EXHIBIT 10.54
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 18, 2004
among
NAVARRE CORPORATION,
as Borrower,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent, Agent and Lender
GECC CAPITAL MARKETS GROUP, INC.
as Lead Arranger
================================================================================
TABLE OF CONTENTS
Page
----
1. AMOUNT AND TERMS OF CREDIT......................................................................................... 2
1.1 Credit Facilities.......................................................................................... 2
1.2 Letters of Credit.......................................................................................... 6
1.3 Prepayments................................................................................................ 6
1.4 Use of Proceeds............................................................................................ 8
1.5 Interest and Applicable Margins............................................................................ 8
1.6 Eligible Accounts.......................................................................................... 10
1.7 Eligible Inventory......................................................................................... 13
1.8 Cash Management Systems.................................................................................... 14
1.9 Fees....................................................................................................... 14
1.10 Receipt of Payments........................................................................................ 15
1.11 Application and Allocation of Payments..................................................................... 15
1.12 Loan Account and Accounting................................................................................ 16
1.13 Indemnity.................................................................................................. 16
1.14 Access..................................................................................................... 17
1.15 Taxes...................................................................................................... 18
1.16 Capital Adequacy; Increased Costs; Illegality.............................................................. 19
1.17 Single Loan................................................................................................ 20
2. CONDITIONS PRECEDENT............................................................................................... 20
2.1 Conditions to the Initial Loans............................................................................ 20
2.2 Further Conditions to Each Loan............................................................................ 21
3. REPRESENTATIONS AND WARRANTIES..................................................................................... 22
3.1 Corporate Existence; Compliance with Law................................................................... 22
3.2 Executive Offices, Collateral Locations, FEIN.............................................................. 23
3.3 Corporate Power, Authorization, Enforceable Obligations.................................................... 23
3.4 Financial Statements and Projections....................................................................... 23
3.5 Material Adverse Effect.................................................................................... 24
3.6 Ownership of Property; Liens............................................................................... 24
3.7 Labor Matters.............................................................................................. 25
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.................................. 25
3.9 Government Regulation...................................................................................... 25
3.10 Margin Regulations......................................................................................... 26
3.11 Taxes...................................................................................................... 26
3.12 ERISA...................................................................................................... 26
3.13 No Litigation.............................................................................................. 27
3.14 Brokers.................................................................................................... 27
3.15 Intellectual Property...................................................................................... 28
3.16 Full Disclosure............................................................................................ 28
3.17 Environmental Matters...................................................................................... 28
3.18 Insurance.................................................................................................. 29
i
3.19 Deposit and Disbursement Accounts.......................................................................... 29
3.20 Government Contracts....................................................................................... 29
3.21 Customer and Trade Relations............................................................................... 29
3.22 Agreements and Other Documents............................................................................. 29
3.23 Solvency................................................................................................... 30
3.24 E-Splice................................................................................................... 30
4. FINANCIAL STATEMENTS AND INFORMATION............................................................................... 30
4.1 Reports and Notices........................................................................................ 30
4.2 Communication with Accountants............................................................................. 30
5. AFFIRMATIVE COVENANTS.............................................................................................. 30
5.1 Maintenance of Existence and Conduct of Business........................................................... 30
5.2 Payment of Charges......................................................................................... 31
5.3 Books and Records.......................................................................................... 31
5.4 Insurance; Damage to or Destruction of Collateral.......................................................... 31
5.5 Compliance with Laws....................................................................................... 33
5.6 Supplemental Disclosure.................................................................................... 33
5.7 Intellectual Property...................................................................................... 33
5.8 Environmental Matters...................................................................................... 33
5.9 Landlords' Agreements...................................................................................... 34
5.10 Borrowing Availability..................................................................................... 35
5.11 Clean Down................................................................................................. 35
5.12 Further Assurances......................................................................................... 35
6. NEGATIVE COVENANTS................................................................................................. 35
6.1 Mergers, Subsidiaries, Etc................................................................................. 35
6.2 Investments; Loans and Advances............................................................................ 38
6.3 Indebtedness............................................................................................... 40
6.4 Employee Loans and Affiliate Transactions.................................................................. 40
6.5 Capital Structure and Business............................................................................. 41
6.6 Guaranteed Indebtedness.................................................................................... 41
6.7 Liens...................................................................................................... 41
6.8 Sale of Stock and Assets................................................................................... 41
6.9 ERISA...................................................................................................... 42
6.10 Financial Covenants........................................................................................ 42
6.11 Hazardous Materials........................................................................................ 42
6.12 Sale-Leasebacks............................................................................................ 42
6.13 Cancellation of Indebtedness............................................................................... 42
6.14 Restricted Payments........................................................................................ 42
6.15 Change of Corporate Name or Location; Change of Fiscal Year................................................ 43
6.16 No Impairment of Intercompany Transfers.................................................................... 43
6.17 No Speculative Transactions................................................................................ 43
6.18 Leases; Real Estate Purchases.............................................................................. 43
6.19 Amendments................................................................................................. 44
6.20 Trade Debt................................................................................................. 44
ii
7. TERM ............................................................................................................... 44
7.1 Termination................................................................................................ 44
7.2 Survival of Obligations Upon Termination of Financing Arrangements......................................... 44
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................................................................. 44
8.1 Events of Default.......................................................................................... 44
8.2 Remedies................................................................................................... 46
8.3 Waivers by Credit Parties.................................................................................. 47
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT................................................................ 47
9.1 Assignment and Participations.............................................................................. 47
9.2 Appointment of Agent....................................................................................... 49
9.3 Agent's Reliance, Etc...................................................................................... 50
9.4 GE Capital and Affiliates.................................................................................. 51
9.5 Lender Credit Decision..................................................................................... 51
9.6 Indemnification............................................................................................ 51
9.7 Successor Agent............................................................................................ 52
9.8 Setoff and Sharing of Payments............................................................................. 52
9.9 Advances and Acquisition Loan Advances; Payments; Non-Funding Lenders; Information; Actions in Concert..... 53
10. SUCCESSORS AND ASSIGNS............................................................................................. 55
10.1 Successors and Assigns..................................................................................... 55
11. MISCELLANEOUS ..................................................................................................... 56
11.1 Complete Agreement; Modification of Agreement.............................................................. 56
11.2 Amendments and Waivers..................................................................................... 56
11.3 Fees and Expenses.......................................................................................... 58
11.4 No Waiver.................................................................................................. 59
11.5 Remedies................................................................................................... 59
11.6 Severability............................................................................................... 59
11.7 Conflict of Terms.......................................................................................... 59
11.8 Confidentiality............................................................................................ 60
11.9 GOVERNING LAW.............................................................................................. 60
11.10 Notices ................................................................................................... 61
11.11 Section Titles ............................................................................................ 61
11.12 Counterparts .............................................................................................. 61
11.13 WAIVER OF JURY TRIAL....................................................................................... 61
11.14 Press Releases and Related Matters......................................................................... 62
11.15 Reinstatement ............................................................................................. 62
11.16 Advice of Counsel ......................................................................................... 62
11.17 No Strict Construction..................................................................................... 62
12. AMENDMENT AND RESTATEMENT.......................................................................................... 63
12.1 Interrelationship with the Existing Credit Agreement....................................................... 63
iii
12.2 Confirmation of Existing Obligations....................................................................... 63
INDEX OF APPENDICES
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Closing Checklist
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A-
Commitments definition) - Commitments as of Closing Date
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.1(c)(i) - Form of Notice of Acquisition Loan Advance
Exhibit 1.1(c)(iii) - Form of Acquisition Loan Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Exhibit B-1 - Application for Standby Letter of Credit
Schedule 1.1 - Agent's Representatives
Disclosure Schedule 3.1 - Type of Entity; State of Organization
Disclosure Schedule 3.2 - Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(a) - Financial Statements
Disclosure Schedule 3.4(b) - Projections
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12 - ERISA Plans
Disclosure Schedule 3.13 - Litigation
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.17 - Hazardous Materials
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Disbursement Accounts
Disclosure Schedule 3.20 - Government Contracts
Disclosure Schedule 3.22 - Material Agreements
Disclosure Schedule 5.1 - Trade Names
Disclosure Schedule 6.2 - Vendor Advances
Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4(a) - Transactions with Affiliates
iv
Disclosure Schedule 6.7 - Existing Liens
v
This AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated
as of June 18, 2004, by and among Navarre Corporation, a Minnesota corporation
("Borrower"), the Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (in its individual capacity, "GE Capital"),
for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory
hereto from time to time.
RECITALS
WHEREAS, Borrower, Agent and the Lenders signatory thereto are
parties to that certain Credit Agreement dated as of October 3, 2001 (as amended
or otherwise modified prior to the date hereof, the "Existing Credit
Agreement");
WHEREAS, Borrower has requested that Lenders extend (i) a revolving
credit facility to Borrower of up to Forty Million Dollars ($40,000,000) in the
aggregate for the purpose of providing (a) working capital financing for
Borrower, (b) funds for other general corporate purposes of Borrower and (c)
funds for other purposes permitted hereunder and (ii) an acquisition loan
facility to Borrower up to Ten Million Dollars ($10,000,000) in the aggregate
for the purposes of providing acquisition financing upon the terms and
conditions set forth herein; and for these purposes, Lenders are willing to make
certain loans and other extensions of credit to Borrower of up to such amount
upon the terms and conditions set forth herein;
WHEREAS, Borrower has agreed to secure all of its obligations under
the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a
security interest in and lien upon all of its existing and after-acquired
personal and real property;
WHEREAS, the Credit Parties signatory hereto (other than Borrower)
have agreed to guarantee the Obligations and to grant to Agent, for the benefit
of Agent and Lenders, a security interest in and lien upon all of their existing
and after-acquired personal and real property to secure the Obligations; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A and, for purposes of this Agreement and the
other Loan Documents, the rules of construction set forth in Annex A shall
govern. All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified to this Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree to amend and restate the Existing Credit Agreement in
its entirety as set forth herein:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available to Borrower from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each, a "Revolving
Credit Advance"). The Pro Rata Share of the Revolving Loan of any Revolving
Lender shall not at any time exceed its separate Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not joint.
Until the Commitment Termination Date, Borrower may from time to time borrow,
repay and reborrow under this Section 1.1(a); provided, that (A) the amount of
any Revolving Credit Advance to be made at any time shall not exceed Borrowing
Availability at such time and (B) the Borrower shall not request, and shall not
borrow, a Revolving Credit Advance to fund all or any portion of a Permitted
Acquisition or a Permitted Intellectual Property Acquisition (1) if the amount
of such Revolving Credit Advance would exceed Revolving Acquisition Loan
Availability at such time, (2) unless, in the case of a Permitted Acquisition,
the Acquisition Loan Funding Termination Date has occurred or the then
outstanding principal balance of Acquisition Loans equals the Maximum
Acquisition Loan Amount at such time, or (3) to the extent that the aggregate
amount of the then outstanding Revolving Credit Advances used to fund such
transactions has exceeded, or would exceed after giving effect to all such
requested Revolving Credit Advances, $10,000,000. Borrowing Availability may be
further reduced by Reserves imposed by Agent in its reasonable credit judgment
for reasons relating to any Credit Party, any Credit Party's business or
industry and/or the Agent's ability to collect or realize the full value of any
Collateral. Each Revolving Credit Advance shall be made on notice by Borrower to
one of the representatives of Agent identified in Schedule 1.1 at the address
specified therein. Any such notice must be given no later than (1) 11:00 a.m.
(Chicago time) on the Business Day of the proposed Revolving Credit Advance, in
the case of an Index Rate Loan, or (2) 11:00 a.m. (Chicago time) on the date
which is 3 Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan. Each such notice (a "Notice of Revolving Credit Advance")
must be given in writing (by telecopy or overnight courier) substantially in the
form of Exhibit 1.1(a)(i), and shall include the information required in such
Exhibit and such other information as may be required by Agent. If Borrower
desires to have the Revolving Credit Advances bear interest by reference to a
LIBOR Rate, it must comply with Section 1.5(e).
(ii) Except as provided in Section 1.12, Borrower shall
execute and deliver to each Revolving Lender a note to evidence the Revolving
Loan Commitment of that Revolving Lender. Each note shall be in the principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each
a "Revolving Note" and, collectively, the "Revolving Notes"). Each Revolving
Note shall represent the obligation of Borrower to pay the amount of Revolving
Lender's Revolving Loan Commitment or, if less, such Revolving Lender's Pro Rata
Share of the aggregate unpaid principal amount
2
of all Revolving Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the Revolving Loan and
all other non-contingent Obligations shall be immediately due and payable in
full in immediately available funds on the Commitment Termination Date.
(b) Swing Line Facility.
(i) Agent shall notify the Swing Line Lender upon Agent's
receipt of any Notice of Revolving Credit Advance. Subject to the terms and
conditions hereof, the Swing Line Lender may, in its discretion, make available
from time to time until the Commitment Termination Date advances (each, a "Swing
Line Advance") in accordance with any such notice. The provisions of this
Section 1.1(b) shall not relieve Revolving Lenders of their obligations to make
Revolving Credit Advances under Section 1.1(a); provided that if the Swing Line
Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line
Advance shall be in lieu of any Revolving Credit Advance that otherwise may be
made by Revolving Credit Lenders pursuant to such notice. The aggregate amount
of Swing Line Advances outstanding shall not exceed at any time the lesser of
(A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and the
Borrowing Base, in each case, less the outstanding balance of the Revolving Loan
at such time ("Swing Line Availability"). Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section
1.1(b). Each Swing Line Advance shall be made pursuant to a Notice of Revolving
Credit advance delivered by Borrower to Agent in accordance with Section 1.1(a).
Any such notice must be given no later than 11:00 a.m. (Chicago time) on the
Business Day of the proposed Swing Line Advance. Unless the Swing Line Lender
has received at least one Business Day's prior written notice from Requisite
Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender
shall, notwithstanding the failure of any condition precedent set forth in
Sections 2.2, be entitled to fund that Swing Line Advance, and to have such
Revolving Lender make Revolving Credit Advances in accordance with Section
1.1(b)(iii) or purchase participating interests in accordance with Section
1.1(b)(iv). Notwithstanding any other provision of this Agreement or the other
Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.
Borrower shall repay the aggregate outstanding principal amount of the Swing
Line Loan upon demand therefor by Agent.
(ii) Borrower shall execute and deliver to the Swing Line
Lender a promissory note to evidence the Swing Line Commitment. Such note shall
be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(b)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line Commitment or, if
less, the aggregate unpaid principal amount of all Swing Line Advances made to
Borrower together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Swing Line Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.
3
(iii) The Swing Line Lender, at any time and from time to time
in its sole and absolute discretion, may on behalf of Borrower (and Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on its behalf)
request each Revolving Lender (including the Swing Line Lender) to make a
Revolving Credit Advance to Borrower (which shall be an Index Rate Loan) in an
amount equal to that Revolving Lender's Pro Rata Share of the principal amount
of the Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date
such notice is given. Unless any of the events described in Sections 8.1(h) or
8.1(i) has occurred (in which event the procedures of Section 1.1(b)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a
Revolving Credit Advance on behalf of the Swing Line Lender, prior to 2:00 p.m.
(Chicago time), in immediately available funds on the Business Day next
succeeding the date that notice is given. The proceeds of those Revolving Credit
Advances shall be immediately paid to the Swing Line Lender and applied to repay
the Refunded Swing Line Loan.
(iv) If, prior to refunding a Swing Line Loan with a Revolving
Credit Advance pursuant to Section 1.1(b)(iii), one of the events described in
Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of
Section 1.1(b)(v) below, each Revolving Lender shall, on the date such Revolving
Credit Advance was to have been made for the benefit of Borrower, purchase from
the Swing Line Lender an undivided participation interest in the Swing Line Loan
in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request,
each Revolving Lender shall promptly transfer to the Swing Line Lender, in
immediately available funds, the amount of its participation interest.
(v) Each Revolving Lender's obligation to make Revolving
Credit Advances in accordance with Section 1.1(b)(iii) and to purchase
participation interests in accordance with Section 1.1(b)(iv) shall be absolute
and unconditional and shall not be affected by any circumstance, including (A)
any setoff, counterclaim, recoupment, defense or other right that such Revolving
Lender may have against the Swing Line Lender, Borrower or any other Person for
any reason whatsoever; (B) the occurrence or continuance of any Default or Event
of Default; (C) any inability of Borrower to satisfy the conditions precedent to
borrowing set forth in this Agreement at any time or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Sections 1.1(b)(iii) or
1.1(b)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.
(c) Acquisition Loan Facility.
(i) Subject to the terms and conditions hereof, each
Acquisition Loan Lender agrees to make available to Borrower from time to time
until
4
the Acquisition Loan Funding Termination Date its Pro Rata Share of acquisition
loan advances (each, an "Acquisition Loan Advance"). The Pro Rata Share of the
Acquisition Loan of any Acquisition Loan Lender shall not at any time exceed its
separate Acquisition Loan Commitment. Until the Acquisition Loan Funding
Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(c); provided, that the aggregate outstanding principal
balance of all Acquisition Loan Advances at any time shall not exceed the
Maximum Acquisition Loan Amount at such time. The obligations of each
Acquisition Loan Lender hereunder shall be several and not joint. Each
Acquisition Loan Advance shall be made on notice by Borrower to one of the
representatives of Agent identified in Schedule 1.1 at the address specified
therein. Any such notice must be given no later than 11:00 a.m. (Chicago time)
on the date which is 3 Business Days prior to the proposed Acquisition Loan
Advance. Each such notice (a "Notice of Acquisition Loan Advance") must be given
in writing (by telecopy or overnight courier) substantially in the form of
Exhibit 1.1(c)(i), and shall include the information required in such Exhibit
and such other information as may be required by Agent.
(ii) The Borrower shall repay the principal amount of each
Acquisition Loan Advance in equal quarterly installments, payable on the first
Business Day of each calendar quarter, based on an amortization of thirty six
(36) months, commencing with the first Business Day of the first calendar
quarter to occur at least thirty (30) days after the date of the extension of
such Acquisition Loan Advance by Acquisition Loan Lenders to Borrower; provided
that the entire unpaid balance of each of the Acquisition Loan Advances and all
other non-contingent Obligations shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date.
(iii) Except as provided in Section 1.12, Borrower shall
execute and deliver to each Acquisition Loan Lender a note to evidence the
Acquisition Loan Commitment of that Acquisition Loan Lender. Each note shall be
in the principal amount of the Acquisition Loan Commitment of the applicable
Acquisition Loan Lender, dated the Closing Date and substantially in the form of
Exhibit 1.1(c)(iii) (each a "Acquisition Loan Note" and, collectively, the
"Acquisition Loan Notes"). Each Acquisition Loan Note shall represent the
obligation of Borrower to pay the amount of Acquisition Loan Lender's
Acquisition Loan Commitment or, if less, such Acquisition Loan Lender's Pro Rata
Share of the aggregate unpaid principal amount of all Acquisition Loan Advances
to Borrower together with interest thereon as prescribed in Section 1.5.
(d) Reliance on Notices. Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Acquisition Loan Advance, Notice of Conversion/Continuation
or similar notice believed by Agent to be genuine. Agent may assume that each
Person executing and delivering any notice in accordance herewith was duly
authorized, unless the responsible individual acting thereon for Agent has
actual knowledge to the contrary.
5
1.2 Letters of Credit. Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.
1.3 Prepayments.
(a) Voluntary Prepayments; Reductions in Revolving Loan Commitments
and Acquisition Loan Commitments. Borrower may at any time on at least 5 days'
prior written notice to Agent permanently reduce (but not terminate) the
Revolving Loan Commitment or the Acquisition Loan Commitment; provided that (A)
any such reductions shall be in a minimum amount of $5,000,000 and integral
multiples of $250,000 in excess of such amount, (B) the Revolving Loan
Commitment shall not be reduced to an amount less than the amount of the
Revolving Loan outstanding and the Acquisition Loan Commitment shall not be
reduced to an amount less than the amount of the Acquisition Loan outstanding,
and (C) after giving effect to such reductions, Borrower shall comply with
Section 1.3(b)(i). Borrower may at any time on at least ten 10 days' prior
written notice to Agent terminate the Revolving Loan Commitment and the
Acquisition Loan Commitment; provided that upon such termination all Loans and
other Obligations shall be immediately due and payable in full and all Letter of
Credit Obligations shall be cash collateralized or otherwise satisfied in
accordance with Annex B hereto. Borrower may at any time on at least ten 10
days' prior written notice to Agent terminate only the Acquisition Loan
Commitment; provided that upon such termination all Acquisition Loans and other
Obligations relating to the Acquisition Loans shall be immediately due and
payable in full. Any voluntary prepayment and any reduction or termination of
the Revolving Loan Commitment or the Acquisition Loan Commitment must be
accompanied by payment of the Fee required by Section 1.9(c), if any, plus the
payment of any LIBOR funding breakage costs in accordance with Section 1.13(b).
Upon any such reduction or termination of the Revolving Loan Commitment,
Borrower's right to request Revolving Credit Advances, or request that Letter of
Credit Obligations be incurred on its behalf, or request Swing Line Advances,
shall simultaneously be permanently reduced or terminated, as the case may be;
provided that a permanent reduction of the Revolving Loan Commitment shall
require a corresponding pro rata reduction in the L/C Sublimit. Upon any such
reduction or termination of the Acquisition Loan Commitment, Borrower's right to
request Acquisition Loan Advances shall simultaneously be permanently reduced or
terminated, as the case may be. Each notice of partial prepayment shall
designate the Loan or other Obligations to which such prepayment is to be
applied.
(b) Mandatory Prepayments.
(i) If at any time the outstanding balances of the Revolving
Loan and the Swing Line Loan exceed the lesser of (A) the Maximum Amount and (B)
the Borrowing Base, Borrower shall immediately repay the aggregate outstanding
Revolving Credit Advances to the extent required to eliminate such excess. If
any such excess remains after repayment in full of the aggregate outstanding
Revolving Credit Advances, Borrower shall provide cash collateral for the Letter
of Credit Obligations in the manner set forth in Annex B to the extent required
to eliminate such excess. If at any time the outstanding balances of the
Acquisition Loans exceed the Maximum Acquisition
6
Loan Amount, the Borrower shall immediately repay the aggregate outstanding
Acquisition Loan Advances to the extent necessary to eliminate such excess.
