EXHIBIT 10.12
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LOAN AND SECURITY AGREEMENT
by and between
CONVERGENT COMMUNICATIONS SERVICES, INC.
as Borrower
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders,
and
FOOTHILL CAPITAL CORPORATION
as Agent
Dated as of April 18, 2000
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TABLE OF CONTENTS
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Page(s)
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1. DEFINITIONS AND CONSTRUCTION....................................................................................... 1
1.1 Definitions.................................................................................................. 1
1.2 Accounting Terms............................................................................................. 21
1.3 Code......................................................................................................... 21
1.4 Construction................................................................................................. 21
1.5 Schedules and Exhibits....................................................................................... 22
2. LOAN AND TERMS OF PAYMENT.......................................................................................... 22
2.1 Revolving Advances........................................................................................... 22
2.2 Letter of Credit Subfacility................................................................................. 28
2.3 [Intentionally Omitted.]..................................................................................... 32
2.4 Payments..................................................................................................... 32
2.5 Overadvances................................................................................................. 33
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations....................................... 33
2.7 Collection of Accounts....................................................................................... 34
2.8 Crediting Payments; Application of Collections............................................................... 35
2.9 Designated Account........................................................................................... 35
2.10 Maintenance of Loan Account; Statements of Obligations...................................................... 36
2.11 Fees........................................................................................................ 36
3. CONDITIONS; TERM OF AGREEMENT...................................................................................... 37
3.1 Conditions Precedent to Closing Date......................................................................... 37
3.2 Conditions Precedent to the Initial Advance and Letter of Credit............................................. 39
3.3 Conditions Precedent to all Advances and all Letters of Credit............................................... 40
3.4 Condition Subsequent......................................................................................... 41
3.5 Term; Automatic Renewal...................................................................................... 41
3.6 Effect of Termination........................................................................................ 41
3.7 Early Termination by Borrower................................................................................ 42
3.8 Termination Upon Event of Default............................................................................ 42
4. CREATION OF SECURITY INTEREST...................................................................................... 42
4.1 Grant of Security Interest................................................................................... 42
4.2 Negotiable Collateral........................................................................................ 43
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral....................................... 43
4.4 Delivery of Additional Documentation Required................................................................ 43
4.5 Power of Attorney............................................................................................ 43
4.6 Right to Inspect............................................................................................. 44
5. REPRESENTATIONS AND WARRANTIES..................................................................................... 44
5.1 No Encumbrances.............................................................................................. 44
5.2 Eligible Accounts............................................................................................ 44
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5.3 Eligible Inventory........................................................................................... 44
5.4 Equipment.................................................................................................... 45
5.5 Location of Inventory and Equipment.......................................................................... 45
5.6 Inventory Records............................................................................................ 45
5.7 Location of Chief Executive Office; FEIN..................................................................... 45
5.8 Due Organization and Qualification; Subsidiaries............................................................. 45
5.10 Litigation.................................................................................................. 47
5.11 No Material Adverse Change.................................................................................. 47
5.12 No Fraudulent Transfer...................................................................................... 47
5.13 Employee Benefits........................................................................................... 47
5.14 Environmental Condition..................................................................................... 47
5.15 Brokerage Fees.............................................................................................. 48
5.16 Permits and other Intellectual Property..................................................................... 48
5.18 Outstanding Balance of Unsecured Notes...................................................................... 48
6. AFFIRMATIVE COVENANTS.............................................................................................. 49
6.1 Accounting System............................................................................................ 49
6.2 Collateral Reporting......................................................................................... 49
6.3 Financial Statements, Reports, Certificates.................................................................. 50
6.4 Tax Returns.................................................................................................. 51
6.5 Intentionally Omitted........................................................................................ 51
6.6 Returns...................................................................................................... 51
6.7 [Intentionally Omitted.]..................................................................................... 51
6.8 Maintenance of Equipment..................................................................................... 51
6.9 Taxes........................................................................................................ 51
6.10 Insurance................................................................................................... 52
6.11 No Setoffs or Counterclaims................................................................................. 53
6.12 Location of Inventory and Equipment......................................................................... 53
6.13 Compliance with Laws........................................................................................ 54
6.14 Employee Benefits........................................................................................... 54
6.15 Leases...................................................................................................... 54
6.16 Broker Commissions.......................................................................................... 55
6.17 Certain Notices............................................................................................. 55
7. NEGATIVE COVENANTS................................................................................................. 55
7.1 Indebtedness................................................................................................. 55
7.2 Liens........................................................................................................ 56
7.3 Restrictions on Fundamental Changes.......................................................................... 56
