immediately
available dollars to such bank deposit account in the United States as
Borrower may designate in the applicable Borrowing Request.
SECTION 2.03. BORROWING PROCEDURE. To request a Loan, Borrower
shall notify Lender of such request by delivering a duly completed Borrowing
Request not later than 10:30 a.m., Pacific time, three Business Days before the
date of the proposed Loan. Each such Borrowing Request shall specify the
following information in compliance with Section 2.02:
(a) the amount of such Loan;
(b) the date of such Loan, which shall be a Business Day;
and
(c) the location and number of Borrower's account to
which funds are to be disbursed, which shall comply with the
requirements of Section 2.02(b).
SECTION 2.04. REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) Borrower hereby unconditionally promises to pay to
Lender the then unpaid principal amount of each Loan on the Final
Maturity Date, together with all accrued and unpaid interest on such
principal amount to the date of payment.
(b) Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of Borrower
to Lender resulting from each Loan made by Lender from time to time,
including the amounts of principal and interest payable and paid to
Lender from time to time under this Agreement, including:
(i) the amount and the borrowing date of each
Loan made hereunder;
(ii) the amount of any principal or interest due
and payable or to become due and payable from Borrower to Lender
hereunder;
(iii) the amount of any principal paid, pre-paid
and repaid and the amount of any interest paid by Borrower to Lender
or added to principal hereunder; and
(iv) the amount of any other sum received by
Lender.
(c) The entries made in the accounts maintained pursuant
to Section 2.04(b) shall be prima facie evidence of the existence and
amounts of the obligations therein recorded (in the absence of manifest
error); provided, however, that the failure of Lender to maintain such
accounts or any error therein shall not in any manner affect the
obligations of Borrower to repay the Loans in accordance with their
terms.
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(d) Lender may request that its Loans be evidenced by a
Note. In such event, Borrower shall prepare, execute and deliver to
Lender a Note payable to the order of Lender (or, if requested by
Lender, to Lender and its registered assigns) and substantially in the
form of Exhibit J or in a form otherwise approved by Lender.
Thereafter, the Loans evidenced by such Note and interest thereon shall
at all times (including after assignment pursuant to Section 9.04) be
represented by one or more Notes in such form payable to the order of
the payee named therein (or, if such Note is a registered note, to such
payee and its registered assigns).
SECTION 2.05. INTEREST ON LOANS.
(a) Subject to Section 2.05(b), the principal amount of
Loans, including the amount of any accrued and unpaid interest which is
not paid in cash and added to principal as provided in Section 2.05(d),
shall bear interest at a rate of ten percent (10%) per annum.
(b) Notwithstanding the foregoing, upon the occurrence
and during the continuation of any Event of Default, the outstanding
principal amount of all Loans and, to the extent permitted by
applicable law, any interest thereon and any fees and other amounts
payable hereunder, shall thereafter bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or
other applicable bankruptcy laws) payable upon demand at a rate that is
12% per annum. Payment or acceptance of the increased rates of interest
provided for in this Section 2.05(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of
Lender.
(c) Accrued interest on each Loan may be paid in arrears
on the last Business Day of each calendar quarter and all accrued and
unpaid interest shall be paid on the Final Maturity Date and upon
termination of the Commitment; provided that, (i) interest accrued
pursuant to Section 2.05(b) shall be payable on demand and, (ii) in the
event of any repayment or prepayment of any Loan, accrued interest on
the principal amount repaid or prepaid shall be payable on the date of
such repayment or prepayment.
(d) Accrued interest not paid in cash on the last
Business Day of each calendar quarter shall be added to the principal
amount outstanding as of the last Business Day of each calendar quarter
and thereafter accrue interest (at the applicable interest rate) until
paid in cash. Any such capitalized interest shall be treated as
principal of Loans for all purposes of the Loan Documents, except that
such capitalized interest shall not be deemed Exposure for purposes of
determining the amount of principal that may be borrowed pursuant to
Section 2.01.
(e) All interest hereunder shall be computed on the basis
of a year of 365/366 days, and shall be payable for the actual number
of days elapsed (including the first day but excluding the last day).
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(f) Notwithstanding anything herein to the contrary, if
at any time the interest rate applicable to any Loan, together with all
fees, charges and other amounts that are treated as interest on such
Loan under applicable law (collectively the "CHARGES"), shall exceed
the maximum lawful rate (the "MAXIMUM RATE") that may be contracted
for, charged, taken, received or reserved by Lender in accordance with
applicable law, the rate of interest payable in respect of such Loan
hereunder, together with all Charges payable in respect thereof, shall
be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but
were not payable as a result of the operation of this Section 2.05(f)
shall be cumulated and the interest and Charges payable to such Lender
in respect of other Loans or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by Lender.
SECTION 2.06. TERMINATION AND REDUCTION OF COMMITMENT.
(a) The Commitments shall automatically terminate on the
Final Maturity Date.
(b) Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that, (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1.0
million and not less than $2.0 million and (ii) the Commitments shall
not be terminated or reduced if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.07(b), the
Exposure would exceed the Commitment.
(c) Borrower shall notify Lender of any election to
terminate or reduce its Commitment under Section 2.06(b) at least one
Business Day prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof.
Each notice delivered by Borrower pursuant to this Section 2.06(b)
shall be irrevocable. Any termination or reduction of the Commitment
shall be permanent.
(d) The Commitment may be terminated at any time an Event
of Default has occurred pursuant to and in accordance with the terms of
Article XIII.
SECTION 2.07. OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS.
(a) OPTIONAL PREPAYMENTS. Borrower shall have the right
at any time and from time to time to prepay any Loan, in whole or in
part without premium or penalty, subject to the requirements of this
Section 2.07; provided that, each partial prepayment shall be in an
amount that is an integral multiple of $1.0 million and not less than
$2.0 million.
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(b) COMMITMENT AMOUNT LOAN PREPAYMENTS. In the event of
any termination of all the Commitments, Borrower shall, on the date of
such termination, repay or prepay all its outstanding Loans. In the
event of any partial reduction of the Commitments, if the Exposure
would exceed the amount of Commitment after giving effect to such
reduction, then Borrower shall, on the date of such reduction, repay or
prepay Loans in an amount sufficient to eliminate such excess.
(c) CASH BALANCE LOAN PREPAYMENT. Borrower must repay
Loans hereunder to the extent its Cash Balance as shown in the most
recent Monthly Cash Balance Report exceeds $25,000,000.
SECTION 2.08. PAYMENTS GENERALLY. Borrower shall make each payment
required to be made by it hereunder or under any other Loan Document (whether of
principal, interest, or of amounts payable under Section 2.09, or otherwise) on
or before the time expressly required hereunder or under such other Loan
Document for such payment (or, if no such time is expressly required, prior to
11:00 a.m., Pacific time), on the date when due, in immediately available
dollars, without set-off or counterclaim. Any amounts received after such time
on any date may, in the discretion of Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to Comerica Bank, Detroit, Michigan, ABA #
072000096, Account No. 1850967629 or such other account as Lender may designate
from time to time in a written notice given to Borrower not later than two
Business Days prior to the date such payment must be made. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.
SECTION 2.09. TAXES.
(a) Any and all payments by or on account of any
obligation of Borrower hereunder or under any other Loan Document shall
be made without set-off, counterclaim or other defense and free and
clear of and without deduction or withholding for any and all
Indemnified Taxes or Other Taxes; provided that, if Borrower shall be
required by law to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary
so that after making all required deductions or withholdings (including
deductions or withholdings applicable to additional sums payable under
this Section 2.09) Lender receives an amount equal to the sum it would
have received had no such deductions or withholdings been made, (ii)
Borrower shall make such deductions or withholdings and (iii) Borrower
shall pay the full amount deducted or withheld to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
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(c) Borrower shall indemnify Lender, within ten Business
Days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by Lender on or with respect to
any payment by or on account of any Obligation of Borrower hereunder or
under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under
this Section 2.09) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. If in the reasonable
opinion of Borrower, any amount has been paid to, by or on behalf of
Lender pursuant to clause (a), (b) or this (c) of this Section 2.09
with respect to Taxes or Other Taxes which are not correctly or legally
asserted, Lender will cooperate with Borrower in seeking to obtain a
refund for the benefit of Borrower of such amount, provided that, the
rendering of any such cooperation by Lender would not, in the
reasonable opinion of Lender (i) cause Lender to incur any expense or
liability (which is not otherwise paid in full by Borrower prior to or
at the time that such expense or liability is incurred) or (ii) have
any adverse effect on Lender. A certificate as to the amount of such
payment or liability delivered to Borrower by Lender shall be
conclusive absent manifest error. If Lender receives a written notice
of Tax assessment from any Governmental Authority regarding any Tax in
respect of which indemnification may be required pursuant to this
Section 2.09(c), Lender shall notify Borrower within 120 days following
the receipt of such notice that such notice has been received;
provided, however, that the failure of Lender to provide such notice
shall not relieve Borrower of its obligation to make any
indemnification payment under this Agreement.
(d) As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by Borrower to a Governmental
Authority, Borrower shall deliver to Lender the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to Lender.
(e) On or before the Closing Date in the case of Lender,
or on or before the effective date of an Assignment and Acceptance
pursuant to which it became a Lender in the case of an assignee, and if
otherwise reasonably requested from time to time by Borrower, within 30
days of such request, each Lender which is not a U.S. Person within the
meaning of Section 7701(a)(30) of the Tax Code shall provide to
Borrower two duly completed and signed copies of Internal Revenue
Service Forms W-8BEN, or W-8ECI or successor form(s), as the case may
be, certifying as to such Lender's status for purposes of determining
exemption from United States withholding taxes with respect to all
payments to be made to Lender under this Agreement. Until Borrower and
Lender have received such forms and indicating that payments under this
Agreement are subject to an exemption from or reduction of United
States withholding tax, Borrower or Lender (if not withheld by
Borrower) shall withhold taxes from such payments at the applicable
statutory rate, without any obligation to "gross-up" or make Lender
whole under clause (a) of this Section. In
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case Lender is subject to a reduction of, rather than exemption from,
United States withholding tax, the obligation of Borrower to "gross-up"
under clause (a) of this Section shall not apply in respect of the
amount of United States withholding tax that Lender is subject to at
the time they become a party to this Agreement (provided, however, that
in the case of an assignee that becomes a Lender pursuant to Section
10.04, the obligation of Borrower to "gross-up" under clause (a) of
this Section, or indemnify for Indemnified Taxes under clause (c) of
this Section, shall apply in respect of the amount of United States
withholding tax that is applicable to payments made on or after the
date upon which the assignee first becomes a Lender to the same extent
that Borrower would have been obligated to "gross-up" under clause (a)
of this Section, or indemnify for Indemnified Taxes under clause (c) of
this Section, had Lender not made such assignment to such assignee).
(f) If (i) Lender receives a cash refund in respect of an
overpayment of Indemnified Taxes or Other Taxes from a Governmental
Authority with respect to, and actually resulting from, an amount of
Indemnified Taxes or Other Taxes actually paid to or on behalf of
Lender by Borrower (a "TAX REFUND") and (ii) Lender determines in its
reasonable opinion that such Tax Refund has been correctly paid by such
Governmental Authority and will not be required to be repaid to such
Governmental Authority, then Lender shall use its reasonable efforts to
notify Borrower of such Tax Refund and to forward the proceeds of such
Tax Refund (or relevant portion thereof) to Borrower as reduced by any
expense or liability incurred by such Lender in connection with
obtaining such Tax Refund.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Loan Parties, as applicable, represents and warrants to
Lender (with references to the Companies being references thereto after giving
effect to the Transactions unless otherwise expressly stated) that:
SECTION 3.01. ORGANIZATION; POWERS. Each Company (a) is duly
organized and validly existing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to carry on its business
as now conducted, and (c) is qualified and in good standing (to the extent such
concept is applicable in the applicable jurisdiction) to do business in every
jurisdiction where such qualification is required, except in such jurisdictions
where the failure to so qualify, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions to be
entered into by each Loan Party are within such Loan Party's powers and have
been duly authorized by all necessary action. This Agreement has been duly
executed and delivered by each Loan Party and constitutes, and each other Loan
Document to which any Loan Party is to be a party, when
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executed and delivered by such Loan Party, will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. Except as set
forth on Schedule 3.03, the Transactions:
(a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental
Authority, except (i) such as have been obtained or made and are in
full force and effect, (ii) filings necessary to perfect Liens created
under the Loan Documents, (iii) consents, approvals, registrations,
filings or actions the failure of which to obtain or perform could not
reasonably be expected to result in a Material Adverse Effect and (iv)
registrations and filings contemplated by the Registration Rights
Agreement;
(b) will not violate (i) any applicable law or regulation
except for violations that could not reasonably be expected to result
in a Material Adverse Effect, or (ii) the charter, bylaws or other
organizational documents of any Company or any order of any
Governmental Authority;
(c) will not violate, result in a default or require any
consent or approval under any indenture, agreement, lease or other
instrument binding upon any Company or its assets, or give rise to a
right thereunder to require any payment to be made by any Company,
except for violations, defaults or the creation of such rights that
could not reasonably be expected to result in a Material Adverse
Effect; and
(d) will not result in the creation or imposition of any
Lien on any asset of any Company, except Liens created under the Loan
Documents and Permitted Liens.
SECTION 3.04. FINANCIAL STATEMENTS.
(a) The historical financial statements and the notes
thereto included in the Form 10 present fairly in all material respects
the consolidated financial position, income statement, cash flows and
changes in stockholder's equity of Borrower and its Subsidiaries at the
respective dates and for the respective periods indicated. All such
financial statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods presented (except as
disclosed therein). The unaudited pro forma financial statements and
the notes thereto included in the Form 10 have been prepared on a basis
consistent with the historical financial statements of Borrower and its
Subsidiaries and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly in
all material respects the historical and proposed transactions
contemplated by the Form 10; and such pro forma financial statements
comply as to form in all material respects with
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the requirements applicable to pro forma financial statements set forth
in Regulation S-X under the Securities Act. The other financial and
statistical information and data included in the Form 10 (other than
industry and market-related data) are accurately presented in all
material respects and prepared on a basis consistent with the financial
statements and the books and records of Borrower and its Subsidiaries.
(b) Since March 31, 2003, there has been no event,
condition or circumstance that could reasonably be expected to result
in a Material Adverse Effect.
(c) When delivered, each Monthly Cash Balance Report is
true and correct and presents fairly Borrower's Cash Balance as of the
date indicated therein.
SECTION 3.05. PROPERTIES.
(a) As of the Closing Date, no Loan Party owns any Real
Property. Each Loan Party has valid leasehold interests in or other
valid rights to use, all of its Real Property. Each Loan Party has good
title, valid leasehold interests in or licenses to or other valid
rights to use all of its personal property material to its business.
The property of the Companies, taken as a whole, (i) is in good
operating order, condition and repair (ordinary wear and tear excepted)
and (ii) constitutes all the properties that are required for the
business and operations of the Companies as currently conducted.
(b) Schedule 3.05(b) contains a true and complete list of
(1) each parcel of Real Property leased, subleased or otherwise
occupied or utilized by any Loan Party, as lessee or sublessee, as of
the Closing Date (each, a "COMPANY FACILITY LEASE"), including a
description of the type of interest therein held by such Loan Party and
the name of the Loan Party holding such interest; and (2) each lease or
license agreement for any property other than Real Property which is
material to the business, operations, condition (financial or other),
assets or prospects of the Companies, taken as a whole, and in effect
as of the Closing Date (each a "COMPANY PROPERTY LEASE"), including a
description of the type of property subject to such lease or license
agreement, the lessors or licensors parties thereto and the name of the
Loan Party that is a party thereto. Each Company Lease is a legal,
valid and binding agreement, enforceable in accordance with its terms,
of the Loan Party that is a party thereto, and, to the knowledge of
Borrower, each of the Lessors or Licensors parties thereto. There is
no, nor has any Loan Party received notice of any, default under any
Company Lease (or to the knowledge of any Loan Party, any condition or
event that, after notice or a lapse of time or both, would constitute a
default thereunder). No Loan Party, and, to the knowledge of each Loan
Party, no third party to any Company Lease, has assigned any Company
Property Lease or sublet any part of the property covered thereby or
exercised any renewal or purchase option thereunder. None of the Loan
Parties has granted any options or rights of first refusal, or rights
of first offer to third parties to purchase or otherwise acquire an
interest in any of the property subject to any Company Property Lease.
True and complete copies of all
9
Company Leases, together with all modifications, extensions, amendments
and assignments thereof have heretofore been made available to Lender.
All improvements required to be made by any Loan Party under any
Company Facility Lease have been completed and fully paid for.
(c) Each Company owns, or is licensed to use, all
Intellectual Property used in the conduct of its business as currently
conducted, except for those the failure to own or license that,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No claim has been asserted and is
pending by any person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Company know of any valid basis for
any such claim. The use of such Intellectual Property by each Company
does not infringe the rights of any person, except for such claims and
infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06. EQUITY INTERESTS AND SUBSIDIARIES; CONSENT.
(a) Schedule 3.06(a) sets forth a list, as of the Closing
Date, of (i) all Subsidiaries of Borrower and their jurisdiction of
organization; (ii) the number of shares of each class of its Equity
Interests authorized, and the number outstanding, and the number of
shares covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights of each such Subsidiary; and
(iii) a designation as to whether such Subsidiary constitutes a
Non-Guarantor Subsidiary. All Equity Interests of each Subsidiary of
Borrower are duly and validly issued, are fully paid and non-assessable
and, except as disclosed on Schedule 3.06(a), are owned directly or
indirectly by Borrower. Each Loan Party is the record and beneficial
owner of, and has good and marketable title to, the Equity Interests
pledged by it under the applicable Security Agreement, free of any and
all Liens, rights or claims of other persons, except for the security
interest created by the Security Agreements.
(b) No consent of any person including any other general
or limited partner, any other member of a limited liability company,
any other shareholder or any trust beneficiary is necessary or
desirable in connection with the creation, perfection or first priority
status of the security interest of Lender in any Equity Interests
pledged to Lender under any Security Agreement or the exercise by
Lender of the voting or other rights provided for in any Security
Agreement or the exercise of remedies in respect thereof.
SECTION 3.07. NO EVENT OF DEFAULT. No Default or Event of Default
has occurred and is continuing.
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SECTION 3.08. AGREEMENTS.
(a) No Company is a party to any agreement or instrument
or subject to any corporate or other constitutional restriction that
has resulted or could reasonably be expected to result in a Material
Adverse Effect.
(b) No Company is in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other agreement, lease or instrument to which it
is a party or by which it or any of its property are or may be bound,
where such default could reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.09. NO MATERIAL MISSTATEMENTS. None of any information,
report, financial statement, exhibit or schedule furnished by or on behalf of
any Company to Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto (including the Form 10), taken
together with all related information so furnished, contained, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were, are or will be made, not misleading
as of the date such information is dated or certified; provided that, to the
extent any such information, report, financial statement, exhibit or schedule
was based upon or constitutes a forecast, projection or pro forma adjustment,
each Company represents only that it acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report,
financial statement, exhibit or schedule (it being understood that, with respect
to projected financial information, actual results may vary significantly from
such projected results).