(ii) Immediately upon receipt by any Credit Party of any
proceeds of any asset disposition (excluding proceeds of asset dispositions
permitted by Section 6.8(a), but including any sale of Stock of any Subsidiary
of any Credit Party, Borrower shall prepay the Loans in an amount equal to all
such proceeds, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by Borrower in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if
any, and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
(iii) If Borrower issues Stock, no later than the Business Day
following the date of receipt of the proceeds thereof, Borrower shall prepay the
Loans in an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith. Any such prepayment shall be applied in accordance with Section
1.3(c). Notwithstanding anything herein to the contrary, as long as no Default
or Event of Default has occurred and is continuing, proceeds from the Private
Issuance in an aggregate amount not to exceed $4,550,000 and any future proceeds
received upon the exercise of one or more PIPE Warrants (i) shall not be
required to be used to prepay Loans and (ii) may be used by Borrower to make (a)
Permitted Acquisitions and Permitted Intellectual Property Acquisitions
otherwise permitted pursuant to Section 6.1 hereof and (b) investments, loans
and advances to the extent otherwise permitted under Section 6.2 hereof.
(iv) On the date that is twenty (20) days after the earlier of
(A) the date on which Borrower's annual audited Financial Statements for the
immediately preceding Fiscal Year are delivered pursuant to Annex E or (B) the
date on which such annual audited Financial Statements were required to be
delivered pursuant to Annex E, Borrower shall prepay the scheduled principal
installments of each of the outstanding Acquisition Loan Advance on a pro rata
basis, in an aggregate amount equal to one hundred percent (100%) of Excess Cash
Flow for the immediately preceding Fiscal Year. Each such prepayment shall be
accompanied by a certificate signed by Borrower's chief financial officer
certifying the manner in which Excess Cash Flow and the resulting prepayment
were calculated, which certificate shall be in form and substance satisfactory
to Agent.
(c) Application of Certain Mandatory Prepayments. Any prepayments
made by Borrower pursuant to Sections 1.3(b)(ii) or (b)(iii) above shall be
applied as follows: first, to Fees and reimbursable expenses of Agent then due
and payable pursuant to any of the Loan Documents; second, to interest then due
and payable on the Swing Line Loan; third, to the principal balance of the Swing
Line Loan until the same has been repaid in full; fourth, to interest then due
and payable on the Revolving Credit Advances; fifth, to the outstanding
principal balance of Revolving Credit Advances until the same has been paid in
full; sixth, to any
7
Letter of Credit Obligations, to provide cash collateral therefor in the manner
set forth in Annex B, until all such Letter of Credit Obligations have been
fully cash collateralized in the manner set forth in Annex B.; seventh, to
interest then due and payable on the Acquisition Loan Advances; and eighth, to
the Acquisition Loan Advances, pro rata among all such Acquisition Loan
Advances, and to the scheduled amortization payments thereon in inverse order of
maturity, until the same have been repaid in full. None of the Revolving Loan
Commitment, the Acquisition Loan Commitment or the Swing Line Commitment shall
be permanently reduced by the amount of any such prepayments. All prepayments
from Excess Cash Flow paid pursuant to Section 1.1(b)(iv) above shall be applied
to prepay Acquisition Loan Advances, pro rata among all such Acquisition Loan
Advances, and to the scheduled amortization payments thereon, in inverse order
of maturity, until each of the outstanding Acquisition Loan Advances shall have
been prepaid in full.
(d) Application of Prepayments from Insurance Proceeds and
Condemnation Proceeds. Prepayments from insurance or condemnation proceeds in
accordance with Section 5.4(c), shall be applied as follows: insurance proceeds
from casualties or losses to cash or Inventory shall be applied first, to the
Swing Line Loans, second, to the Revolving Credit Advances and third, to the
Acquisition Loan Advances, pro rata among all such Acquisition Loan Advances,
and to the scheduled amortization payments thereon, in inverse order of
maturity, until the same have been repaid in full. None of the Revolving Loan
Commitment, the Acquisition Loan Commitment or the Swing Line Loan Commitment
shall be permanently reduced by the amount of any such prepayments.
(e) No Implied Consent. Nothing in this Section 1.3 shall be
construed to constitute Agent's or any Lender's consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents.
1.4 Use of Proceeds.
(a) Borrower shall utilize the proceeds of the Revolving Loan and
the Swing Line Loan solely for the financing of Borrower's ordinary working
capital, Permitted Acquisitions and Permitted Intellectual Property Acquisitions
permitted pursuant to Section 6.1 hereof, general corporate needs, and subject
to Section 1.1 hereof for Permitted Acquisitions and Permitted Intellectual
Property Acquisitions.
(b) Borrower shall utilize the proceeds of the Acquisition Loan
solely for the purposes of financing Permitted Acquisitions and Permitted
Intellectual Property Acquisitions.
1.5 Interest and Applicable Margins.
(a) Borrower shall pay interest to Agent, for the ratable benefit of
Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates: (i)
with respect to the Revolving Credit Advances, the Index Rate plus the
Applicable Revolver Index Margin per annum or, at the election of Borrower, the
applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based
on the aggregate Revolving Credit Advances outstanding from time to time; (ii)
with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver
Index Margin per
8
annum; and (iii) with respect to the Acquisition Loan Advances, the greater of
(i) 10.5% or (ii) the Index Rate plus the Applicable Acquisition Loan Index
Margin per annum or, at the election of Borrower, the applicable LIBOR Rate plus
the Applicable Acquisition Loan LIBOR Margin per annum.
The Applicable Margins are as follows:
Applicable Revolver Index Margin 0.25%
Applicable Revolver LIBOR Margin 2.50%
Applicable L/C Margin 2.50%
Applicable Acquisition Loan Index Margin 6.00%
Applicable Acquisition Loan LIBOR Margin 8.50%
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a 360-day year, in each case for
the actual number of days occurring in the period for which such interest and
Fees are payable. The Index Rate is a floating rate determined for each day.
Each determination by Agent of an interest rate and Fees hereunder shall be
final, binding and conclusive on Borrower, absent manifest error.
(d) So long as an Event of Default has occurred and is continuing
under Section 8.1(a), (h) or (i), or so long as any other Default or Event of
Default has occurred and is continuing and at the election of Agent (or upon the
written request of Requisite Lenders) confirmed by written notice from Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fees otherwise applicable hereunder ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.
(e) Subject to the conditions precedent set forth in Section 2.2,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans,
(iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan
upon the expiration of
9
the applicable LIBOR Period and the succeeding LIBOR Period of that continued
Loan shall commence on the first day after the last day of the LIBOR Period of
the Loan to be continued. Any Loan or group of Loans having the same proposed
LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must be
in a minimum amount of $1,000,000 and integral multiples of $500,000 in excess
of such amount. Any such election must be made by 11:00 a.m. (Chicago time) on
the 3rd Business Day prior to (1) the date of any proposed Advance which is to
bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect
to any LIBOR Loans to be continued as such, or (3) the date on which Borrower
wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower in such election. If no election is received with respect
to a LIBOR Loan by 11:00 a.m. (Chicago time) on the 3rd Business Day prior to
the end of the LIBOR Period with respect thereto (or if a Default or an Event of
Default has occurred and is continuing or the additional conditions precedent
set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan shall
be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower must
make such election by notice to Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of Conversion/Continuation") in the
form of Exhibit 1.5(e).
(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate. Thereafter, interest hereunder shall be
paid at the rate(s) of interest and in the manner provided in Sections 1.5(a)
through (e), unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this paragraph shall again apply. In no event
shall the total interest received by any Lender pursuant to the terms hereof
exceed the amount that such Lender could lawfully have received had the interest
due hereunder been calculated for the full term hereof at the Maximum Lawful
Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.5(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in Section 1.11 and thereafter shall refund any excess to Borrower or as a court
of competent jurisdiction may otherwise order.
1.6 Eligible Accounts. All of the Accounts owned by one or more of
the Eligible Credit Parties and reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be "Eligible Accounts" for
purposes of this Agreement, except any Account to which any of the exclusionary
criteria set forth below applies. Agent shall have the right to establish or
modify or eliminate Reserves against Eligible Accounts from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any of the criteria set
forth below, to establish new criteria and to adjust advance rates with respect
to Eligible Accounts, in its reasonable credit judgment for reasons relating to
any Credit Party, any Credit Party's business or industry and/or the Agent's
ability to collect or realize the full value of any Collateral, subject to the
approval of Supermajority Revolving Lenders in the case of adjustments or new
criteria or changes in
10
advance rates or the elimination of Reserves which have the effect of making
more credit available. Eligible Accounts shall not include any Account of any
Eligible Credit Party:
(a) that does not arise from the sale of goods or the performance of
services by such Eligible Credit Party in the ordinary course of its business;
(b) (i) upon which the right of such Eligible Credit Party to
receive payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) as to which such Eligible Credit Party is not able
to bring suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (iii) if the Account represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant to
a contract under which the Account Debtor's obligation to pay that invoice is
subject to such Eligible Credit Party's completion of further performance under
such contract or is subject to the equitable lien of a surety bond issuer;
(c) to the extent that any defense, counterclaim, setoff or dispute
is asserted as to such Account;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice has not been sent to the
applicable Account Debtor;
(f) that (i) is not owned by such Eligible Credit Party or (ii) is
subject to any right, claim, security interest or other interest of any other
Person, other than Liens in favor of Agent, on behalf of itself and Lenders;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party, or to any entity that has any common officer
or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and such Eligible
Credit Party, if necessary or desirable, has complied with respect to such
obligation with the Federal Assignment of Claims Act of 1940, or any applicable
state, county or municipal law restricting the assignment thereof with respect
to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the province of Newfoundland, the Northwest
Territories and the Territory of Nunavit) unless payment thereof is assured by a
letter of credit assigned and delivered to Agent, satisfactory to Agent as to
form, amount and issuer;
(j) to the extent such Eligible Credit Party or any of its
Subsidiaries is liable for goods sold or services rendered by the applicable
Account Debtor to such Eligible Credit Party or any of its Subsidiaries but only
to the extent of the potential offset;
11
(k) that arises with respect to goods that are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) the Account is not paid within the earlier of: 60 days
following its due date or 90 days following its original invoice date;
(ii) the Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails to
pay its debts generally as they come due; or
(iii) a petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal, state
or foreign (including any provincial) receivership, insolvency relief or other
law or laws for the relief of debtors;
(m) that is the obligation of an Account Debtor if 50% or more of
the Dollar amount of all Accounts owing by that Account Debtor are ineligible
under the other criteria set forth in this Section 1.6;
(n) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(o) as to which any of the representations or warranties in the Loan
Documents are untrue;
(p) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(q) to the extent such Account exceeds any credit limit established
by Agent, in its reasonable credit judgment;
(r) to the extent that such Account, together with all other
Accounts owing by such Account Debtor and its Affiliates as of any date of
determination exceed 20% of all otherwise Eligible Accounts (provided, however
that on and after the first anniversary of the Closing Date, Accounts owing by
an Approved Obligor and its Affiliates which constitute less than 25% of all
otherwise Eligible Accounts shall not be deemed ineligible pursuant to this
clause (r));
(s) that is payable in any currency other than Dollars or Canadian
Dollars; or
(t) that is otherwise unacceptable to Agent in its reasonable credit
judgment for reasons relating to any Credit Party, any Credit Party's business
or industry and/or the Agent's ability to collect or realize the full value of
any Collateral.
12
1.7 Eligible Inventory. All of the inventory owned by one or more of
the Eligible Credit Parties and reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be "Eligible Inventory" for
purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies. Agent shall have the right to
establish, modify, or eliminate Reserves against Eligible Inventory from time to
time in its reasonable credit judgment. In addition, Agent reserves the right,
at any time and from time to time after the Closing Date, to adjust any of the
criteria set forth below, to establish new criteria and to adjust advance rates
with respect to Eligible Inventory in its reasonable credit judgment, subject to
the approval of Supermajority Revolving Lenders in the case of adjustments or
new criteria or changes in advance rates or the elimination of Reserves which
have the effect of making more credit available. Eligible Inventory shall not
include any Inventory of any Eligible Credit Party that:
(a) is not owned by such Eligible Credit Party free and clear of all
Liens and rights of any other Person (including the rights of a purchaser that
has made progress payments and the rights of a surety that has issued a bond to
assure the performance of such Eligible Credit Party with respect to that
Inventory), except the Liens in favor of Agent, on behalf of itself and Lenders;
(b) (i) is not located on premises owned, leased or rented by such
Eligible Credit Party and set forth in Disclosure Schedule (3.2) or (ii) is
stored at a leased location, unless Agent has given its prior consent thereto
and unless (x) a reasonably satisfactory landlord waiver has been delivered to
Agent, or (y) Reserves satisfactory to Agent have been established with respect
thereto, (iii) is stored with a bailee or warehouseman unless a reasonably
satisfactory, acknowledged bailee letter has been received by Agent and Reserves
reasonably satisfactory to Agent have been established with respect thereto, or
(iv) is located at an owned location subject to a mortgage in favor of a lender
other than Agent, unless a reasonably satisfactory mortgagee waiver has been
delivered to Agent, or (v) is located at any site if the aggregate book value of
Inventory at any such location is less than $100,000;
(c) is placed on consignment or is in transit, except for Inventory
in transit between domestic locations of Credit Parties as to which Agent's
Liens have been perfected at origin and destination;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Agent and Lenders;
(e) is excess, obsolete, unsalable, shopworn, seconds, damaged or
unfit for sale;
(f) consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement parts;
(g) consists of goods which have been returned by the buyer;
(h) is not of a type held for sale in the ordinary course of such
Eligible Credit Party's business;
13
(i) is not subject to a first priority lien in favor of Agent on
behalf of itself and Lenders subject to Permitted Encumbrances;
(j) breaches any of the representations or warranties pertaining to
Inventory set forth in the Loan Documents;
(k) consists of any costs associated with "freight-in" charges;
(l) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance reasonably acceptable to
Agent;
(n) unless such Inventory is computer software, has been produced or
published by anyone other than one of the Major Labels;
(o) consists of the "reserve for inventory valuation" on the general
ledger of such Eligible Credit Party; or
(p) is otherwise unacceptable to Agent in its reasonable credit
judgment for reasons relating to any Credit Party, any Credit Party's business
or industry and/or the Agent's ability to collect or realize the full value of
any Collateral."
1.8 Cash Management Systems. On or prior to the Closing Date,
Borrower will establish and will maintain until the Termination Date, the cash
management systems described in Annex C (the "Cash Management Systems").
1.9 Fees.
(a) Borrower shall pay to GE Capital, individually, the Fees
specified in the GE Capital Fee Letter, at the times specified for payment
therein..
(b) As additional compensation for the Revolving Lenders, Borrower
shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and on
the Commitment Termination Date, a Fee for Borrower's non-use of available funds
in an amount equal to one half of one percent (0.5%) per annum (calculated on
the basis of a 360 day year for actual days elapsed) multiplied by the
difference between (x) the Maximum Amount (as it may be reduced from time to
time) and (y) the average for the period of the daily closing balances of the
Revolving Loan and the Swing Line Loan outstanding during the period for which
the such Fee is due.
(c) If, on or prior to the third anniversary of the Closing Date,
Borrower prepays the Revolving Loan or the Acquisition Loan and/or reduces or
terminates the Revolving Loan Commitment or the Acquisition Loan Commitment,
whether voluntarily or involuntarily and whether before or after acceleration of
the Obligations or if the Revolving Loan Commitments or the Acquisition Loan
Commitments are reduced or terminated, Borrower shall pay to Agent, for the
benefit of Lenders as liquidated damages and compensation for the costs of being
prepared to make funds available hereunder an amount equal to the Applicable
Percentage
14
(as defined below) multiplied by the amount of the reduction of the Revolving
Loan Commitment or the Acquisition Loan Commitment. As used herein, the term
"Applicable Percentage" shall mean (x) two percent (2%), in the case of a
reduction on or prior to the first anniversary of the Closing Date, (y) one
percent (1%), in the case of a reduction after the first anniversary of the
Closing Date but on or prior to the second anniversary thereof and (z) one half
of one percent (0.5%), in the case of a reduction after the second anniversary
of the Closing Date but on or prior to the third anniversary thereof. The Credit
Parties agree that the Applicable Percentages are a reasonable calculation of
Lenders' lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early termination of the Revolving
Loan Commitment or the Acquisition Loan Commitment. Notwithstanding the
foregoing, no prepayment fee shall be payable by Borrower upon a mandatory
prepayment made pursuant to Sections 1.3(b) or 1.16(c); provided that Borrower
does not permanently reduce or terminate the Revolving Loan Commitment or the
Acquisition Loan Commitment upon any such prepayment and, in the case of
prepayments made pursuant to Sections 1.3(b)(ii) or (b)(iii), the transaction
giving rise to the applicable prepayment is expressly permitted under Section 6.
(d) Borrower shall pay to Agent, for the ratable benefit of
Revolving Lenders, the Letter of Credit Fee as provided in Annex B.
1.10 Receipt of Payments. Borrower shall make each payment under
this Agreement not later than 2:00 p.m. (Chicago time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the first Business Day following
the Business Day on which immediately available funds therefor are received in
the Collection Account prior to 2:00 p.m. Chicago time. Payments received after
2:00 p.m. Chicago time on any Business Day or on a day that is not a Business
Day shall be deemed to have been received on the following Business Day.
1.11 Application and Allocation of Payments.
(a) So long as no Default or Event of Default has occurred and is
continuing, (i) payments consisting of proceeds of Accounts received in the
ordinary course of business shall be applied, first, to the Swing Line Loan and,
second, to the Revolving Loan; (ii) payments matching specific scheduled
payments then due shall be applied to those scheduled payments; (iii) voluntary
prepayments shall be applied as determined by Borrower, subject to the
provisions of Section 1.3(a); and (iv) mandatory prepayments shall be applied as
set forth in Sections 1.3(c) and 1.3(d). All payments and prepayments applied to
a particular Loan shall be applied ratably to the portion thereof held by each
Lender as determined by its Pro Rata Share. As to any other payment, and as to
all payments made when a Default or Event or Default has occurred and is
continuing or following the Commitment Termination Date, Borrower hereby
irrevocably waives the right to direct the application of any and all payments
received from or on behalf of Borrower, and Borrower hereby irrevocably agrees
that Agent shall have the continuing exclusive right to apply any and all such
payments against the Obligations as Agent may deem advisable notwithstanding any
previous entry by Agent in the Loan Account or any other books and records. In
the absence of a specific determination by Agent with respect thereto, payments
shall be applied to amounts then due and payable in the following order: (1) to
Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing
Line Loan; (3) to principal
15
payments on the Swing Line Loan;(4) to interest on the Revolving Loans; (5) to
principal payments on the Revolving Loans and to provide cash collateral for
Letter of Credit Obligations in the manner described in Annex B; (6) to interest
on the Acquisition Loan Advances, ratably in proportion to the interest accrued
as to each Acquisition Loan Advance; (7) to principal payments on the
Acquisition Loan Advances, pro rata among all such Acquisition Loan Advances,
and to the scheduled amortization payments thereon in inverse order of maturity,
and (8) to all other Obligations including expenses of Lenders to the extent
reimbursable under Section 11.3.
(b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent Borrower fails to pay promptly any such amounts
as and when due, even if the amount of such charges would exceed Borrowing
Availability at such time. At Agent's option and to the extent permitted by law,
any charges so made shall constitute part of the Revolving Loan hereunder.
1.12 Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: all Advances and
Acquisition Loan Advances, all payments made by Borrower, and all other debits
and credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrower; provided that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower's duty to pay the Obligations. Agent shall render to Borrower a
monthly accounting of transactions with respect to the Loans setting forth the
balance of the Loan Account for the immediately preceding month. Unless Borrower
notifies Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within 90 days after the date thereof,
each and every such accounting shall, absent manifest error, be deemed final,
binding and conclusive on Borrower in all respects as to all matters reflected
therein. Only those items expressly objected to in such notice shall be deemed
to be disputed by Borrower. Notwithstanding any provision herein contained to
the contrary, any Lender may elect (which election may be revoked) to dispense
with the issuance of Notes to that Lender and may rely on the Loan Account as
evidence of the amount of Obligations from time to time owing to it.
1.13 Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit
16
having been extended, suspended or terminated under this Agreement and the other
Loan Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in connection therewith, including any and all
Environmental Liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) Borrower shall refuse to accept any borrowing of, or shall
request a termination of any borrowing, conversion into or continuation of LIBOR
Loans after Borrower has given notice requesting the same in accordance
herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan
after Borrower has given a notice thereof in accordance herewith, then Borrower
shall indemnify and hold harmless each Lender from and against all losses, costs
and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender shall
be deemed to have actually funded its relevant LIBOR Loan through the purchase
of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount
of that LIBOR Loan and having a maturity comparable to the relevant LIBOR
Period; provided, that each Lender may fund each of its LIBOR Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower with its written calculation
of all amounts payable pursuant to this Section 1.13(b), and such calculation
shall be binding on the parties hereto unless Borrower shall object in writing
within 10 Business Days of receipt thereof, specifying the basis for such
objection in detail.
1.14 Access. Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon 5 Business Day's prior notice as
frequently as Agent determines to be appropriate: (a) provide Agent and any of
its officers, employees and
17
agents access to its properties, facilities, advisors and employees (including
officers) of each Credit Party and to the Collateral (provided, however, that
unless an Event of Default has occurred, no Credit Party shall be required to
provide the Agent access to its properties and facilities more than four times
during any calendar year), (b) permit Agent, and any of its officers, employees
and agents, to inspect, audit and make extracts from any Credit Party's books
and records, and (c) permit Agent, and its officers, employees and agents, to
inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Credit Party. If a Default or
Event of Default has occurred and is continuing or if access is necessary to
preserve or protect the Collateral as determined by the Agent, each such Credit
Party shall provide such access to Agent and to each Lender at all times and
without advance notice. Furthermore, so long as any Event of Default has
occurred and is continuing, Borrower shall provide Agent and each Lender with
access to its suppliers and customers. Each Credit Party shall make available to
Agent and its counsel, as quickly as is possible under the circumstances,
originals or copies of all books and records that Agent may reasonably request.