7.4 Disposal of Assets........................................................................................... 57
7.5 Change Name.................................................................................................. 57
7.6 Guarantee.................................................................................................... 57
7.7 Nature of Business........................................................................................... 57
7.8 Prepayments and Amendments................................................................................... 57
7.9 Change of Control............................................................................................ 58
7.10 Consignments................................................................................................ 58
7.11 Distributions............................................................................................... 58
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7.12 Accounting Methods........................................................................................... 59
7.13 Investments.................................................................................................. 59
7.14 Transactions with Affiliates................................................................................. 59
7.15 Suspension................................................................................................... 60
7.16 Compensation................................................................................................. 60
7.17 Use of Proceeds.............................................................................................. 60
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees........................... 60
7.19 No Prohibited Transactions Under ERISA....................................................................... 60
7.20 Tangible Net Wroth........................................................................................... 61
7.21 Capital Expenditures......................................................................................... 62
7.22 Benefit Plans................................................................................................ 62
8. EVENTS OF DEFAULT................................................................................................... 62
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.............................................................................. 65
9.1 Rights and Remedies........................................................................................... 65
9.2 Remedies Cumulative........................................................................................... 67
10. TAXES AND EXPENSES.................................................................................................. 67
11. WAIVERS; INDEMNIFICATION............................................................................................ 68
11.1 Demand; Protest; etc......................................................................................... 68
11.2 The Lender Group's Liability for Collateral.................................................................. 68
11.3 Indemnification.............................................................................................. 68
12. NOTICES............................................................................................................. 68
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................................................................... 70
14. DESTRUCTION OF BORROWER'S DOCUMENTS................................................................................. 70
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.......................................................................... 71
15.1 Assignments and Participations............................................................................... 71
15.2 Successors................................................................................................... 73
16. AMENDMENTS; WAIVERS................................................................................................. 73
16.1 Amendments and Waivers....................................................................................... 73
16.2 No Waivers; Cumulative Remedies.............................................................................. 74
17. AGENT; THE LENDER GROUP............................................................................................. 74
17.1 Appointment and Authorization of Agent....................................................................... 74
17.2 Delegation of Duties......................................................................................... 75
17.3 Liability of Agent........................................................................................... 75
17.4 Reliance by Agent............................................................................................ 76
17.5 Notice of Default or Event of Default........................................................................ 76
17.6 Credit Decision.............................................................................................. 76
17.7 Costs and Expenses; Indemnification.......................................................................... 77
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17.8 Agent in Individual Capacity................................................................................ 78
17.9 Successor Agent............................................................................................. 78
17.10 Withholding Tax............................................................................................. 78
17.11 Collateral Matters.......................................................................................... 80
17.12 Restrictions on Actions by Lenders; Sharing of Payments..................................................... 81
17.13 Agency for Perfection....................................................................................... 81
17.14 Payments by Agent to the Lenders............................................................................ 81
17.15 Concerning the Collateral and Related Loan Documents........................................................ 82
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information............................................................................... 82
17.17 Several Obligations; No Liability........................................................................... 83
18. GENERAL PROVISIONS................................................................................................. 84
18.1 Effectiveness................................................................................................ 84
18.2 Section Headings............................................................................................. 84
18.3 Interpretation............................................................................................... 84
18.4 Severability of Provisions................................................................................... 84
18.5 Amendments in Writing........................................................................................ 84
18.6 Counterparts; Telefacsimile Execution........................................................................ 84
18.7 Revival and Reinstatement of Obligations..................................................................... 84
18.8 Integration.................................................................................................. 85
SCHEDULES AND EXHIBITS
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Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Permitted Other Indebtedness
Schedule 7.14 Transactions with Affiliates
Exhibit A-1 Form of Assignment and Acceptance Agreement
Exhibit C-1 Form of Compliance Certificate
Exhibit 3.1(p) Permitted Items and Property to Secure Indebtedness
Exhibit 3.2(e) Required UCC Terminations, Amendments, and Releases
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LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
April 18, 2000, among the financial institutions listed on the signature pages
hereof (such financial institutions, together with their respective successors
and assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California
corporation, as agent for the Lenders ("Agent"), with a place of business
located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ and CONVERGENT COMMUNICATIONS SERVICES, INC., a Colorado corporation
("Borrower"), with its chief executive office located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
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obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising
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accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"Acquisition Sub" means CCSI Acquisition Corporation No. 1, a
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Colorado corporation.