SECTION 3.10. SOLVENCY. Immediately after the consummation of the
Transactions to occur on the Closing Date, (a) the fair value of the assets of
the Loan Parties, taken as a whole, will exceed their debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of the Loan Parties, taken as a whole, will be greater than the
amount that will be required to pay the probable liability of their collective
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c) the Loan Parties,
taken as a whole, will be able to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably
small capital with which to conduct the business in which they are engaged as
such business is now conducted and is proposed to be conducted following the
Closing Date.
SECTION 3.11. SECURITY DOCUMENTS.
(a) The Security Agreements are effective to create in
favor of Lender, a legal, valid and enforceable security interest in
and Lien on the Security Agreement Collateral and, when (i) financing
statements and other filings in appropriate form are filed in the
offices specified in Section III.B of the Perfection Certificate and
(ii) the Loan Parties have complied with Article III of the U.S.
Security Agreement, the U.S.
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Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors
thereunder in such Collateral (other than (A) the Intellectual Property
(as defined in the U.S. Security Agreement) and (B) such Collateral in
which a security interest cannot be perfected under the Uniform
Commercial Code as in effect at the relevant time in the relevant
jurisdiction for filing), in each case subject to no Liens other than
Permitted Liens.
(b) When the U.S. Security Agreement is filed in the
United States Patent and Trademark Office and the United States
Copyright Office, the U.S. Security Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and
interest of the grantors thereunder in the Intellectual Property (as
defined in the U.S. Security Agreement), in each case subject to no
Liens other than Permitted Liens (it being understood that subsequent
recordings in the United States Patent and Trademark Office and the
United States Copyright Office may be necessary to perfect a Lien on
registered trademarks, trademark applications and copyrights acquired
by the grantors after the Closing Date).
(c) Each Security Document delivered pursuant to Section
5.10 will, upon execution and delivery thereof, be effective to create
in favor of Lender a legal, valid and enforceable Lien on all of the
Loan Parties' right, title and interest in and to the Collateral
described therein, and when such Security Document is filed or recorded
in the appropriate offices as may be required under applicable law,
such Security Document will constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties
in such Security Agreement Collateral, in each case subject to no Liens
other than the applicable Permitted Liens.
SECTION 3.12. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL.
(a) TYPES OF COLLATERAL. Set forth in Schedule 3.12(a) is
a complete and accurate description of each Material Item of Collateral
in which any Loan Party has any right, title or interest on the Closing
Date that is:
(1) Real Property, Fixtures or an
interest therein;
(2) Deposit Accounts, Security Accounts
or similar accounts maintained with
financial institutions in the United States;
(3) Investment Property (other than
Security Accounts), including Pledged Equity
Interests;
(4) Letter-of-Credit Rights held by or
on behalf of any Loan Party in the United
States;
(5) Instruments held by or on behalf of
any Loan Party in the United States;
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(6) Patents;
(7) registered Trademarks or
applications for registration that have been
filed in the United States Patent and
Trademark Office; and
(8) registered Copyrights or
applications for registration that have been
filed in the United States Copyright Office.
(b) LOCATION OF CERTAIN COLLATERAL. Set forth in Schedule
3.12(b) is a complete and accurate description for each Material Item
of Collateral located in the United States in which any Loan Party has
any right, title or interest on the Closing Date, of:
(1) the location of any Real Property
or Fixture;
(2) the jurisdiction of any bank or
other financial institution at which each
Deposit Account or similar account is
maintained, determined in accordance with
Section 9-304 of the UCC;
(3) the jurisdiction in which any
certificated security is located, the
jurisdiction of the issuer of any
uncertificated security, the jurisdiction of
any securities intermediary at which any
security entitlement or securities account
is held, and the jurisdiction of any
commodity intermediary at which any
commodity account or commodity contract is
held, determined in each case in accordance
with Section 9-305 of the UCC;
(4) the jurisdiction of the issuer or
nominated person in respect of any
Letter-of-Credit Rights, determined in
accordance with Section 9-306 of the UCC;
and
(5) the jurisdiction where any
Instrument is located.
(c) LOCATION OF LOAN PARTIES. Set forth in Schedule
3.12(c) is the location of each Loan Party, determined in accordance
with Section 9-307 of the UCC.
(d) NO LIENS. None of the Collateral is subject to any
Lien of any kind, other than Permitted Liens. As of the Closing Date,
there is no financing statement (or similar statement or instrument
under the laws of any jurisdiction in the United States) covering or
purporting to cover any interest of any kind in the Collateral, other
than financing statements filed pursuant to this Agreement or the other
Security Documents or in respect of (i) Permitted Liens or financing
statements for which proper termination statements have been delivered
to Lender for filing or (ii) other obligations which in the aggregate
do not exceed $10,000.
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(e) PLEDGED EQUITY INTERESTS. So long as Lender has
possession of the Pledged Equity Interests, it will have a fully
perfected, first priority security interest in the Pledged Equity
Interests of the Domestic Subsidiaries. No filings or recordings are
required to perfect (or maintain the perfection or priority of) the
security interests created in the Pledged Equity Interests of the
Domestic Subsidiaries. Lender will have a fully perfected pledge of the
Pledged Equity Interests of the Foreign Subsidiaries upon compliance by
Borrower and such Foreign Subsidiaries with Section 4.02(h)(ix).
(f) INVESTMENT PROPERTY. Upon execution and delivery of
the Control Agreements by each of the parties thereto, and assuming
compliance by each securities intermediary or commodity intermediary
which is a party thereto, Lender will have (x) "control" within the
meaning of Section 9-106 of the UCC of each account referred to in such
agreements and all security entitlements or commodity contracts carried
in such accounts and (y) a fully perfected, first priority security
interest in each account referred to therein and all Investment
Property credited to any such account subject to such Control
Agreement.
(g) DEPOSIT ACCOUNTS; BANK ACCOUNTS. Upon execution and
delivery of the Control Agreements by each of the parties thereto, and
assuming compliance by each bank or depositary which is a party
thereto, Lender will have (x) "control" within the meaning of Section
9-104 of the UCC with respect to each Deposit Account subject to such
Control Agreement, (y) exclusive dominion and control with respect to
each bank or depositary account subject to such Control Agreement which
is not a Deposit Account or Securities Account, and (z) a fully
perfected, first priority security interest in all funds held in each
account subject to such Control Agreement.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of Lender to make Loans hereunder is subject to the
satisfaction of the following conditions:
SECTION 4.01. ALL LOANS. On the date of each Loan:
(a) Lender shall have received a Borrowing Request in
accordance with Section 2.03.
(b) Borrower and each other Loan Party shall be in
compliance with all the terms and provisions set forth herein and in
each other Loan Document on its part to be observed or performed,
including its obligation to deliver Monthly Cash Balance Reports
pursuant to Section 5.01(d).
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(c) At the time of and immediately after such Loan, no
Default or Event of Default shall have occurred and be continuing.
(d) Each of the representations and warranties set forth
in Article III hereof or in any other Loan Document shall be true and
correct in all material respects (except that any representation and
warranty that is qualified as to "materiality" or "Material Adverse
Effect" shall be true and correct in all respects) on and as of the
date of such Loan with the same effect as though made on and as of such
date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations
and warranties shall have been true and correct in all material
respects (except that those that are qualified as to "materiality" or
"Material Adverse Effect" shall be true and correct in all respects) on
and as of such earlier date).
(e) After giving effect to the Loan, Borrower's Cash
Balance shall not exceed $25,000,000.
Each Loan shall be deemed to constitute a representation and warranty by
Borrower and each other Loan Party on the date of such Loan as to the matters
specified in paragraphs (b) through (e) above.
SECTION 4.02. CLOSING DATE ITEMS. On the Closing Date:
(a) LOAN DOCUMENTS. All legal matters incident to this
Agreement, the Loans hereunder and the other Loan Documents shall be
satisfactory to Lender and there shall have been delivered to Lender an
executed counterpart of each of the Loan Documents, including this
Agreement, each Security Agreement, the Perfection Certificate and each
other applicable Loan Document and each of such agreements shall be in
full force and effect.
(b) CORPORATE DOCUMENTS. Lender shall have received:
(i) a certificate of the Secretary or Assistant
Secretary of each Loan Party dated the Closing Date and certifying
(A) that attached thereto is a true and complete copy of the
certificate or articles of incorporation or other constitutive
documents, including all amendments thereto certified as of a recent
date by the Secretary of State (or like official) of the jurisdiction
of its organization (if such document is of a type that may be so
certified), (B) that attached thereto is a true and complete copy of
the bylaws or other organizational documents of each Loan Party as in
effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in clause (C) below, (C) that
attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors or other governing body of such
person authorizing the execution, delivery and performance of the
Loan Documents to which such person is a party and, in the case of
Borrower, the borrowings hereunder, and that
15
such resolutions have not been modified, rescinded or amended and are
in full force and effect, and (D) as to the incumbency and specimen
signature of each officer executing any Loan Document or any other
document delivered in connection herewith on behalf of such person
(together with a certificate of another officer as to the incumbency
and specimen signature of the Secretary or Assistant Secretary
executing the certificate in this clause (i));
(ii) a long form certificate as to the good
standing of each Loan Party as of a recent date, from the Secretary
of State (or like official) of the jurisdiction of its organization,
to the extent such certificates or their equivalent are issued by
such jurisdiction; and
(iii) such other documents as Lender may
reasonably request.
(c) OFFICER'S CERTIFICATE. Lender shall have received a
certificate, dated the Closing Date and signed by a Financial Officer
or the Chief Executive Officer of Borrower, confirming compliance with
the conditions precedent set forth in paragraphs (b), (c) and (d) of
Section 4.01, to the extent applicable.
(d) INDEBTEDNESS. After giving effect to the Transactions
and the other transactions contemplated hereby, no Company shall have
outstanding any Indebtedness, preferred stock or minority interests
other than (i) the Loans hereunder and (ii) the minority interests
described on Schedule 3.06(a) attached hereto.
(e) REQUIREMENTS OF LAW. Lender shall be satisfied that
the Transactions shall be in full compliance with all material
Requirements of Law.
(f) CONSENTS. Lender shall be satisfied that all material
consents and approvals required from Governmental Authorities and third
parties in connection with the Transactions have been obtained and
remain in effect, and there shall be no governmental or judicial action
(or any adverse development therein), actual or threatened, that Lender
shall reasonably determine has or could have, singly or in the
aggregate, a material adverse effect on the Transactions.
(g) LITIGATION. There shall be no litigation, public or
private, or administrative proceedings, governmental investigation or
other legal or regulatory developments that, singly or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect, or could materially and adversely affect the ability of any
Company to fully and timely perform its respective obligations under
the Transaction Documents, or the ability of the parties to consummate
the financings contemplated hereby or the other Transactions.
(h) PERSONAL PROPERTY REQUIREMENTS. Lender shall have
received from each Loan Party (other than any Non-Guarantor
Subsidiary):
16
(i) all certificates, agreements or instruments
representing or evidencing the Pledged Equity Interests and the
Pledged Intercompany Debt accompanied by instruments of transfer and
stock powers endorsed in blank shall have been delivered to Lender;
(ii) all other certificates, agreements,
including Control Agreements, or instruments necessary to perfect
security interests in all Chattel Paper, all Instruments, all Deposit
Accounts and all Investment Property of each Loan Party (as each such
term is defined in the U.S. Security Agreement and to the extent
required by the terms of the U.S. Security Agreement);
(iii) UCC financing statements in appropriate form
for filing under the UCC and such other documents under applicable
Requirements of Law in each jurisdiction as may be necessary or
appropriate to perfect the Liens created, or purported to be created,
by the Security Documents;
(iv) certified copies of Requests for Information
(Form UCC-11), tax lien, judgment lien, bankruptcy and pending
lawsuit searches or equivalent reports or lien search reports, each
of a recent date listing all effective financing statements, lien
notices or comparable documents that name (A) any domestic Loan Party
as debtor and that are filed in those state and county jurisdictions
in which any of the property of such domestic Loan Party is located
and the state and county jurisdictions in which such domestic Loan
Party's principal place of business is located, and (B) any foreign
Loan Party, to the extent obtainable from the District of Columbia,
none of which encumber the Collateral covered or intended to be
covered by the Security Documents (other than those relating to Liens
acceptable to Lender);
(v) evidence of the completion of all recordings
and filings of, or with respect to, each Security Agreement,
including filings with the United States Patent, Trademark and
Copyright Offices, and the execution and/or delivery of such other
security and other documents, and the taking of all actions as may be
necessary or, in the reasonable opinion of Lender, desirable, to
perfect the Liens created, or purported to be created, by the
Security Agreements, except for any of the foregoing to be provided
after the Closing Date pursuant to Section 5.12 hereof;
(vi) any documents required to be submitted to
Lender by the Loan Parties as may be necessary or desirable to
perfect the security interest of Lender pursuant to each Foreign
Security Agreement, except for any of the foregoing to be provided
after the Closing Date pursuant to Section 5.12 hereof;
(vii) with respect to each Real Property located
in the United States in which a Loan Party holds the tenant's
interest thereunder set forth on Schedule 4.02(n) where the Loan
Parties maintain Collateral having a value in excess of
17
$1.0 million (other than the MacArthur Sublease) or which Real
Property is operationally significant to such Loan Party's business,
as reasonably determined by Lender, a Landlord Lien Waiver and Access
Agreement and a Collateral Assignment of Lease, except for any of the
foregoing to be provided after the Closing Date pursuant to Section
5.12 hereof;
(viii) evidence acceptable to Lender of payment by
the Loan Parties of all applicable recording taxes, fees, charges,
costs and expenses required for the recording of the Security
Documents, except for any of the foregoing to be provided after the
Closing Date pursuant to Section 5.12 hereof; and
(ix) with respect to Pledged Equity Interests
issued by Foreign Subsidiaries, the documentation specified in Annex
III.
(i) INSURANCE. Lender shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.04 and the applicable provisions of the Security Documents,
each of which (other than directors' and officers' liability insurance
policies) shall be endorsed or otherwise amended to include a
"standard" or "New York" lender's loss payable endorsement and to name
Lender as additional insured, in form and substance satisfactory to
Lender.
(j) SUBSIDIARY GUARANTORS. Each Subsidiary Guarantor
listed on Schedule 1.01(b) that is a Foreign Subsidiary and is not a
signatory to this Agreement shall have executed and delivered a
Guarantee in form and substance satisfactory to Lender.
ARTICLE V
AFFIRMATIVE COVENANTS
Each Loan Party covenants and agrees with Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all other expenses or amounts
payable under any Loan Document shall have been paid in full, unless Lender
shall otherwise consent in writing, each Loan Party will, and will cause each of
its Subsidiaries to:
SECTION 5.01. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of
Borrower, furnish to Lender:
(a) ANNUAL REPORTS. Within 90 days after the end of each
fiscal year, or such other period in which the Borrower must file its
Form 10-K with the Securities and Exchange Commission, the consolidated
balance sheet of Borrower as of the end of such fiscal year and related
consolidated statements of income, cash flows and stockholders' equity
for such fiscal year, and notes thereto, all prepared in
18
accordance with Regulation S-X under the Securities Act and in a manner
acceptable to the Securities and Exchange Commission and accompanied by
an opinion of Deloitte & Touche or other independent public accountants
of recognized national standing satisfactory to Lender (which opinion
shall not be qualified as to scope or contain any going concern or
other qualification), stating that such financial statements fairly
present, in all material respects, the consolidated financial
condition, results of operations, cash flows and changes in
stockholders' equity of the Consolidated Companies as of the end of and
for such fiscal year in accordance with GAAP;
(b) QUARTERLY REPORTS. Commencing with the filing of
Borrower's Form 10-Q for the fiscal quarter ending June 30, 2003,
within 45 days after the end of each of the first three fiscal quarters
of each fiscal year, or such other period in which the Borrower must
file its Form 10-Q with the Securities and Exchange Commission, the
consolidated balance sheet of Borrower as of the end of such fiscal
quarter and related consolidated statements of income and cash flows
for such fiscal quarter and for the then elapsed portion of the fiscal
year, in comparative form with the consolidated statements of income
and cash flows for the comparable periods in the previous fiscal year,
and notes thereto, all prepared in accordance with Regulation S-X under
the Securities Act and in a manner acceptable to the Securities and
Exchange Commission and accompanied by a certificate of a Financial
Officer stating that such financial statements fairly present, in all
material respects, the consolidated financial condition, results of
operations and cash flows of the Consolidated Companies as of the date
and for the periods specified in accordance with GAAP and on a basis
consistent with the audited financial statements referred to in Section
5.01(a), subject to normal year-end audit adjustments and the absence
of footnotes;
(c) FINANCIAL OFFICER'S COMPLIANCE CERTIFICATE.
Concurrently with any delivery of financial statements under Sections
5.01(a) and (b), a certificate of a Financial Officer, substantially in
the form of Exhibit K attached hereto, certifying that no Default has
occurred or, if such a Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken
with respect thereto;
(d) MONTHLY CASH BALANCE REPORT. Within ten (10) Business
Days of the end of each fiscal month, a report signed by a Financial
Officer of Borrower setting forth Borrower's Cash Balance as of the
last Business Day of such month substantially in the form of Exhibit D
hereto, appropriately completed and signed by a Financial Officer of
the Borrower (the "MONTHLY CASH BALANCE REPORT");
(e) PERFECTION CERTIFICATE SUPPLEMENT. Concurrently with
any delivery of financial statements under Sections 5.01(a) and (b), a
Perfection Certificate Supplement;
19
(f) PUBLIC REPORTS. Promptly after the same become
publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by any Company with the Securities
and Exchange Commission, or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national
securities exchange, or distributed to holders of its Indebtedness
pursuant to the terms of the documentation governing such Indebtedness
(or any trustee, agent or other representative therefor), as the case
may be;
(g) MANAGEMENT LETTERS. Promptly after the receipt
thereof by any Company, a copy of any "management letter" received by
any such person from its certified public accountants and management's
responses thereto; and
(h) OTHER INFORMATION. Promptly, from time to time, such
other information regarding the operations, property, business affairs
and financial condition of any Company, or any Collateral, or
compliance with the terms of any Loan Document, as Lender may
reasonably request.
SECTION 5.02. LITIGATION AND OTHER NOTICES. Furnish to Lender
prompt written notice upon any Responsible Officer of a Loan Party becoming
aware of the following:
(a) the filing or commencement of, or any threat or
notice of intention of any person to file or commence, any action, suit
or proceeding, whether at law or in equity by or before any
Governmental Authority (i) against any Company (or any Affiliate
thereof) that could reasonably be expected to result in a Material
Adverse Effect or (ii) with respect to any Loan Document;
(b) any Default, specifying the nature and extent thereof
and the corrective action (if any) taken or proposed to be taken with
respect thereto;
(c) any development that has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect;
(d) the occurrence of a Casualty Event in excess of
$500,000; and
(e) the incurrence of any Lien (other than Permitted
Liens) on, or claim asserted against, any Material Item of Collateral.
SECTION 5.03. EXISTENCE; BUSINESSES AND PROPERTIES.