Each Credit Party shall deliver any document or instrument necessary for Agent,
as it may from time to time request, to obtain records from any service bureau
or other Person that maintains records for such Credit Party, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by such Credit Party. Agent will give Lenders at least 5 days'
prior notice (10 days' prior notice for any audit to be commenced during the
period from and including October 1 through and including January 15) of
regularly scheduled audits. Representatives of other Lenders may accompany
Agent's representatives on regularly scheduled audits at no charge to Borrower.
1.15 Taxes.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this Section 1.15, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.15) Agent
or Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within 30
days after the date of any payment of Taxes, Borrower shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof. Agent and
Lenders shall not be obligated to return or refund any amounts received pursuant
to this Section.
(b) Each Credit Party that is a signatory hereto shall indemnify
and, within 10 days of demand therefor, pay Agent and each Lender for the full
amount of Taxes (including any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.15) paid by Agent or such Lender, as appropriate,
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes were correctly or legally
asserted.
(c) Each Lender organized under the laws of a jurisdiction outside
the United States (a "Foreign Lender") as to which payments to be made under
this Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty
18
shall provide to Borrower and Agent a properly completed and executed IRS Form
W-8ECI or Form W-8BEN or other applicable form, certificate or document
prescribed by the IRS or the United States certifying as to such Foreign
Lender's entitlement to such exemption (a "Certificate of Exemption"). Any
foreign Person that seeks to become a Lender under this Agreement shall provide
a Certificate of Exemption to Borrower and Agent prior to becoming a Lender
hereunder. No foreign Person may become a Lender hereunder if such Person fails
to deliver a Certificate of Exemption in advance of becoming a Lender.
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent manifest error,
be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower and
to Agent by such Lender, shall be conclusive and binding on Borrower for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through Agent,
(i) the obligation of such Lender to
19
agree to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) Borrower shall forthwith prepay in full all outstanding LIBOR
Loans owing to such Lender, together with interest accrued thereon, unless
Borrower, within 5 Business Days after the delivery of such notice and demand,
converts all LIBOR Loans into Index Rate Loans.
(d) Within 15 days after receipt by Borrower of written notice and
demand from any Lender (an "Affected Lender") for payment of additional amounts
or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower
may, at its option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of Default has
occurred and is continuing, Borrower, with the consent of Agent, may obtain, at
Borrower's expense, a replacement Lender ("Replacement Lender") for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent. If
Borrower obtains a Replacement Lender within 90 days following notice of its
intention to do so, the Affected Lender must sell and assign its Loans and
Commitments to such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all accrued interest and
Fees with respect thereto through the date of such sale; provided, that Borrower
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. Notwithstanding the foregoing, Borrower shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within 15 days
following its receipt of Borrower's notice of intention to replace such Affected
Lender. Furthermore, if Borrower gives a notice of intention to replace and does
not so replace such Affected Lender within 90 days thereafter, Borrower's rights
under this Section 1.16(d) shall terminate and Borrower shall promptly pay all
increased costs or additional amounts demanded by such Affected Lender pursuant
to Sections 1.15(a), 1.16(a) and 1.16(b).
1.17 Single Loan. All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans. No Lender shall be obligated to
make any Loan or incur any Letter of Credit Obligations on the Closing Date, or
to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner satisfactory to
Agent, or waived in writing by Agent and Requisite Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrower, Agent and
Lenders; and Agent shall have received such documents, instruments, agreements
and legal opinions as Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Closing Checklist attached hereto as Annex D,
each in form and substance reasonably satisfactory to Agent.
20
(b) Approvals. Agent shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer's certificate in
form and substance reasonably satisfactory to Agent affirming that no such
consents or approvals are required.
(c) Opening Availability. The Eligible Accounts and Eligible
Inventory supporting the initial Revolving Credit Advance and the initial Letter
of Credit Obligations incurred and the amount of the Reserves to be established
on the Closing Date shall be sufficient in value, as determined by Agent, to
provide Borrower with Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a pro forma
basis, with trade payables being paid currently, and expenses and liabilities
being paid in the ordinary course of business and without acceleration of sales)
of at least $25,000,000.
(d) Payment of Fees. Borrower shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of the
Closing Date.
(e) Capital Structure: Other Indebtedness. The capital structure of
each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to Agent in its sole discretion.
(f) Due Diligence. Agent shall have completed its business and legal
due diligence with results reasonably satisfactory to Agent.
2.2 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance or any
Acquisition Loan Advance, convert or continue any Loan as a LIBOR Loan or incur
any Letter of Credit Obligation, if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any other Loan Document is untrue or incorrect as of such date,
except to the extent that such representation or warranty expressly relates to
an earlier date and except for changes therein expressly permitted or expressly
contemplated by this Agreement, and Agent or Requisite Lenders have determined
not to make such Advance or such Acquisition Loan Advance, convert or continue
any Loan as LIBOR Loan or incur such Letter of Credit Obligation as a result of
the fact that such warranty or representation is untrue or incorrect;
(b) any event or circumstance having a Material Adverse Effect has
occurred since the date hereof as determined by the Requisite Lenders, and Agent
or Requisite Lenders have determined not to make such Advance or such
Acquisition Loan Advance, convert or continue any Loan as a LIBOR Loan or incur
such Letter of Credit Obligation as a result of the fact that such event or
circumstance has occurred;
21
(c) any Default or Event of Default has occurred and is continuing
or would result after giving effect to any Advance or Acquisition Loan Advance
(or the incurrence of any Letter of Credit Obligation), and Agent or Requisite
Lenders shall have determined not to make any Advance or Acquisition Loan
Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of
Credit Obligation as a result of that Default or Event of Default;
(d) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), the outstanding principal amount of the Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, in
each case, less the then outstanding principal amount of the Swing Line Loan, or
after giving effect to any Acquisition Loan Advance, the outstanding principal
amount of the Acquisition Loans would exceed the Maximum Acquisition Loan
Amount; or
(e) Borrower shall have paid all Fees owing and payable to GE
Capital, Agent and Lenders as of such date under this Agreement and the GE
Capital Fee Letter.
The request and acceptance by Borrower of the proceeds of any Advance or
Acquisition Loan Advance, the incurrence of any Letter of Credit Obligations or
the conversion or continuation of any Loan into, or as, a LIBOR Loan shall be
deemed to constitute, as of the date thereof, (i) a representation and warranty
by Borrower that the conditions in this Section 2.2 have been satisfied and (ii)
a reaffirmation by Borrower of the granting and continuance of Agent's Liens, on
behalf of itself and Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Agent and each Lender with
respect to all Credit Parties, each and all of which shall survive the execution
and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each Credit Party (a)
is a corporation, limited liability company or limited partnership duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization set forth in Disclosure
Schedule (3.1); (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses, damages or
liabilities in excess of $50,000; (c) has the requisite power and authority and
the legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (e) is in compliance with its charter and bylaws or
partnership or operating agreement, as applicable; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law,
22
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.2 Executive Offices, Collateral Locations, FEIN. As of the Closing
Date, each Credit Party's name as it appears in official filings in its state of
incorporation or organization, state of incorporation or organization,
organization type, organization number, if any, issued by its state
incorporation or organization, and the current location of each Credit Party's
chief executive office and the warehouses and premises at which any Collateral
is located are set forth in Disclosure Schedule (3.2), and none of such
locations has changed within 12 months preceding the Closing Date. In addition,
Disclosure Schedule (3.2) lists the federal employer identification number of
each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's power; (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action; (c) do not
contravene any provision of such Person's charter, bylaws or partnership or
operating agreement as applicable; (d) do not violate any law or regulation, or
any order or decree of any court or Governmental Authority; (e) do not conflict
with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (g) do not require the
consent or approval of any Governmental Authority or any other Person, except
those referred to in Section 2.1(c), all of which will have been duly obtained,
made or complied with prior to the Closing Date. Each of the Loan Documents
shall be duly executed and delivered by each Credit Party that is a party
thereto and each such Loan Document shall constitute a legal, valid and binding
obligation of such Credit Party enforceable against it in accordance with its
terms.
3.4 Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning Borrower and its Subsidiaries
that are referred to below have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present fairly in all
material respects the financial position of the Persons covered thereby as at
the dates thereof and the results of their operations and cash flows for the
periods then ended.
(a) Financial Statements. The following Financial Statements
attached hereto as Disclosure Schedule (3.4(a)) have been delivered on the date
hereof:
(i) The audited consolidated and consolidating balance sheets
at March 31, 2003 and the related statements of income and cash flows of
Borrower and its Subsidiaries for the Fiscal Years then ended, certified by
Ernst & Young, LLP.
23
(ii) The unaudited balance sheet(s) at April 30, 2004 and the
related statement(s) of income and cash flows of Borrower and its Subsidiaries
for the five month period then ended.
(b) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(b)) have been prepared by Borrower
in light of the past operations of its businesses, and reflect projections for
the three year period beginning on April 30, 2004 on a month-by-month basis for
the two years and on a year-by-year basis thereafter. The Projections are based
upon estimates and assumptions stated therein, all of which Borrower believes to
be reasonable and fair in light of current conditions and current facts known to
Borrower and, as of the Closing Date, reflect Borrower's good faith and
reasonable estimates of the future financial performance of Borrower and of the
other information projected therein for the period set forth therein.
3.5 Material Adverse Effect. Between March 31, 2003 and the Closing
Date, (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract, lease
or other agreement or instrument has been entered into by any Credit Party or
has become binding upon any Credit Party's assets and no law or regulation
applicable to any Credit Party has been adopted that has had or could reasonably
be expected to have a Material Adverse Effect, and (c) no Credit Party is in
default and to the best of Borrower's knowledge no third party is in default
under any material contract, lease or other agreement or instrument, that alone
or in the aggregate could reasonably be expected to have a Material Adverse
Effect. Between March 31, 2003 and the Closing Date no event has occurred, that
alone or together with other events, could reasonably be expected to have a
Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed in Disclosure Schedule (3.6) constitutes all of
the real property owned, leased, subleased, or used by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned Real
Estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on Disclosure Schedule (3.6), and copies of all such
leases or a summary of terms thereof reasonably satisfactory to Agent have been
delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good and marketable title to, or
valid leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title and
interest in and to all such Real Estate and other properties and assets.
Disclosure Schedule (3.6) also describes any purchase options, rights of first
refusal or other similar contractual rights pertaining to any Real Estate. As of
the Closing Date, no portion of any Credit Party's Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore
24
been repaired and restored in all material respects to its original condition or
otherwise remedied. As of the Closing Date, all material permits required to
have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which it is currently occupied and
used have been lawfully issued and are in full force and effect.
3.7 Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
except as set forth in Disclosure Schedule (3.7), no Credit Party is a party to
or bound by any collective bargaining agreement, management agreement,
consulting agreement, employment agreement, bonus, restricted stock, stock
option, or stock appreciation plan or agreement or any similar plan, agreement
or arrangement (and true and complete copies of any agreements described on
Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no
organizing activity involving any Credit Party pending or, to any Credit Party's
knowledge, threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in Disclosure Schedule (3.7), there are
no material complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Credit Party is owned by
each of the Stockholders and in the amounts set forth in Disclosure Schedule
(3.8). Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in Section 6.3 (including Disclosure Schedule
(6.3)).
3.9 Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Credit Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, or any other federal
or state statute that restricts or limits its ability to incur Indebtedness or
to perform its obligations hereunder. The making of the Loans by Lenders to
Borrower, the incurrence of the Letter of Credit Obligations on behalf of
Borrower, the application of the proceeds thereof and repayment thereof and the
consummation of the Related
25
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any Indebtedness that
was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with Section 5.2(b). Proper and
accurate amounts have been withheld by each Credit Party from its respective
employees for all periods in full and complete compliance with all applicable
federal, state, local and foreign laws and such withholdings have been timely
paid to the respective Governmental Authorities. Disclosure Schedule (3.11) sets
forth as of the Closing Date those taxable years for which any Credit Party's
tax returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described in Disclosure Schedule (3.11), no Credit Party has executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. None of the Credit Parties and their respective
predecessors are liable for any Charges: (a) under any agreement (including any
tax sharing agreements) or (b) to each Credit Party's knowledge, as a
transferee. As of the Closing Date, no Credit Party has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, which would have a Material Adverse Effect.
3.12 ERISA.
(a) Disclosure Schedule (3.12) lists all Plans and separately
identifies all Pension Plans, including Title IV Plans, Multiemployer Plans,
ESOPs and Welfare Plans, including all Retiree Welfare Plans. Copies of all such
listed Plans, together with a copy of the latest form. IRS/DOL 5500-series for
each such Plan have been delivered to Agent. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt
26
from tax under the provisions of Section 501 of the IRC, and nothing has
occurred that would cause the loss of such qualification or tax-exempt status.
Each Plan is in compliance with the applicable provisions of ERISA and the IRC,
including the timely filing of all reports required under the IRC or ERISA,
including the statement required by 29 CFR Section 2520.104-23. Neither any
Credit Party nor ERISA Affiliate has failed to make any contribution or pay any
amount due as required by either Section 412 of the IRC or Section 302 of ERISA
or the terms of any such Plan. Neither any Credit Party nor ERISA Affiliate has
engaged in a "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the IRC, in connection with any Plan, that would subject any
Credit Party to a material tax on prohibited transactions imposed by Section
502(i) of ERISA or Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated, whether or not in a
"standard termination" as that term is used in Section 404(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or ERISA Affiliate (determined at any
time within the past five years) with Unfunded Pension Liabilities been
transferred outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; (vi) except in the
case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates makes
up, in the aggregate, no more than 10% of fair market value of the assets of any
Plan measured on the basis of fair market value as of the latest valuation date
of any Plan; and (vii) no liability under any Title IV Plan has been satisfied
with the purchase of a contract from an insurance company that is not rated AAA
by the Standard & Poor's Corporation or an equivalent rating by another
nationally recognized rating agency.
3.13 No Litigation. No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party, before any Governmental Authority or before
any arbitrator or panel of arbitrators (collectively, "Litigation"), (a) that
challenges any Credit Party's right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Credit Party and
that, if so determined, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13), as of the Closing
Date there is no Litigation pending or threatened that seeks damages in excess
of $100,000 or injunctive relief against, or alleges criminal misconduct of, any
Credit Party.
3.14 Brokers. No broker or finder acting on behalf of any Credit
Party or Affiliate thereof brought about the obtaining, making or closing of the
Loans or the Related Transactions, and no Credit Party or Affiliate thereof has
any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
27
3.15 Intellectual Property. As of the Closing Date, each Credit
Party owns or has rights to use all Intellectual Property necessary to continue
to conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule (3.15). Each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect. Except as set forth in Disclosure Schedule
(3.15), no Credit Party is aware of any infringement claim by any other Person
with respect to any Intellectual Property.
3.16 Full Disclosure. No information contained in this Agreement,
any of the other Loan Documents, any Projections, Financial Statements or
Collateral Reports or other written reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit Party
to Agent or any Lender pursuant to the terms of this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. Projections
from time to time delivered hereunder are or will be based upon the estimates
and assumptions stated therein, all of which Borrower believed at the time of
delivery to be reasonable and fair in light of current conditions and current
facts known to Borrower as of such delivery date, and reflect Borrower's good
faith and reasonable estimates of the future financial performance of Borrower
and of the other information projected therein for the period set forth therein.
The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times be fully perfected first priority Liens
in and to the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances.
3.17 Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3.17), as of the
Closing Date: (i) the Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance that would not result in
Environmental Liabilities which could reasonably be expected to exceed $100,000;
(ii) the Credit Parties have obtained, and are in compliance with, all
Environmental Permits required by Environmental Laws for the operations of their
respective businesses as presently conducted or as proposed to be conducted,
except where the failure to so obtain or comply with such Environmental Permits
would not result in Environmental Liabilities that could reasonably be expected
to exceed $100,000, and all such Environmental Permits are valid, uncontested
and in good standing; (iii) no Credit Party is involved in operations or knows
of any facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Credit Party which could reasonably be expected to exceed $100,000, and no
Credit Party has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (iv) there is no Litigation arising
under or related to any Environmental Laws, Environmental Permits or Hazardous
Material that seeks damages, penalties, fines, costs or expenses in excess of
$25,000 or injunctive relief against, or that alleges criminal misconduct by,
any Credit Party; (v) no notice has been received by any Credit Party
identifying it as a "potentially responsible party" or requesting information
under CERCLA or analogous state statutes, and to the knowledge of the Credit
Parties, there are no facts, circumstances or conditions that may result in any
Credit Party being identified as a "potentially responsible party"
28
under CERCLA or analogous state statutes; and (vi) the Credit Parties have
provided to Agent copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that Agent (i)
is not now, and has not ever been, in control of any of the Real Estate or any
Credit Party's affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
3.18 Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
3.20 Government Contracts. Except as set forth in Disclosure
Schedule (3.20), as of the Closing Date, no Credit Party is a party to any
contract or agreement with any Governmental Authority and no Credit Party's
Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section
3727) or any similar state or local law.
3.21 Customer and Trade Relations. As of the Closing Date, there
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier material to its operations.
3.22 Agreements and Other Documents. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed in Disclosure
Schedule (3.22): supply agreements and purchase agreements involving
transactions in excess of $2,000,000 per annum; agreements relating to advances
to Vendors in excess of $2,000,000; leases of Equipment having a remaining term
of one year or longer and requiring aggregate rental and other payments in
excess of $1,000,000 per annum; licenses and permits held by the Credit Parties,
the absence of which could be reasonably likely to have a Material Adverse
Effect; instruments and documents evidencing any Indebtedness or Guaranteed
Indebtedness of such Credit Party and any Lien granted by such Credit Party with
respect thereto; and instruments and agreements evidencing the issuance of any
equity securities, warrants, rights or options to purchase equity securities of
such Credit Party.
29
3.23 Solvency. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the payment and accrual of all
transaction costs in connection with the foregoing, each Credit Party is and
will be Solvent.
3.24 E-Splice. The assets of E-Splice, Inc. have a fair market value
of less than $10,000 and E-Splice does not have any operations.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent or to Agent and Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons and in
the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent or to Agent and Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the
times, to the Persons and in the manner set forth in Annex F.
4.2 Communication with Accountants. Each Credit Party executing this
Agreement authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate directly with the
partner in charge of such Credit Party's audit at such Credit Party's
independent certified public accountants, and authorizes and shall instruct
those accountants and advisors to communicate to Agent and each Lender
information relating to any Credit Party with respect to the business, results
of operations and financial condition of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact business
only in such corporate and trade names as are set forth in Disclosure Schedule
(5.1).
30
5.2 Payment of Charges.
(a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, (ii) lawful
claims for labor, materials, supplies and services or otherwise, and (iii) all
storage or rental charges payable to warehousemen and bailees, in each case,
before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges, Taxes or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing payment of the Obligations and such contest is maintained and
prosecuted continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest, (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met, and (v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.
5.3 Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
(3.4(a)).
5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on Disclosure Schedule (3.18) as in
effect on the date hereof or otherwise in form and amounts and with insurers
reasonably acceptable to Agent. Such policies of insurance (or the loss payable
and additional insured endorsements delivered to Agent) shall contain provisions
pursuant to which the insurer agrees to provide 30 days prior written notice to
Agent in the event of any non-renewal, cancellation or amendment of any such
insurance policy. If any Credit Party at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required above or to pay
all premiums relating thereto, Agent may at any time or times thereafter obtain
and maintain such policies of insurance and pay such premiums and take any other
action with respect thereto that Agent deems advisable. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default or
Event of Default arising from any Credit Party's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
reasonable attorneys' fees, court costs and other charges related thereto,
31
shall be payable on demand by Borrower to Agent and shall be additional
Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change in any
Credit Party's risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such Credit
Party) to require additional forms and limits of insurance to, in Agent's
reasonable opinion, adequately protect both Agent's and Lender's interests in
all or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry.
If reasonably requested by Agent, each Credit Party shall deliver to Agent from
time to time a report of a reputable insurance broker, reasonably satisfactory
to Agent, with respect to its insurance policies.
(c) Borrower shall deliver to Agent, in form and substance
reasonably satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and Lenders,
as loss payee, and (ii) all general liability and other liability policies
naming Agent, on behalf of itself and Lenders, as additional insured. Borrower
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent), so long as any Default or Event of Default has
occurred and is continuing or the anticipated insurance proceeds exceed
$1,000,000, as Borrower's true and lawful agent and attorney-in-fact for the
purpose of making, settling and adjusting claims under such "All Risk" policies
of insurance, endorsing the name of Borrower on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance and for making
all determinations and decisions with respect to such "All Risk" policies of
insurance. Agent shall have no duty to exercise any rights or powers granted to
it pursuant to the foregoing power-of-attorney. Borrower shall promptly notify
Agent of any loss, damage, or destruction to the Collateral in the amount of
$250,000 or more, whether or not covered by insurance. After deducting from such
proceeds the expenses, if any, incurred by Agent in the collection or handling
thereof, Agent may, at its option, apply such proceeds to the reduction of the
Obligations in accordance with Section 1.3(d), or permit or require Borrower to
use such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction. Notwithstanding the foregoing, if the casualty giving rise to such
insurance proceeds could not reasonably be expected to have a Material Adverse
Effect and such insurance proceeds do not exceed $1,000,000 in the aggregate,
Agent shall permit Borrower to replace, restore, repair or rebuild the property;
provided that if Borrower has not completed or entered into binding agreements
to complete such replacement, restoration, repair or rebuilding within 180 days
of such casualty, Agent may apply such insurance proceeds to the Obligations in
accordance with Section 1.3(d). All insurance proceeds that are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Agent to reduce the outstanding principal balance of the
Revolving Loan (which application shall not result in a permanent reduction of
the Revolving Loan Commitment) and upon such application, Agent shall establish
a Reserve against the Borrowing Base in an amount equal to the amount of such
proceeds so applied. All insurance proceeds made available to any Credit Party
that is not a Borrower to replace, repair, restore or rebuild Collateral shall
be deposited in a cash collateral account. Thereafter, such funds shall be made
available to Borrower to provide funds to replace, repair, restore or rebuild
the Collateral as follows: (i) Borrower shall request a Revolving Credit Advance
be made to Borrower in the amount requested to be released; (ii) so
32
long as the conditions set forth in Section 2.2 have been met, Revolving Lenders
shall make such Revolving Credit Advance or Agent shall release funds from the
cash collateral account; and (iii) in the case of insurance proceeds applied
against the Revolving Loan, the Reserve established with respect to such
insurance proceeds shall be reduced by the amount of such Revolving Credit
Advance. To the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds shall be applied in accordance with Section
1.3(d).