"Advances" has the meaning set forth in Section 2.1(a).
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"Affiliate" means, as applied to any Person, any other Person
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who directly or indirectly controls, is controlled by, is under common control
with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agent" means Foothill, solely in its capacity as agent for
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the Lenders, and shall include any successor agent.
"Agent Account" has the meaning set forth in Section 2.7.
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"Agent Advances" has the meaning set forth in Section 2.1(g).
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"Agent's Liens" has the meaning set forth in Section 4.1.
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"Agent-Related Persons" means Agent and any successor agent,
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together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
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"Assignee" has the meaning set forth in Section 15.1.
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"Assignment and Acceptance" has the meaning set forth in
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Section 15.1 and shall be in the form of Exhibit A-1 attached hereto.
"Authorized Person" means any officer or other employee of
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Borrower.
"Availability" means the amount that Borrower is entitled to
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borrow as Advances under Section 2.1, such amount being the difference derived
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when (a) the sum of (i) the principal amount of Advances (including Agent
Advances and Foothill Loans) then outstanding (including any amounts that the
Lender Group may have paid for the account of Borrower pursuant to any of the
Loan Documents and that have not been reimbursed by Borrower), plus (ii) the
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aggregate amount of the accounts payable of Borrower and the other Loan Parties
that are not within 45 days of due date, as determined by Agent, is subtracted
from (b) the least of (i) the Maximum Revolving Amount less the Letter of Credit
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Usage, or (ii) the Borrowing Base less the aggregate amount of all Letter of
Credit Usage, or (iii) the Unsecured Notes Indebtedness Limitation less the
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Letter of Credit Usage.
"Average Unused Portion of Maximum Revolving Amount" means,
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as of any date of determination, (a) the Maximum Revolving Amount, less (b) the
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sum of (i) the average Daily Balance of Advances that were outstanding during
the immediately preceding month, plus (ii) the average Daily Balance of the
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Letter of Credit Usage during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
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U.S.C. (S) 101 et seq.), as amended, and any successor statute.
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"Benefit Plan" means a "defined benefit plan" (as defined in
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Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Books" means all of Borrower's and each other Loan Party's,
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and their respective Subsidiaries', books and records (in whatever media or form
they may now or hereafter exist) including: ledgers; records indicating,
summarizing, or evidencing Borrower's and each other Loan Party's, and their
respective Subsidiaries', properties or assets (including the Collateral) or
liabilities; all information relating to Borrower's and each other Loan Party's,
and their respective Subsidiaries', business operations or financial condition;
all billing software, programs, systems and
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source codes; and all computer programs, disk or tape files, printouts, runs, or
other computer prepared information.
"Borrower" has the meaning set forth in the preamble to this
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Agreement.
"Borrowing" means a borrowing hereunder consisting of
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Advances made on the same day by the Lenders to Borrower, or by Foothill in the
case of a Foothill Loan, or by Agent in the case of an Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
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"Business Day" means any day that is not a Saturday, Sunday,
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or other day on which national banks are authorized or required to close.
"CCC" means Convergent Capital Corporation, a Colorado
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corporation.
"CCI" means Convergent Communications, Inc., a Colorado
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corporation.
"Change of Control" shall be deemed to have occurred at such
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time as (a) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) other than TPG (or an Affiliate
of TPG which is controlled by TPG) or SCM (or an Affiliate of SCM which is
controlled by SCM) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of more than
40% of the total voting power of all classes of stock then outstanding of CCI
entitled to vote in the election of directors, or (b) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) other than CCI becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of any
voting power of any class of stock then outstanding of Borrower or CCC entitled
to vote in the election of directors, or (c) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
other than Borrower or CCI becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of any
voting power of any class of stock then outstanding of any Subsidiary of
Borrower entitled to vote in the election of directors.
"Closing Date" means the date of the satisfaction, or waiver
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in writing by Agent, of all of the conditions contained in Section 3.1.
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"Code" means the California Uniform Commercial Code.