(a) Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence,
except as otherwise expressly permitted under Section 6.05 or, in the
case of any Subsidiary, where the failure to perform such obligations,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
20
(b) Do or cause to be done all things necessary to
obtain, preserve, renew, extend and keep in full force and effect the
rights, licenses, permits, franchises, authorizations, patents,
copyrights, trademarks and trade names material to the conduct of its
business;
(c) Maintain and operate its business in substantially
the manner in which it is presently conducted and operated;
(d) Pay and perform its obligations under all Company
Leases; and
(e) Maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made,
all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times;
provided, however, that nothing in this Section 5.03 shall prevent (i) sales of
assets, consolidations or mergers by or involving any Company in accordance with
Section 6.04; (ii) the withdrawal by any Company of its qualification as a
foreign corporation, partnership or company in any jurisdiction where such
withdrawal, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect; or (iii) the abandonment by any Company
of any property, rights, franchises, licenses, trademarks, tradenames,
copyrights or patents that such person reasonably determines are not useful to
its business.
SECTION 5.04. INSURANCE.
(a) Keep its insurable property adequately insured at all
times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or
similar locations, including public liability insurance against claims
for personal injury or death or property damage occurring upon, in,
about or in connection with the use of any property owned, occupied or
controlled by it, to the extent obtainable on commercially reasonable
terms; and maintain such other insurance as may be required by law;
and, with respect to any Mortgaged Real Property, otherwise maintain
all insurance coverage required under the applicable Mortgage, such
policies to be in such form and amounts and having such coverage as may
be reasonably satisfactory to Lender; provided, that, unless a Default
has occurred and is continuing, any proceeds of insurance policies (x)
insuring the Collateral may be applied by the Borrower to promptly
replace, rebuild or restore such Collateral and (y) insuring
liabilities to third parties may be applied by the Borrower to promptly
pay, discharge or bond such liabilities, in each case on commercially
reasonable terms.
21
(b) Assure that all such insurance shall (i) provide that
no cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after
receipt by Lender of written notice thereof; (ii) name Lender as
insured party or loss payee; (iii) if reasonably requested by Lender,
include a breach-of-warranty clause; and (iv) be reasonably
satisfactory in all other respects to Lender.
(c) Notify Lender immediately whenever any separate
insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this Section 5.04 is taken out by
any Company; and promptly deliver to Lender a duplicate original copy
of, or a certificate as to coverage under, such policy or policies.
(d) Deliver to Lender a report of a reputable insurance
broker annually with respect to such insurance and such supplemental
reports with respect thereto as Lender may from time to time reasonably
request.
SECTION 5.05. TAXES. File or cause to be filed all federal Tax
Returns and all material state, local and foreign Tax Returns or materials
required to have been filed by it and pay and discharge promptly when due all
Taxes before the same shall become delinquent or in default; provided, however,
that such payment and discharge shall not be required with respect to any such
Taxes so long as the validity or amount thereof shall be contested in good faith
by appropriate proceedings and the applicable Company shall have set aside on
its books adequate reserves with respect thereto in accordance with GAAP and
such proceedings (or orders entered in connection with such proceedings) operate
to prevent the forfeiture or sale of the property or assets subject to any such
Lien and suspend collection of the contested Tax and enforcement of a Lien and,
in the case of Collateral, the applicable Company shall have otherwise complied
with the provisions of the applicable Security Document in connection with such
nonpayment.
SECTION 5.06. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. Keep proper books of record and account (i) in which full, true and
correct entries are made in conformity with GAAP and all Requirements of Law,
and (ii) in which all material dealings and transactions in relation to its
business and activities are recorded. Each Company will permit any
representatives designated by Lender to visit and inspect the financial records
and the property of such Company at reasonable times during normal business
hours and upon reasonable advance notice and to make extracts from and copies of
such financial records, and permit any representatives designated by Lender to
discuss the affairs, finances and condition of any Company with and be advised
as to the same by the officers thereof and the independent accountants therefor.
SECTION 5.07. USE OF PROCEEDS. Use the proceeds of the Loans only
to maintain Cash Balances, subject to the limitations on the amount of such Cash
Balances set forth in this Agreement. No part of the proceeds of any Loan will
be used in any manner, whether directly or indirectly, for any purpose that
violates, or that is inconsistent with, the provisions of Regulation T, U or X.
Subject to the limitations in this Agreement and the other Loan Documents
proceeds
22
of Loans may be used for general corporate purposes of Borrower and its
Subsidiaries, including working capital expenditures.
SECTION 5.08. PAYMENT OF OBLIGATIONS. Pay and discharge at or
before maturity, all its respective material obligations and liabilities
(including, without limitation, claims of materialmen, warehousemen and the like
or for labor, materials or supplies or other obligations which if unpaid would
reasonably be expected to give rise to a Lien), except where the same may be
contested in good faith by appropriate proceedings (including administrative
proceedings), and appropriate reserves are maintained for the accrual of any of
the same.
SECTION 5.09. COMPLIANCE WITH LAWS. Comply with all applicable
Requirements of Law and decrees and orders of Governmental Authorities, now or
hereafter in effect, except where the failure to so comply, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
SECTION 5.10. ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS.
(a) Subject to this Section 5.10 and except to the extent
Lender, in its sole discretion, otherwise determines, with respect to
any assets acquired after the Closing Date by Borrower or any other
Loan Party that are intended to be subject to the Lien created by any
of the Security Documents but that are not so subject, and with respect
to any assets held by Borrower or any other Loan Party on the Closing
Date not made subject to a Lien created by any of the Security
Documents but of a type intended to be subject to the Lien created by
the applicable Security Documents, promptly (and in any event within 30
days after the acquisition thereof or upon Lender's request): (i)
execute and deliver to Lender such amendments or supplements to the
relevant Security Documents or such other documents (including, without
limitation, a Mortgage or Collateral Assignment of Lease) as Lender
shall deem necessary or advisable to grant to Lender, for its benefit,
a Lien on such properties or assets (including using its reasonable
efforts to deliver a Landlord Lien Waiver and Access Agreement with
respect to each Real Property located in the United States in which a
Loan Party holds the tenant's interest thereunder and where the Loan
Parties maintain Collateral having a value in excess of $1.0 million
(other than with respect to the MacArthur Sublease) or which Real
Property is operationally significant to such Loan Party's business as
reasonably determined by Lender), subject to no Liens other than
Permitted Liens, and (ii) take all actions necessary to cause such Lien
to be duly perfected to the extent required by such Security Document
in accordance with all applicable Requirements of Law, including the
filing of a Mortgage or Collateral Assignment of Lease and financing
statements in such jurisdictions as may be reasonably requested by
Lender. Borrower shall otherwise take such actions and execute and/or
deliver to Lender such documents as Lender shall require to confirm the
validity, perfection and priority of the Lien of Security Documents
against such after-acquired properties or assets, and such assets held
on the Closing Date not made subject to a Lien created by any of the
Security Documents. For purposes of this Section 5.10(a), Lender and
Borrower agree that the Lien referred to in this Section
23
5.10(a) is intended to cover all assets and properties of Borrower and
all other Loan Parties whether now owned or hereafter acquired, except
for such properties or assets which are expressly excluded pursuant to
the terms of this Agreement.
(b) For any person that is a Wholly Owned Subsidiary of
Parent or any of its Subsidiaries that are listed on Schedule 5.10(b)
(a "SECTION 5.10(b) LISTED SUBSIDIARY"), and any person that becomes a
Wholly Owned Subsidiary of Borrower or any of its Subsidiaries after
the Closing Date (a "NEW WHOLLY OWNED SUBSIDIARY"), promptly (and in
any event (x) in the case of a New Wholly Owned Subsidiary, no later
than 30 days after each such person becomes a New Wholly Owned
Subsidiary, and (y) in the case of each Section 5.10(b) Listed
Subsidiary or a New Wholly Owned Subsidiary that is required to become
a Guarantor, or the stock or assets of which are required to be
pledged, pursuant to clauses (i) and (ii) immediately below, no later
than 30 days following the Closing Date), cause such Subsidiary (i) to
become a Guarantor and deliver to Lender the certificates representing
the Equity Interests of such Subsidiary (provided that, in no event
shall the stock of any such Subsidiary be required to be pledged if
such pledge is illegal under applicable law and no reasonable
alternative structure can be devised having substantially the same
effect as such pledge that would not be illegal under applicable law),
together with undated stock powers executed and delivered in blank by a
duly authorized officer of such Subsidiary's parent, as the case may
be, and all Intercompany Notes owing from such Subsidiary to any Loan
Party; and (ii) (A) to execute a Joinder Agreement or such comparable
documentation, in form and substance reasonably satisfactory to Lender,
and (B) to take all actions reasonably necessary or advisable to cause
the Lien created by each Security Agreement to be duly perfected to the
extent required by such agreement in accordance with all applicable
Requirements of Law, including the filing of financing statements in
such jurisdictions as may be reasonably requested by Lender (provided
that any such Subsidiary shall not be required to comply with clause
(ii)(A) and (B) above if satisfying such requirements is illegal under
applicable law and no reasonable alternative structure can be devised
having substantially the same effect as such pledge that would not be
illegal under applicable law).
(c) Notwithstanding anything to the contrary contained
herein:
(i) in the case of any (x) Section 5.10(b)
Listed Subsidiary and New Wholly Owned Subsidiary that has not
previously become a Guarantor and (y) other Non-Guarantor Subsidiary,
100% of the Equity Interests of any such Subsidiary, except in the
case of any Foreign Subsidiary where a security interest of 100% of
its Equity Interests could reasonably be expected to have a material
adverse effect on the tax position of Borrower or such Foreign
Subsidiary, in which case 65% of the Equity Interests of such Foreign
Subsidiary, shall be subject to a Lien and be required to be pledged
under the applicable Loan Document except to the extent Lender, in
its sole discretion, otherwise determines; and
24
(ii) notwithstanding clause (c)(i) immediately
above and as of the end of any fiscal quarter of Borrower:
(1) if the aggregate consolidated
revenues of the Non-Guarantor Subsidiaries
exceeds 10.0% of Borrower's consolidated
revenues, then within 60 days of such date
Borrower shall cause a sufficient number of
the Non-Guarantor Subsidiaries to become
Guarantors hereunder so that, after giving
pro forma effect to such action, the
aggregate consolidated revenues of the
Subsidiaries remaining as Non-Guarantor
Subsidiaries is less than 10.0% of
Borrower's consolidated revenues; or
(2) if the aggregate consolidated sum
of the Non-Guarantor Subsidiaries' fixed
assets, receivables and inventories exceeds
10.0% of the aggregate consolidated sum of
Borrower's fixed assets, receivables and
inventories (which fixed assets, receivables
and inventories shall be computed after
eliminating intercompany profit), then
within 60 days of such date Borrower shall
cause a sufficient number of the
Non-Guarantor Subsidiaries to become
Guarantors hereunder so that, after giving
pro forma effect to such action, the
aggregate consolidated sum of fixed assets,
receivables and inventories of the
Subsidiaries remaining as Non-Guarantor
Subsidiaries is less than 10.0% of the
aggregate consolidated sum of Borrower's
fixed assets, receivables and inventories.
If the condition set forth in clause (ii)(1) or (ii)(2) above is
established, Borrower shall, or shall cause the applicable Foreign
Subsidiaries to, take all such further action and execute and deliver all
such further agreements or documents as Lender deems necessary or advisable
to receive the full benefits of the Guarantees and Security Documents to be
entered into by such Foreign Subsidiaries to the extent necessary to
preclude the 10.0% thresholds set forth in the immediately preceding clauses
(ii)(1) and (ii)(2) from being exceeded, except to the extent such actions,
executions, or, deliveries are illegal under applicable law, and no
reasonable alternative structure can be devised having substantially the
same effect as such actions, executions, or deliveries that would not be
illegal under applicable law.
(d) Upon the written request of Lender, each Loan Party
will promptly grant to Lender, within 30 days of such request, security
interests and Mortgages in such owned or leased Real Property of such
Loan Party located in the United States as is acquired or leased by
such Loan Party after the Closing Date by Borrower or such Subsidiary
and has a value as determined in good faith by Lender in excess of $1.0
million or is otherwise material to the business operations of Borrower
or such Subsidiary, as additional security for the Secured Obligations
(unless (i) the subject
25
property is already mortgaged to a third party to the extent permitted
by Section 6.02 or (ii) if the encumbrancing of such leased Real
Property requires the consent of any applicable lessor, where Borrower
and its Subsidiaries have attempted in good faith, but are unable, to
obtain such lessor's consent). Such Mortgages shall be granted pursuant
to documentation reasonably satisfactory in form and substance to
Lender and shall constitute valid and enforceable perfected Liens
subject only to Permitted Liens and such other Liens reasonably
acceptable to Lender. The Mortgages or instruments related thereto
shall be duly recorded or filed in such manner and in such places as
are required by law to establish, perfect, preserve and protect the
Liens in favor of Lender required to be granted pursuant to the
Mortgages and all taxes, fees and other charges payable in connection
therewith shall be paid in full by such Loan Party. Such Loan Party
shall otherwise take such actions and execute and/or deliver to Lender
such documents as Lender shall require to confirm the validity,
perfection and priority of the Lien of any existing Mortgage or new
Mortgage against such after-acquired Real Property within 30 days of
the written request of Lender, including the following:
(i) Mortgages encumbering each Mortgaged Real
Property in favor of Lender, duly executed and acknowledged by the
Loan Party that is the owner of or holder of an interest in such
Mortgaged Real Property, and otherwise in form for recording in the
recording office of each political subdivision where each such
Mortgaged Real Property is situated, and such certificates,
affidavits, questionnaires or returns as shall be required in
connection with the recording or filing thereof to create a Lien
under applicable law, and such UCC financing statements and fixture
filings, all of which shall be in form and substance reasonably
satisfactory to Lender, and any other instruments necessary to grant
a mortgage lien under the laws of any applicable jurisdiction;
(ii) with respect to each Mortgaged Real Property
for which a Mortgage is obtained in accordance with clause (i) above,
an Agreement and Estoppel Certificate executed by the applicable Loan
Party and fee interest holder, and such other consents, approvals,
amendments, supplements, memoranda of lease estoppels, tenant
non-disturbance or subordination agreements or other instruments as
shall reasonably be deemed necessary by Lender in order for the owner
or holder of the fee or leasehold interest constituting such
Mortgaged Real Property to grant the Lien contemplated by the
Mortgage with respect to such Mortgaged Real Property;
(iii) with respect to each Mortgage, a policy of
title insurance insuring the Lien of such Mortgage as a valid first
mortgage Lien on the Real Property and fixtures described therein in
an amount equal to 115% of the fair market value of the fee or
leasehold interest, as applicable, of such Real Property which
policies (each, a "TITLE POLICY") shall (A) be issued by the Title
Company, (B) to the extent necessary, include such reinsurance
arrangements (with provisions for direct access, if necessary) as
shall be reasonably acceptable to
26
Lender, (C) contain a "tie-in" or "cluster" endorsement (if available
under applicable law) (i.e., policies that insure against losses
regardless of location or allocated value of the insured property up
to a stated maximum coverage amount), (D) have been supplemented by
such endorsements (or where such endorsements are not available,
opinions of special counsel, architects or other professionals
reasonably acceptable to Lender to the extent that such opinions can
be obtained at a cost that is reasonable with respect to the value of
the Real Property subject to such Mortgage) as shall be requested by
Lender, to the extent such endorsements are available in the
applicable jurisdiction (including endorsements on matters relating
to usury, first loss, last dollar, zoning, contiguity, revolving
credit, doing business, non-imputation, public road access, survey,
variable rate, environmental lien and so-called comprehensive
coverage over covenants and restrictions), and (E) contain no
exceptions to title other than exceptions for the Permitted Liens
applicable to such Mortgaged Real Property and otherwise acceptable
to Lender;
(iv) with respect to each Mortgaged Real Property
for which a Mortgage is obtained in accordance with clause (i) above,
such affidavits, certificates, information (including financial data)
and instruments of indemnification (including a so-called "gap,"
"mechanics lien," and "owner's" indemnifications and affidavits) as
shall be required to induce the Title Company to issue the Title
Policy/ies and endorsements contemplated in clause (iii) above;
(v) evidence reasonably acceptable to Lender of
payment by Borrower of all Title Policy premiums, escrow, search and
examination charges, and related charges, mortgage recording taxes,
fees, charges, costs and expenses required for the recording of the
Mortgages and issuance of the Title Policies referred to in clause
(iii) above;
(vi) with respect to each Real Property or
Mortgaged Real Property, copies of all Leases in which Borrower or
any Subsidiary holds the lessor's interest or other agreements
relating to possessory interests, if any. To the extent any of the
foregoing affect any Mortgaged Real Property for which a Mortgage is
obtained in accordance with clause (i) above, such agreement shall be
subordinate to the Lien of the Mortgage to be recorded against such
Mortgaged Real Property, either expressly by its terms or pursuant to
a subordination, non-disturbance and attornment agreement, and shall
otherwise be acceptable to Lender;
(vii) with respect to each Mortgaged Real Property
for which a Mortgage is obtained in accordance with clause (i) above,
Borrower and each Subsidiary shall have made all notification,
registrations and filings, to the extent required by, and in
accordance with, all Requirements of Law; and
27
(viii) with respect to each Mortgaged Real Property
for which a Mortgage is obtained in accordance with clause (i) above,
an Officers' Certificate or other evidence reasonably satisfactory to
Lender that as of the date thereof (A) there is no outstanding
citation, violation or similar notice indicating that the Mortgaged
Real Property contains conditions that are not in compliance in any
material respect with local codes or ordinances relating to building
or fire safety or structural soundness, (B) there has not occurred
any taking or destruction of any Mortgaged Real Property and (C)
there are no material disputes regarding boundary lines, location,
encroachment or possession of such Mortgaged Real Property, and to
the best knowledge of Borrower or any Subsidiary that is the owner of
or holder of an interest in such Mortgaged Real Property, no state of
facts exist that could give rise to any such claim.
SECTION 5.11. SECURITY INTERESTS; FURTHER ASSURANCES. Each Loan
Party shall, at its own cost and expense, take any and all actions necessary to
defend title to the Collateral against all persons and to defend the security
interest of Lender in the Collateral and the priority thereof against any Lien
not expressly permitted pursuant to Section 6.02. Promptly, upon the reasonable
request of Lender, at Borrower's expense, execute, acknowledge and deliver, or
cause the execution, acknowledgment and delivery of, and thereafter register,
file or record, or cause to be registered, filed or recorded, in an appropriate
governmental office, any document or instrument supplemental to or confirmatory
of the Security Documents or otherwise deemed by Lender reasonably necessary or
desirable for the continued validity, perfection and priority of the Liens on
the Collateral covered thereby superior and prior to the rights of all third
persons other than the holders of Permitted Liens and subject to no other Liens
except as permitted by the Security Documents, or obtain any consents, including
landlord or similar Lien waivers and consents, as may be necessary or
appropriate in connection therewith, to the extent contemplated hereby. Each
Loan Party shall, at its own cost and expense, deliver or cause to be delivered
to Lender from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to Lender as
Lender shall deem necessary to perfect or maintain the Liens on the Collateral
pursuant to the Security Documents. Upon the exercise by Lender of any power,
right, privilege or remedy pursuant to any Loan Document that requires any
consent, approval, registration, qualification or authorization of any
Governmental Authority or any other person, execute and deliver and/or obtain
all applications, certifications, instruments and other documents and papers
that Lender may be so required to obtain. Notwithstanding anything to the
contrary contained herein, if an Event of Default has occurred and is
continuing, Lender shall have the right to require any Loan Party to execute and
deliver documentation, consents, authorizations, approvals and orders in form
and substance reasonably satisfactory to Lender as Lender shall deem necessary
to grant to Lender, for its benefit, a valid and perfected Lien subject to no
Liens other than Permitted Liens on such assets and properties not otherwise
required hereunder, except to the extent such requirements are illegal under
applicable law, and no reasonable alternative structure can be devised having
substantially the same effect as such actions that would not be illegal under
applicable law. If Lender determines that it is required by law or regulation to
have appraisals prepared in respect of the Real Property of any Loan Party
constituting Collateral, Borrower shall provide to Lender appraisals that
satisfy the applicable requirements of the Real Estate Appraisal Reform
Amendments of the Federal
28
Institutions Reform, Recovery and Enforcement Act of 1989 and are in form and
substance satisfactory to Lender.