5.5 Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to ERISA and labor matters and Environmental Laws and
Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.6 Supplemental Disclosure. From time to time as may be reasonably
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.
5.7 Intellectual Property. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.8 Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Estate that is
reasonably likely to result in Environmental Liabilities in excess of $25,000;
and (d) promptly forward to Agent a copy of any order, notice, request for
information or any communication or report received by such Credit Party in
connection with any such violation or
33
Release or any other matter relating to any Environmental Laws or Environmental
Permits that could reasonably be expected to result in Environmental Liabilities
in excess of $50,000, in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action in
connection with any such violation, Release or other matter. If Agent at any
time has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Agent's written request (i) cause the performance
of such environmental audits including subsurface sampling of soil and
groundwater, and preparation of such environmental reports, at Borrower's
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance reasonably acceptable to Agent, and
(ii) permit Agent or its representatives to have access to all Real Estate for
the purpose of conducting such environmental audits and testing as Agent deems
appropriate, including subsurface sampling of soil and groundwater. Borrower
shall reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 Landlords' Agreements. Each Credit Party shall obtain a
landlord's agreement, mortgagee agreement and bailee letter as applicable, from
the lessor of each leased property, mortgagee of owned property or bailee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Collateral at that location, and shall otherwise
be reasonably satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date and
thereafter, if Agent has not received a landlord or mortgagee agreement or
bailee letter as of the Closing Date (or, if later, as of the date such location
is acquired or leased), Borrower's Eligible Inventory at that location shall, in
Agent's discretion, be excluded from the Borrowing Base or be subject to such
Reserves as may be established by Agent in its reasonable credit judgment. After
the Closing Date, no real property or warehouse space shall be leased by any
Credit Party and no Inventory shall be shipped to a processor or converter under
arrangements established after the Closing Date without the prior written
consent of Agent (which consent, in Agent's discretion, may be conditioned upon
the exclusion from the Borrowing Base of Eligible Inventory at that location or
the establishment of Reserves acceptable to Agent) or, unless and until a
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location. Each Credit Party shall timely
and fully pay and perform its obligations under all leases and other agreements
with respect to each leased location or public warehouse where any Collateral is
or may be located. To the extent permitted hereunder, if any Credit Party
proposes to acquire a fee ownership interest in Real Estate after the Closing
Date, it shall first provide to Agent a mortgage or deed of trust granting Agent
a first priority Lien on such Real Estate, together with environmental audits,
mortgage title insurance commitment, real property survey, local counsel
opinion(s), and, if required by Agent, supplemental casualty insurance and flood
insurance, and such other documents, instruments or agreements reasonably
requested by Agent, in each case, in form and substance reasonably satisfactory
to Agent.
34
5.10 Borrowing Availability. The Borrower shall at all times
maintain Borrowing Availability of at least $10,000,000 (or such lesser amount
as agreed to in writing by the Agent in its sole discretion).
5.11 Clean Down. The Borrower shall cause the aggregate outstanding
principal amount of Revolving Credit Advances to be zero at all times for at
least one consecutive thirty day period from and including April 1 until and
including June 30 of each year.
5.12 Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof until the
Termination Date:
6.1 Mergers, Subsidiaries, Etc. Without the prior written consent of
the Agent (which consent may be provided or withheld in the Agent's sole
discretion), no Credit Party shall directly or indirectly, by operation of law
or otherwise, (a) form or acquire any Subsidiary, (b) merge with, consolidate
with, acquire all or substantially all of the assets or Stock of, or otherwise
combine with or acquire, any Person, or (c) other than purchases of Inventory
and licenses of Intellectual Property, in each case in the ordinary course of
business consistent with practices as in effect on the date hereof, purchase
assets from any Person if (i) such purchase is not a Capital Expenditure or (ii)
the amount paid for such purchase does not reduce the EBITDA, during the period
such purchase is made and by the amount paid for such purchase, of the Credit
Party which makes such purchase. Notwithstanding the foregoing, Borrower, may
(i) acquire all or substantially all of the assets or Stock of any Person (the
"Target") (in each case, a "Permitted Acquisition") and (ii) make Permitted
Intellectual Property Acquisitions from any Person (a "Seller"), in the case of
each of (i) and (ii) subject to the satisfaction of each of the following
conditions:
(i) in the case of a Permitted Acquisition, Agent shall receive at
least 30 Business Days' prior written notice of such proposed Permitted
Acquisition, which notice shall include a reasonably detailed description of
such proposed Permitted Acquisition;
(ii) in the case of a Permitted Intellectual Property Acquisition,
promptly following the consummation of such Permitted Intellectual Property
Acquisition, Agent shall receive notice thereof, which notice shall include a
reasonably detailed description thereof;
(iii) in the case of a Permitted Acquisition, such Permitted
Acquisition shall only involve assets located in the United States or Canada and
solely comprising a business of distributing (exclusive of distributing via
internet) and/or publishing of music, videogames, software and/or videos, or the
assets of such business, and which business would not subject
35
Agent or any Lender to regulatory or third party approvals in connection with
the exercise of its rights and remedies under this Agreement or any other Loan
Documents other than approvals applicable to the exercise of such rights and
remedies with respect to Borrower prior to such Permitted Acquisition;
(iv) such transaction shall be consensual and shall have been
approved by the Target's or Seller's board of directors;
(v) no additional Indebtedness, Guaranteed Indebtedness, Contingent
Obligations or other liabilities shall be incurred, assumed or otherwise be
reflected on a consolidated balance sheet of Borrower and Target (if applicable)
after giving effect to such transaction, except (A) Loans made hereunder and (B)
ordinary course trade payables, accrued expenses and , to the extent approved by
the Agent in writing in its sole direction and otherwise permitted hereunder,
unsecured Indebtedness of the Target (if applicable) to the extent no Default or
Event of Default has occurred and is continuing or would result after giving
effect to such transaction;
(vi) (a) the sum of all amounts payable in connection with any such
transaction (including all transaction costs and all Indebtedness, liabilities
and Contingent Obligations incurred or assumed in connection therewith or
otherwise reflected on a consolidated balance sheet of Borrower, its
Subsidiaries and Target (if applicable)) shall not exceed $1,000,000 and the sum
of all amounts payable in connection with all Permitted Acquisitions and
Permitted Intellectual Property Acquisitions (including all transaction costs
and all Indebtedness, liabilities and Contingent Obligations incurred or assumed
in connection therewith or otherwise reflected on a consolidated balance sheet
of Borrower, its Subsidiaries and Target) (if applicable) during any Fiscal Year
shall not exceed $2,500,000 in the aggregate (provided, however, that this
clause (a) shall not apply to Permitted Acquisitions consummated on or prior to
the Acquisition Loan Funding Termination Date) and (b) the sum of all amounts
payable in connection with any Permitted Acquisition consummated on or prior to
the Acquisition Loan Funding Termination Date (including all transaction costs
and all Indebtedness, liabilities and Contingent Obligations incurred or assumed
in connection therewith or otherwise reflected on a consolidated balance sheet
of Borrower, its Subsidiaries and Target (if applicable)) shall not exceed
$20,000,000 and the sum of all amounts payable in connection with all Permitted
Acquisitions consummated on or prior to the Acquisition Loan Funding Termination
Date (including all transaction costs and all Indebtedness, liabilities and
Contingent Obligations incurred or assumed in connection therewith or otherwise
reflected on a consolidated balance sheet of Borrower, its Subsidiaries and
Target) (if applicable) during any Fiscal Year shall not exceed $40,000,000 in
the aggregate;
(vii) in the case of a Permitted Acquisition, the Target shall not
have incurred an operating loss for the trailing twelve-month period preceding
the date of the Permitted Acquisition, as determined based upon the Target's
financial statements for its most recently completed fiscal year and its most
recent interim financial period completed within sixty (60) days prior to the
date of consummation of such Permitted Acquisition;
(viii) the business and assets acquired in such transaction shall be
free and clear of all Liens (other than Permitted Encumbrances);
36
(ix) at or prior to the closing of each such transaction, Agent will
be granted a first priority perfected Lien (subject to Permitted Encumbrances)
in all assets acquired pursuant thereto or in the assets and Stock of the
Target, and Borrower and the Target shall have executed such documents and taken
such actions as may be required by Agent in connection therewith;
(x) in the case of a Permitted Acquisition, concurrently with
delivery of the notice referred to in clause (i) above, Borrower shall deliver
to Agent, in form and substance reasonably satisfactory to Agent:
(A) a pro forma consolidated balance sheet, income statement
and cash flow statement of Borrower and its Subsidiaries (the
"Acquisition Pro Forma"), based on recent financial statements,
which shall be complete and shall fairly present in all material
respects the assets, liabilities, financial condition and results of
operations of Borrower and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted
Acquisition and the funding of all Loans in connection therewith,
and such Acquisition Pro Forma shall reflect that (x) average daily
Borrowing Availability for the 90-day period preceding the
consummation of such Permitted Acquisition would have exceeded
$22,500,000 on a pro forma basis (after giving effect to such
Permitted Acquisition and all Loans funded in connection therewith
as if made on the first day of such period and calculated as if
there has been no deteriorations from the date hereof in the working
capital position of Borrower) and the Acquisition Projections (as
hereinafter defined) shall reflect that such Borrowing Availability
of $22,500,000 shall continue for at least 90 days after the
consummation of such Permitted Acquisition, and (y) on a pro forma
basis, no Event of Default has occurred and is continuing or would
result after giving effect to such Permitted Acquisition and
Borrower would have been in compliance with the financial covenants
set forth in Annex G to the Credit Agreement for the four quarter
period reflected in the Compliance Certificate most recently
delivered to Agent pursuant to clause (a) of Annex E to the Credit
Agreement prior to the consummation of such Permitted Acquisition
(after giving effect to such Permitted Acquisition and all Loans
funded in connection therewith as if made on the first day of such
period);
(B) updated versions of the most recently delivered
Projections covering the 3 year period commencing on the date of
such Permitted Acquisition and otherwise prepared in accordance with
the Projections (the "Acquisition Projections") and based upon
historical financial data of a recent date reasonably satisfactory
to Agent, taking into account such Permitted Acquisition; and
(C) a certificate of the chief financial officer of Borrower
to the effect that: (w) Borrower is Solvent immediately following
the consummation of the Permitted Acquisition; (x) the Acquisition
Pro Forma fairly presents the financial condition of Borrower and
its Subsidiaries (on a consolidated basis) as of the date thereof
after giving effect to the Permitted Acquisition; (y) the
Acquisition Projections are reasonable estimates of the future
financial performance of Borrower and its Subsidiaries subsequent to
the date thereof based
37
upon the historical performance of Borrower and its Subsidiaries and
the Target and show that Borrower and its Subsidiaries shall
continue to be in compliance with the financial covenants set forth
in Annex G to the Credit Agreement for the 3-year period thereafter;
and (z) Borrower and its Subsidiaries have completed their due
diligence investigation with respect to the Target and such
Permitted Acquisition, which investigation was conducted in a manner
similar to that which would have been conducted by a prudent
purchaser of a comparable business and the results of which
investigation were delivered to Agent and Lenders;
(xi) in the case of any Permitted Intellectual Property Acquisition,
the average daily Borrowing Availability for the 90-day period preceding the
consummation of such Permitted Intellectual Property Acquisition would have
exceeded $22,500,000 on a pro forma basis (after giving effect to such Permitted
Intellectual Property Acquisition and all Loans funded in connection therewith
as if made on the first day of such period and calculated as if there has been
no deteriorations from the date hereof in the working capital position of
Borrower);
(xii) in the case of a Permitted Acquisition, on or prior to the
date of such Permitted Acquisition, Agent shall have received, in form and
substance reasonably satisfactory to Agent, copies of the acquisition agreement
and related agreements and instruments, and all opinions, certificates, lien
search results and other documents reasonably requested by Agent, including
those specified in the last sentence of Section 5.9; and
(xiii) at the time of such transaction and after giving effect
thereto, no Default or Event of Default has occurred and is continuing.
Notwithstanding the foregoing, the Accounts and Inventory of a Target shall not
be included in Eligible Accounts and Eligible Inventory without the prior
written consent of Agent and Requisite Lenders.
6.2 Investments; Loans and Advances. No Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Borrower, Encore
Software and BCI Eclipse may hold investments comprised of notes payable, or
stock or other securities issued by Account Debtors to Borrower, Encore Software
or BCI Eclipse, as applicable pursuant to negotiated agreements with respect to
settlement of such Account Debtor's Accounts in the ordinary course of business,
so long as the aggregate amount of such Accounts so settled by Borrower, Encore
Software and BCI Eclipse does not exceed $500,000 (in the aggregate for
Borrower, Encore Software and BCI Eclipse combined); (b) each Credit Party may
maintain its existing investments in its Subsidiaries as of the Closing Date;
(c) Borrower may maintain Eligible Certificate of Deposits; (d) so long as no
Default or Event of Default has occurred and is continuing and there is no
outstanding Revolving Loan or Acquisition Loan balance, Borrower may make
investments, subject to Control Letters in favor of Agent for the benefit of
Lenders or otherwise subject to a perfected security interest in favor of Agent
for the benefit of Lenders, in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof, (ii) commercial
paper maturing no more
38
than one year from the date of creation thereof and currently having the highest
rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than one
year from the date of creation thereof issued by (A) the Business Bank, a
Minnesota corporation, or (B) commercial banks incorporated under the laws of
the United States of America, each having combined capital, surplus and
undivided profits of not less than $300,000,000 and having a senior unsecured
rating of "A" or better by a nationally recognized rating agency (an "A Rated
Bank"), (iv) time deposits maturing no more than 30 days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest solely in
one or more of the investments described in clauses (i) through (iv) above; (e)
Borrower, Encore Software and BCI Eclipse may provide advances to Vendors
described in Part A of Disclosure Schedule 6.2; (f) Borrower, Encore Software
and BCI Eclipse may provide advances to Vendors so long as (i) at the time of
each such advance the Borrowing Availability immediately after giving effect to
such advance is at least $20,000,000, (ii) the aggregate outstanding amount of
advances to Vendors permitted solely pursuant to Section 6.2(e) and this Section
6.2(f) does not exceed $15,000,000 at any time and (iii) with respect to each
advance to a Vendor to be made by Encore Software or BCI Eclipse, immediately
after giving effect thereto the Borrower would be permitted to make at least
$500,000 of additional advances to Encore Software or BCI Eclipse, as applicable
pursuant to Section 6.2(i) hereof (provided, however, that the amount set forth
in this Section 6.2(f) shall be reduced from time to time by the amount of
advances to Vendors otherwise permitted by Section 6.2(e) and/or Section 6.2(f)
which have been written off as uncollectible in accordance with Borrower's
policies and as determined in accordance with GAAP to the extent that the amount
of such write off has not caused a reduction in the EBITDA of Borrower in the
fiscal period such write off is taken; (g) Borrower may provide advances to
Vendors described in Part B of Disclosure Schedule 6.2; (h) Borrower may provide
advances by a Credit Party to its employees expressly permitted by Section
6.4(b) hereof; (i) Borrower may make loans to Encore Software in an aggregate
outstanding principal amount not to exceed, at any time, $10,000,000; (j) the
Borrower may make loans to BCI Eclipse in an aggregate outstanding principal
amount not to exceed, at any time, $5,000,000; (k) the Borrower may (i) make a
loan (the "Mix & Burn Loan") to Mix & Burn, Inc., a Minnesota corporation ("Mix
& Burn") in an aggregate principal amount not to exceed $500,000 pursuant to
that certain Discretionary Revolving Loan Agreement dated as of January 26, 2004
between the Borrower and Mix & Burn and that certain Promissory Note dated as of
January 26, 2004 by Mix & Burn in favor of Borrower (the "Mix & Burn Promissory
Note"), as long as (a) the Mix & Burn Loan is fully secured by fully perfected
first priority Liens in and to all or substantially all of the assets of Mix &
Burn pursuant to that certain Security Agreement dated as of January 26, 2004
between the Borrower and Mix & Burn (the "Mix & Burn Security Agreement"), and
(b) Borrower has granted to Agent, for itself and the benefit of Lenders, fully
perfected first priority Liens, pursuant to documentation in form and substance
satisfactory to Agent, in and to the Mix & Burn Promissory Note, the Liens
granted to Borrower under the Mix & Burn Security Agreement, all of the Stock
owned by Borrower from time to time in Mix & Burn whether (1) as a result of the
conversion of the Mix & Burn Promissory Note into equity, (2) consisting of
warrants issued by Mix & Burn in favor of the Borrower in connection with the
Mix & Burn Loan or (3) otherwise, (ii) own Stock in Mix & Burn issued to
Borrower for no additional consideration in connection with the Mix & Burn Loan,
and (iii) convert the obligations relating to the Mix & Burn Loan into Stock of
Mix & Burn and own such Stock]; and (l) other investments not exceeding $100,000
in the aggregate at any time outstanding.
39
6.3 Indebtedness.
(a) No Credit Party shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in Section
6.7(c), (ii) the Loans and the other Obligations, (iii) unfunded pension fund
and other employee benefit plan obligations and liabilities to the extent they
are permitted to remain unfunded under applicable law, (iv) existing
Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or
amendments or modifications thereof that do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than to
extend the same) and that are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined by Agent, than
the terms of the Indebtedness being refinanced, amended or modified, (v)
Indebtedness permitted pursuant to Section 6.2(i) hereof, (vi) Indebtedness of
Encore Software to the Borrower in an aggregate amount not to exceed $7,200,000,
so long as such Indebtedness is evidenced by an intercompany note, in form and
substance satisfactory to Agent, and such intercompany note has been delivered
and endorsed to Agent, and Indebtedness of Borrower to Encore Software, Inc., a
California corporation pursuant to Section 5 of the Amendment No. 1 to Encore
Purchase Agreement in an aggregate principal amount not to exceed $1,150,000;
provided that, no Credit Party (other than Encore Software) shall guarantee,
grant liens on its assets (including, without limitation, the equity interests
in Encore Software) to secure, or otherwise be directly or indirectly liable for
any such Indebtedness or related obligations, and (vii) Indebtedness of BCI
Eclipse to the Borrower, so long as (a) the related loans to BCI Eclipse from
the Borrower are permitted pursuant to Section 6.2(i), and (b) such Indebtedness
is evidenced by an intercompany note, in form and substance satisfactory to
Agent, and such intercompany note has been delivered and endorsed to Agent.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
with Sections 6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(iv)
upon any refinancing thereof in accordance with Section 6.3(a)(iv); (iv) other
Indebtedness not in excess of $250,000; and (v) as otherwise permitted in
Section 6.14.
6.4 Employee Loans and Affiliate Transactions.
(a) No Credit Party shall enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except in the
ordinary course of and pursuant to the reasonable requirements of such Credit
Party's business and upon fair and reasonable terms that are no less favorable
to such Credit Party than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of such Credit Party. In addition, if
any such transaction or series of related transactions involves payments in
excess of $100,000 in the aggregate, the terms of these transactions must be
disclosed in advance to Agent and Lenders. All such transactions existing as of
the date hereof are described in Disclosure Schedule (6.4(a)).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
respective employees on an arm's-length
40
basis in the ordinary course of business consistent with past practices for
travel and entertainment expenses, relocation costs and similar purposes and
stock option financing up to a maximum of $100,000 to any employee and up to a
maximum of $500,000 in the aggregate at any one time outstanding.
6.5 Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that could
in any way adversely affect the repayment of the Loans or any of the other
Obligations or could reasonably be expected to have or result in a Material
Adverse Effect, (b) make any change in its capital structure as described in
Disclosure Schedule (3.8), including the issuance or sale of any shares of
Stock, warrants or other securities convertible into Stock or any revision of
the terms of its outstanding Stock; provided, that the Borrower may issue or
sell its Stock for cash so long as (i) the proceeds thereof are applied in
prepayment of the Obligations as required by Section 1.3(b)(iii), and (ii) no
Change of Control occurs after giving effect thereto, or (c) amend its charter
or bylaws in a manner that would adversely affect Agent or Lenders or such
Credit Party's duty or ability to repay the Obligations. No Credit Party shall
engage in any business other than the businesses currently engaged in by it or
businesses reasonably related thereto.
6.6 Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
6.7 Liens. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens in existence on the date hereof and summarized on
Disclosure Schedule (6.7) securing Indebtedness described on Disclosure Schedule
(6.3) and permitted refinancings, extensions and renewals thereof, including
extensions or renewals of any such Liens; provided that the principal amount so
secured is not increased and the Lien does not attach to any other property; and
(c) Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations of
not more than $250,000 outstanding at any one time for all such Liens (provided
that such Liens attach only to the assets subject to such purchase money debt
and such Indebtedness is incurred within 20 days following such purchase and
does not exceed 100% of the purchase price of the subject assets). In addition,
no Credit Party shall become a party to any agreement, note, indenture or
instrument, or take any other action, that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and Lenders, as additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses which prohibit Liens upon the assets that are
subject thereto.
6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise) or any of its
41
Accounts, other than (a) the sale of Inventory in the ordinary course of
business, and (b) the sale, transfer, conveyance or other disposition by a
Credit Party of Equipment, Fixtures or Real Estate that are obsolete or no
longer used or useful in such Credit Party's business and having an appraised
value not exceeding $100,000 in any single transaction or $500,000 in the
aggregate in any Fiscal Year. With respect to any disposition of assets or other
properties permitted pursuant to clause (b) above, subject to Section 1.3(b),
Agent agrees on reasonable prior written notice to release its Lien on such
assets or other properties in order to permit the applicable Credit Party to
effect such disposition and shall execute and deliver to Borrower, at Borrower's
expense, appropriate UCC-3 termination statements and other releases as
reasonably requested by Borrower.
6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10 Financial Covenants. Borrower shall not breach or fail to
comply with any of the Financial Covenants.