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"Collateral" means all of Borrower's right, title, and
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interest in and to each of the following:
(a) the Accounts,
(b) the Books,
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(c) the General Intangibles,
(d) the Inventory,
(e) the Investment Property,
(f) the Negotiable Collateral,
(g) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(h) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, the Books, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof; provided,
however, that Collateral shall not include the Excluded Property (as
defined below). As used in this definition of Collateral, "Excluded Property"
means Borrower's contract rights, license agreements, leases pertaining to real
or personal property or other general intangibles with respect to which the
granting of a security interest therein by Borrower to Agent is prohibited by
applicable law or by the terms and provisions of the written agreement, document
or instrument creating or evidencing such contract rights, license agreements,
leases pertaining to real or personal property or other general intangibles
(other than to the extent that such prohibition, or the term or provision
providing for such prohibition, is rendered ineffective pursuant to Section
9318(4) of the Code or other applicable law, including the Bankruptcy Code or
principles of equity); provided, however, that (i) immediately upon the
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ineffectiveness, lapse or termination of any such prohibition or term or
provision providing for such prohibition, the Collateral shall include, and
Borrower shall be deemed to have granted a security interest to Agent in, all
such contract rights, license agreements, leases pertaining to real or personal
property and other general intangibles as if such prohibition, or term or
provision providing for such prohibition, had never been in effect, and (ii) in
no event shall "Excluded Property" under any circumstances include "accounts"
(as such term is defined in the Code) or "inventory" (as such term is defined in
the Code).
"Collateral Access Agreement" means a landlord waiver or
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consent, mortgagee waiver or consent, bailee letter, or a similar
acknowledgement agreement of any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment or Inventory, in each case, in form and substance satisfactory
to Agent.
"Collections" means all cash, checks, notes, instruments, and
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other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
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"Commitment" means, at any time with respect to a Lender, the
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principal amount set forth beside such Lender's name under the heading
"Commitment" on Schedule C-1 attached hereto or on the signature page of the
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Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 15.1, as such Commitment
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may be adjusted from time to time in accordance with the provisions of Section
15.1, and "Commitments" means, collectively, the aggregate amount of the
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commitments of all of the Lenders.
"Compliance Certificate" means a certificate substantially in
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the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Agent.
"Control Agreement" means a control agreement, in form and
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substance reasonably satisfactory to Agent, between Borrower, Agent, and the
applicable securities intermediary with respect to the applicable Securities
Account and related Investment Property.
"Daily Balance" means the amount of an Obligation owed at the
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end of a given day.
"deems itself insecure" means that the Person deems itself
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insecure in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with
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the giving of notice, the passage of time, or both, would be an Event of
Default.
"Defaulting Lender" means any Lender that fails to make any
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Advance that it is required to make hereunder on any Funding Date and that has
not cured such failure by making such Advance within 1 Business Day after
written demand upon it by Agent to do so.
"Defaulting Lenders Rate" means the Reference Rate for the
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first 3 days from and after the date the relevant payment is due and,
thereafter, at the interest rate then applicable to Advances.
"Designated Account" means account number 1018186981 of
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Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Agent.
"Designated Account Bank" means Norwest Bank Colorado, N.A.,
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whose office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and whose
ABA number is ▇▇▇▇▇▇▇▇▇.
"Dilution" means, in each case based upon the experience of
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the immediately prior 180 days, the result of dividing the Dollar amount of (a)
bad debt write-downs, discounts, advertising, returns, promotions, credits, or
other dilution with respect to the Accounts, by (b) Borrower's Collections
(excluding extraordinary items) plus the Dollar amount of clause (a).
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"Dilution Reserve" means, as of any date of determination, an
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amount sufficient to reduce the advance rate against Eligible Accounts hereunder
by one percentage point for each percentage point by which Dilution is in excess
of five percent (5%).
"Disbursement Letter" means an instructional letter executed
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and delivered by Borrower to Agent regarding the extensions of credit to be made
on the Initial Advance Effective Date, the form and substance of which shall be
satisfactory to Agent.
"Dollars or $" means United States dollars.
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"Early Termination Premium" has the meaning set forth in
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Section 3.7.