SECTION 5.12. POST-CLOSING MATTERS. Execute and deliver the
documents and complete the tasks set forth on Schedule 5.12, in each case within
the time limits specified on such schedule. Notwithstanding any other provision
in this Agreement, the Availability Period shall not commence and Borrower shall
have no right to borrow under this Agreement until such time as the Loan Parties
have executed and delivered the documents and completed the tasks set forth on
Schedule 5.12.
ARTICLE VI
NEGATIVE COVENANTS
Each Loan Party covenants and agrees with Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all other expenses or amounts
payable under any Loan Document have been paid in full, unless Lender shall
otherwise consent in writing, no Loan Party will, nor will any Loan Party cause
or permit any of its Subsidiaries to:
SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to
exist, directly or indirectly, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and
the other Loan Documents;
(b) Indebtedness under Hedging Agreements entered into
from time to time by any Company in accordance with Section 6.03(c);
(c) intercompany Indebtedness of the Companies
outstanding to the extent permitted by Sections 6.03(d), (g) and (k)
and Section 6.18;
(d) Indebtedness in respect of workers' compensation
claims, self-insurance obligations, performance bonds, surety, appeal
or similar bonds and completion guarantees provided by a Company in the
ordinary course of its business consistent with past practices;
(e) (i) Indebtedness actually outstanding on the Closing
Date and listed on Schedule 6.01, provided that, any such scheduled
Indebtedness that constitutes intercompany Indebtedness (A) must be
subordinated to the Obligations of the Loan Parties in accordance with
a subordination agreement in form and substance reasonably satisfactory
to Lender, and (B) except for any intercompany Indebtedness of the
Companies permitted by Section 6.01(c), shall not be repaid, prepaid,
refinanced or renewed unless the repayment, prepayment, refinancing or
renewal
29
thereof is treated as an Investment and permitted under Section 6.03;
and (ii) refinancings or renewals thereof, provided that, (A) any such
refinancing Indebtedness is in an aggregate principal amount not
greater than the aggregate principal amount of the Indebtedness being
renewed or refinanced, plus the amount of any premiums required to be
paid thereon and fees and expenses associated therewith, (B) such
refinancing Indebtedness has a later or equal final maturity and longer
or equal weighted average life than the Indebtedness being renewed or
refinanced and (C) the covenants, events of default, subordination and
other provisions thereof (including any guarantees thereof) shall be,
in the aggregate, no less favorable to the Loan Parties than those
contained in the Indebtedness being renewed or refinanced;
(f) Indebtedness to the extent permitted as part of a
Permitted Refinancing; and
(g) other Indebtedness, including Purchase Money
Obligations and Capital Lease Obligations, of Borrower and its
Subsidiaries not to exceed $10 million in aggregate principal amount at
any time outstanding.
SECTION 6.02. LIENS. Create, incur, assume or permit to exist,
directly or indirectly, any Lien on any property now owned or hereafter acquired
by it or on any income or revenues or rights in respect of any thereof, except
(each of the following being the "PERMITTED LIENS"):
(a) inchoate Liens for Taxes not yet due and payable or
delinquent and Liens for Taxes that (i) are being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, which proceedings (or orders
entered in connection with such proceedings) have the effect of
preventing the forfeiture or sale of the property or assets subject to
any such Lien, or (ii) in the case of any such charge or claim that has
or may become a Lien against any of the Collateral, such Lien and the
contest thereof shall satisfy the Contested Collateral Lien Conditions;
(b) Liens imposed by law that were incurred in the
ordinary course of business consistent with past practices of the
Companies and do not secure Indebtedness for borrowed money, such as
carriers', warehousemen's, materialmen's, landlords', workmen's,
suppliers', repairmen's and mechanics' Liens and other similar Liens
arising in the ordinary course of business consistent with past
practices of the Companies (i) for amounts not yet overdue or (ii) for
amounts that are overdue and that are being contested in good faith by
appropriate proceedings, so long as (A) adequate reserves have been
established in accordance with GAAP, and (B) in the case of any such
Lien that has or may become a Lien against any of the Collateral, such
Lien and the contest thereof shall satisfy the Contested Collateral
Lien Conditions;
30
(c) easements, rights-of-way, restrictions (including
zoning restrictions), covenants, encroachments, protrusions and other
similar charges or encumbrances, and minor title deficiencies on or
with respect to any Real Property, in each case whether now or
hereafter in existence, not (i) securing Indebtedness and (ii)
individually or in the aggregate materially interfering with the
conduct of the business of the Companies at such Real Property;
(d) Liens arising out of judgments or awards not
resulting in an Event of Default and in respect of which such Company
shall in good faith be prosecuting an appeal or proceedings for review
in respect of which there shall be secured a subsisting stay of
execution pending such appeal or proceedings;
(e) Liens (other than any Lien imposed by ERISA or
Section 401(a)(29) or 412(n) or the Tax Code) (i) imposed by law or
deposits made in connection therewith in the ordinary course of
business consistent with past practices in connection with workers'
compensation, unemployment insurance and other types of social
security; (ii) incurred in the ordinary course of business consistent
with past practices to secure the performance of tenders, statutory
obligations (other than excise taxes), surety, stay, customs and appeal
bonds, statutory bonds, bids, leases, government contracts, trade
contracts, performance and return of money bonds and other similar
obligations (including obligations imposed by the applicable laws of
foreign jurisdictions and exclusive of obligations for the payment of
borrowed money); or (iii) arising by virtue of deposits made in the
ordinary course of business consistent with past practices to secure
liability for premiums to insurance carriers; provided that, (x) with
respect to clauses (i), (ii) and (iii) above such Liens are set amounts
not yet due and payable or delinquent or, to the extent such amounts
are so due and payable, such amounts are being contested in good faith
by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, which proceedings for orders
entered in connection with such proceedings have the effect of
preventing the forfeiture or sale of the property or assets subject to
any such Lien, (y) to the extent such Liens are not imposed by Law,
such Liens shall in no event encumber any property other than cash and
cash equivalents, and (z) in the case of any such Lien against any of
the Collateral, such Lien and the contest thereof shall satisfy the
Contested Collateral Lien Conditions;
(f) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods
entered into by any of the Companies in the ordinary course of business
in accordance with the past practices of the Companies;
(g) Liens arising pursuant to Purchase Money Obligations
or Capital Lease Obligations incurred pursuant to Section 6.01(f);
provided that, (i) the Indebtedness secured by any such Lien (including
refinancings thereof) does not exceed 100% of the cost (including
financing cost) of the property being acquired or leased at the time of
the incurrence of such Indebtedness and (ii) any such Liens
31
attach only to the property being financed pursuant to such Purchase
Money Obligations or Capital Lease Obligations and directly related
assets, such as proceeds (including insurance proceeds), products,
accessions and substitutions, and do not encumber any other property of
any Company;
(h) bankers' Liens, rights of set-off and other similar
Liens existing solely with respect to cash and cash equivalents on
deposit in one or more accounts maintained by any of the Companies, in
each case granted in the ordinary course of business consistent with
past practices in favor of the bank or banks with which such accounts
are maintained, securing amounts owing to such bank with respect to
cash management and operating account arrangements, including those
involving pooled accounts and netting arrangements; provided that, in
no case shall any such Liens secure (either directly or indirectly) the
repayment of any Indebtedness;
(i) Liens on assets of a person existing at the time such
person is acquired or merged with or into or consolidated with Borrower
or any of its Subsidiaries (and not created in anticipation or
contemplation thereof); provided that, such Liens do not extend to
assets not subject to such Liens at the time of acquisition (other than
improvements thereon) and are no more favorable to the lienholders than
the existing Lien;
(j) Liens pursuant to the Security Documents;
(k) Liens in existence on the Closing Date and set forth
on Schedule 6.02; provided that, (i) the aggregate principal amount of
the Indebtedness, if any, secured by such Liens does not increase; and
(ii) such Liens do not encumber any property other than the property
subject thereto on the Closing Date;
(l) Liens on cash and cash equivalents securing
reimbursement obligations to financial institutions that have issued
letters of credit or guarantees to secure obligations of any Loan Party
or its subsidiaries under leases or licensing agreements entered into
in the ordinary course of business, consistent with past practice;
provided, however, that the amount of cash and cash equivalents subject
to such Liens, when taken together with fair market value of any
property subject to Liens set forth on Schedule 6.02, shall not exceed
the sum of (i) $2,000,000 plus (ii) the face amount of any letter of
credit issued to or for the benefit of Lender;
(m) Licenses of Intellectual Property granted by any of
the Companies in the ordinary course of business and not interfering in
any material respect with the ordinary conduct of the business
consistent with past practices of the Companies; and
(n) restrictions on transfers of securities imposed by
applicable securities laws;
32
provided, however, that no Liens shall be permitted to exist, directly or
indirectly, on any Securities Collateral (as defined in the U.S. Security
Agreement) except to the extent permitted under Section 6.02(n) above).
SECTION 6.03. INVESTMENTS, LOANS AND ADVANCES. Directly or
indirectly, lend money or credit or make advances to any person, or purchase or
acquire (using money, securities, obligations or property of any kind) any
stock, obligations or securities of, or any Equity Interests or other interest
in, or make any capital contribution to, any other person, or purchase or own a
futures or forward contract or otherwise become liable for the purchase or sale
of commodities at a future date in the nature of a futures or forward contract
(all of the foregoing, collectively, "INVESTMENTS"), except that the following
shall be permitted:
(a) the Companies may consummate the Transactions in
accordance with the provisions of the Transaction Documents;
(b) any Company may (i) acquire and hold accounts
receivables owing to any of them if created or acquired in the ordinary
course of business consistent with past practices and payable or
dischargeable in accordance with customary terms, (ii) acquire and hold
cash and cash equivalents, (iii) endorse negotiable instruments for
collection in the ordinary course of business consistent with past
practices, or (iv) make lease, utility and other similar deposits in
the ordinary course of business consistent with past practices;
(c) any Company may enter into and perform its
obligations under Hedging Agreements entered into in the ordinary
course of business consistent with past practices and so long as any
such Hedging Agreement is not speculative in nature and is (i) related
to income related to foreign currency exposure of any Company or
otherwise related to purchases permitted hereunder from foreign
suppliers or (ii) entered into to protect such Companies against
fluctuations in the prices of raw materials used in their businesses or
changes in interest rates on Indebtedness that (x) is permitted under
Section 6.01 and (y) bears interest at a fluctuating rate per annum;
(d) any Company may make intercompany loans and advances
to any Loan Party and any Loan Party may make intercompany loans and
advances to any other Loan Party, and any Subsidiary that is not a Loan
Party may make intercompany loans and advances to any other Subsidiary
that is not a Loan Party; provided that, (i) no Loan Party may make
loans to any Foreign Subsidiary or Non-Guarantor Subsidiary pursuant to
this Section 6.03(d) unless otherwise permitted under this Section 6.03
or Section 6.18, and (ii) any loan or loans made by any Foreign
Subsidiary or Non-Guarantor Subsidiary to any Loan Party pursuant to
this Section 6.03(d) shall be subordinated to the obligations of the
Loan Parties pursuant to an Intercompany Note if any such loan or
loans, individually or in the aggregate to any one Loan Party, has an
outstanding principal amount in excess of $1.0 million;
33
(e) any Company may make Investments in the form of
advances to employees for travel, relocation and like expenses, in each
case, in the ordinary course of business and consistent with such
Company's past practices;
(f) any Company may sell or transfer amounts to the
extent permitted by Section 6.04;
(g) Investments (other than as described in Section
6.03(d)) (i) by Borrower in any existing Subsidiary Guarantor, (ii) by
any Company in Borrower or any existing Subsidiary Guarantor, and (iii)
by a Subsidiary Guarantor in another existing Subsidiary Guarantor (in
each case only for so long as a Subsidiary Guarantor remains a
Guarantor);
(h) Investments in securities of trade creditors or
customers in the ordinary course of business and consistent with such
Company's past practices that are received in the settlement of bona
fide disputes or pursuant to any plan of reorganization or liquidation
or similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers;
(i) Investments made by any Company as a result of
consideration received in connection with an Asset Sale or other
transaction effected in compliance with Section 6.04;
(j) Investments outstanding on the Closing Date and
identified on Schedule 6.03;
(k) any Company may make loans, advances or capital
contributions to any Wholly Owned Foreign Subsidiary in accordance with
Section 6.18; and
(l) any Company may make Permitted Acquisitions.
SECTION 6.04. MERGERS, CONSOLIDATIONS, ASSET SALES AND PURCHASES OF
ASSETS. Wind up, liquidate or dissolve its affairs or enter into any transaction
of merger or consolidation, or make any Asset Sale or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, equipment or
other assets used or useful in the Companies' business, but not (x) Investments
or (y) all or any material part of a person's assets) of any person (or agree to
do any of the foregoing at any future time), except that:
(a) Capital Expenditures by any Company shall be
permitted to the extent permitted by Section 6.07;
(b) (i) Asset Sales of used, worn out, obsolete or
surplus property by any Company in the ordinary course of business
consistent with past practices and the abandonment or other Asset Sale
of Intellectual Property that is, in the reasonable judgment of
Borrower, no longer economically practicable to maintain or useful in
34
the conduct of the business of the Companies taken as a whole shall be
permitted; and (ii) any other Asset Sale shall be permitted if (1) the
aggregate consideration received or value of property disposed of
(based on the value thereof shown on the Borrower's balance sheet
prepared in accordance with GAAP) in respect of all Asset Sales
pursuant to this clause (ii) does not exceed $5.0 million in any four
consecutive fiscal quarters of Borrower (excluding for purposes of this
amount, any property sold by a Non-Guarantor Subsidiary in connection
with its liquidation and dissolution, the proceeds of which are
promptly distributed to the Borrower or another Loan Party), (2) such
property is sold for cash or cash equivalents, (3) such property is
sold for at least eighty percent (80%) of its Fair Market Value, and
(4) such property is not a Business Unit;
(c) Investments shall be permitted to the extent
permitted by Section 6.03;
(d) any Company may sell cash equivalents in the ordinary
course of business consistent with past practices;
(e) any Company may lease (as lessee or lessor) real or
personal property to the extent permitted by Section 6.12 and Section
6.13;
(f) the Transactions shall be permitted;
(g) any Subsidiary may be merged into Borrower (as long
as Borrower is the surviving corporation of such merger) or any other
Wholly Owned Subsidiary Guarantor; provided, however, that the Lien on
and security interest in such property granted in favor of Lender under
the Security Documents shall be maintained in accordance with the
provisions of Section 5.10;
(h) any Subsidiary may convey, sell, transfer, assign or
otherwise dispose of assets to Borrower or any other Loan Party,
subject, in the case of any sale by a Foreign Subsidiary, to Section
6.18;
(i) Permitted Acquisitions and Consent Acquisitions shall
be permitted;
(j) Permitted Business Dispositions shall be permitted;
(k) any Company may settle or release tort or other
litigation claims in the ordinary course of business consistent with
past practices; and
(l) any Immaterial Subsidiary may voluntarily dissolve,
liquidate or wind up.
To the extent Lender waives the provisions of this Section 6.04 with respect to
the sale of any Collateral, or any Collateral is sold as permitted by this
Section 6.04, such Collateral (unless sold to a Company) shall be sold free and
clear of the Liens created by the Security Documents, and Lender shall take all
actions deemed appropriate to release such Liens.
35
SECTION 6.05. DIVIDENDS. Authorize, declare or pay, directly or
indirectly, any Dividends with respect to any Company, except that any
Subsidiary of Borrower may pay cash Dividends to (x) Borrower, (y) any Guarantor
Subsidiary or (z) any Non-Guarantor Subsidiary, provided that, in the case of
clause (z), any such Dividend is distributed within ten Business Days of receipt
thereof by such Non-Guarantor Subsidiary to Borrower or any other Loan Party.
SECTION 6.06. TRANSACTIONS WITH AFFILIATES. Enter into, directly or
indirectly, any transaction or series of related transactions with any Affiliate
of any Company, other than in the ordinary course of business consistent with
past practices and on terms and conditions substantially as favorable to such
Company as would reasonably be obtained by such Company at that time in a
comparable arm's-length transaction with a person other than an Affiliate,
except that:
(a) Dividends may be paid to the extent provided in
Section 6.05;
(b) loans may be made and other transactions may be
entered into between and among any Company and its Affiliates to the
extent permitted by Sections 6.01, 6.03 and 6.18;
(c) customary fees may be paid to non-officer directors
of the Loan Parties, and customary indemnities may be provided to all
directors of the Loan Parties;
(d) the Transactions may be effected; and
(e) payments may be made between Loan Parties pursuant to
the Tax Sharing Agreement.
SECTION 6.07. LIMITATION ON CAPITAL EXPENDITURES. Make or commit to
make any Capital Expenditures, other than Capital Expenditures made or committed
to be made by Borrower and its Consolidated Subsidiaries which in the aggregate
do not exceed during any fiscal year of the Borrower $25 million multiplied by
the Pro Rata Percentage for such fiscal year, reduced dollar for dollar by the
Purchase Price for any Permitted Acquisitions made during such period.
Notwithstanding anything to the contrary contained in the prior sentence, to the
extent that the Capital Expenditures made by Borrower and its Consolidated
Subsidiaries in any fiscal year are less than the amount permitted to be made in
such period (without giving effect to any additional amount available as a
result of this sentence), the amount of such difference may be carried forward
and used to make Capital Expenditures in the next succeeding fiscal year of
Borrower, but only to such next succeeding fiscal year.
SECTION 6.08. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS;
MODIFICATIONS OF CERTIFICATE OF INCORPORATION, OTHER CONSTITUTIVE DOCUMENTS OR
BYLAWS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Amend or modify, or permit the
amendment or modification of, any provision of any existing Indebtedness, any
Transaction Document, or Borrower's investment policy statement as in effect on
the Closing Date, other than any amendments or modifications to
36
any Indebtedness, any Transaction Document, or such corporate policy that do not
in any way adversely affect the interests of Lender; (ii) amend, modify or
change its articles of incorporation or other constitutive documents (including
by the filing or modification of any certificate of designation) or bylaws, or
any agreement entered into by it, with respect to its capital stock (including
any shareholders' agreement), or enter into any new agreement with respect to
its capital stock, other than any amendments, modifications, agreements or
changes pursuant to this clause (ii) or any such new agreements pursuant to this
clause (ii) that do not in any way adversely affect the interests of Lender; or
(iii) amend or terminate any Company Lease relating to any Mortgaged Property
other than any amendments or terminations that do not in any way adversely
affect the interests of Lender or take any action or fail to take any action
that, with or without either notice or lapse of time, would constitute a default
under any Company Lease relating to any Mortgaged Real Property.