6.11 Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets; provided that Borrower may engage in a sale-leaseback transaction with
respect to the Minnesota Facility pursuant to the Minnesota Sale-Leaseback
Documents, as long as Agent shall have received certified copies of all
documents governing or evidencing such transaction, including, without
limitation, a landlord waiver, in form and substance reasonably satisfactory to
Agent, prior to consummation of such transaction.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) dividends and distributions by Subsidiaries of Borrower paid
to Borrower, (b) employee loans permitted under Section 6.4(b),(c) on any day,
the Borrower may repurchase the Borrower's own shares of common stock, as long
as (i) at the time of such repurchase and after giving effect thereto, no
Default or Event of Default has occurred and is continuing, (ii) after giving
effect to such repurchase, the Borrowing Availability shall be at least
$20,000,000 and (iii) the aggregate consideration paid for all such repurchases
during any consecutive twelve
42
month period does not exceed $250,000, and (d) payment of Earnout Amounts (under
and as defined in the BCI Eclipse Purchase Agreement as in effect on November 5,
2003) as long as (i) at the time of such payment and after giving effect
thereto, no Default or Event of Default has occurred and is continuing, (ii)
after giving effect to such payment, the Borrowing Availability shall be at
least $20,000,000, (iii) the Borrower has demonstrated to the Agent's reasonable
satisfaction that the average daily Borrowing Availability for the 30-day period
preceding such payment was at least $20,000,000 and (iv) prior to such payment
the Borrower has delivered evidence satisfactory to the Agent demonstrating
that, had such payment been made on the last day of the then most recently
completed Fiscal Quarter, Borrower would have been in compliance with the
financial covenants set forth on Annex G to the Credit Agreement as of the end
of such Fiscal Quarter.
6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its name as it appears in official filings in the
state of its incorporation or other organization, (b) change its chief executive
office, principal place of business, corporate offices or warehouses or
locations at which Collateral is held or stored, or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of incorporation or
organization, in each case without at least 30 days prior written notice to
Agent and after Agent's written acknowledgment that any reasonable action
requested by Agent in connection therewith, including to continue the perfection
of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has
been completed or taken, and provided that any such new location shall be in the
continental United States. Without limiting the foregoing, no Credit Party shall
change its name, identity or corporate structure in any manner that might make
any financing or continuation statement filed in connection herewith seriously
misleading as such term is defined in and/or used in the Code or any other then
applicable provision of the Code except upon prior written notice to Agent and
Lenders and after Agent's written acknowledgment that any reasonable action
requested by Agent in connection therewith, including to continue the perfection
of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has
been completed or taken. No Credit Party shall change its Fiscal Year.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
6.17 No Speculative Transactions. No Credit Party shall engage in
any transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 Leases; Real Estate Purchases. Except as otherwise permitted in
Section 6.1 in connection with a Permitted Acquisition and except for the lease
of the Minnesota Facility pursuant to the Minnesota Sale-Leaseback Documents, no
Credit Party shall enter into
43
any operating lease for Equipment or Real Estate, if the aggregate of all such
operating lease payments payable in any year for Borrowers on a consolidated
basis would exceed $250,000. Except as otherwise permitted in Section 6.1 in
connection with a Permitted Acquisition, no Credit Party shall purchase a fee
simple ownership interest in Real Estate.
6.19 Amendments. The Borrower shall not enter into any amendment,
supplement, restatement, other modification or waiver with respect to any of the
Minnesota Sale-Leaseback Documents without the prior written consent of Agent.
6.20 Trade Debt. The Credit Parties shall not cause or permit BCI
Eclipse or Encore Software to incur third party obligations to trade creditors
(excluding intercompany indebtedness among the Credit Parties) in an amount not
to exceed (i) $5,000,000 in the aggregate for BCI Eclipse or (ii) $12,000,000 in
the aggregate for Encore Software.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Loans and all
other Obligations shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within 10 days following Agent's demand for such reimbursement or payment of
expenses.
44
(b) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 5.4(a) or 6, or any of the
provisions set forth in Annexes C or G, respectively.
(c) Borrower fails or neglects to perform, keep or observe any of
the provisions of Section 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for 5 days or more.
(d) Any Credit Party fails or neglects to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.1) and the same shall remain unremedied for 45 days or more.
(e) A default or breach occurs under any other agreement, document
or instrument to which any Credit Party is a party that is not cured within any
applicable grace period therefor, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness or
Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $250,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $250,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral to be demanded in respect
thereof, in each case, regardless of whether such default is waived, or such
right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect, or any representation or warranty herein or
in any Loan Document or in any written statement, report, financial statement or
certificate (other than a Borrowing Base Certificate) made or delivered to Agent
or any Lender by any Credit Party is untrue or incorrect in any material respect
as of the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $100,000
or more are attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Credit Party and such condition
continues for 30 days or more.
(h) A case or proceeding is commenced against any Credit Party
seeking a decree or order in respect of such Credit Party (i) under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for such Credit Party or for any
substantial part of any such Credit Party's assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party, and such case or
proceeding shall remain undismissed or unstayed for 60 days or more or a decree
or order granting the relief sought in such case or proceeding by a court of
competent jurisdiction.
45
(i) Any Credit Party (i) files a petition seeking relief under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) consents to or fails to contest in a timely and
appropriate manner to the institution of proceedings thereunder or to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party's assets, (iii) makes an assignment for the benefit of creditors, or (iv)
takes any action in furtherance of any of the foregoing, or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of money in excess
of $100,000 in the aggregate at any time are outstanding against one or more of
the Credit Parties and the same are not, within 30 days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay.
(k) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien created under any Loan Document ceases to be a valid and perfected
first priority Lien (except as otherwise permitted herein or therein) in any of
the Collateral purported to be covered thereby.
(l) Any Change of Control occurs.
(m) Any event occurs, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrower generating more than 10% of Borrower's
revenues for the Fiscal Year preceding such event and such cessation or
curtailment continues for more than 30 days.
8.2 Remedies.
(a) If any Default or Event of Default has occurred and is
continuing, Agent may (and at the written request of the Requisite Lenders
shall), without notice, suspend the Revolving Loan facility with respect to
additional Advances, the Acquisition Loan facility with respect to additional
Acquisition Loan Advances and/or the incurrence of additional Letter of Credit
Obligations, whereupon any additional Advances, Acquisition Loan Advances and
additional Letter of Credit Obligations shall be made or incurred in Agent's
sole discretion (or in the sole discretion of the Requisite Lenders, if such
suspension occurred at their direction) so long as such Default or Event of
Default is continuing. If any Default or Event of Default has occurred and is
continuing, Agent may (and at the written request of Requisite Lenders shall),
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Loans and the Letter of Credit Fees to the Default
Rate.
46
(b) If any Event of Default has occurred and is continuing, Agent
may (and at the written request of the Requisite Lenders shall), without notice:
(i) terminate the Revolving Loan facility with respect to further Advances, the
Acquisition Loan facility with respect to additional Acquisition Loan Advances
or the incurrence of further Letter of Credit Obligations; (ii) declare all or
any portion of the Obligations, including all or any portion of any Loan to be
forthwith due and payable, and require that the Letter of Credit Obligations be
cash collateralized as provided in Annex B, all without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; or (iii) exercise any rights and remedies
provided to Agent under the Loan Documents or at law or equity, including all
remedies provided under the Code; provided, that upon the occurrence of an Event
of Default specified in Sections 8.1(h) or (i), the Commitments shall be
immediately terminated and all of the Obligations, including the Revolving Loan,
shall become immediately due and payable without declaration, notice or demand
by any Person.
8.3 Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in any way be
liable, and hereby ratifies and confirms whatever Agent may do in this regard,
(b) all rights to notice and a hearing prior to Agent's taking possession or
control of, or to Agent's replevy, attachment or levy upon, the Collateral or
any bond or security that might be required by any court prior to allowing Agent
to exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) Subject to the terms of this Section 9.1, any Lender may make an
assignment to a Qualified Assignee of, or sale of participations in, at any time
or times, the Loan Documents, Loans, Letter of Credit Obligations and any
Commitment or any portion thereof or interest therein, including any Lender's
rights, title, interests, remedies, powers or duties thereunder. Any assignment
by a Lender shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an "Assignment Agreement" substantially in
the form attached hereto as Exhibit 9.1(a) and otherwise in form and substance
reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) after
giving effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $5,000,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $5,000,000; (iv)
include a payment to Agent of an assignment fee of $3,500. In the case of an
assignment by a Lender under this Section 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as all
other Lenders hereunder. The assigning Lender shall be relieved of its
obligations hereunder with
47
respect to its Commitments or assigned portion thereof from and after the date
of such assignment. Borrower hereby acknowledges and agrees that any assignment
shall give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender". In all instances, each Lender's
liability to make Loans hereunder shall be several and not joint and shall be
limited to such Lender's Pro Rata Share of the applicable Commitment. In the
event Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrower and Borrower
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. Notwithstanding the foregoing provisions
of this Section 9.1(a), any Lender may at any time pledge the Obligations held
by it and such Lender's rights under this Agreement and the other Loan Documents
to a Federal Reserve Bank, and any lender that is an investment fund may assign
the Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor; provided, that no such pledge to a Federal Reserve Bank shall release
such Lender from such Lender's obligations hereunder or under any other Loan
Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.13,
1.15, 1.16 and 9.8, Borrower acknowledges and agrees that a participation shall
give rise to a direct obligation of Borrower to the participant and the
participant shall be considered to be a "Lender". Except as set forth in the
preceding sentence neither Borrower nor any other Credit Party shall have any
obligation or duty to any participant. Neither Agent nor any Lender (other than
the Lender selling a participation) shall have any duty to any participant and
may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no Lender
shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Credit Parties and their respective affairs
contained in any selling materials provided by it and all other information
provided by it and included in such materials, except that any Projections
48
delivered by Borrower shall only be certified by Borrower as having been
prepared by Borrower in compliance with the representations contained in Section
3.4(c).
(e) A Lender may furnish any information concerning Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.
(f) So long as no Event of Default has occurred and is continuing,
no Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.16(a), increased
costs under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a).
(g) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender"), may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing by the Granting Lender to Agent and
Borrower, the option to provide to Borrower all or any part of any Loans that
such Granting Lender would otherwise be obligated to make to Borrower pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan; and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of such Loan,
the Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if such Loan were made by such
Granting Lender. No SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender). Any SPC may (i) with notice to, but without the prior written
consent of, Borrower and Agent and without paying any processing fee therefor
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by Borrower and Agent) providing
liquidity and/or credit support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or liquidity
enhancement to such SPC. This Section 9.1(g) may not be amended without the
prior written consent of each Granting Lender, all or any of whose Loans are
being funded by an SPC at the time of such amendment. For the avoidance of
doubt, the Granting Lender shall for all purposes, including without limitation,
the approval of any amendment or waiver of any provision of any Loan Document or
the obligation to pay any amount otherwise payable by the Granting Lender under
the Loan Documents, continue to be the Lender of record hereunder.
9.2 Appointment of Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any
49
Credit Party or any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the other Loan
Documents. The duties of Agent shall be mechanical and administrative in nature
and Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender. Except as expressly set forth in this Agreement and the other Loan
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Credit Party or any of
their respective Subsidiaries or any Account Debtor that is communicated to or
obtained by GE Capital or any of its Affiliates in any capacity. Neither Agent
nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders with respect to any act
or action (including failure to act) in connection with this Agreement or any
other Loan Document, then Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received instructions from
Requisite Lenders, Supermajority Revolving Lenders, or all affected Lenders, as
the case may be, and Agent shall not incur liability to any Person by reason of
so refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (a) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders,
as applicable.
9.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates
nor any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent: (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form reasonably satisfactory to
Agent; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents
50
or any other instrument or document furnished pursuant hereto or thereto; and
(f) shall incur no liability under or in respect of this Agreement or the other
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.4 GE Capital and Affiliates. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital in its individual capacity. GE
Capital and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Credit Party, any of their Affiliates and any
Person who may do business with or own securities of any Credit Party or any
such Affiliate, all as if GE Capital were not Agent and without any duty to
account therefor to Lenders. GE Capital and its Affiliates may accept fees and
other consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders. Each
Lender acknowledges the potential conflict of interest between GE Capital as a
Lender holding interests in the Loans and GE Capital as Agent.
9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Aggregate Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted to be taken by Agent in
connection therewith; provided, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Credit Parties.
51
9.7 Successor Agent. Agent may resign at any time by giving not less
than 30 days' prior written notice thereof to Lenders and Borrower. Upon any
such resignation, the Requisite Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent's giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank or
financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, within 30 days after the
date such notice of resignation was given by the resigning Agent, such
resignation shall become effective and the Requisite Lenders shall thereafter
perform all the duties of Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Agent as provided above. Any successor
Agent appointed by Requisite Lenders hereunder shall be subject to the approval
of Borrower, such approval not to be unreasonably withheld or delayed; provided
that such approval shall not be required if a Default or an Event of Default has
occurred and is continuing. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder
by a successor Agent or the effective date of the resigning Agent's resignation,
the resigning Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents, except that any indemnity rights or
other rights in favor of such resigning Agent shall continue. After any
resigning Agent's resignation hereunder, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was acting as Agent under this Agreement and the other Loan Documents.
9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default
and subject to Section 9.9(f), each Lender is hereby authorized at any time or
from time to time, without notice to any Credit Party or to any other Person,
any such notice being hereby expressly waived, to offset and to appropriate and
to apply any and all balances held by it at any of its offices for the account
of Borrower or any Guarantor (regardless of whether such balances are then due
to Borrower or any Guarantor) and any other properties or assets at any time
held or owing by that Lender or that holder to or for the credit or for the
account of Borrower or any Guarantor against and on account of any of the
Obligations that are not paid when due. Any Lender exercising a right of setoff
or otherwise receiving any payment on account of the Obligations in excess of
its Aggregate Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's Aggregate Pro Rata Share of the Obligations as would be necessary to
cause such Lender to share the amount so offset or otherwise received with each
other Lender or holder in accordance with their respective Aggregate Pro Rata
Shares, (other than offset rights exercised by any Lender with respect to
Sections 1.13, 1.15 or 1.16). Each Lender's obligation under this Section 9.8
shall be in addition to and not in limitation of its obligations to purchase a
participation in an amount equal to its Pro Rata Share of the Swing Line Loans
under Section 1.1. Borrower and each Guarantor agrees, to the fullest extent
permitted by law, that (a) any Lender may exercise its right to offset with
52
respect to amounts in excess of its Aggregate Pro Rata Share of the Obligations
and may sell participations in such amounts so offset to other Lenders and
holders and (b) any Lender so purchasing a participation in the Loans made or
other Obligations held by other Lenders or holders may exercise all rights of
offset, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender or holder were a direct holder of the
Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.
9.9 Advances and Acquisition Loan Advances; Payments; Non-Funding
Lenders; Information; Actions in Concert.
(a) Advances and Acquisition Loan Advances; Payments.
(i) Revolving Lenders shall refund or participate in the Swing
Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(b). If the
Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Advance and in any event prior to 1:00 p.m.
(Chicago time) on the date such Notice of Revolving Advance is received, by
telecopy, telephone or other similar form of transmission. Each Revolving Lender
shall make the amount of such Lender's Pro Rata Share of such Revolving Credit
Advance available to Agent in same day funds by wire transfer to Agent's account
as set forth in Annex H not later than 3:00 p.m. (Chicago time) on the requested
funding date, in the case of an Index Rate Loan and not later than 11:00 a.m.
(Chicago time) on the requested funding date in the case of a LIBOR Loan. Each
Acquisition Loan Lender shall make the amount of such Acquisition Loan Lender's
Pro Rata Share of such Acquisition Loan Advance available to Agent in same day
funds by wire transfer to Agent's account as set forth in Annex H not later than
11:00 a.m. (Chicago time) on the requested funding date. After receipt of such
wire transfers (or, in the Agent's sole discretion, before receipt of such wire
transfers), subject to the terms hereof, Agent shall make the requested
Revolving Credit Advance or Acquisition Loan Advance to Borrower. All payments
by each Revolving Lender and each Acquisition Loan Lender shall be made without
setoff, counterclaim or deduction of any kind.
(ii) On the 2nd Business Day of each calendar week or more
frequently at Agent's election (each, a "Settlement Date"), Agent shall advise
each Lender by telephone, or telecopy of the amount of such Lender's Pro Rata
Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments and Advances and Acquisition Loan Advances required to be made by it
and purchased all participations required to be purchased by it under this
Agreement and the other Loan Documents as of such Settlement Date, Agent shall
pay to each Lender such Lender's Pro Rata Share of principal, interest and Fees
paid by Borrower since the previous Settlement Date for the benefit of such
Lender on the Loans held by it. To the extent that any Lender (a "Non-Funding
Lender") has failed to fund all such payments and Advances, Acquisition Loan
Advances or failed to fund the purchase of all such participations, Agent shall
be entitled to set off the funding short-fall against that Non-Funding Lender's
Pro Rata Share of all payments received from Borrower. Such payments shall be
made by wire transfer to such
53
Lender's account (as specified by such Lender in Annex H or the applicable
Assignment Agreement) not later than 1:00 p.m. (Chicago time) on the next
Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume that
(i) each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date, and (ii) each Acquisition Loan
Lender will make its Pro Rata Share of each Acquisition Loan Advance available
to Agent on each funding date. If such Pro Rata Share is not, in fact, paid to
Agent by such Revolving Lender or Acquisition Loan Lender when due, Agent will
be entitled to recover such amount on demand from such Revolving Lender or
Acquisition Loan Lender without setoff, counterclaim or deduction of any kind.
If any Revolving Lender or Acquisition Loan Lender fails to pay the amount of
its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify
Borrower and Borrower shall immediately repay such amount to Agent. Nothing in
this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents
shall be deemed to require Agent to advance funds on behalf of any Revolving
Lender or Acquisition Loan Lender or to relieve any Revolving Lender or
Acquisition Loan Lender from its obligation to fulfill its Commitments hereunder
or to prejudice any rights that Borrower may have against any Revolving Lender
or Acquisition Loan Lender as a result of any default by such Revolving Lender
or Acquisition Loan Lender hereunder. To the extent that Agent advances funds to
Borrower on behalf of any Revolving Lender or Acquisition Loan Lender and is not
reimbursed therefor on the same Business Day as such Advance or Acquisition Loan
Advance is made, Agent shall be entitled to retain for its account all interest
accrued on such Advance or Acquisition Loan Advance until reimbursed by the
applicable Revolving Lender or Acquisition Loan Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement or any other Loan Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to
make any Revolving Credit Advance, any Acquisition Loan Advance or any payment
required by it hereunder, or to purchase any participation in any Swing Line
Loan to be made or purchased by it on the date specified therefor shall not
relieve any other Lender (each such other Revolving Lender or Acquisition Loan
Lender, an "Other Lender") of its obligations to make such Advance, such
Acquisition Loan Advance or purchase such participation on such date, but
neither any
54
Other Lender nor Agent shall be responsible for the failure of any Non-Funding
Lender to make an Advance, an Acquisition Loan Advance, purchase a participation
or make any other payment required hereunder. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender", a "Revolving Lender", or an "Acquisition Loan Lender" (or be included
in the calculation of "Requisite Lenders", " or "Supermajority Revolving
Lenders" hereunder) for any voting or consent rights under or with respect to
any Loan Document. At Borrower's request, Agent or a Person acceptable to Agent
shall have the right with Agent's consent and in Agent's sole discretion (but
shall have no obligation) to purchase from any Non-Funding Lender, and each
Non-Funding Lender agrees that it shall, at Agent's request, sell and assign to
Agent or such Person, all of the Commitments of that Non-Funding Lender for an
amount equal to the principal balance of all Loans held by such Non-Funding
Lender and all accrued interest and fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement.
(e) Dissemination of Information. Agent shall use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has actually become aware and with notice of any
action taken by Agent following any Event of Default; provided, that Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrower is required to provide Financial Statements
and Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent or Requisite Lenders.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party
55
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of interest, commitment letter or fee
letter (other than the GE Capital Fee Letter) or confidentiality agreement, if
any, between any Credit Party and Agent or any Lender or any of their respective
Affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrower, and by Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders, as applicable. Except
as set forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that increases the percentage
advance rates set forth in the definition of the Borrowing Base, or that makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7, shall be
effective unless the same shall be in writing and signed by Agent, Supermajority
Revolving Lenders and Borrower. No amendment, modification, termination or
waiver of or consent with respect to any provision of this Agreement that waives
compliance with the conditions precedent set forth in Section 2.2 to the making
of any Loan or the incurrence of any Letter of Credit Obligations shall be
effective unless the same shall be in writing and signed by Agent, Requisite
Lenders and Borrower. Notwithstanding anything contained in this Agreement to
the contrary, no waiver or consent with respect to any Default or any Event of
Default shall be effective for purposes of the conditions precedent to the
making of Loans or the incurrence of Letter of Credit Obligations set forth in
Section 2.2 unless the same shall be in writing and signed by Agent, Requisite
Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall, unless
in writing and signed by Agent and each Lender directly affected thereby: (i)
increase the principal amount of any Lender's Commitment (which action shall be
deemed to directly affect all Lenders); (ii) reduce the principal of, rate of
interest on or Fees payable with respect to any Loan or Letter of Credit
Obligations of any affected Lender; (iii) extend any scheduled payment date
(other than payment dates of mandatory prepayments under Section
1.3(b)(ii)-(iv)) or final maturity date of the principal amount of any Loan of
any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment
of interest or Fees as to any affected Lender; (v) release
56
any Guaranty or, except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Credit Party to sell or otherwise dispose of,
any Collateral with a value exceeding $1,000,000 in the aggregate (which action
shall be deemed to directly affect all Lenders); (vi) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans that
shall be required for Lenders or any of them to take any action hereunder; and
(vii) amend or waive this Section 11.2 or the definitions of the terms
"Requisite Lenders", or "Supermajority Revolving Lenders" insofar as such
definitions affect the substance of this Section 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
Agent or L/C Issuer under this Agreement or any other Loan Document shall be
effective unless in writing and signed by Agent or L/C Issuer, as the case may
be, in addition to Lenders required hereinabove to take such action. Each
amendment, modification, termination or waiver shall be effective only in the
specific instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required for Agent to
take additional Collateral pursuant to any Loan Document. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note. No notice
to or demand on any Credit Party in any case shall entitle such Credit Party or
any other Credit Party to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.2 shall be binding upon each holder
of the Notes at the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the consent
of Requisite Lenders is obtained, but the consent of other Lenders whose consent
is required is not obtained (any such Lender whose consent is not obtained as
described in this clause (i) and in clauses (ii) and (iii) below being referred
to as a "Non-Consenting Lender"),
(ii) requiring the consent of Supermajority Revolving Lenders,
the consent of Requisite Lenders is obtained, but the consent of Supermajority
Revolving Lenders is not obtained,
(iii) requiring the consent of Requisite Lenders, the consent
of Revolving Lenders holding 51% or more of the aggregate Revolving Loan
Commitments is obtained, but the consent of Requisite Lenders is not obtained;
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request
Agent, or a Person reasonably acceptable to Agent, shall have the right with
Agent's consent and in Agent's sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent's request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
57
(e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions proceedings, or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrower termination statements,
mortgage releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.