SECTION 6.09. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.
Directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:
(a) pay dividends or make any other distributions on its
capital stock or any other interest or participation in its profits
owned by Borrower or any Subsidiary of Borrower, or pay any
Indebtedness owed to Borrower or a Subsidiary of Borrower;
(b) make loans or advances to Borrower or any of
Borrower's Subsidiaries; or
(c) transfer any of its properties to Borrower or any of
Borrower's Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement
and the other Loan Documents, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of
Borrower or a Subsidiary of Borrower, or (iv) customary provisions with
respect to the disposition or distribution of assets in joint venture
agreements and other similar agreements (to the extent otherwise
permitted by this Agreement) relating solely to the assets subject to
such agreement.
SECTION 6.10. LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue any
Equity Interest of any Subsidiary (including by way of sales of treasury stock)
or any options or warrants to purchase, or securities convertible into, Equity
Interests of any Subsidiary, except (i) for stock splits, stock dividends and
additional Equity Interest issuances that do not decrease the percentage
ownership of Borrower or any Subsidiary in any class of the Equity Interest of
such Subsidiary; (ii) Borrower Common Stock may be issued, at then Fair Market
Value, to pay (in whole or in part) the purchase price for any Permitted
Acquisition; (iii) Subsidiaries of Borrower formed after the Closing Date
pursuant to Section 6.11 may issue Equity Interests to Borrower or the
Subsidiary of Borrower that is to own such stock; (iv) the Borrower or any
Subsidiary of the Borrower may issue Equity Interests to the extent permitted as
part of a Permitted Refinancing; and (v) only to the extent required in
accordance with applicable law, any Foreign Subsidiary
37
may issue directors' qualifying shares. All Equity Interests issued in
accordance with this Section 6.10 shall, to the extent required by Section 5.10
or the applicable Security Agreement, be delivered to Lender for pledge pursuant
to the applicable Security Agreement.
SECTION 6.11. LIMITATION ON CREATION OF SUBSIDIARIES. Establish,
create or acquire any additional Subsidiaries without the prior written consent
of Lender, except that (i) Borrower may acquire one or more Wholly Owned
Subsidiaries in any Permitted Acquisition and (ii) Borrower may establish or
create one or more Wholly Owned Subsidiaries of Borrower or one of its Wholly
Owned Subsidiaries without such consent so long as (except to the extent any of
the following is expressly exempted or otherwise limited pursuant to Section
5.10(b), but subject, in any event, to the requirements of Section 5.10(c)): (a)
100% of the Equity Interest of any new Subsidiary is upon the acquisition,
creation or establishment of any such new Subsidiary pledged and delivered to
Lender for its benefit under the applicable Security Agreement; and (b) upon the
acquisition, creation or establishment of any such new Subsidiary, such
Subsidiary becomes a party to the applicable Security Documents and shall become
a Subsidiary Guarantor hereunder and execute a Joinder Agreement and other
applicable Loan Documents all in accordance with Section 5.10(b); and (c) any
Investment made in any such Subsidiary is permitted under Section 6.03.
SECTION 6.12. SALE AND LEASEBACK TRANSACTIONS. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, except such transactions
among Loan Parties, unless (i) the sale of such property is permitted by Section
6.04 and (ii) any Liens arising in connection with its use of such property are
permitted by Section 6.02.
SECTION 6.13. LIMITATION ON LEASE OBLIGATIONS. Incur, create,
assume or permit to exist, directly or indirectly, any obligation as a lessee in
an amount exceeding, during any fiscal year of Borrower, $2 million multiplied
by the Pro Rata Percentage for such fiscal year in respect of any lease
obligation other than (i) a Capital Lease Obligation, (ii) obligations under the
MacArthur Sublease, and (iii) lease obligations under leases in effect on the
Closing Date and set forth on Schedule 6.13.
SECTION 6.14. BUSINESS. Unless otherwise expressly provided herein,
engage (directly or indirectly) in any business other than those businesses in
which Borrower and its Subsidiaries are engaged on the Closing Date (or that are
complementary or substantially related thereto or are reasonable extensions
thereof).
SECTION 6.15. LIMITATION ON ACCOUNTING CHANGES. Make or permit any
change in accounting policies or reporting practices without the consent of
Lender except changes that are required by GAAP.
SECTION 6.16. RESTRICTED PAYMENTS. Redeem, retire, purchase or
otherwise acquire, directly or indirectly, for any consideration, any shares of
any class of its capital stock or
38
interest of any of its shareholders, in each case now or hereafter outstanding
(or any options or warrants issued by Borrower or any of its Subsidiaries with
respect to Borrower or any of its Subsidiaries' capital stock); except that
Borrower and its Subsidiaries may redeem, retire, purchase or otherwise acquire
any of Borrower's Subsidiaries' capital stock.
SECTION 6.17. FISCAL YEAR. Change its fiscal year-end from that in
effect on the Closing Date.
SECTION 6.18. FOREIGN SUBSIDIARIES. Sell, lease, contribute, loan,
advance, assign or otherwise transfer any property that is Collateral to any
Foreign Subsidiary, except that:
(a) Borrower or any of its Subsidiaries may make loans,
capital contributions or advances to any Wholly Owned Foreign
Subsidiary, in the ordinary course of business consistent with past
practice, to fund working capital, operating expenses and, to the
extent permitted by this Agreement, Capital Expenditures, of any such
Wholly Owned Foreign Subsidiary, required in the ordinary course of
business consistent with past practice, in no event to exceed $8
million in the aggregate for any fiscal quarter (excluding any amounts
invested in any Wholly Owned Foreign Subsidiary that is as of the
Closing Date or subsequently becomes a Guarantor (effective only upon
such person being or becoming a Guarantor and only for so long as such
person remains a Guarantor)); and provided further that, any such
investment in excess of $1.0 million must be in the form of an
intercompany loan to such Wholly Owned Foreign Subsidiary and shall be
evidenced by an Intercompany Note pledged (and delivered) by the Loan
Party that is the lender of such intercompany loan as Collateral
pursuant to the applicable Security Agreement.
(b) Borrower or any of its Subsidiaries may sell for cash
(but not otherwise transfer) any property that is Collateral to any
Foreign Subsidiary to the extent that any such sale would be a sale of
assets permitted by Section 6.04(b)(ii).
ARTICLE VII
GUARANTEE
SECTION 7.01. THE GUARANTEE. The Guarantors hereby irrevocably and
unconditionally, jointly and severally guarantee as primary obligors and not as
sureties to Lender and its successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on (including any interest, fees, costs or charges
that would accrue but for the provisions of Title 11 of the United States Code
after any bankruptcy or insolvency petition under Title 11 of the United States
Code) the Loans made by Lender to, and the Notes held by Lender of, Borrower,
and all other Obligations from time to time owing to Lender by any Loan Party
under any Loan Document strictly in accordance with the terms thereof (such
obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The
Guarantors hereby irrevocably and unconditionally, jointly and severally agree
that if
39
Borrower or other Guarantor(s) shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantors will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
SECTION 7.02. OBLIGATIONS UNCONDITIONAL. The obligations of the
Guarantors under Section 7.01 shall constitute a guaranty of payment (and not of
collection) and are absolute, irrevocable and unconditional, joint and several
(except to the extent otherwise limited in accordance with applicable
Requirements of Law as described in Annex I attached hereto or in any other
Guarantee required by applicable Requirements of Law), irrespective of the
value, genuineness, validity, regularity or enforceability of the Guaranteed
Obligations of Borrower under this Agreement, the Notes, if any, or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or Guarantor
(except for payment in full). Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Guarantors hereunder, which shall remain
absolute, irrevocable and unconditional under any and all circumstances as
described above:
(i) at any time or from time to time, without
notice to the Guarantors, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended,
or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the
provisions of this Agreement or the Notes, if any, or any other
agreement or instrument referred to herein or therein shall be done
or omitted;
(iii) the maturity of any of the Guaranteed
Obligations shall be accelerated, or any of the Guaranteed
Obligations shall be amended in any respect, or any right under the
Loan Documents or any other agreement or instrument referred to
herein or therein shall be amended or waived in any respect or any
other guarantee of any of the Guaranteed Obligations or any security
therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
(iv) any Lien or security interest granted to, or
in favor of, Lender as security for any of the Guaranteed Obligations
shall fail to be perfected; or
(v) the release of any other Guarantor.
40
The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that any Loan
Party exhaust any right, power or remedy or proceed against Borrower under this
Agreement or the Notes, if any, or any other agreement or instrument referred to
herein or therein, or against any other person under any other guarantee of, or
security for, any of the Guaranteed Obligations. The Guarantors waive any and
all notice of the creation, renewal, extension, waiver, termination or accrual
of any of the Guaranteed Obligations and notice of or proof of reliance by
Lender upon this Guarantee or acceptance of this Guarantee, and the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee, and all dealings between
Borrower and Lender shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. This Guarantee shall be construed
as a continuing, absolute, irrevocable and unconditional guarantee of payment
without regard to any right of offset with respect to the Guaranteed Obligations
at any time or from time to time held by Lender, and the obligations and
liabilities of the Guarantors hereunder shall not be conditioned or contingent
upon the pursuit by Lender or any other person at any time of any right or
remedy against Borrower or against any other person that may be or become liable
in respect of all or any part of the Guaranteed Obligations or against any
collateral or guarantee therefor or right of offset with respect thereto. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantors and the successors and
assigns thereof, and shall inure to the benefit of Lender, and its successors
and assigns, notwithstanding that from time to time during the term of this
Agreement there may be no Guaranteed Obligations outstanding.
For purposes of this paragraph only, references to the "principal"
include each Loan Party and references to the "creditor" includes Lender and its
successors and permitted assigns. In accordance with Section 2856 of the
California Civil Code, each Guarantor waives all rights and defenses (i)
available to such Guarantor by reason of Sections 2787 through 2855, 2899, and
3433 of the California Civil Code, including all rights or defenses such
Guarantor may have by reason of protection afforded to the principal with
respect to any of the Guaranteed Obligations, or to any other guarantor of any
of the Guaranteed Obligations with respect to any of such guarantor's
obligations under its guarantee, in either case in accordance with the
antideficiency or other laws of the State of California limiting or discharging
the principal's Indebtedness or such other guarantor's obligations, including
Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure; and
(ii) arising out of an election of remedies by the creditor, even though such
election, such as a nonjudicial foreclosure with respect to security for any
Guaranteed Obligation (or any obligation of any other guarantor of any of the
Guaranteed Obligations), has destroyed such Guarantor's right of subrogation and
reimbursement against the principal (or such other guarantor) by the operation
of Section 580d of the California Code of Civil Procedure or otherwise. No other
provision of this Guarantee shall be construed as limiting the generality of any
of the covenants and waivers set forth in this paragraph. As provided below,
this Agreement shall be governed by, and shall be construed and enforced in
accordance with the laws of the State of New York. This paragraph is included
solely out of an abundance of caution, and shall not be construed to mean that
any of the above-referenced provisions of California law are in any way
applicable to this Agreement or to any of the Guaranteed Obligations.
41
SECTION 7.03. REINSTATEMENT. The obligations of the Guarantors
under this Article VII shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of Borrower or any other Loan
Party in respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors
jointly and severally (except to the extent otherwise limited in accordance with
applicable Requirements of Law as described in Annex I attached hereto or in any
other Guarantee required by applicable Requirements of Law) agree that they will
indemnify Lender on demand for all reasonable costs and expenses (including
reasonable fees of counsel) incurred by Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law, other than any costs or expenses resulting from the gross
negligence, bad faith or willful misconduct of Lender.
SECTION 7.04. SUBROGATION; SUBORDINATION. Each Guarantor hereby
agrees that until the indefeasible payment and satisfaction in full in cash of
all Guaranteed Obligations and the expiration and termination of the Commitment
of Lender under this Agreement it shall not exercise any right or remedy arising
by reason of any performance by it of its guarantee in Section 7.01, whether by
subrogation or otherwise, against Borrower or any other Guarantor of any of the
Guaranteed Obligations or any security for any of the Guaranteed Obligations.
The payment of any amounts due with respect to any Indebtedness of Borrower or
any other Guarantor now or hereafter owing to any Guarantor or Borrower by
reason of any payment by such Guarantor under the Guarantee in this Article VII
is hereby subordinated to the prior indefeasible payment in full in cash of the
Guaranteed Obligations. In addition, any Indebtedness of the Borrower or any
Subsidiary now or hereafter held by any Guarantor is hereby subordinated in
right of payment in full in cash to the Guaranteed Obligations. Each Guarantor
agrees that it will not demand, sue for or otherwise attempt to collect any such
Indebtedness of Borrower or any Subsidiary to such Guarantor until the
Obligations shall have been indefeasibly paid in full in cash. If,
notwithstanding the preceding sentence, any Guarantor shall, prior to the
indefeasible payment in full in cash of the Guaranteed Obligations, collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Guarantor as trustee for
Lender and be paid over to Lender on account of the Guaranteed Obligations
without affecting in any manner the liability of such Guarantor under the other
provisions of the guaranty contained herein. Each Subsidiary of Borrower which
(x) is not a Guarantor and (y) holds outstanding Indebtedness of another
Subsidiary of Borrower shall execute an agreement, in form and substance
reasonably satisfactory to Lender, subordinating such indebtedness to the prior
indefeasible payment in full in cash of the Guaranteed Obligations. Solely for
the purposes of this Section 7.04, the term "Indebtedness" shall not include
intercompany advances and amounts for goods or services sold or rendered in the
ordinary course of business, consistent with past practices, owed by any
Subsidiary to any Guarantor.
SECTION 7.05. REMEDIES. The Guarantors jointly and severally
(except to the extent otherwise limited in accordance with applicable
Requirements of Law as described in Annex I attached hereto) agree that, as
between the Guarantors and the Lenders, the obligations of Borrower under this
Agreement and the Notes, if any, may be declared to be forthwith due and
42
payable as provided in Article VIII (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Article
VIII) for purposes of Section 7.01, notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by Borrower)
shall forthwith become due and payable by the Guarantors for purposes of Section
7.01.
SECTION 7.06. INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor
hereby acknowledges that the guarantee in this Article VII constitutes an
instrument for the payment of money, and consents and agrees that Lender, at its
sole option, in the event of a dispute by such Guarantor in the payment of any
moneys due hereunder, shall have the right to bring a motion-action under New
York CPLR Section 3213 to the extent permitted thereunder.
SECTION 7.07. GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any
action or proceeding involving any state corporate law, or any state, federal or
foreign bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of any Guarantor under Section 7.01
would otherwise be held or determined to be void, voidable, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 7.01, then, notwithstanding any
other provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor, any Loan Party or any other person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
SECTION 7.08. CONTINUING GUARANTEE. The Guarantees in this Article
VII are continuing guarantees of payment, and shall apply to all Guaranteed
Obligations whenever arising.
SECTION 7.09. RELEASE OF GUARANTORS. If at any time after the
Closing Date and in connection with the Guarantee of any Loan Party in this
Article VII (i) subject to the requirements of Section 5.10(c), in the case of a
Foreign Subsidiary, Lender (after consultation with Borrower) determines that in
the case of any existing Guarantor, it would not be commercially reasonable for
such Guarantor to remain a Guarantor (taking into account the expense (including
taxes), the ability of Borrower or such Guarantor to obtain any necessary
approvals or consents required to be obtained under applicable law (but have not
been previously obtained) in connection therewith, and the effectiveness and
enforceability thereof under applicable law) or (ii) such Guarantee becomes
illegal under applicable law and such Loan Party delivers to Lender a legal
opinion from its counsel to such effect, and no reasonable alternative structure
can be devised having substantially the same effect as the issuance of a
Guarantee that would not be illegal under applicable law, then, in case of each
of the immediately preceding clauses (i) and (ii), Lender shall (at the expense
of Borrower) take all action necessary to release its security interest in that
portion of the Security Agreement Collateral owned by such Guarantor (provided,
however, that any Equity Interests of such Guarantor subject to the Lien of the
Lender shall not be released from the Security Agreement Collateral), and such
Guarantor shall be
43
released from its obligations in respect of the Guarantees in this Article VII
(such Guarantor being hereinafter referred to as a "RELEASED GUARANTOR," so long
as it continues to be a Non-Guarantor Subsidiary), which release from such
Guarantees, in the case of an event described in the immediately preceding
clause (i), shall become effective as of the closing of the last day of the
taxable year that immediately precedes the date that Lender makes a
determination described in such clause (i).
ARTICLE VIII
EVENTS OF DEFAULT
In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):
(a) default shall be made in the payment of any principal
of any Loan when and as the same shall become due and payable, whether
at the due date thereof or by acceleration thereof or otherwise;
(b) default shall be made in the payment of any interest
on any Loan (other than any amount added to principal of Loans pursuant
to Section 2.05(d)) or any other amount (other than an amount referred
to in paragraph (a) above) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(c) any representation or warranty made or deemed made in
or in connection with any Loan Document or the borrowings hereunder, or
any representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished
in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made,
deemed made or furnished;
(d) default shall be made in the due observance or
performance by any Company of any covenant, condition or agreement
contained in Section 5.01, 5.03 or 5.07 or in Article VI;
(e) default shall be made in the due observance or
performance by any Company of any covenant, condition or agreement
contained in any Loan Document (other than those specified in paragraph
(a), (b) or (d) above), and such default shall continue unremedied or
shall not be waived for a period of 30 days after the earlier of (i) an
officer of such Company becoming aware of such default or (ii) receipt
by Borrower and such Company of notice from Lender of such default;
(f) any Company (other than any Immaterial Subsidiary)
shall (i) fail to pay any principal or interest, regardless of amount,
due in respect of any Indebtedness (other than the Obligations) when
and as the same shall become due
44
and payable (after all applicable grace periods have expired); or (ii)
fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or
governing any such Indebtedness if the effect of any failure referred
to in this clause (ii) is to cause, or to permit the holder or holders
of such Indebtedness or a trustee on its or their behalf (with or
without the giving of notice, the lapse of time or both) to cause, such
Indebtedness to become due prior to its stated maturity; provided that,
it shall not constitute an Event of Default pursuant to this paragraph
(f) unless the aggregate amount of all such Indebtedness referred to in
clauses (i) and (ii) exceeds $1.0 million at any one time;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Company (other than
any Immaterial Subsidiary), or of a substantial part of the property or
assets of any Company (other than any Immaterial Subsidiary), under the
Bankruptcy Code, or any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law; (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for any Company (other than any Immaterial Subsidiary) or for
a substantial part of the property or assets of any Company; or (iii)
the winding-up or liquidation of any Company (other than any Immaterial
Subsidiary); and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(h) any Company (other than any Immaterial Subsidiary)
shall (i) voluntarily commence any proceeding or file any petition
seeking relief under the Bankruptcy Code, or any other federal, state
or foreign bankruptcy, insolvency, receivership or similar law; (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition
described in paragraph (g) above; (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Company (other than any
Immaterial Subsidiary) or for a substantial part of the property or
assets of any Company (other than any Immaterial Subsidiary); (iv) file
an answer admitting the material allegations of a petition filed
against it in any such proceeding; (v) make a general assignment for
the benefit of creditors; (vi) become unable, admit in writing its
inability or fail generally to pay its debts as they become due; (vii)
take any action for the purpose of effecting any of the foregoing; or
(viii) wind up or liquidate;
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $1.0 million shall be rendered against
any Company or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of any Company
to enforce any such judgment;
45
(j) an ERISA Event occurs, an event of noncompliance with
respect to any Foreign Plan occurs or, if the present value of the
accrued benefit liabilities (whether or not vested) under any Foreign
Plan that is funded, determined as of the end of the most recently
ended fiscal year of the respective Loan Party on the basis of
actuarial assumptions proper under applicable foreign law, exceeds the
current value of the assets of such Foreign Plan by more than $1.0
million, that in the opinion of Lender, when taken together with all
other such ERISA Events, noncompliance and underfunding, could
reasonably be expected to result in liability to any Company or its
ERISA Affiliates in an aggregate amount exceeding $1.0 million;
(k) any security interest and Lien purported to be
created by any Security Document shall cease to be in full force and
effect, or shall cease to give Lender, for its benefit, the Liens,
rights, powers and privileges purported to be created and granted under
such Security Documents (including a perfected first priority security
interest in and Lien on all of the Collateral thereunder (except as
otherwise expressly provided in such Security Documents)) in favor of
Lender, or shall be asserted by Borrower or any other Loan Party not to
be a valid, perfected, first priority (except as otherwise expressly
provided in this Agreement or such Security Document) security interest
in or Lien on the Collateral covered thereby;
(l) the Guarantees or any Security Document shall cease
to be in full force and effect, except to the extent expressly
permitted to be released hereunder in accordance with Section 7.09;
(m) any Loan Document or any material provisions thereof
shall at any time and for any reason be declared by a court of
competent jurisdiction to be null and void, or a proceeding shall be
commenced by any Loan Party or any other person, or by any Governmental
Authority, seeking to establish the invalidity or unenforceability
thereof (exclusive of questions of interpretation of any provision
thereof), or any Loan Party shall repudiate or deny that it has any
liability or obligation for the payment of principal or interest or
other obligations purported to be created under any Loan Document;
(n) there shall have occurred a Change of Control; or
(o) the Distribution shall not have occurred on the
Closing Date in accordance with the terms and conditions of the
Distribution Agreement;
then, and in every such event (other than an event described in paragraph (g) or
(h) above), and at any time thereafter during the continuance of such event,
Lender may by notice to Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitment in whole
or in part; and (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and all other
liabilities of Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without
46
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower and the Guarantors, anything contained
herein or in any other Loan Document to the contrary notwithstanding. In any
event described in paragraph (g) or (h) above, the Commitment shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all other liabilities of Borrower
accrued hereunder and under any other Loan Document, shall automatically become
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by Borrower and the Guarantors,
anything contained herein or in any other Loan Document to the contrary
notwithstanding.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as
follows:
(a) if to any Loan Party, to Borrower at:
Mindspeed Technologies, Inc.
4000 MacArthur Boulevard
Newport Beach, California 92660-3095
Attention: Simon Biddiscombe
Phone: (949) 579-3000
Telecopy No.: (949) 579-5289;
With a courtesy copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Phone: (212) 408-5100
Telecopy No.: (212) 541-5369
47
(b) if to Conexant, to it at:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: Dennis E. O'Reilly, Esq.,
Senior Vice President,
General Counsel and Secretary
Phone: (949) 483-4600
Telecopy No.: (949) 483-6388;
With a courtesy copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Phone: (212) 408-5100
Telecopy No.: (212) 541-5369
(c) if to a Lender other than Conexant, to it at its
address (or telecopy number) set forth in the Assignment and Acceptance
pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or by certified or registered mail, in each case delivered, sent or
mailed (properly addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01, and failure to deliver courtesy copies of
notices and other communications shall in no event affect the validity or
effectiveness of such notices and other communications.
SECTION 9.02. WAIVERS; AMENDMENT.
(a) No failure or delay by Lender in exercising any right
or power hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and
remedies of Lender hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provision of any Loan Document
or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by Section
9.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting
the
48
generality of the foregoing, the making of a Loan shall not be
construed as a waiver of any Default, regardless of whether Lender may
have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document
nor any provision hereof or thereof may be waived, amended or modified
except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by Borrower and Lender or, in the
case of any other Loan Document, pursuant to an agreement or agreements
in writing entered into by Lender and the Loan Party or Loan Parties
that are parties thereto.
SECTION 9.03. EXPENSES; INDEMNITY.
(a) Borrower agrees to pay all reasonable out-of-pocket
expenses (including reasonable legal fees and expenses of counsel,
expenses incurred in connection with due diligence and travel, courier,
reproduction, printing and delivery expenses) incurred by Lender in
connection with the preparation, execution and delivery, administration
of this Agreement and the other Loan Documents or in connection with
any amendments, modifications, enforcement costs or waivers of the
provisions hereof or thereof (whether or not the transactions hereby or
thereby contemplated shall be consummated), or incurred by Lender, in
connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in
connection with the Loans made hereunder, including the reasonable
fees, charges and disbursements of Chadbourne & Parke LLP, special
counsel for Lender (and one local counsel in each foreign jurisdiction
where Lender deems such local counsel advisable and any additional
counsel to Lender required in the event of a conflict of interest),
and, in connection with any such enforcement or protection, the fees,
charges and disbursements of any consultants and advisors in connection
with any out of court workout or in any bankruptcy case.
(b) Except to the extent otherwise limited in accordance
with applicable Requirements of Law as described in Annex I attached
hereto, the Loan Parties agree, jointly and severally, to indemnify
Lender, each Affiliate of Lender, and each of their respective
directors, officers, trustees, employees and agents (each such person
being called an "INDEMNITEE") against, and to hold each Indemnitee
harmless from, all reasonable out-of-pocket costs and any and all
losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected
with, or as a result of (i) any actual or proposed use of the proceeds
of the Loans; or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; or (iii) any Transaction Document;
provided that, such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities
or related expenses are determined by a court of competent jurisdiction
by final and nonappealable judgment
49
to have resulted from the bad faith, gross negligence or willful
misconduct of such Indemnitee.
(c) The provisions of this Section 9.03 shall remain
operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the Transactions
contemplated hereby, the repayment of any of the Loans, the expiration
of the Commitment, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of Lender. All amounts due under
this Section 9.03 shall be payable on written demand therefor
accompanied by reasonable documentation with respect to any
reimbursement, indemnification or other amount requested.
SECTION 9.04. SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Loan
Party may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of Lender (and any
attempted assignment or transfer by any Loan Party without such consent
shall be null and void). Nothing in this Agreement, express or implied,
shall be construed to confer upon any person (other than the parties
hereto, their respective successors and assigns permitted hereby and,
to the extent expressly contemplated hereby, the Indemnitees) any legal
or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to
it); provided that, (i) except in the case of an assignment to an
Affiliate of a Lender, Borrower must give its prior written consent to
such assignment (which consent shall not be unreasonably withheld or
delayed); (ii) except in the case of an assignment of the entire
remaining amount of the assigning Lender's Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the
Borrower) shall be in a principal amount that is an integral multiple
of $500,000 and not less than $1.0 million, unless Borrower otherwise
consents; (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement; and (iv) the parties to each
assignment shall execute and deliver to Borrower an Assignment and
Acceptance; provided further that, any consent of Borrower otherwise
required under this Section 9.04(b) shall not be required if a Default
or an Event of Default under Article VIII has occurred and is
continuing. Subject to acceptance, from and after the effective date
specified in each Assignment and Acceptance, the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by
such Assignment and Acceptance, have the rights and
50
obligations of Lender under this Agreement (provided that, any
liability of Borrower to such assignee under Section 2.09 shall be
limited to the amount, if any, that would have been payable thereunder
by Borrower in the absence of such assignment), and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.09 and 9.03).
(c) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the
assignee's completed Administrative Questionnaire, and any written
consent to such assignment required by Section 9.04(b), such Assignment
and Acceptance shall become effective for all purposes.
(d) Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to
secure its obligations, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and the other provisions of this
Section 9.04 shall not apply to any such pledge or assignment of a
security interest; provided that, no such pledge or assignment of a
security interest shall release Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for Lender as a
party hereto.
SECTION 9.05. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that Lender may have had notice or knowledge of any Default
or incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.09 and 9.03 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Commitments or the termination of this Agreement or any
provision hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in
51
Article IV, this Agreement shall become effective when it shall have been
executed by the parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. RIGHT OF SET-OFF. If an Event of Default shall have
occurred and be continuing, Lender and each of its Affiliates are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final (other than deposits in trust accounts)) at any
time held and other obligations at any time owing by Lender or Affiliate to or
for the credit or the account of any Loan Party against any of and all the
obligations of any Loan Party now or hereafter existing under this Agreement
held by Lender, irrespective of whether or not Lender shall have made any demand
under this Agreement and although such obligations may be unmatured. The rights
of Lender under this Section 9.08 are in addition to other rights and remedies
(including other rights of set-off) that Lender may have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (INCLUDING SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK).
(b) Each Loan Party hereby irrevocably and
unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that any
Lender may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against any Loan Party or its
properties in the courts of any jurisdiction.
52
(c) Each Loan Party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court
referred to in Section 9.09(b). Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01.
Nothing in this Agreement or any other Loan Document will affect the
right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.10.
SECTION 9.11. CONFIDENTIALITY. Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates' directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential pursuant to the terms hereof); (b) to the extent
requested by any regulatory authority; (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process; (d) to any
other party to this Agreement; (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder;
(f) subject to an agreement containing provisions substantially the same as
those of this Section 9.11, to any assignee of, or any prospective assignee of,
any of its rights or obligations under this Agreement; (g) with the consent of
Borrower; or (h) to the extent such Information (i) is publicly available at the
time of disclosure or becomes publicly available other than as a result of a
breach of this Section 9.11, or (ii) becomes available to Lender on a
nonconfidential basis from a source other than Borrower or any Subsidiary. For
the purposes of this Section 9.11, "INFORMATION" shall mean all information
received from Borrower or any Subsidiary on a confidential basis relating to
Borrower or any
53
Subsidiary or its business, other than any such information that is available to
any Lender on a nonconfidential basis prior to disclosure by Borrower or any
Subsidiary. Any person required to maintain the confidentiality of Information
as provided in this Section 9.11 shall be considered to have complied with its
obligation to do so if such person has exercised the same degree of care to
maintain the confidentiality of such Information as such person would accord to
its own confidential information.
[signature pages follow]
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MINDSPEED TECHNOLOGIES, INC.,
as Borrower
By: /s/ Simon Biddiscombe
----------------------------------------
Name: Simon Biddiscombe
Title: Senior Vice President, Chief
Financial Officer and Treasurer
APPLIED TELECOM, INC., as a Guarantor
By: /s/ Balakrishnan S. Iyer
----------------------------------------
Name: Balakrishnan S. Iyer
Title: Vice President
HOTRAIL, INC., as a Guarantor
By: /s/ Balakrishnan S. Iyer
-----------------------------------
Name: Balakrishnan S. Iyer
Title: President
CONEXANT SPINCO TECHNOLOGIES, LLC, as a
Guarantor
By: Steven W. Sprecher
----------------------------------------
Name: Steven W. Sprecher
Title: Manager
MAKER COMMUNICATIONS, INC., as a Guarantor
By: /s/ Jasmina Theodore Boulanger
----------------------------------------
Name: Jasmina Theodore Boulanger
Title: Assistant Secretary
BROOKTREE CORPORATION, as a Guarantor
By: /s/ Balakrishnan S. Iyer
--------------------------------------
Name: Balakrishnan S. Iyer
Title: Vice President
CONEXANT SYSTEMS, INC., as Lender
By: /s/ Kerry K. Petry
----------------------------------------
Name: Kerry K. Petry
Title: Vice President and Treasurer
EXHIBIT A
DEFINED TERMS
RULES OF CONSTRUCTION
1.01. DEFINED TERMS.
"AFFILIATE" means, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with the person specified;
provided, however, that, for purposes of Section 6.06, the term "AFFILIATE"
shall also include any person, other than Conexant, that directly or indirectly
owns more than 10% of any class of Equity Interests of the person specified or
that is an officer or director of the person specified.
"AGREEMENT" means this Agreement, as amended, restated, supplemented or
otherwise modified from time to time.
"AGREEMENT AND ESTOPPEL CERTIFICATE" means any Agreement and Estoppel
Certificate between a Loan Party, as tenant, and the applicable holder of the
fee interest, as landlord, substantially in the form of Exhibit E-1.
"ASSET SALE" means (a) any conveyance, sale, lease, sublease,
assignment, transfer, license or other disposition (including by way of merger
or consolidation and including any sale and leaseback transaction) of any
property (including stock of any Subsidiary by the holder thereof) by Borrower
or any of its Subsidiaries to any person other than a Loan Party (other than
sales and other dispositions of inventory, and licensing of Intellectual
Property in the ordinary course of business consistent with past practices) and
(b) any issuance or sale by any Subsidiary of its Equity Interests to any person
other than a Loan Party.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by Lender and its assignee, in the form of Exhibit B, or such other form as
shall be approved by Borrower.
"ATTRIBUTABLE INDEBTEDNESS" means, when used with respect to any sale
and leaseback transaction, as at the time of determination, the present value
(discounted at a rate equivalent to Borrower's then-current weighted-average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such sale and leaseback
transaction.
"AVAILABILITY PERIOD" means the period from and including the Closing
Date (subject to the last sentence in Section 5.12 and the satisfaction of all
the conditions to Loans in Article IV) to the first to occur of (x) the Final
Maturity Date, (y) any termination of the Commitment pursuant to Section 2.06 or
Article VIII hereof and (z) the date the Borrower enters into any binding
commitment for a Consent Acquisition which either (i) is not approved by Lender
as provided in the definition of "Consent Acquisition" or (ii) is effected
pursuant to the waiver contained in the proviso clause in paragraph (3) of the
definition of "Consent Acquisition".
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"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"BOARD" means the Board of Governors of the Federal Reserve System of
the United States of America.
"BORROWER" has the meaning assigned to such term in the preamble
hereto.
"BORROWER COMMON STOCK" means the common stock $0.01 par value per
share of Borrower, together with the associated preferred share purchase rights.
"BORROWING REQUEST" means a request for a Loan by Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C, or such other form as shall be approved by Lender, appropriately
completed in conformity with this Agreement and signed by the Chief Executive
Officer or Chief Financial Officer of Borrower.
"BUSINESS DAY" means any day other than a Saturday, Sunday or day on
which banks in California or Michigan are authorized or required by law to
close.
"BUSINESS UNIT" means, with respect to Borrower or any Subsidiary, (i)
any "segment," as defined by GAAP, reflected in Borrower's financial statements
included in filings made under the Exchange Act and (ii) any business unit,
product line or product, or any combination thereof, that, consistent with past
practice under Borrower's internal controls and procedures for accounting
matters, separately reports Revenue for purposes of preparing Borrower's
financial statements under GAAP.
"CAPITAL EXPENDITURES" means, with respect to any person, for any
period, the aggregate of all expenditures of such person and its Consolidated
Subsidiaries for the acquisition of fixed or capital assets which should be
capitalized under GAAP on a consolidated balance sheet of such person and its
Consolidated Subsidiaries.
"CAPITAL LEASE OBLIGATIONS" of any person means the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CASH BALANCE" means the sum, as of the last Business Day of a fiscal
month, of all cash and all Permitted Investments, as shown on the Borrower's
balance sheet for such fiscal month, and for this purpose, all amounts of cash
and Permitted Investments held by Borrower and its Subsidiaries shall be
included in the Cash Balance, without regard to any characterization or
treatment of such amounts (whether as cash and cash equivalents, short-term
investments, or other assets) on Borrower's balance sheet or under GAAP.
"CASUALTY EVENT" means, with respect to any property (including Real
Property) of any person, any loss of title with respect to such property or any
loss of or damage to or destruction
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of, or any condemnation or other taking (including by any Governmental
Authority) of, such property for which such person or any of its subsidiaries
receives insurance proceeds or proceeds of a condemnation award or other
compensation. "CASUALTY EVENT" includes any taking of all or any part of any
Real Property of any person or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, or by reason of the temporary
requisition of the use or occupancy of all or any part of any Real Property of
any person or any part thereof by any Governmental Authority, civil or military.
"CHANGE OF CONTROL" shall have the meaning assigned to such term in the
By-Laws of the Borrower as in effect on the Closing Date, without giving effect
to any amendment thereof after the Closing Date.
"CHARGES" has the meaning assigned to such term in Section 2.05(f).
"CLOSING DATE" means June 27, 2003.
"COLLATERAL" means all of the Security Agreement Collateral, any
Mortgaged Real Property and all other property of whatever kind and nature
pledged as collateral under any Security Document.
"COLLATERAL ASSIGNMENT OF LEASE" means a Collateral Assignment of Lease
in form and substance reasonably satisfactory to Lender.
"COMMITMENT" means Lender's commitment to make Loans hereunder in the
amount set forth on Annex II, or in the Assignment and Acceptance pursuant to
which such Lender assumed its Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.06 and (b) reduced or increased
from time to time pursuant to assignments pursuant to Section 9.04. The initial
aggregate amount of Lender's Commitment is $50.0 million.
"COMPANIES" means Borrower and its Subsidiaries; and "COMPANY" means
any one of them.
"COMPANY FACILITY LEASE" has the meaning assigned to such term in
Section 3.05(b).
"COMPANY LEASE" means any Company Facility Lease and any Company
Property Lease, individually and collectively.
"COMPANY PROPERTY LEASE" has the meaning assigned to such term in
Section 3.05(b).
"CONSENT ACQUISITION" means any Investment, merger, consolidation, or
purchase of property, in one or a series of transactions, which has been
approved in writing by the Lender, which approval shall not be unreasonably
withheld or delayed if all the following conditions are satisfied:
(1) after giving effect to the acquisition, (x) there is no Change of
Control and (y) either:
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(i) Borrower Controls each other person that is a party to the
transaction, or
(ii) in the case of a merger or consolidation to which the
Borrower is a party, the management of the surviving or resulting
corporation consists of (A) in the case of directors, at least a
majority of persons who were directors of Borrower prior to the
merger or consolidation, and (B) in the case of officers, at least
the chief executive officer and chief financial officer and a
majority of the other executive officers (as defined in Rule 405
under the Securities Act) who held such positions (or
substantially similar positions) with Borrower prior to the merger
or consolidation, or
(iii) all property or assets acquired in connection with the
acquisition are owned by Borrower or a Subsidiary Guarantor.