11.3 Fees and Expenses. Borrower shall reimburse (i) Agent for all
fees, costs and expenses (including the reasonable fees and expenses of all of
its counsel, advisors, consultants and auditors) and (ii) Agent (and, with
respect to clauses (c) and (d) below, all Lenders) for all fees, costs and
expenses, including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers)
incurred in connection with the negotiation, preparation and filing and/or
recordation of the Loan Documents and incurred in connection with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of any Loan (including a wire transfer fee of
$25 per wire transfer);
(b) any amendment, modification or waiver of, or consent with
respect to, or termination of, any of the Loan Documents or advice in connection
with the syndication and administration of the Loans made pursuant hereto or its
rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Credit Party or any other Person
and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Credit Parties or any other Person that may be obligated to Agent by virtue of
the Loan Documents, including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders; provided,
further, that no Person shall be entitled to reimbursement under this clause (c)
in respect of any litigation, contest, dispute, suit, proceeding or action to
the extent any of the foregoing results from such Person's gross negligence or
willful misconduct;
(d) any attempt to enforce any remedies of Agent or any Lender
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(e) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
58
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrower to Agent. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
11.4 No Waiver. Agent's or any Lender's failure, at any time or
times, to require strict performance by the Credit Parties of any provision of
this Agreement or any other Loan Document shall not waive, affect or diminish
any right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.
11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any
59
provision in any of the other Loan Documents, the provision contained in this
Agreement shall govern and control.
11.8 Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential following receipt thereof, except
that Agent and each Lender may disclose such information (a) to Persons employed
or engaged by Agent or such Lender; (b) to any bona fide assignee or participant
or potential assignee or participant that has agreed to comply with the covenant
contained in this Section 11.8 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as required
or requested by any Governmental Authority or reasonably believed by Agent or
such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advise of Agent's or such
Lender's counsel, is required by law; (e) in connection with the exercise of any
right or remedy under the Loan Documents or in connection with any Litigation to
which Agent or such Lender is a party; or (f) that ceases to be confidential
through no fault of Agent or any Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
COOK COUNTY AND; PROVIDED, FURTHER THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
60
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT
PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and 3 Business
Days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 11.10); (c)
1 Business Day after deposit with a reputable overnight courier with all charges
prepaid or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated in Annex I or to such other address (or facsimile
number) as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower or Agent) designated in Annex I to receive copies
shall in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
61
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases and Related Matters. Each Credit Party
executing this Agreement agrees that neither it nor its Affiliates will in the
future issue any press releases or other public disclosure using the name of GE
Capital or its affiliates or referring to this Agreement or the other Loan
Documents without at least 2 Business Days' prior notice to GE Capital and
without the prior written consent of GE Capital unless (and only to the extent
that) such Credit Party or Affiliate is required to do so under law and then, in
any event, such Credit Party or Affiliate will consult with GE Capital before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Agent or any Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this
Agreement. Agent or such Lender shall provide a draft of any such tombstone or
similar advertising material to each Credit Party for review and comment prior
to the publication thereof. Agent reserves the right to provide to industry
trade organizations information necessary and customary for inclusion in league
table measurements.
11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party for liquidation or reorganization, should any Credit Party
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Credit Party's assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11.16 Advice of Counsel. Each of the parties represents to each
other party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
62
12. AMENDMENT AND RESTATEMENT
12.1 Interrelationship with the Existing Credit Agreement. As stated
in the preamble hereof, this Agreement is intended to amend and restate the
provisions of the Existing Credit Agreement and, except as expressly modified
herein, (x) all of the terms and provisions of the Existing Credit Agreement
shall continue to apply for the period prior to the Closing Date, including any
determinations of payment dates, interest rates, Events of Default or any amount
that may be payable to Agent or the Lenders, (y) the Obligations under the
Existing Credit Agreement shall continue to be paid or prepaid on or prior to
the Closing Date, and shall from and after the Closing Date continue to be owing
and be subject to the terms of this Agreement and (z) this Agreement shall not
be deemed to evidence or result in a novation or repayment of the Original
Revolving Loans and reborrowing hereunder, but Obligations under the Existing
Credit Agreement and Liens securing payment and performance thereof shall in all
respects be continuing as Obligations under this Agreement and Liens securing
payment and performance thereof. All references in the other Loan Documents and
the Loan Documents executed in connection with the Existing Credit Agreement to
(i) the Existing Credit Agreement or the "Credit Agreement" shall be deemed to
include references to this Agreement and (ii) the "Lenders" or a "Lender" or to
the "Agent" shall mean such terms as defined in this Agreement. All Obligations
of the Borrower under the Existing Credit Agreement shall be governed by this
Agreement from and after the Closing Date. The Loan Documents delivered in
connection with this Agreement shall supersede the corresponding Loan Documents
delivered in connection with the Existing Credit Agreement. The Loan Documents
executed in connection with the Existing Credit Agreement that are not
superseded by corresponding Loan Documents executed and delivered in connection
with this Agreement shall remain in full force and effect. All references to the
Existing Credit Agreement in the Loan Documents executed in connection with the
Existing Credit Agreement that are not expressly superseded by deliveries of
such new Loan Documents shall be deemed to refer to this Agreement.
12.2 Confirmation of Existing Obligations. Borrower acknowledges and
agrees that as of close of business on June 18, 2004, the outstanding balance of
the Revolving Loans outstanding under the Existing Credit Agreement (including
accrued interest thereon but excluding all of the fees and expenses (including
professional fees and expenses) related thereto) was $0 and that Borrower has no
defense, counterclaim or setoff with respect to the payment thereof.
[Signature Pages Follow]
63
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
NAVARRE CORPORATION, as Borrower
By:_____________________________
Name:___________________________
Title:__________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By:_____________________________
Duly Authorized Signatory
[Signature Page to Credit Agreement]
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above by below Persons in their capacity as Credit Parties
not as Borrower.
ENCORE SOFTWARE, INC., as Credit Party
By:______________________________________
Name:____________________________________
Title:___________________________________
BCI ECLIPSE COMPANY, LLC, as Credit Party
By:______________________________________
Name:____________________________________
Title:___________________________________
[Signature Page to Credit Agreement]
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
"Account Debtor" means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account, Chattel Paper
or General Intangibles (including a payment intangible).
"Accounting Changes" has the meaning ascribed thereto in Annex G.
"Accounts" means all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper or
Instruments), (including any such obligations that may be characterized as an
account or contract right under the Code), (b) all of each Credit Party's rights
in, to and under all purchase orders or receipts for goods or services, (c) all
of each Credit Party's rights to any goods represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), (d)
all rights to payment due to any Credit Party for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued or
to be issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Credit Party or in connection with
any other transaction (whether or not yet earned by performance on the part of
such Credit Party), (e) all healthcare insurance receivables, and (f) all
collateral security of any kind, now or hereafter in existence, given by any
Account Debtor or other Person with respect to any of the foregoing.
"Accounts Payable" shall mean as of any date of determination the
sum of (i) accounts payable of Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP; and (ii) the then outstanding
balance of advances to Vendors to the extent taken into account in the
determination of the amount in clause (i) of this definition.
"Acquisition Loan" means, at any time, the sum of the aggregate
amount of Acquisition Loan Advances outstanding to Borrower.
"Acquisition Loan Advance" has the meaning ascribed to it in Section
1.1(c)(i).
"Acquisition Loan Commitment" means (a) as to any Acquisition Loan
Lender, the aggregate commitment of such Acquisition Loan Lender to make
Acquisition Loan Advances as set forth on Annex J to the Agreement or in the
most recent Assignment Agreement executed
A-1
by such Acquisition Loan Lender and (b) as to all Acquisition Loan Lenders, the
aggregate commitment of all Acquisition Loan Lenders to make Acquisition Loan
Advances, which aggregate commitment shall be Ten Million Dollars ($10,000,000)
on the Closing Date, as such amount may be adjusted, if at all, from time to
time in accordance with the Agreement.
"Acquisition Loan Funding Termination Date" means the earlier of (i)
June 18, 2006 or (ii) the Commitment Termination Date.
"Acquisition Loan Lender" means, as of any date of determination, a
Lender having an Acquisition Loan Commitment.
"Acquisition Pro Forma" has the meaning ascribed to it in Section
6.1.
"Acquisition Projections" has the meaning ascribed to it in Section
6.1.
"Advance" means any Revolving Credit Advance, Swing Line Advance or
Acquisition Loan Advance, as the context may require.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers and partners and (d) in
the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower. For the purposes of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "Affiliate" shall specifically
exclude Agent and each Lender.
"Agent" means GE Capital in its capacity as Agent for Lenders or its
successor appointed pursuant to Section 9.7.
"Agreement" means the Amended and Restated Credit Agreement dated as
of the Closing Date by and among Borrower, the other Credit Parties party
thereto, GE Capital, as Agent and Lender and the other Lenders from time to time
party thereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
"Aggregate Pro Rata Share" means, as to any Lender, the percentage
obtained by dividing (i) the aggregate Commitments (or, with respect to any
Commitment which has terminated, the outstanding principal balance of the
applicable Loans) of such Lender by (ii) the aggregate Commitments (or, with
respect to any Commitment which has terminated, the outstanding principal
balance of the applicable Loans) of all Lenders.
"Amendment No. 1 to Encore Purchase Agreement" means that certain
Amendment No. 1 to Encore Purchase Agreement dated as of July 31, 2002, between
Borrower and Encore Software, Inc., a California corporation (including an
assignment by Borrower to Encore Software).
A-2
"Appendices" has the meaning ascribed to it in the recitals to the
Agreement.
"Applicable Acquisition Loan Index Margin" means the per annum
interest rate margin from time to time in effect and payable in addition to the
Index Rate applicable to the Acquisition Loan, as determined by reference to
Section 1.5(a).
"Applicable Acquisition Loan LIBOR Margin" means the per annum
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to the Acquisition Loan, as determined by reference to Section
1.5(a).
"Applicable L/C Margin" means the per annum fee, from time to time
in effect, payable with respect to outstanding Letter of Credit Obligations as
determined by reference to Section 1.5(a).
"Applicable Margins" means collectively the Applicable L/C Margin,
the Applicable Revolver Index Margin, the Applicable Revolver LIBOR Margin, the
Applicable Acquisition Loan Index Margin and the Applicable Acquisition Loan
LIBOR Margin.
"Applicable Revolver Index Margin" means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable Revolver LIBOR Margin" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).
"Approved Obligor" shall mean each Person which the Agent has
notified the Borrower in writing from time to time constitutes an "Approved
Obligor" for the purposes of this Agreement. As of the Closing Date, each of
Costco Wholesale Corporation, Sam's Club and Best Buy Co., Inc. constitutes an
Approved Obligor.
"Assignment Agreement" has the meaning ascribed to it in Section
9.1(a).
"Bankruptcy Code" means the provisions of Title 11 of the United
States Code, 11 U.S.C. Sections 101 et seq.
"BCI Eclipse" means BCI Eclipse Company, LLC, a Minnesota limited
liability company, a wholly-owned Subsidiary of Borrower.
"BCI Eclipse Purchase Agreement" means that certain Asset Purchase
Agreement, dated as of November 3, 2003, by and among Borrower, BCI Eclipse as
buyer, BCI Eclipse, LLC, a New York limited liability company as seller and the
Members (as defined therein) named therein (together with any exhibits,
schedules and any other annexes or supplements thereto and as in effect as of
November 3, 2003 and as amended or otherwise modified in a manner not prohibited
by the Credit Agreement.
"Blocked Accounts" has the meaning ascribed to it in Annex C.
A-3
"Borrower" has the meaning ascribed thereto in the preamble to the
Agreement.
"Borrowing Availability" means as of any date of determination the
lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, less
the sum of the Revolving Loan and Swing Line Loan then outstanding.
"Borrowing Base" means, as of any date of determination by Agent,
from time to time, an amount equal to the sum at such time of:
(a) the lesser of (i) 58% of the book value of the Eligible Accounts
of the Eligible Credit Parties or (ii) (a) during the month of January of each
Fiscal Year, $25,000,000, (b) during the months of February, March, April, May,
June, July and August of each Fiscal Year, $20,000,000 and (c) at all other
times, $30,000,000;
(b) the lesser of (i) 58% of the Eligible Inventory of the Eligible
Credit Parties valued at the lower of cost (FIFO) or market or (ii) 85% of the
Orderly Liquidation Value of the Eligible Inventory of the Eligible Credit
Parties; and
(c) 100% of the aggregate face value of each Eligible Certificate of
Deposit issued to Borrower;
in each case less any Reserves established by Agent from time to time; provided
however that at no time shall the amount of the Borrowing Base attributable to
the Eligible Accounts and Eligible Inventory, collectively, of (i) Encore
Software exceed the then aggregate outstanding principal balance of all loans
made by Borrower to Encore Software and (ii) BCI Eclipse exceed the then
aggregate outstanding principal balance of all loans made by Borrower to BCI
Eclipse. The value of any Eligible Accounts denominated in Canadian Dollars
shall be included in the Borrowing Base using such Accounts' Dollar Amount.
"Borrowing Base Certificate" means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
Exhibit 4.1(b).
"Business Day" means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the States of
Illinois and/or New York and in reference to LIBOR Loans shall mean any such day
that is also a LIBOR Business Day.
"Canadian Dollars" means the lawful currency of Canada.
"Capital Expenditures" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
A-4
"Capital Lease Obligation" means, with respect to any Capital Lease
of any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"Cash Collateral Account" has the meaning ascribed to it Annex B.
"Cash Equivalents" has the meaning ascribed to it in Annex B.
"Cash Management Systems" has the meaning ascribed to it in Section
1.8.
"Change of Control" means any of the following: (a) other than the
holders of the Borrower's capital Stock as of the Closing Date, any person or
group of persons (within the meaning of the Securities Exchange Act of 1934)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the issued and outstanding shares of
capital Stock of the Borrower having the right to vote for the election of
directors of the Borrower under ordinary circumstances; (b) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of the Borrower (together with any new
directors whose election by the board of directors of the Borrower or whose
nomination for election by the Stockholders of the Borrower was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in office; or (c)
Borrower ceases to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of any of its Subsidiaries.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
"Chattel Paper" means any "chattel paper," as such term is defined
in the Code, including electronic chattel paper, now owned or hereafter acquired
by any Credit Party, wherever located.
"Closing Checklist" means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D.
"Closing Date" means June 18, 2004.
"Code" means the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of Illinois; provided, that to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or
A-5
Division 9 shall govern; provided further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent's or any Lender's Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of Illinois, the term "Code" shall mean
the Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"Collateral" means the property covered by the Security Agreement,
the Mortgages and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations.
"Collateral Documents" means the Security Agreements, the Pledge
Agreements, the Mortgages, the Patent Security Agreements, the Trademark
Security Agreements, the Copyright Security Agreements and all similar
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"Collateral Reports" means the reports with respect to the
Collateral referred to in Annex F.
"Collection Account" means that certain account of Agent, account
number 502-328-54 in the name of Agent at Deutsche Bank Trust Company Americas
in New York, New York ABA No. 021 001 033, or such other account as may be
specified in writing by Agent as the "Collection Account."
"Commitment Termination Date" means the earliest of (a) December 18,
2007 and (b) the date of termination of Lenders' obligations to make Advances
and to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible
prepayment in full by Borrower of the Loans and the cancellation and return (or
stand-by guarantee) of all Letters of Credit or the cash collateralization of
all Letter of Credit Obligations pursuant to Annex B, and the permanent
reduction of the Commitments to zero dollars ($0).
"Commitments" shall collectively mean the Revolving Loan Commitment
and the Acquisition Loan Commitment.
"Compliance Certificate" has the meaning ascribed to it in Annex E.
"Concentration Account" has the meaning ascribed to it in Annex C.
"Construction Loan Agreement" means that certain Construction Loan
Agreement, dated as of October 23, 2003, between The Business Bank and Borrower
(as amended, restated or otherwise modified from time to time).
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability of that Person: (i) with respect to Guaranteed
Indebtedness and with respect to any
A-6
Indebtedness, lease, dividend or other obligation of another Person if the
purpose or intent of the Person incurring such liability, or the effect thereof,
is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; (ii) with respect to any letter
of credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates, (iv) any agreement, contract
or transaction involving commodity options or future contracts, (v) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, or (vi) pursuant to any agreement to
purchase, repurchase or otherwise acquire any obligation or any property
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.
"Contracts" means all "contracts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Control Letter" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated, securities entitlements and
other financial assets held in a securities account in the name of any Credit
Party, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by any Credit
Party, whereby, among other things, the issuer, securities intermediary or
futures commission merchant disclaims any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, on such financial assets, and agrees to follow the instructions or
entitlement orders of Agent without further consent by the affected Credit
Party.
"Copyright License" means any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright or Copyright registration.
"Copyright Security Agreements" means the Copyright Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.
"Copyrights" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all copyrights and General
Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States
A-7
Copyright Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof, and (b) all reissues, extensions or renewals thereof.
"Credit Parties" means Borrower, and its Subsidiaries.
"Currency Exchange Convention" shall mean a procedure as specified
from time to time by Agent to value in Dollars the obligations or assets of the
Borrower or its Affiliates that are originally measured in Canadian Dollars by
using the spot price for Canadian Dollars as determined by Agent in its sole
discretion for the preceding business day.
"Default" means any event that, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning ascribed to it in Section 1.5(d).
"Deposit Accounts" means all "deposit accounts" as such term in
defined in the Code, now or hereafter held in the name of any Credit Party.
"Disbursement Accounts" has the meaning ascribed to it in Annex C.
"Disclosure Schedules" means the Schedules prepared by Borrower and
denominated as Disclosure Schedules (3.1) through (6.7) in the Index to the
Agreement.
"Documents" means any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"Dollar Amount" means, in respect of any amount, the sum of (a) such
portion, if any, of such amount denominated in Dollars; and (b) to the extent
that a portion of such amount is denominated in Canadian Dollars, the amount in
Dollars calculated by Lender using the Currency Exchange Convention in effect on
the Business Day of determination (and calculated based upon 97% of the
applicable amount of Canadian Dollars).
"Dollars" or "$" means lawful currency of the United States of
America.
"EBITDA" means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period, determined in accordance with GAAP, minus (b) the sum of
(i) income tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains that have been
added in determining consolidated net income, in each case to the extent
included in the calculation of net income of such Person for such period in
accordance with GAAP, but without duplication, plus (c) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary
items for such period, (iv) depreciation and amortization for such period, (v)
amortized debt discount for such period, and (vi) the amount of any deduction to
consolidated net income as the result of any grant to any members of
A-8
the management of such Person of any Stock, in each case to the extent included
in the calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person's Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) the undistributed earnings
of any Subsidiary of such Person to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-up of any asset; (6) any net
gain from the collection of the proceeds of life insurance policies; (7) any net
gain arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of such Person, (8) in the case of a successor
to such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, and (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
"Eligible Accounts" has the meaning ascribed to it in Section 1.6 of
the Agreement.
"Eligible Certificate of Deposit" means a certificate of deposit (i)
in which the Agent has a first priority perfected security interest subject to
no other Liens, (ii) issued by a Person acceptable to the Agent and (iii) held
in an account for which an account control agreement in form and substance
satisfactory to the Agent has been executed and delivered by all parties
thereto.
"Eligible Credit Parties" means each of the Borrower, Encore
Software and BCI Eclipse.
"Eligible Inventory" has the meaning ascribed to it in Section 1.7
of the Agreement.
"Encore Purchase Agreement" means that certain Amended and Restated
Asset Purchase Agreement dated as of July 10, 2002, between Borrower, as buyer
and Encore Software, Inc., a California corporation, as seller for a purchase
price in an amount not to exceed $11,000,000 (together with any exhibits,
schedules and any other annexes or supplements thereto, as amended, pursuant to
the Amendment No. 1 to Encore Purchase Agreement.
"Encore Software" means Encore Software, Inc. (f/k/a Encore Software
Corporation), a Minnesota corporation.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, now
or hereafter in effect, and any
A-9
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws
include the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (42 U.S.C. Sections 9601 et seq.) ("CERCLA"); the Hazardous
Materials Transportation Authorization Act of 1994 (49 U.S.C. Sections 5101 et
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Sections 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. Sections 6901 et
seq.); the Toxic Substance Control Act (15 U.S.C. Sections 2601 et seq.); the
Clean Air Act (42 U.S.C. Sections 7401 et seq.); the Federal Water Pollution
Control Act (33 U.S.C. Sections 1251 et seq.); the Occupational Safety and
Health Act (29 U.S.C. Sections 651 et seq.); and the Safe Drinking Water Act (42
U.S.C. Sections 300(f) et seq.), and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.
"Environmental Liabilities" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"Environmental Permits" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"Equipment" means all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations promulgated thereunder.
A-10
"ERISA Affiliate" means, with respect to any Credit Party, any trade
or business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
"ERISA Event" means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i)
the loss of a Qualified Plan's qualification or tax exempt status; or (j) the
termination of a Plan described in Section 4064 of ERISA.
"ESOP" means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
"Event of Default" has the meaning ascribed to it in Section 8.1.