(2) Borrower has delivered to Lender, not less than thirty days prior
to the time Borrower proposes to enter into any binding commitment for any such
acquisition, pro forma financial statements which (x) have been prepared in
accordance with GAAP applied on a basis consistent with Borrower's past practice
in respect of pro forma financial statements; (y) give effect to the acquisition
as of the date of the most recent quarterly financial statements delivered to
Lender under this Agreement, and (z) include:
(i) pro forma consolidated balance sheets and consolidated
statements of income and cash flows for such fiscal quarter, the
current fiscal year to date and as at the end of the immediately
preceding fiscal year of Borrower;
(ii) a forecast, for each of the four fiscal quarters following
such fiscal quarter of the pro forma consolidated balance sheets
and consolidated and consolidating (at least for (1) any person
acquired in the acquisition and (2) the Borrower and those persons
that were Subsidiaries prior to the acquisition) statements of
income and cash flows for such periods and showing in reasonable
detail any adjustments or eliminations made in preparing the
consolidated statements; and
(iii) a reasonably detailed statement of the assumptions and
critical accounting estimates used to prepare the financial
statements referred to in clauses (i) and (ii), all in such detail
as Lender may reasonably request.
(3) the financial statements referred to in clause (2) above show that,
on a pro forma basis:
(x) the Net Cash Position (as hereinafter defined) after giving effect
to the acquisition is not less than the Net Cash Position (as hereinafter
defined) immediately prior to the acquisition, where Net Cash Position means an
amount equal to:
(i) the sum of cash and cash equivalents of Borrower and its
consolidated Subsidiaries, plus, for purposes of determining the
Net Cash Position after giving effect to the acquisition, all cash
and cash equivalents of each person acquired and its
A-4
consolidated Subsidiaries, as such amounts would be shown on a pro
forma balance sheet prepared in accordance with GAAP (except as
expressly provided herein), consistent with the past practices of
the Borrower, immediately after giving effect to the acquisition,
minus
(ii) the sum of all Indebtedness of the Borrower and its
consolidated Subsidiaries, plus, for purposes of determining the
Net Cash Position after giving effect to the acquisition, all
Indebtedness of each person acquired and its consolidated
Subsidiaries, as such amounts would be shown on a pro forma balance
sheet prepared in accordance with GAAP (except as expressly
provided herein), consistent with the past practices of the
Borrower, immediately after giving effect to the acquisition; and
(iii) in each case where the Net Cash Position is to be determined
after giving effect to the acquisition, such determination will be
made on a pro forma basis that, without duplication, treats:
(A) all monetary payment obligations incurred or required to
be paid in connection with the acquisition (including any
payments of amounts included in the definition of Purchase
Price (as defined below in clause (d) of the definition of
"Permitted Acquisition," but substituting the phrase "person
or property acquired" for the term "Acquired Business" in
that definition), any dividends or other distributions to be
made to shareholders or other persons, any sales,
documentary, transfer, income, gain or other taxes of any
kind, and any fees, costs or expenses of any kind associated
with the acquisition, in each case to the extent payable in
cash or cash equivalents) of the Borrower and its
subsidiaries and each person acquired, whether paid or
accrued, and without regard to the time when any such amount
becomes due and payable or any contingency associated with
any such payment obligation, as a reduction of the amount of
cash and cash equivalents, on a dollar for dollar basis,
effective immediately after giving effect to the acquisition;
and
(B) all Indebtedness incurred, assumed, guaranteed or
required to be paid in connection with the acquisition by the
Borrower, any Subsidiary of the Borrower and each person
acquired in connection with the acquisition, other than any
Indebtedness actually paid or discharged in connection with
the acquisition, as Indebtedness outstanding effective
immediately after giving effect to the acquisition; and
(iv) in each case where the Net Cash Position is to be determined
immediately prior to giving effect to the acquisition, such
determination will be made on a pro forma basis that excludes from
the computations all amounts referred to in clause (iii) above;
and
(y) no later than the fourth fiscal quarter following the acquisition,
the sum of (A) the operating profit before amortization of goodwill of each
person acquired, plus (B) the amount of
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any identified cost savings to Borrower as a direct result of acquiring such
person, is positive; provided, however, that the requirements in clause (x) and
(y) shall be waived if the Borrower shall deliver to Lender not less than thirty
days prior to the time Borrower proposes to enter into any binding commitment
for any such acquisition:
(i) an irrevocable notice of prepayment of all outstanding Loans
and termination of the entire Commitment to become effective,
automatically and without further notice or action of any kind by
Borrower, Lender or any other person, 180 days following the date
of any such acquisition; and
(ii) a reasonably detailed business plan (including the assumptions
and estimates made in preparing such business plan) that shows,
with reasonable certainty, that Borrower will be able to prepay all
outstanding Loans and terminate the entire Commitment 180 days
following the date of any such acquisition, which plan must be
satisfactory to Lender in its discretion.
(4) the acquisition does not result in any Loan Party, incurring,
creating, assuming, permitting to exist or otherwise having any liability for,
directly or indirectly, any Liens (other than Permitted Liens).
(5) the acquisition does not result in any Default or Event of Default.
(6) the acquisition does not have a Material Adverse Effect.
(7) upon the consummation of any acquisition that results in a person
becoming a Subsidiary of a Loan Party, immediately following such acquisition:
(i) such Subsidiary is a Domestic Subsidiary; and
(ii) 100% of the Equity Interest of any such new Subsidiary
is pledged and delivered to Lender for its benefit under the
applicable Security Agreement; and
(iii) such Subsidiary becomes a party to the applicable
Security Documents and becomes a Subsidiary Guarantor hereunder
and executes a Joinder Agreement and other applicable Loan
Documents all in accordance with Section 5.10(b).
(8) upon the consummation of any acquisition that results in any Loan
Party acquiring any assets that are not then subject to a perfected first
priority security interest or Lien of the Lender under the Security Documents,
immediately following such acquisition, the Loan Parties shall execute and
deliver to Lender such agreements and other instruments, record such Mortgages
and financing statements or other documents and take such other actions as may
be required so that Lender has a perfected, first priority security interest in
or Lien on all such acquired assets, subject to no Liens other than Permitted
Liens.
(9) upon the consummation of any merger or consolidation of any Loan
Party with another person in which the Loan Party is not the surviving or
resulting corporation, or the
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Lender otherwise does not have a perfected, first priority security interest or
Lien under the Security Documents covering all the assets of such surviving or
resulting corporation, immediately following such acquisition, each surviving or
resulting corporation shall execute and deliver to Lender a Joinder Agreement
and other applicable Loan Documents and such agreements and other instruments as
Lender may reasonably request, record such Mortgages and financing statements or
other documents and take such other actions as may be required so that Lender
has a perfected, first priority security interest in or Lien on all such
acquired assets, subject to no Liens other than Permitted Liens.
(10) the Purchase Price (as defined below in clause (d) of the
definition of "Permitted Acquisition," but excluding for this purpose any
amounts referred to in clause (2) of that definition, and substituting the
phrase "person or property acquired" for the term "Acquired Business" in that
definition) paid for the acquisition of such person or property (x) is solely of
Borrower Common Stock and (y) is greater than $25,000,000.
"CONSOLIDATED COMPANIES" means Borrower and its Consolidated
Subsidiaries.
"CONSOLIDATED SUBSIDIARIES" means, as to any person, all subsidiaries
of such person that are consolidated with such person for financial reporting
purposes in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any time:
(a) the total assets of Borrower and its Subsidiaries
which would be shown as assets on a consolidated balance sheet of
Borrower and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and
surplus of Subsidiaries, minus
(b) the total liabilities of Borrower and its
Subsidiaries which would be shown as liabilities on a consolidated
balance sheet of Borrower and its Subsidiaries as of such time
prepared in accordance with GAAP, minus
(c) the net book value of all assets, after deducting any
reserves applicable thereto, which would be treated as intangible
under GAAP, including, without limitation, good will, trademarks,
trade names, service marks, brand names, copyrights, patents and
unamortized debt discount and expense, organizational expenses and
the excess of the equity in any Subsidiary over the cost of the
investment in such Subsidiary.
"CONTESTED COLLATERAL LIEN CONDITIONS" means, with respect to any
Permitted Lien of the type described in Sections 6.02(a), (b) and (e), the
following conditions:
(a) any proceeding instituted contesting such Lien shall
conclusively operate to stay the sale or forfeiture of any portion
of the Collateral on account of such Lien;
A-7
(b) at the option and upon request of Lender, the
appropriate Loan Party shall maintain cash reserves in an amount
sufficient to pay and discharge such Lien and Lender's reasonable
estimate of all interest and penalties related thereto; and
(c) such Lien shall in all respects be subject and
subordinate in priority to the Lien and security interest created
and evidenced by the Security Documents, except if and to the
extent that the law or regulation creating, permitting or
authorizing such Lien provides that such Lien is or must be
superior to the Lien and security interest created and evidenced by
the Security Documents.
"CONTINGENT OBLIGATION" means, as to any person, any obligation of such
person guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including any
obligation of such person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor; (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor; (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; or (d)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term "CONTINGENT
OBLIGATION" shall not include (w) endorsements of instruments for deposit or
collection in the ordinary course of business consistent with past practices,
(x) any product warranties issued on products by Borrower or any of its
Subsidiaries in the ordinary course of business consistent with past practices,
(y) any obligation to buy back products in the ordinary course of business
consistent with past practices made pursuant to the buyback policy of Borrower
and its Subsidiaries or pursuant to applicable Requirements of Law, and (z) any
operating lease guarantees (other than in respect of Synthetic Lease
Obligations) executed by Borrower in the ordinary course of business consistent
with past practices. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (or, if less,
the maximum amount of such primary obligation for which such person may be
liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such person is required to
perform thereunder) as determined by such person in good faith.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"CONTROL AGREEMENT" has the meaning assigned to such term in the U.S.
Security Agreement.
A-8
"DEFAULT" means any event or condition that is, or upon notice or lapse
of time or both would constitute, an Event of Default.
"DISCONTINUED REVENUE" means, with respect to any Business Unit sold or
proposed to be sold in a Permitted Business Disposition, the Revenue of such
Business Unit for the twelve consecutive fiscal month period preceding the date
a binding commitment is made for the sale of such Business Unit.
"DISTRIBUTION" means the distribution by Conexant to its shareholders
of shares of Borrower Common Stock as provided in the Form 10.
"DISTRIBUTION AGREEMENT" means the distribution agreement between
Conexant and Borrower, dated June 27, 2003.
"DISTRIBUTION DATE" means the date of the Distribution.
"DIVIDEND" with respect to any person means that such person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(other than common stock of such person) or cash to its stockholders as such, or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
consideration any shares of any class of its capital stock outstanding on or
after the Closing Date (or any options or warrants issued by such person with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock of such person outstanding on or after the Closing Date (or any options or
warrants issued by such person with respect to its capital stock). Without
limiting the foregoing, "DIVIDEND" with respect to any person also includes all
payments made or required to be made by such person with respect to any stock
appreciation rights, plans, equity incentive or achievement plans or any similar
plans or setting aside of any funds for the foregoing purposes.
"DOLLARS" or "$" means the lawful money of the United States of
America.
"DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of
the United States of America, any state thereof or the District of Columbia.
"DOMESTICATED FOREIGN SUBSIDIARY" means a Foreign Subsidiary which has
become domesticated into the United States of America.
"EQUITY INTEREST" means, with respect to any person, any and all
shares, interests, participations or other equivalents, including membership
interests (however designated, whether voting or non-voting), of capital of such
person, including, if such person is a partnership, partnership interests
(whether general or limited) and any other interest (other than an interest
constituting Indebtedness) or participation that confers on a person the right
to receive a share of the profits and losses of, or distributions of assets of,
such partnership, whether outstanding on or issued after the date hereof.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with Borrower, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Tax Code.
"ERISA EVENT" means (a) any "reportable event," as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan
(other than an event for which the 30-day notice period is waived by
regulation); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Tax Code or Section 302 of
ERISA), whether or not waived, the failure to make by its due date a required
installment under Section 412(m) of the Tax Code with respect to any Plan or the
failure to make any required contribution to a Multiemployer Plan; (c) the
filing pursuant to Section 412(d) of the Tax Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a
plan administrator of any notice relating to the intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan, or the occurrence of
any event or condition that could reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (f) the incurrence by any Company or any of its ERISA
Affiliates of any liability with respect to the withdrawal from any Plan or
Multiemployer Plan; (g) the receipt by any Company or its ERISA Affiliates of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA; (h) the making of any
amendment to any Plan that could result in the imposition of a lien or the
posting of a bond or other security; (i) the occurrence of a nonexempt
prohibited transaction (within the meaning of Section 4975 of the Tax Code or
Section 406 of ERISA) that could result in a Material Adverse Effect; (j) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Tax Code or
pursuant to ERISA with respect to any Plan; and (k) the assertion of a material
claim (other than routine claims for benefits) against any Plan or the assets
thereof, or against any Company or any ERISA Affiliates in connection with any
Plan.
"EVENT OF DEFAULT" has the meaning assigned to such term in Article
VIII.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED TAXES" means, with respect to any payment to Lender made by
or on account of any obligation of Borrower hereunder, federal, state or local
income or franchise taxes imposed on (or measured by) Lender's net income by the
United States of America or by any other jurisdiction in which Lender is
organized.
"EXPOSURE" means, with respect to Lender at any time, the aggregate
principal amount at such time of all outstanding Loans of Lender excluding from
principal, for purposes of this
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definition, any amount of interest which has been capitalized and become
principal as provided in Section 2.05(d).
"FAIR MARKET VALUE" means on the day of valuation, for (a) any Equity
Interest, with respect to each share, interest, participation or other
equivalent (i) the last reported sale price regular way or, in case no such sale
takes place on such day, the average of the closing bid and asked prices regular
way, in either case as reported on the principal national securities exchange on
which the share, interest, participation or other equivalent is listed or
admitted for trading or (ii) if the share, interest, participation or other
equivalent is not listed or admitted for trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place on
such day, the average of the highest reported bid and the lowest reported asked
quotation for the share, interest, participation or other equivalent, in either
case as quoted on the NASDAQ National Market System or the NASDAQ Small Cap
Market or (iii) if the share, interest, participation or other equivalent is not
listed or admitted for trading on any national securities exchange or quoted on
the NASDAQ National Market System or the NASDAQ Small Cap Market, the last
reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
the share, interest, participation or other equivalent, in either case as
reported on NASDAQ or a similar service if NASDAQ is no longer reporting such
information; and (b) any asset other than an Equity Interest and any Equity
Interest for which prices can not be obtained in accordance with clause (a)
above, the fair market value thereof as determined in good faith by an
independent auditor mutually agreed to by the Borrower and Lender.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"FINAL MATURITY DATE" means June 29, 2007.
"FINANCIAL OFFICER" of any person means the chief financial officer,
principal accounting officer, treasurer or controller of such person.
"FOREIGN PLAN" means any employee benefit plan, program, policy,
arrangement or agreement that would be an "employee pension benefit plan" under
Section 3(2) of ERISA if such plan, program, policy, arrangement or agreement
was not maintained outside the United States primarily for the benefit of
persons substantially all of whom are nonresident aliens with respect to which
any Company could incur liability.
"FOREIGN SECURITY AGREEMENTS" means each security, pledge or similar
agreement necessary or desirable to evidence the grant of a security interest or
pledge of assets of any Subsidiary Guarantor that is a Foreign Subsidiary and
that is required hereunder, in each case in
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form and substance satisfactory to Lender and as such agreement may thereafter
be amended, supplemented or otherwise modified from time to time.
"FOREIGN SUBSIDIARY" means a Subsidiary that is organized under the
laws of a jurisdiction other than the United States or any state thereof or the
District of Columbia.
"FORM 10" means the registration statement on Form 10 filed by Borrower
with the Securities and Exchange Commission as effective June , 2003, as
amended.
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"GUARANTEED OBLIGATIONS" has the meaning assigned to such term in
Section 7.01.
"GUARANTEES" means the guarantees issued pursuant to Article VII (or
pursuant to any other form of guarantee required by applicable Requirements of
Law and in form and substance reasonably satisfactory to Lender) by Borrower and
the Subsidiary Guarantors.
"GUARANTORS" has the meaning assigned to such term in the preamble
hereof.
"HEDGING AGREEMENT" means any interest rate derivative contract,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"IMMATERIAL SUBSIDIARY" means a Subsidiary that has less than $1.0
million in assets (based on the amounts thereof reflected on such Subsidiary's
most recent balance sheet prepared in accordance with GAAP) and generates less
than $1.0 million of net revenues during any fiscal year (based on the amount
thereof reflected on such Subsidiary's most recent income statement prepared in
accordance with GAAP) or, in the case of a Subsidiary without prior operating
history, is reasonably projected by Borrower to generate less than $1.0 million
of net revenues during its first full year of operation. All Immaterial
Subsidiaries in existence on the Closing Date are identified on Schedule
1.01(a).
"INDEBTEDNESS" of any person means, without duplication, (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such person upon which interest charges are customarily paid or
accrued; (d) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person; (e)
all obligations of such person issued or assumed as the deferred purchase price
of property or services (excluding trade accounts payable incurred in the
ordinary course of business on normal trade terms and not overdue by more than
90 days or, if overdue for more than 90 days, as to which a dispute exists and
adequate reserves in conformity with GAAP have been established); (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such person, whether
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or not the obligations secured thereby have been assumed; (g) all Capital Lease
Obligations, Purchase Money Obligations and Synthetic Lease Obligations of such
person; (h) all obligations of such person in respect of Hedging Agreements;
provided that, the amount of Indebtedness of the type referred to in this clause
(h) of any person shall be zero unless and until such Indebtedness shall be
terminated, in which case the amount of such Indebtedness shall be the then
termination payment due thereunder by such person; (i) all obligations of such
person as an account party in respect of letters of credit, letters of guaranty
and bankers' acceptances; (j) all Attributable Indebtedness of such person; and
(k) all Contingent Obligations of such person in respect of Indebtedness or
obligations of others of the kinds referred to in clauses (a) through (j) above.
The Indebtedness of any person shall include the Indebtedness of any other
entity (including any partnership in which such person is a general partner) to
the extent such person is liable therefor as a result of such person's ownership
interest in or other relationship with such entity, except to the extent that
the terms of such Indebtedness provide that such person is not liable therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INDEMNITEE" has the meaning assigned to such term in Section 9.03(b).
"INFORMATION" has the meaning assigned to such term in Section 9.11.
"INTELLECTUAL PROPERTY" has the meaning assigned to such term in the
U.S. Security Agreement.
"INTERCOMPANY NOTE" means a promissory note, substantially in the form
of Exhibit G, evidencing Indebtedness payable by a payor Company to a payee Loan
Party.
"INTEREST PAYMENT DATE" means with respect to any Loan, the last
Business Day of each March, June, September and December to occur during the
period that such Loan is outstanding and the Final Maturity Date.
"INVESTMENTS" has the meaning assigned to such term in Section 6.03.
"JOINDER AGREEMENT" means a joinder agreement substantially in the form
of Exhibit H.
"LANDLORD LIEN WAIVER AND ACCESS AGREEMENT" means the Landlord Lien
Waiver and Access Agreement, substantially in the form of Exhibit E-2 or
otherwise in form and substance reasonably satisfactory to Lender.
"LEASES" means any and all leases, subleases, tenancies, options,
concession agreements, rental agreements, occupancy agreements, franchise
agreements, access agreements and any other agreements (including all
amendments, extensions, replacements, renewals, modifications and/or guarantees
thereof), whether or not of record and whether now in existence or hereafter
entered into, affecting the use or occupancy of all or any portion of any Real
Property.
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"LENDER" means Lender and any other person that has become a party
hereto pursuant to an Assignment and Acceptance.
"LIEN" means, with respect to any property, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation,
security interest or encumbrance of any kind, any other type of preferential
arrangement in respect of such property or any filing of any financing statement
under the UCC or any other similar notice of Lien under any similar notice or
recording statute of any Governmental Authority, including any easement,
right-of-way or other encumbrance on title to Real Property, in each of the
foregoing cases whether voluntary or imposed by law, and any agreement to give
any of the foregoing; (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such property; and (c) in the case of securities, any
transfer restriction (other than restrictions on transfer arising solely by
virtue of registration, qualification or similar requirements under the
securities laws of any jurisdiction), purchase option, call or similar right of
a third party with respect to such securities.
"LOAN" means a Loan made by Lender to Borrower pursuant to Section
2.01.
"LOAN DOCUMENTS" means this Agreement, each Guarantee, the Notes (if
any), the Warrant, the Registration Rights Agreement and the Security Documents.
"LOAN PARTIES" means Borrower and the Subsidiary Guarantors.
"MACARTHUR SUBLEASE" means the sublease between Lender and Borrower of
the Real Property located at 4000 MacArthur Boulevard, Newport Beach,
California.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the
business, property, results of operations, prospects or condition (financial or
otherwise), of Borrower and its Subsidiaries, taken as a whole; (b) material
impairment of the ability of the Loan Parties to perform any of their
obligations under any Loan Document; (c) material impairment of the rights of or
benefits or remedies available to the Lender under any Loan Document; or (d) a
material adverse effect on the Collateral or the Liens in favor of Lender on the
Collateral or the priority of such Liens.
"MATERIAL ITEM" shall mean any property that is Collateral except for
any particular property that (x) is not material to the business, operations or
condition (financial or other) of any Loan Party and (y) has a book value of
less than $100,000, as shown on the most recent balance sheet of any Loan Party
prepared in accordance with GAAP.
"MAXIMUM RATE" has the meaning assigned to such term in Section
2.05(f).
"MONTHLY CASH BALANCE REPORT" has the meaning assigned to such term in
Section 5.01(d).
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"MORTGAGE" means an agreement, including a mortgage, deed of trust or
any other document, creating and evidencing a Lien on a Real Property, which
shall be in form and substance reasonably satisfactory to Lender, with such
schedules and including such provisions as shall be necessary to conform such
document to applicable or local law or as shall be customary under local law, as
the same may at any time be amended in accordance with the terms thereof and
hereof.
"MORTGAGED REAL PROPERTY" means any Real Property that shall be subject
to a Mortgage delivered after the Closing Date pursuant to Section 5.10(d).
"MULTIEMPLOYER PLAN" means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA (a) to which any Company or any ERISA Affiliate is
then making or accruing an obligation to make contributions, (b) to which any
Company or any ERISA Affiliate has within the preceding five plan years made
contributions, or (c) with respect to which any Company or any ERISA Affiliate
could incur liability.
"NASDAQ" shall mean the Automatic Quotation System of the National
Association of Securities Dealers, Inc.
"NEW WHOLLY OWNED SUBSIDIARY" has the meaning assigned to such term in
Section 5.10(b).
"NON-GUARANTOR SUBSIDIARY" means (a) all of the Companies listed on
Schedule 3.06(a) (as in effect on the Closing Date), (b) each Subsidiary that
has been and remains released from its Guarantee in accordance with Section 7.09
hereof, and (c) each New Wholly Owned Subsidiary that is not required to become
a Guarantor hereunder in accordance with Section 5.10.
"NOTES" means any notes evidencing the Loans issued pursuant to this
Agreement, if any, substantially in the form of Exhibit J.
"OBLIGATIONS" means (a) obligations of each Loan Party from time to
time arising under or in respect of the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of each Loan Party under this Agreement and the
other Loan Documents; and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of each Loan Party under or pursuant to
this Agreement and the other Loan Documents.
"OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any
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Loan Document or from the execution, delivery or enforcement of, or otherwise
with respect to, any Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PERFECTION CERTIFICATE" means a certificate in the form of Exhibit I-1
or any other form approved by Lender, as the same shall be supplemented from
time to time by a Perfection Certificate Supplement.
"PERFECTION CERTIFICATE SUPPLEMENT" means a certificate supplement in
the form of Exhibit I-2 or any other form approved by Lender.
"PERMITTED ACQUISITION" means any Investment, merger, consolidation, or
purchase of property, in one or a series of transactions, that satisfies all of
the following conditions:
(a) results in a Loan Party owning either (x) all of the
outstanding Equity Interests of another person that was not a
Subsidiary of Borrower prior to such transaction or (y) all or
substantially all of the business, operations and assets of another
person that was not a Subsidiary of Borrower prior to such
transaction (the "ACQUIRED BUSINESS");
(b) does not result in any Loan Party, incurring,
creating, assuming, guaranteeing, permitting to exist or otherwise
having any liability for, directly or indirectly, any Indebtedness
or any Liens (other than Permitted Liens);
(c) does not result in any Default or Event of Default;
(d) The Purchase Price (as defined below) for all
Acquired Businesses acquired in any fiscal year of the Borrower
does not exceed, for any fiscal year, $25,000,000 multiplied by the
Pro Rata Percentage for such fiscal year, reduced dollar for dollar
by the amount of any Capital Expenditures made or committed to be
made by Borrower or any other Loan Party in such fiscal year
accounted for in accordance with GAAP, and for purposes of this
definition, the Purchase Price for any Acquired Business shall be
allocated to the fiscal year in which a binding commitment is made
to acquire the Acquired Business, without regard to when (1) the
acquisition of the Acquired Business is consummated or (2) the
Purchase Price is actually paid, and without regard to when or how
such Purchase Price may be accounted for in accordance with GAAP;
For purposes of this definition, PURCHASE PRICE shall mean the Fair
Market Value of the property (whether cash, cash equivalents,
Equity Interests, or other property) used, directly or indirectly,
to pay (1) the purchase price, merger consideration, tender offer
or exchange offer consideration, license or cross-license fees or
other consideration (including any (x) contingent consideration,
A-16
valued for this purpose assuming the maximum amount of contingent
consideration will be paid, and (y) any compensation, bonus or
other payment made to any shareholder, director, officer or
employee of the Acquired Business other than ordinary course of
business compensation for services to be performed following the
acquisition of the Acquired Business) for the acquisition of the
Acquired Business, and (2) all out-of-pocket costs and expenses
incurred in connection with the acquisition of the Acquired
Business (including any investment banker, finder or broker fee or
commission and any accounting, legal or other professional
expenses), without regard to whether such costs and expenses would
be accounted for as purchase price in accordance with GAAP.
Notwithstanding anything to the contrary contained in clause
(d)(ii) of this definition, to the extent that the Permitted
Acquisitions made by Borrower and its Consolidated Subsidiaries in
any fiscal year are less than the amount permitted to be made in
such period (without giving effect to any additional amount
available as a result of this sentence), the amount of such
difference may be carried forward and used to make Permitted
Acquisitions in the next succeeding fiscal year of Borrower but
only to such next succeeding fiscal year.
(e) does not have a Material Adverse Effect;
(f) upon the consummation of any acquisition that results
in a person becoming a Subsidiary of a Loan Party, immediately
following such acquisition:
(i) 100% of the Equity Interest of any such new
Subsidiary is pledged and delivered to Lender for its benefit under
the applicable Security Agreement; and
(ii) such Subsidiary becomes a party to the
applicable Security Documents and becomes a Subsidiary Guarantor
hereunder and executes a Joinder Agreement and other applicable
Loan Documents all in accordance with Section 5.10(b);
(g) upon the consummation of any acquisition that results
in any Loan Party acquiring any assets that are not then subject to
a perfected first priority security interest or Lien of the Lender
under the Security Documents, immediately following such
acquisition, the Loan Parties shall execute and deliver to Lender
such agreements and other instruments, record such Mortgages and
financing statements or other documents and take such other actions
as may be required so that Lender has a perfected, first priority
security interest in or Lien on all such acquired assets, subject
to no Liens other than Permitted Liens.
"PERMITTED BUSINESS DISPOSITION" means any Asset Sale that satisfies
all of the following conditions:
A-17
(a) the Equity Interest or other property sold is a
Business Unit;
(b) the Business Unit is sold for cash or cash
equivalents;
(c) the Asset Sale increases Borrower's Consolidated
Tangible Net Worth;
(d) the Asset Sale does not result in any Default or
Event of Default; and
(e) the aggregate amount of Discontinued Revenue for such
Business Unit and for all other Business Units for which binding
commitments for Asset Sales have been made after the Closing Date,
is less than 25% of Borrower's consolidated Revenue for the 12
consecutive fiscal months immediately preceding the month in which
any binding commitment is or may be made for such Asset Sale.
"PERMITTED INVESTMENT" means any investment that Borrower is permitted
to make for the investment of surplus cash under Borrower's investment policy
statement as in effect on the Closing Date.
"PERMITTED LIENS" has the meaning assigned to such term in Section
6.02.
"PERMITTED REFINANCING" means any (i) issuance by the Borrower or any
Subsidiary of the Borrower of securities (whether constituting debt or equity
securities or securities exchangeable, exercisable or convertible for debt or
equity securities) or (ii) incurrence of Indebtedness by the Borrower or any
Subsidiary of the Borrower or (iii) obtaining by the Borrower or any Subsidiary
of the Borrower of any credit facility, line of credit, loan or financing
agreement or other credit arrangement providing, among other things, for
borrowings or other extensions of credit to finance working capital
requirements, inventory or equipment purchases or for other general corporate
purposes (other than arrangements referred to in clause (g) of the definition of
Indebtedness), whether or not such facility includes a binding commitment to
make loans or otherwise extend credit, in each case that satisfies all the
following conditions:
(a) Borrower reduces the Commitment in accordance with Section
2.06(b), effective not later than immediately prior to any such
issuance of securities or incurrence of Indebtedness or obtaining
other credit arrangements, by an amount equal to (1) in the case of
any issuance of securities or incurrence of Indebtedness, an
amount, without duplication, equal to the net cash proceeds to the
Borrower or its Subsidiaries, after (x) payment of all discounts,
commissions, fees, expenses, taxes and other liabilities incurred
in connection with the issuance of such securities or incurrence of
Indebtedness and (y) funding any reserve, special deposit, sinking
fund, prepayment, security deposit or other similar requirement,
and (2) in the case of obtaining other credit arrangements, an
amount equal to the total credit commitments thereunder, if any,
and otherwise
A-18
the maximum aggregate principal amount of Indebtedness that may be
outstanding at any one time thereunder in each case assuming all
conditions to any extension of credit, if any, are satisfied; and
(b) Borrower repays or prepays outstanding Loans in accordance
with Section 2.07(b), not later than simultaneously with any such
issuance of securities or incurrence of Indebtedness or obtaining
other credit arrangements, to the extent the Exposure would exceed
the amount of the Commitment after giving effect to the reduction
required by clause (a) above.
"PERSON" means any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Tax Code or Section 307 of ERISA, and in respect of which any Company
or its ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA
or with respect to which any Company could incur liability.
"PLEDGED EQUITY INTERESTS" has the meaning set forth in the Security
Agreements.
"PLEDGED FOREIGN STOCK" shall mean the shares of capital stock of each
direct or indirect Foreign Subsidiary of Borrower owned by Borrower or any
Subsidiary of Borrower, including any and all certificates and other instruments
now or hereafter evidencing any such capital stock.
"PLEDGED INTERCOMPANY DEBT" has the meaning set forth in the Security
Agreements.
"PRO RATA PERCENTAGE" shall mean for (i) each of the fiscal years
ending in 2004, 2005 and 2006, 1.0, (ii) for the fiscal year ending in 2003,
0.25 and (iii) for the fiscal year ending in 2007, 0.75.
"PROPERTY" means any right, title or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible and including Equity Interests or other ownership
interests of any person and whether now in existence or owned or hereafter
entered into or acquired.
"PURCHASE MONEY OBLIGATION" means, for any person, the obligations of
such person in respect of Indebtedness incurred for the purpose of financing all
or any part of the purchase price of any property (including Equity Interests of
any person) or the cost of installation, construction or improvement of any
property or assets and any refinancing thereof; provided, however, that such
Indebtedness is incurred within 90 days after such acquisition of such property
by such person.
"REAL PROPERTY" means, collectively, all right, title and interest
(including any leasehold estate) in and to any and all parcels of or interests
in real property owned, leased or operated by
A-19
any person, whether by lease, license or other means, together with, in each
case, all easements, hereditaments and appurtenances relating thereto, all
improvements and appurtenant fixtures and equipment, all general intangibles and
contract rights and other property and rights incidental to the ownership, lease
or operation thereof.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement, dated June 27, 2003, entered into between Lender and Borrower in
connection with the issuance of the Warrant.
"REGULATION T" means Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION U" means Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION X" means Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"RELEASED GUARANTOR" has the meaning assigned to such term in Section
7.09.
"REQUIREMENTS OF LAW" means, collectively, any and all requirements of
any Governmental Authority including any and all laws, ordinances, rules,
regulations or similar statutes or case law and all final orders, judgments,
decrees, injunctions, rulings or awards of any court of competent jurisdiction.
"RESPONSIBLE OFFICER" of any corporation means any executive officer or
Financial Officer of such corporation and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"REVENUE" means, for any person in respect of any period, the revenue
of such person for such period determined in accordance with GAAP as applied by
Borrower.
"SECTION 5.10(b) LISTED SUBSIDIARIES" has the meaning assigned to such
term in Section 5.10(b).
"SECURED PARTIES" has the meaning assigned to such term in the Security
Documents.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" means, collectively, the U.S. Security Agreement
and each Foreign Security Agreement.
"SECURITY AGREEMENT COLLATERAL" has the meaning set forth in any
Security Agreement delivered on the Closing Date or thereafter pursuant to the
terms of this Agreement.
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"SECURITY DOCUMENTS" means the Security Agreements, the Mortgages, the
Control Agreements, the Perfection Certificate, the Collateral Assignments of
Lease and each other security document or pledge agreement required by
applicable local law to grant a valid, perfected security interest in any
property acquired or developed, and all UCC or other financing statements or
instruments of perfection required by this Agreement, any Security Agreement,
Mortgage or Collateral Assignment of Lease to be filed with respect to the
security interests in property and fixtures created pursuant to any Security
Agreement, Mortgage or Collateral Assignment of Lease and any other document or
instrument utilized to pledge as collateral for the Obligations any property of
whatever kind or nature.
"SUBSIDIARY" means, with respect to any person (the "PARENT") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the ordinary voting power or, in the case of a partnership, more
than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent or one or more Subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
"SUBSIDIARY GUARANTOR" means each Subsidiary listed on Schedule
1.01(b), each other Subsidiary that is or becomes a party to this Agreement
pursuant to Section 5.10 (but excluding any Released Guarantor that remains
released from its Guarantee in accordance with Section 7.09 hereof and including
each Foreign Subsidiary that enters into any other Guarantee required by
applicable Requirements of Law).
"SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such person but which, upon the insolvency
or bankruptcy of such person, would be characterized as the indebtedness of such
person (without regard to accounting treatment).
"TAX CODE" means the Internal Revenue Code of 1986, as amended.
"TAXES" mean any and all present or future taxes, duties, levies, fees,
assessments, imposts, deductions, charges or withholdings, whether computed on a
separate, consolidated, unitary, combined or other basis and any and all
liabilities (including interest, fines, penalties or additions to tax) with
respect to the foregoing.
"TAX REFUND" has the meaning assigned to such term in Section 2.09(f).
"TAX RETURN" means all returns, statements, filings, attachments and
other documents or certifications required to be filed in respect of Taxes or
any amendments thereof or thereto.
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"TAX SHARING AGREEMENT" means the tax sharing agreement dated as of
June 27, 2003, among the Borrower and its Subsidiaries, as in effect on the
Closing Date and without giving effect to any subsequent amendment, waiver or
supplement thereof.
"TITLE COMPANY" means any title insurance company as shall be retained
by Borrower and reasonably acceptable to Lender.
"TITLE POLICY" has the meaning assigned to such term in Section
5.10(d).
"TRANSACTION DOCUMENTS" means any and all documents entered into or
delivered in connection with the Transactions, including the Distribution
Agreement, the Tax Sharing Agreement and the Loan Documents.
"TRANSACTIONS" means, collectively, the transactions to occur pursuant
to the Transaction Documents, including (a) the consummation of the
Distribution; (b) the execution and delivery of the Loan Documents; (c) any
borrowings pursuant to this Agreement; (d) the guarantees and grant of security
interests provided in the Loan Documents; (e) the issue of the Warrant; and (f)
the payment of all fees and expenses to be paid on or prior to the Closing Date
and owing in connection with the foregoing.
"UCC" has the meaning set forth in the U.S. Security Agreement.
"U.S. SECURITY AGREEMENT" means a Security Agreement substantially in
the form of Exhibit F among the Loan Parties for the benefit of the Secured
Parties, as the same may be amended in accordance with the terms thereof and
hereof, or such other agreements reasonably acceptable to Lender as shall be
necessary to comply with applicable Requirements of Law and effective to grant
to Lender a perfected, first-priority security interest in the Security
Agreement Collateral covered thereby.
"VOTING STOCK" means any class or classes of capital stock of Borrower
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the Board of Directors of
Borrower.
"WARRANT" means the warrant to acquire up to 8,333,334 shares of
Borrower's Common Stock to be issued to Lender.
"WHOLLY OWNED FOREIGN SUBSIDIARY" means any Wholly Owned Subsidiary
that is a Foreign Subsidiary.
"WHOLLY OWNED SUBSIDIARY" means, as to any person, (a) any corporation
100% of whose capital stock (other than directors' qualifying shares) is at the
time owned by such person and/or one or more Wholly Owned Subsidiaries of such
person and (b) any partnership, association, joint venture, limited liability
company or other entity in which such person and/or one or more Wholly Owned
Subsidiaries of such person have a 100% equity interest at such time.
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"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
1.02. TERMS GENERALLY. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be modified by the phrase "without limitation." The word "will" shall be
construed to have the same meaning and effect as the word "shall." Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument of other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified in accordance with the provisions hereof and
thereof; (b) any reference herein to any person shall be construed to include
such person's successors and permitted assigns; (c) the words "herein," "hereof"
and "hereunder," and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision of this
Agreement; (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to articles and sections of, and exhibits
and schedules to, this Agreement; and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights. All references to the knowledge of any Company or
to facts known by any Company shall mean actual knowledge of any Responsible
Officer of any Loan Party or any of its Subsidiaries.
1.03. ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein,
all accounting terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP, as in effect from time to time.
Financial statements and other information required to be delivered by Borrower
to Lenders pursuant to Sections 5.01(a), (b) and (c) shall be prepared in
accordance with GAAP as in effect at the time of such preparation.
1.04. HEADINGS. Article and section headings and the table of contents used
herein are for convenience of reference only, are not part of this Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.
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