"Excess Cash Flow" means, without duplication, with respect to any
period of Borrower and its Subsidiaries, consolidated net income for such period
plus (a) depreciation, amortization and Interest Expense to the extent deducted
in determining consolidated net income for such period, minus (b) Capital
Expenditures and payments for Permitted Intellectual Property Acquisitions
during such period (excluding, in each case, the financed portion thereof),
minus (c) Interest Expense paid or accrued (excluding any original issue
discount, interest paid in kind or amortized debt discount, to the extent
included in determining Interest Expense) and scheduled principal payments paid
or payable in respect of Funded Debt for such period, plus or minus (as the case
may be), (d) extraordinary gains or losses which are cash items not included in
the calculation of net income for such period, plus (e) taxes deducted in
determining consolidated net income to the extent not paid for in cash for such
period, minus (f) the aggregate amount of Restricted Payments made during such
period to the extent permitted solely pursuant to Section 6.14(c) or Section
6.14(d).
"Existing Credit Agreement" has the meaning ascribed to it in the
recitals to the Agreement.
"Fair Labor Standards Act" means the Fair Labor Standards Act, 29
U.S.C. Section 201 et seq.
A-11
"Federal Funds Rate" means, for any day, a floating rate equal to
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Fees" means any and all fees payable to Agent or any Lender
pursuant to the Agreement or any of the other Loan Documents.
"Financial Covenants" means the financial covenants set forth in
Annex G.
"Financial Statements" means the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrower
delivered in accordance with Section 3.4 and Annex E.
"Fiscal Month" means any of the monthly accounting periods of
Borrower.
"Fiscal Quarter" means any of the quarterly accounting periods of
Borrower, ending on March 31, June 30, October 30, and December 31 of each year.
"Fiscal Year" means any of the annual accounting periods of Borrower
ending on March 31 of each year.
"Fixtures" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party.
"Funded Debt" means, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness and that by its terms matures
more than one year from, or is directly or indirectly renewable or extendible at
such Person's option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one year from
the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also
including, in the case of Borrower, the Obligations and, without duplication,
Guaranteed Indebtedness consisting of guaranties of Funded Debt of other
Persons.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex G to the Agreement.
"GE Capital" means General Electric Capital Corporation, a Delaware
corporation.
"GE Capital Fee Letter" means that certain amended and restated
letter, dated as of the date hereof, between GE Capital and Borrower with
respect to certain Fees to be paid from time to time by Borrower to GE Capital.
A-12
"General Intangibles" means "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, chooses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights to
receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.
"Goods" means any "goods" as defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, including embedded
software to the extent included in "goods" as defined in the Code, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means, as to any Person, any obligation of
such Person guaranteeing, providing comfort or otherwise supporting any
Indebtedness, lease, dividend, or other obligation ("primary obligation") of any
other Person (the "primary obligor") in any manner, including any obligation or
arrangement of such Person to (a) purchase or repurchase any such primary
obligation, (b) 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 or any
balance sheet condition of the primary obligor, (c) 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, (d) protect the beneficiary of such arrangement from
loss (other than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such primary obligation against loss in respect
thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed
A-13
Indebtedness, or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Guaranties" means, each guaranty executed by any Guarantor in favor
of Agent and Lenders in respect of the Obligations.
"Guarantors" means each Subsidiary of Borrower and each other
Person, if any, that executes a guaranty or other similar agreement in favor of
Agent, for itself and the ratable benefit of Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.
"Hazardous Material" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
"Indebtedness" means , with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred 6 months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are unsecured and not overdue by more than 6 months
unless being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers' acceptances and surety
bonds, whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.
"Indemnified Liabilities" has the meaning ascribed to it in Section
1.13.
"Indemnified Person" has the meaning ascribed to it in Section 1.13.
A-14
"Index Rate" means, for any day, a floating rate equal to the higher
of (i) the rate publicly quoted from time to time by The Wall Street Journal as
the "base rate on corporate loans posted by at least 75% of the nation's 30
largest banks" (or, if The Wall Street Journal ceases quoting a base rate of the
type described, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
"Index Rate Loan" means a Loan or portion thereof bearing interest
by reference to the Index Rate.
"Instruments" means all "instruments," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
"Interest Expense" means, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.
"Interest Payment Date" means (a) as to any Index Rate Loan, the
first Business Day of each month to occur while such Loan is outstanding, and
(b) as to any LIBOR Loan, the last day of the applicable LIBOR Period; provided,
that in the case of any LIBOR Period greater than three months in duration,
interest shall be payable at three month intervals and on the last day of such
LIBOR Period; and provided further that, in addition to the foregoing, each of
(x) the date upon which all of the Commitments have been terminated and the
Loans have been paid in full and (y) the Commitment Termination Date shall be
deemed to be an "Interest Payment Date" with respect to any interest that has
then accrued under the Agreement.
"Inventory" means any "inventory," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.
A-15
"Inventory Value" shall mean as of any date of determination the
book value of the Inventory of Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP.
"Investment Property" means all "investment property" as such term
is defined in the Code now owned or hereafter acquired by any Credit Party,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Credit Party;
(iv) all commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.
"IRC" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"L/C Issuer" has the meaning ascribed to it in Annex B.
"L/C Sublimit" has the meaning ascribed to in it Annex B.
"Lenders" means GE Capital, the other Lenders named on the signature
pages of the Agreement, and, if any such Lender shall decide to assign all or
any portion of the Obligations, such term shall include any assignee of such
Lender.
"Letter of Credit Fee" has the meaning ascribed to it in Annex B.
"Letter of Credit Obligations" means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of
a participation as set forth in Annex B with respect to any Letter of Credit.
The amount of such Letter of Credit Obligations shall equal the maximum amount
that may be payable by Agent or Lenders thereupon or pursuant thereto.
"Letter of Credit Rights" means "letter-of-credit rights" as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, including rights to payment or performance under a letter of credit,
whether or not such Credit Party, as beneficiary, has demanded or is entitled to
demand payment or performance.
"Letters of Credit" means documentary or standby letters of credit
issued for the account of Borrower by any L/C Issuer, and bankers' acceptances
issued by Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.
"LIBOR Business Day" means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.
A-16
"LIBOR Loan" means a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
"LIBOR Period" means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower's irrevocable notice to Agent as set forth in Section 1.5(e); provided,
that the foregoing provision relating to LIBOR Periods is subject to the
following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end 2 LIBOR Business Days prior to such
date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Period)
shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such
Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no
more than 5 separate LIBOR Loans in existence at any one time.
"LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00
a.m. (London time), on the second full LIBOR Business Day next preceding
the first day of such LIBOR Period (unless such date is not a Business
Day, in which event the next succeeding Business Day will be used);
divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is 2 LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Federal
Reserve Board or other Governmental Authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation
D of the Federal Reserve Board that are required to be maintained by a
member bank of the Federal Reserve System.
A-17
If such interest rates shall cease to be available from Telerate
News Service, the LIBOR Rate shall be determined from such financial
reporting service or other information as shall be mutually acceptable to
Agent and Borrower.
"License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Litigation" has the meaning ascribed to it in Section 3.13.
"Loan Account" has the meaning ascribed to it in Section 1.12.
"Loan Documents" means the Agreement, the Notes, the Collateral
Documents, the Master Standby Agreement and all other agreements, instruments,
documents and certificates identified in the Closing Checklist executed and
delivered to, or in favor of, Agent or any Lenders and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, and all
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Credit Party, or any employee of any Credit Party, and delivered
to Agent or any Lender in connection with the Agreement or the transactions
contemplated thereby. Any reference in the Agreement or any other Loan Document
to a Loan Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications thereto,
and shall refer to the Agreement or such Loan Document as the same may be in
effect at any and all times such reference becomes operative.
"Loans" means the Revolving Loan, the Acquisition Loan and the Swing
Line Loan.
"Lock Boxes" has the meaning ascribed to it in Annex C.
"Major Labels" means Sony Music Entertainment, Inc., EMI Music
Distribution, a division of Capitol Records, Inc., BMG Music, Universal Music
and Video Distribution, Inc. and AOL-Time Warner, Inc.
"Margin Stock" has the meaning ascribed to it in Section 3.10.
"Master Standby Agreement" means the Master Agreement for Standby
Letters of Credit dated as of October 3, 2001 between Borrower, as Applicant,
and GE Capital, as Issuer.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of any
Credit Party, (b) Borrower's ability to pay any of the Loans or any of the other
Obligations in accordance with the terms of
A-18
the Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and
Lenders, on the Collateral or the priority of such Liens, or (d) Agent's or any
Lender's rights and remedies under the Agreement and the other Loan Documents.
Without limiting the generality of the foregoing, any event or occurrence
adverse to one or more Credit Parties which results or could reasonably be
expected to result in costs and/or liabilities or loss of revenues,
individually, or in the aggregate, to any Credit Party in any 30-day period in
excess of the lesser of $ $1,000,000 and 10% of Borrowing Availability as of any
date of determination or 10% of the lesser of the Maximum Amount or the
Borrowing Base at any date of determination shall constitute a Material Adverse
Effect.
"Maximum Acquisition Loan Amount" means, as of any date of
determination, an amount equal to the aggregate Acquisition Loan Commitment of
all Acquisition Loan Lenders as of that date.
"Maximum Amount" means, as of any date of determination, an amount
equal to the Revolving Loan Commitment of all Lenders as of that date.
"Minnesota Facility" means the office/warehouse facility to be
constructed on the Minnesota Real Estate.
"Minnesota Real Estate" means the Real Estate owned by Borrower
located in the County of Hennepin and the State of Minnesota and as further
described on Exhibit A hereto.
"Minnesota Sale-Leaseback Documents" means that certain Sale,
Purchase and Build to Suit Agreement, dated effective as of August 14, 2003
between Borrower, as seller and NL Ventures IV, L.P., as buyer, as further
amended by the First Amendment to Sale, Purchase and Build to Suit Agreement
dated as of October 9, 2003 among the parties thereto, and all other agreements,
instruments, documents and certificates executed and delivered in connection
therewith, as in effect as of October 9, 2003 and as amended or otherwise
modified in a manner permitted hereunder.
"Mix & Burn" has the meaning ascribed to it in Section 6.2 hereof.
"Mix & Burn Loan" has the meaning ascribed to it in Section 6.2
hereof.
"Mix & Burn Promissory Note" has the meaning ascribed to it in
Section 6.2 hereof.
"Mix & Burn Security Agreement" has the meaning ascribed to it in
Section 6.2 hereof.
"Mortgages" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Credit Party to Agent on behalf
of itself and Lenders with respect to the Real Property owned by a Credit Party,
all in form and substance reasonably satisfactory to Agent.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated
A-19
to make or has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.
"Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).
"Notes" means, collectively, the Revolving Notes and the Swing Line
Note.
"Notice of Acquisition Loan Advance" has the meaning ascribed to it
in Section 1.1(c)(i).
"Notice of Conversion/Continuation" has the meaning ascribed to it
in Section 1.5(e).
"Notice of Revolving Credit Advance" has the meaning ascribed to it
in Section 1.1(a).
"Obligations" means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to any Credit Party under the Agreement or any of the other Loan
Documents.
"Orderly Liquidation Value" means, with respect to any Eligible
Inventory at any time, the net amount that will be obtained upon an orderly
liquidation sale of such Eligible Inventory, as determined in accordance with
the then most recent appraisal which was acceptable to the Agent.
"Patent License" means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
"Patent Security Agreements" means the Patent Security Agreements
made in favor of Agent, on behalf of itself and Lenders, by each applicable
Credit Party.
"Patents" means all of the following in which any Credit Party now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
A-20
"Pension Plan" means a Plan described in Section 3(2) of ERISA.
"Permitted Acquisition" has the meaning ascribed to it in Section
6.1.
"Permitted Encumbrances" means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $ $100,000 at any time, so long as such Liens attach
only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or
customs bonds in proceedings to which any Credit Party is a party; (g) any
attachment or judgment lien not constituting an Event of Default under Section
8.1(j); (h) zoning restrictions, easements, licenses, or other restrictions on
the use of any Real Estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially impair the use,
value, or marketability of such Real Estate; (i) presently existing or hereafter
created Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly
permitted under clauses (b) and (c) of Section 6.7 of the Agreement.
"Permitted Intellectual Property Acquisition" shall mean the
acquisition by Borrower of the assets of any Person to the extent that such
assets consist primarily of copyright protected works and any registrations or
applications for registration of any such copyright protected works.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"PIPE Warrants" means those certain Warrants, dated as of December
15, 2003, issued by the Borrower to the PIPE Purchasers.
"Plan" means, at any time, an "employee benefit plan," as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Credit Party.
"Pledge Agreements" means each pledge agreement entered into by any
Credit Party in favor of the Agent and/or the Lenders.
"Private Issuance" means the issuance and sale of certain Stock
(including, without limitation, the PIPE Warrants) of Borrower pursuant to and
as more fully described in
A-21
that certain Securities Purchase Agreement, dated as of December 15, 2003, by
and among Borrower and the Purchasers (as defined therein, the "PIPE
Purchasers").
"Pro Rata Share" means, as to any Lender, (x) with respect to all
matters relating to Revolving Lenders, Revolving Loans or Revolving Loan
Commitments (a) prior to the Commitment Termination Date, the percentage
obtained by dividing (i) the Revolving Loan Commitment of such Revolving Lender
by (ii) the aggregate Revolving Loan Commitments of all Revolving Lenders, and
(b) on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the aggregate outstanding principal balance of the Revolving Loans
held by such Revolving Lender by (ii) the outstanding principal balance of the
Revolving Loans held by all Revolving Lenders; and (y) with respect to all
matters relating to Acquisition Loan Lenders, Acquisition Loans or Acquisition
Loan Commitments (a) prior to the Acquisition Loan Funding Termination Date, the
percentage obtained by dividing (i) the Acquisition Loan Commitment of such
Acquisition Loan Lender by (ii) the aggregate Acquisition Loan Commitments of
all Acquisition Loan Lenders, and (b) on and after the Acquisition Loan Funding
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Acquisition Loans held by such Acquisition
Loan Lender by (ii) the outstanding principal balance of the Acquisition Loans
held by all Acquisition Loan Lenders.
"Proceeds" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary or division-by-division basis, if applicable, and otherwise
consistent with the historical Financial Statements of Borrower, together with
appropriate supporting details and a statement of underlying assumptions.
"Qualified Assignee" means (a) any Lender, any Affiliate of any
Lender and, with respect to any Lender that is an investment fund that invests
in commercial loans, any other investment fund that invests in commercial loans
and that is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor, and (b) any
A-22
commercial bank, savings and loan association or savings bank or any other
entity which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its businesses,
including insurance companies, mutual funds, lease financing companies and
commercial finance companies, in each case, which has a rating of BBB or higher
from S&P and a rating of Baa2 or higher from Moody's at the date that it becomes
a Lender and which, through its applicable lending office, is capable of lending
to Borrower without the imposition of any withholding or similar taxes; provided
that no Person determined by Agent to be acting in the capacity of a vulture
fund or distressed debt purchaser shall be a Qualified Assignee and no Person or
Affiliate of such Person (other than a Person that is already a Lender) holding
Subordinated Debt or Stock issued by any Credit Party shall be a Qualified
Assignee.
"Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"Real Estate" has the meaning ascribed to it in Section 3.6.
"Refunded Swing Line Loan" has the meaning ascribed to it in Section
1.1(c)(iii).
"Related Transactions" means the initial borrowing under the
Revolving Loan, the execution and delivery of the Loan Documents and the payment
of all fees, costs and expenses associated with all of the foregoing.
"Release" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"Requisite Lenders" means Lenders having more than 66 2/3% of the
Commitments (or, with respect to any facility for which the Commitment has been
terminated the outstanding principal amount of the applicable Loans) of all
Lenders.
"Reserves" means, with respect to the Borrowing Base of Borrower (a)
reserves established by Agent from time to time against Eligible Inventory
pursuant to Section 5.9, (b) reserves established pursuant to Section 5.4(c),
and (c) such other reserves against Eligible Accounts, Eligible Inventory,
Eligible Certificates of Deposit or Borrowing Availability of Borrower that
Agent may, in its reasonable credit judgment for reasons relating to any Credit
Party, any Credit Party's business or industry and/or the Agent's ability to
collect or realize the full value of any Collateral, establish from time to
time. Without limiting the generality of the foregoing, Reserves established to
ensure the payment of accrued Interest Expenses shall be deemed to be a
reasonable exercise of Agent's credit judgment.
"Restricted Payment" means, with respect to any Credit Party (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Credit Party's
A-23
Stock or any other payment or distribution made in respect thereof, either
directly or indirectly; (c) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
and any claim for rescission with respect to, any Subordinated Debt; (d) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire Stock
of such Credit Party now or hereafter outstanding; (e) any payment of a claim
for the rescission of the purchase or sale of, or for material damages arising
from the purchase or sale of, any shares of such Credit Party's Stock or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder of
such Credit Party other than payment of compensation in the ordinary course of
business to Stockholders who are employees of such Credit Party; (g) any payment
of management fees (or other fees of a similar nature) by such Credit Party to
any Stockholder of such Credit Party or its Affiliates, and (h) any payment of
any Earnout Amount (as defined in the BCI Eclipse Purchase Agreement) or similar
payment pursuant to the BCI Eclipse Purchase Agreement.
"Retiree Welfare Plan" means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"Revolving Acquisition Loan Availability" means, as of any date of
determination, (i) $10,000,000, plus (ii) the aggregate Acquisition Loan
Commitment at such time, minus (iii) the aggregate principal amount of Loans
made on or after the Closing Date to the extent that the proceeds thereof have
been used to fund one or more Permitted Acquisitions, plus (iv) the aggregate
amount of all payments made to repay principal of Acquisition Loan Advances.
"Revolving Credit Advance" has the meaning ascribed to it in Section
1.1(a)(i).
"Revolving Lenders" means, as of any date of determination, Lenders
having a Revolving Loan Commitment.
"Revolving Loan" means, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower plus (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless
the context otherwise requires, references to the outstanding principal balance
of the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
"Revolving Loan Commitment" means (a) as to any Revolving Lender,
the aggregate commitment of such Revolving Lender to make Revolving Credit
Advances or incur Letter of Credit Obligations as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Revolving
Lender and (b) as to all Revolving Lenders, the aggregate commitment of all
Revolving Lenders to make Revolving Credit Advances or incur Letter of Credit
Obligations, which aggregate commitment shall be Forty Million Dollars
A-24
($40,000,000) on the Closing Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement.
"Revolving Note" has the meaning ascribed to it in Section
1.1(a)(ii).
"Security Agreements" means each Security Agreement entered into by
and among Agent, on behalf of itself and Lenders, Borrower and each Credit Party
that is a signatory thereto.
"Seller" has the meaning ascribed to it in Section 6.1.
"Software" means all "software" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"Stock" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934).
"Stockholder" means, with respect to any Person, each holder of
Stock of such Person.
"Subordinated Debt" means debt which is subordinated to any or all
of the Obligations."
"Subsidiary" means, with respect to any Person, (a) any corporation
of which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which
A-25
any such Person has the right to vote or designate the vote of 50% or more of
such Stock whether by proxy, agreement, operation of law or otherwise, and (b)
any partnership or limited liability company in which such Person and/or one or
more Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner. Unless the context otherwise requires, each reference to a
Subsidiary shall be a reference to a Subsidiary of the Borrower.
"Supermajority Revolving Lenders" means Lenders having (a) 80% or
more of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving
Loan Commitments have been terminated, 80% or more of the aggregate outstanding
amount of the Revolving Loan (with the Swing Line Loan being attributed to the
Lender making such Loan), and Letter of Credit Obligations.
"Supporting Obligations" means all "supporting obligations" as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
"Swing Line Advance" has the meaning ascribed to it in Section
1.1(b)(i).
"Swing Line Availability" has the meaning ascribed to it in Section
1.1(b)(i).
"Swing Line Commitment" means, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Advances as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" means GE Capital.
"Swing Line Loan" means at any time, the aggregate amount of Swing
Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning ascribed to it in Section
1.1(b)(ii).
"Target" has the meaning ascribed to it in Section 6.1.
"Taxes" means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of which Agent and Lenders are organized or conduct business or any
political subdivision thereof.
"Termination Date" means the date on which (a) the Loans have been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged, (c) all Letter of
Credit Obligations have been cash collateralized, cancelled or backed by standby
letters of credit in accordance with Annex B, and (d) Borrower shall not have
any further right to borrow any monies under the Agreement.
A-26
"Title IV Plan" means a Pension Plan (other than a Multiemployer
Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Trademark License" means rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark.
"Trademark Security Agreements" means the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
"Trademarks" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.
"Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of 5 years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"Vendor" means a Person who supplies goods to the Borrower which
become Inventory of the Borrower.
"Welfare Plan" means a Plan described in Section 3(i) of ERISA.
Rules of construction with respect to accounting terms used in the
Agreement or the other Loan Documents shall be as set forth in Annex G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code to the
extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained in
the Agreement. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented,
A-27
and not to any particular section, subsection or clause contained in the
Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Credit Party, such words are
intended to signify that such Credit Party has actual knowledge or awareness of
a particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
A-28
ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower and for Borrower's
account, Letter of Credit Obligations by causing Letters of Credit to be issued
by GE Capital or a Subsidiary thereof or a bank or other legally authorized
Person selected by or acceptable to Agent in its sole discretion (each, an "L/C
Issuer") for Borrower's account and guaranteed by Agent; provided, that if the
L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the terms
and conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below. The
aggregate amount of all such Letter of Credit Obligations shall not at any time
exceed the least of (i) Fifteen Million Dollars ($ 15,000,000) (the "L/C
Sublimit"), and (ii) the Maximum Amount less the aggregate outstanding principal
balance of the Revolving Credit Advances and the Swing Line Loan, and (iii) the
Borrowing Base less the aggregate outstanding principal balance of the Revolving
Credit Advances and the Swing Line Loan. No such Letter of Credit shall have an
expiry date that is more than one year following the date of issuance thereof,
unless otherwise determined by Agent in its sole discretion, and neither Agent
nor Revolving Lenders shall be under any obligation to incur Letter of Credit
Obligations in respect of, or purchase risk participations in, any Letter of
Credit having an expiry date that is later than the Commitment Termination Date.
(b)(i) Advances Automatic; Participations. In the event that Agent
or any Revolving Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Credit Advance under Section 1.1(a) of the Agreement regardless of
whether a Default or Event of Default has occurred and is continuing and
notwithstanding Borrower's failure to satisfy the conditions precedent set forth
in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata
Share thereof in accordance with the Agreement. The failure of any Revolving
Lender to make available to Agent for Agent's own account its Pro Rata Share of
any such Revolving Credit Advance or payment by Agent under or in respect of a
Letter of Credit shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Agent its Pro Rata Share thereof, but no
Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender's Pro Rata Share of any
such payment.
(ii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Revolving Lender, then (i) immediately and without
further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may
B-1
be) an undivided interest and participation equal to such Revolving Lender's Pro
Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to such
Letter of Credit on the date of such issuance. Each Revolving Lender shall fund
its participation in all payments or disbursements made under the Letters of
Credit in the same manner as provided in the Agreement with respect to Revolving
Credit Advances.
(c) Cash Collateral. (i) If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the ratable
benefit of itself and Revolving Lenders cash or cash equivalents acceptable to
Agent ("Cash Equivalents") in an amount equal to 110% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
(the "Cash Collateral Account") maintained at a bank or financial institution
acceptable to Agent. The Cash Collateral Account shall be in the name of
Borrower and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Lenders, in a manner satisfactory to Agent. Borrower hereby
pledges and grants to Agent, on behalf of itself and Lenders, a security
interest in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit Obligations and other
Obligations, whether or not then due. The Agreement, including this Annex B,
shall constitute a security agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then due
and payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrower shall either (A) provide cash collateral therefor in the manner
described above, or (B) cause all such Letters of Credit and guaranties thereof,
if any, to be canceled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guarantee of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor and duration (plus
30 additional days) as, and in an amount equal to 110% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are be satisfactory to
Agent in its sole discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, and in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Agent and Lenders with respect to such Letter of Credit Obligations of Borrower
and, upon the satisfaction in full of all Letter of Credit Obligations of
Borrower, to any other Obligations then due and payable.
(iv) Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash
B-2
Collateral Account, except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower to Agent and
Lenders in respect thereof, any funds remaining in the Cash Collateral Account
shall be applied to other Obligations then due and owing and upon payment in
full of such Obligations, any remaining amount shall be paid to Borrower or as
otherwise required by law. Interest earned on deposits in the Cash Collateral
Account shall be for the account of Agent.
(d) Fees and Expenses. Borrower agrees to pay to Agent for the
benefit of Revolving Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder, (i) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (ii)
for each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "Letter of Credit Fee") in an amount equal to the
Applicable L/C Margin multiplied by the maximum amount available from time to
time to be drawn under the applicable Letter of Credit. Such fee shall be paid
to Agent for the benefit of the Revolving Lenders in arrears, on the first day
of each month and on the Commitment Termination Date. In addition, Borrower
shall pay to any L/C Issuer, on demand, such fees (including all per annum
fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
shall give Agent at least 2 Business Days' prior written notice requesting the
incurrence of any Letter of Credit Obligation. The notice shall be accompanied
by the form of the Letter of Credit (which shall be acceptable to the L/C
Issuer) and a completed Application for Standby Letter of Credit or Application
for Documentary Letter of Credit as applicable in the form Exhibit B-1 or B-2
attached hereto. Notwithstanding anything contained herein to the contrary,
Letter of Credit applications by Borrower and approvals by Agent and the L/C
Issuer may be made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among Borrower, Agent and
the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to reimburse
Agent and Revolving Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrower and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following:
(i) any lack of validity or enforceability of any Letter of Credit
or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, setoff, defense or other right that
Borrower or any of its Affiliates or any Lender may at any time have
against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such transferee may be acting), Agent,
any Lender, or any other Person, whether in connection with the Agreement,
the Letter of Credit, the transactions contemplated herein or therein
B-3
or any unrelated transaction (including any underlying transaction between
Borrower or any of its Affiliates and the beneficiary for which the Letter
of Credit was procured);
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided in
paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit
or guaranty thereof against presentation of a demand, draft or certificate
or other document that does not comply with the terms of such Letter of
Credit or such guaranty;
(v) any other circumstance or event whatsoever, that is similar to
any of the foregoing; or
(vi) the fact that a Default or an Event of Default has occurred and
is continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrower hereby agrees
to pay and to protect, indemnify, and save harmless Agent and each Lender from
and against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees and allocated costs
of internal counsel) that Agent or any Lender may incur or be subject to as a
consequence, direct or indirect, of (A) the issuance of any Letter of Credit or
guaranty thereof, or (B) the failure of Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for payment under any
Letter of Credit or guaranty thereof as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of Agent or such Lender (as
finally determined by a court of competent jurisdiction).
(ii) As between Agent and any Lender and Borrower, Borrower assumes
all risks of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to comply fully with conditions required
in order to demand payment under such Letter of Credit; provided, that in the
case of any payment by Agent under any Letter of Credit or guaranty thereof,
Agent shall be liable to the extent such payment was made solely as a result of
its gross negligence or willful misconduct (as finally determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Letter of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such
B-4
Letter of Credit or guaranty thereof; (D) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they may be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a payment under any Letter
of Credit or guaranty thereof or of the proceeds thereof; (G) the credit of the
proceeds of any drawing under any Letter of Credit or guaranty thereof; and (H)
any consequences arising from causes beyond the control of Agent or any Lender.
None of the above shall affect, impair, or prevent the vesting of any of Agent's
or any Lender's rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to expand
any waivers, covenants or indemnities made by Borrower in favor of any L/C
Issuer in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between Borrower and such L/C Issuer,
including an Application and Agreement for Documentary Letter of Credit or a
Master Documentary Agreement and a Master Standby Agreement entered into with
Agent.
B-5
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish lock boxes ("Lock Boxes") or, at Agent's
discretion, blocked accounts ("Blocked Accounts") at one or more of the banks
set forth in Disclosure Schedule (3.19), and shall request in writing and
otherwise take such reasonable steps to ensure that all Account Debtors forward
payment directly to such Lock Boxes, and (ii) deposit and cause its Subsidiaries
to deposit or cause to be deposited promptly, and in any event no later than the
first Business Day after the date of receipt thereof, all cash, checks, drafts
or other similar items of payment relating to or constituting payments made in
respect of any and all Collateral (whether or not otherwise delivered to a Lock
Box) into one or more Blocked Accounts in Borrower's name or any such
Subsidiary's name and at a bank identified in Disclosure Schedule (3.19) (each,
a "Relationship Bank"). On or before the Closing Date, Borrower shall have
established a concentration account in its name (the "Concentration Account")
(which account may be the same as one of the Blocked Accounts) at the bank that
shall be designated as the Concentration Account bank for Borrower in Disclosure
Schedule (3.19) (the "Concentration Account Bank") (which bank may be one of the
Relationship Banks) which bank shall be reasonably satisfactory to Agent.
(b) Borrower may maintain, in its name, an account (each a
"Disbursement Account" and collectively, the "Disbursement Accounts") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances, the Acquisition Loan Advances and Swing Line
Advances made to Borrower pursuant to Section 1.1 for use by Borrower in
accordance with the provisions of Section 1.4.
(c) On or before the Closing Date (or such later date as Agent shall
consent to in writing), the Concentration Account Bank, each bank where a
Disbursement Account is maintained and all other Relationship Banks, shall have
entered into tri-party blocked account agreements with Agent, for the benefit of
itself and Lenders, and Borrower and Subsidiaries thereof, as applicable, in
form and substance reasonably acceptable to Agent, which shall become operative
on or prior to the Closing Date. Each such blocked account agreement shall
provide, among other things, that (i) all items of payment deposited in such
account and proceeds thereof deposited in the Concentration Account are held by
such bank as agent or bailee-in-possession for Agent, on behalf of itself and
Lenders, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) from and after the Closing Date (A) with respect to banks at
which a Blocked Account is maintained, if such Blocked Account is not also the
Concentration Account, such bank agrees to forward
C-1
immediately all amounts in each Blocked Account to the Concentration Account
Bank and to commence the process of daily sweeps from such Blocked Account into
the Concentration Account and (B) with respect to the Concentration Account
Bank, such bank agrees to immediately forward all amounts received in the
Concentration Account to the Collection Account through daily sweeps from such
Concentration Account into the Collection Account. Borrower shall not, and shall
not cause or permit any Subsidiary thereof to, accumulate or maintain cash in
Disbursement Accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.
(d) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Blocked Account or to replace any Concentration
Account or any Disbursement Account; provided, that (i) Agent shall have
consented in writing in advance to the opening of such account or Lock Box with
the relevant bank and (ii) prior to the time of the opening of such account or
Lock Box, Borrower or its Subsidiaries, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance reasonably satisfactory to Agent. Borrower shall close any of its
accounts (and establish replacement accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days following notice from Agent
that the creditworthiness of any bank holding an account is no longer acceptable
in Agent's reasonable judgment, or as promptly as practicable and in any event
within 60 days following notice from Agent that the operating performance, funds
transfer or availability procedures or performance with respect to accounts or
Lock Boxes of the bank holding such accounts or Agent's liability under any
tri-party blocked account agreement with such bank is no longer acceptable in
Agent's reasonable judgment.
(e) The Lock Boxes, Blocked Accounts, Disbursement Accounts and the
Concentration Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Agent, on behalf of itself and Lenders,
pursuant to the Security Agreement.
(f) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "Related Person") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within 1 Business Day
after receipt by Borrower or any such Related Person of any checks, cash or
other items of payment, deposit the same into a Blocked Account. Borrower and
each Related Person thereof acknowledges and agrees that all cash, checks or
other items of payment constituting proceeds of Collateral are part of the
Collateral. All proceeds of the sale or other disposition of any Collateral,
shall be deposited directly into Blocked Accounts.
C-2
ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
CLOSING CHECKLIST
[TO BE ATTACHED]
D-1
ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within 30 days after
the end of each Fiscal Month (45 days after the end of each Fiscal Month ending
on or about March 31, June 30, October 30 or December 31; provided, however,
that with respect to such Fiscal Months, the Borrower shall deliver to the Agent
and the Lenders drafts of the financial statements otherwise required by this
sentence within 30 days after the end of each such Fiscal Month), financial
information regarding Borrower and its Subsidiaries, certified by the Chief
Financial Officer of Borrower, consisting of consolidated and consolidating (i)
unaudited balance sheets as of the close of such Fiscal Month and the related
statements of income and cash flows for that portion of the Fiscal Year ending
as of the close of such Fiscal Month and (ii) unaudited statements of income and
cash flows for such Fiscal Month, setting forth in comparative form the figures
for the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments). Such financial information shall be accompanied
by (A) a statement in reasonable detail (each, a "Compliance Certificate")
showing the calculations used in determining compliance with each Financial
Covenant that is tested for a period ending on the last day of such Fiscal Month
and (B) the certification of the Chief Financial Officer of Borrower that (i)
such financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position and results of operations of
Borrower and its Subsidiaries, on a consolidated and consolidating basis, in
each case as at the end of such Fiscal Month and for that portion of the Fiscal
Year then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default shall
have occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.
(b) Operating Plan. To Agent and Lenders, as soon as available, but
not later than 30 days after the end of each Fiscal Year, an annual operating
plan for Borrower, approved by the Board of Directors of Borrower, for the
following Fiscal Year, which (i) includes a statement of all of the material
assumptions on which such plan is based, (ii) includes monthly balance sheets
and a monthly budget for the following year and (iii) integrates sales, gross
profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections, all prepared on the same basis and in
similar detail as that on which operating results are reported (and in the case
of cash flow projections, representing management's good faith estimates of
future financial performance based on historical performance), and including
plans for personnel, Capital Expenditures and facilities.
(c) Annual Audited Financials. To Agent and Lenders, within 90 days
after the end of each Fiscal Year, audited Financial Statements for Borrower and
its Subsidiaries on a
E-1
consolidated and (unaudited) consolidating basis, consisting of balance sheets
and statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification, by an independent certified public accounting firm of
national standing or otherwise acceptable to Agent. Such Financial Statements
shall be accompanied by (i) a statement prepared in reasonable detail showing
the calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred with
respect to the Financial Covenants (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) a letter addressed to Agent, on behalf of itself and Lenders, in
form and substance reasonably satisfactory to Agent and subject to standard
qualifications required by nationally recognized accounting firms, signed by
such accounting firm acknowledging that Agent and Lenders are entitled to rely
upon such accounting firm's certification of such audited Financial Statements,
(iv) the annual letters to such accountants in connection with their audit
examination detailing contingent liabilities and material litigation matters,
and (v) the certification of the Chief Executive Officer or Chief Financial
Officer of Borrower that all such Financial Statements present fairly in
accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrower and its Subsidiaries on a consolidated and
consolidating basis, as at the end of such Fiscal Year and for the period then
ended, and that there was no Default or Event of Default in existence as of such
time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default.
(d) Management Letters. To Agent and Lenders, within 5 Business Days
after receipt thereof by any Credit Party, copies of all management letters,
exception reports or similar letters or reports received by such Credit Party
from its independent certified public accountants.
(e) Default Notices. To Agent and Lenders, as soon as practicable,
and in any event within 5 Business Days after an executive officer of Borrower
has actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
(f) SEC Filings and Press Releases. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.
E-2
(g) Equity Notices. To Agent, as soon as practicable, copies of all
material written notices given or received by any Credit Party with respect to
any Stock of such Person.
(h) Supplemental Schedules. To Agent, supplemental disclosures, if
any, required by Section 5.6.
(i) Litigation. To Agent in writing, promptly upon learning thereof,
notice of any Litigation commenced or threatened against any Credit Party that
(i) seeks damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Credit Party or ERISA Affiliate in connection with any Plan, (iv)
alleges criminal misconduct by any Credit Party, (v) alleges the violation of
any law regarding, or seeks remedies in connection with, any Environmental
Liabilities; or (vi) involves any product recall. In addition, within 15 days
after the end of each Fiscal Quarter, the Borrower shall provide the Agent with
a summary of all litigation set forth on Disclosure Schedule 3.13 or for which
the Agent is otherwise to be notified pursuant to this clause (i).
(j) Insurance Notices. To Agent, disclosure of losses or casualties
required by Section 5.4.
(k) Lease Default Notices. To Agent, within 2 Business Days after
receipt thereof, copies of (i) any and all default notices received under or
with respect to any leased location or public warehouse where Collateral is
located, and (ii) such other notices or documents as Agent may reasonably
request.
(l) Lease Amendments. To Agent, within 2 Business Days after receipt
thereof, copies of all material amendments to real estate leases.
(m) Other Documents. To Agent and Lenders, such other financial and
other information respecting any Credit Party's business or financial condition
as Agent or any Lender shall, from time to time, reasonably request.
E-3
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, on a each Business Day or at such more frequent
intervals as Agent may request from time to time (together with a copy of all or
any part of such delivery requested by any Lender in writing after the Closing
Date), collateral reports with respect to Borrower, including all additions and
reductions (cash and non-cash) with respect to Accounts of Borrower, prepared by
the Borrower as of the then immediately preceding Business Day;
(b) To Agent, upon its request, and in any event no less frequently
than noon Chicago time on Wednesday of each week, (together with a copy of all
or any part of the following reports requested by any Lender in writing after
the Closing Date), each of the following reports, each of which shall be
prepared by the Borrower as of the last day of the immediately preceding week or
the date 2 days prior to the date of any such request:
(i) a Borrowing Base Certificate with respect to Borrower,
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion; and
(ii) with respect to Borrower, a summary of Inventory by location
and type in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.
(c) To Agent, within five (5) business days after the end of each
month each of the following reports:
(i) with respect to Borrower, a monthly trial balance showing
Accounts outstanding aged from invoice date as follows: 1 to 30 days, 31
to 60 days, 61 to 90 days and 91 days or more, accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(ii) a summary of Inventory by location and type with a supporting
perpetual inventory report, in each case accompanied by supporting Agent;
(iii) an aging of accounts payable;
(d) To Agent, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to Annex E:
(i) a reconciliation of the most recent Borrowing Base, general
ledger and month-end Accounts and Inventory reports of Borrower to
Borrower's general ledger and
F-1
monthly Financial Statements delivered pursuant to such Annex E, in each
case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(ii) a reconciliation of the perpetual inventory by location to
Borrower's most recent Borrowing Base Certificate, general ledger and
monthly Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(iii) an aging of accounts payable and a reconciliation of that
accounts payable aging to Borrower's general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(iv) a reconciliation of the outstanding Loans as set forth in the
monthly Loan Account statement provided by Agent to Borrower's general
ledger and monthly Financial Statements delivered pursuant to Annex E, in
each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion;
(e) To Agent, at the time of delivery of each of the annual
Financial Statements delivered pursuant to Annex E, (i) a listing of government
contracts of Borrower subject to the Federal Assignment of Claims Act of 1940;
and (ii) a list of any applications for the registration of any Patent,
Trademark or Copyright filed by any Credit Party with the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in the prior Fiscal Quarter;
(f) Borrower, at its own expense, shall deliver to Agent the results
of each physical verification, if any, that Borrower or any of its Subsidiaries
may in their discretion have made, or caused any other Person to have made on
their behalf, of all or any portion of their Inventory (and, if a Default or an
Event of Default has occurred and be continuing, Borrower shall, upon the
request of Agent, conduct, and deliver the results of, such physical
verifications as Agent may require);
(g) Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time, such appraisals to be
conducted by an appraiser, and in form and substance reasonably satisfactory to
Agent; and
(h) Such other reports, statements and reconciliations with respect
to the Borrowing Base or Collateral or Obligations of any or all Credit Parties
as Agent shall from time to time request in its reasonable discretion.
F-2
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:
Period Maximum Capital Expenditures per Period
- --------------------------------------------- ---------------------------------------
Fiscal Year ending on or about March 31, 2005 $2,600,000
Fiscal Year ending on or about March 31, 2006 $3,000,000
and each Fiscal Year ending thereafter
provided, however, that the amount of permitted Capital Expenditures during any
measuring period set forth above shall be increased by the amount of the cash
proceeds received during such measuring period from a sale-leaseback of the
Minnesota Facility (as long as such sale-leaseback is consented to by Agent) to
the extent that the construction of the assets subject to such sale-leaseback
were funded with the proceeds of loans under the Construction Loan Agreement or
proceeds of the Revolving Loans on or after April 1, 2003.
(b) [Intentionally Deleted]
(c) [Intentionally Deleted]
(d) Minimum Fixed Charge Coverage Ratio. Borrowers and their
Subsidiaries shall have on a consolidated basis, as of the last day of the
Fiscal Month ending on December 31, 2003 and as of the last day of each Fiscal
Month thereafter, for the 12 month period then ended, a ratio of (A) EBITDA plus
a one-time non-cash loss in an amount not to exceed $5,500,000 related to the
write-off of capitalized software development expenses incurred by Encore
Software during the period commencing on June 1, 2001 and ending on March 1,
2004, to the extent included in the calculation of consolidated net income of
Encore Software for such period in accordance with GAAP, but without duplication
plus interest income received during such period to (B) the sum of, without
duplication, (i) the aggregate of all Interest Expense paid or accrued during
such period, plus (ii) scheduled payments of principal with respect to
Indebtedness during such period, plus (iii) Capital Expenditures during such
period (other than Capital Expenditures financed other than with the proceeds of
Loans), plus (iv) income taxes paid in cash during such period, plus (v) the
aggregate amount of all consideration paid for Permitted Intellectual Property
Acquisitions during such period, plus (vi) all Restricted Payments made by a
Credit Party during such period (other than Restricted Payments (a) made to
another Credit Party or (b) which have caused EBITDA to be reduced for
G-1
such period), of not less than 1.35:1.00; provided, however, that solely for the
purposes of the calculation of the Fixed Charge Coverage Ratio set forth herein,
the amount of Capital Expenditures during any measuring period set forth above
shall be decreased by the amount of the cash proceeds received during such
measuring period from a sale-leaseback of the Minnesota Facility (as long as
such sale-leaseback is consented to by Agent) to the extent that the
construction of the assets subject to such sale-leaseback were funded with
proceeds of the Revolving Loans.
(e) Indebtedness to EBITDA. Borrowers and their Subsidiaries shall
have on a consolidated basis, as of the last day of each Fiscal Quarter a ratio
of (i) the sum of (x) the daily average amount of Revolving Loans for the 30-day
period preceding the last day of such Fiscal Quarter and (y) the amount of other
Indebtedness as of the last day of such Fiscal Quarter to (ii) EBITDA plus
interest income for the four Fiscal Quarters then ending of not greater than
3.0:1.
Unless otherwise specifically provided herein, any accounting term used in
the Agreement shall have the meaning customarily given such term in accordance
with GAAP, and all financial computations hereunder shall be computed in
accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower's and its Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by Borrower's certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If Agent,
Borrower and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained in
the Agreement or in any other Loan Document shall, only to the extent of such
Accounting Change, refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. If Agent, Borrower and Requisite
Lenders cannot agree upon the required amendments within 30 days following the
date of implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and
G-2
made without regard to the underlying Accounting Change. For purposes of Section
8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed
to have occurred as of any date of determination by Agent or as of the last day
of any specified measurement period, regardless of when the Financial Statements
reflecting such breach are delivered to Agent.
G-3
ANNEX H (SECTION 1.1(c))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
Name: General Electric Capital Corporation
Bank: Deutsche Bank Trust Company Americas
New York, New York
ABA #: 021001033
Account #: 50232854
Account Name: GECC/CAF Depository
Reference: CFC4301
H-1
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
500 West Monroe Street
17th Floor
Chicago, Illinois 60661
Attention: Navarre Account Manager
Telecopier No.: (312) 463-3855
Telephone No.: (312) 463-2262
with copies to:
Latham & Watkins
5800 Sears Tower
Chicago, Illinois 60606
Attention: Jeffrey G. Moran
Telecopier No.: 312-993-9767
Telephone No.: 312-876-7700
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to Borrower or any Credit Party, at
Navarre Corporation
7400 49th Avenue North
New Hope, MN 55428
Attention: CFO
Telecopier No.: 763-504-1107
Telephone No.: 763-971-2770
I-1
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
Lender(s):
General Electric Capital Corporation
Revolving Loan Commitment (including a
Swing Line Commitment of $5,000,000): $40,000,000
Acquisition Loan Commitment $10,000,000
J-1