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"Eligible Accounts" means those Accounts (net of unapplied
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cash, customer deposits, deferred maintenance, deferred revenue, ▇▇▇▇▇▇▇▇
pertaining to Borrower's "Enterprise Management Services", "Enterprise Network
Solutions" or similar arrangements, unreconciled variances between Borrower's
accounts receivable aging and Borrower's general ledger, and credits posted to
Borrower's general ledger and not reflected on Borrower's accounts receivable
aging) created by Borrower in the ordinary course of business, that arise out of
Borrower's sale of goods or rendition of services, that strictly comply with
each and all of the representations and warranties respecting Accounts made by
Borrower to Agent in the Loan Documents, and that are and at all times continue
to be acceptable to Agent in all respects; provided, however, that standards of
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eligibility may be fixed and revised from time to time by Agent in Agent's
reasonable credit judgment. Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
within 90 days of original invoice date or 60 days of original due date;
(b) Accounts owed by an Account Debtor or its Affiliates
known to any Loan Party where 50% or more of all Accounts owed by that Account
Debtor (or such Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is
an employee, Subsidiary, Affiliate, or agent of Borrower;
(d) Accounts that have been rebilled;
(e) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(f) Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political
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subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Agent (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Agent and is directly
drawable by Agent, or (z) the Account is covered by credit insurance in form and
amount, and by an insurer, satisfactory to Agent;
(g) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Agent, with the Assignment of
Claims Act, 31 U.S.C. (S) 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(h) Accounts with respect to which the Account Debtor is
a creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account, to the extent of
such right, dispute or claim, as the case may be;
(i) Accounts with respect to an Account Debtor whose
total obligations owing to Borrower exceed 10% of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage;
(j) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(k) Accounts the collection of which Agent, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(l) Accounts with respect to which the goods giving rise
to such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
(m) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement;
(n) Accounts that represent progress payments or other
advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by Borrower
of the subject contract for goods or services;
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(o) Accounts acquired by Borrower from another Person
(whether in a Permitted Acquisition or otherwise) with respect to which Agent
has not performed an audit the results of which are satisfactory to Agent in its
sole discretion; and
(p) At any time during which Accounts that arise from or
relate to the sale of voice or data long distance services or switching services
provided through a third party (a "Third Party Provider") exceed 30% of
Borrower's revenue during the immediately preceding calendar month, all such
Accounts with respect to which the related Third Party Provider is not a party
to a written intercreditor in favor of Agent, in form and substance satisfactory
to Agent, which provides for, among other things, continuity of service by such
Third Party Provider for a reasonable period of time following a default by any
Loan Party under its agreements with such Third Party Provider.
"Eligible Inventory" means Inventory consisting of first
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quality finished goods held for sale in the ordinary course of Borrower's
business, that are located at or in-transit between Borrower's premises
identified on Schedule E-1, that strictly comply with each and all of the
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representations and warranties respecting Inventory made by Borrower to Agent in
the Loan Documents, and that are and at all times continue to be acceptable to
Agent in its sole discretion in all respects; provided, however, that standards
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of eligibility may be fixed and revised from time to time by Agent in Agent's
sole discretion. In determining the amount to be so included, Inventory shall be
valued at the lower of cost or market on a basis consistent with Borrower's
current and historical accounting practices. An item of Inventory shall not be
included in Eligible Inventory if:
(a) it is not owned solely by Borrower or Borrower does
not have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth
on Schedule E-1;
(c) it is not located on property owned or leased by
Borrower or in a contract warehouse, in each case, subject to a Collateral
Access Agreement executed by the mortgagee, lessor, the warehouseman, or other
third party, as the case may be, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of Agent for the benefit of the Lender
Group;
(e) it consists of goods returned or rejected by
Borrower's customers or goods in transit;
(f) it is obsolete or slow moving, a restrictive or
custom item, raw materials, work-in-process, a component that is not part of
finished goods, or constitutes spare parts, packaging and shipping materials,
supplies used or consumed in Borrower's business, Inventory subject to a Lien in
favor of any third Person, ▇▇▇▇ and hold goods, defective goods, "seconds," or
Inventory acquired on consignment or accepted on trade; and
8
(g) it is Inventory acquired in a transaction outside the
ordinary course of business (whether in a Permitted Acquisition or otherwise)
with respect to which Agent has not performed an audit the results of which are
satisfactory to Agent in its sole discretion.
"Eligible Transferee" means: (a) a commercial bank organized
-------------------
under the laws of the United States, or any state thereof, and having total
assets in excess of $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States; (c) a finance company,
insurance company or other financial institution or fund that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of $50,000,000; (d) any
Affiliate (other than individuals) of a pre-existing Lender; (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Borrower; and (f) during the continuation of an Event of Default, any
other Person approved by Agent.
"Equipment" means all of Borrower's present and hereafter
---------
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, 29 U.S.C. (S)(S) 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA
---------------
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
-----------
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of
its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
9
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries
or ERISA Affiliates from a Multiemployer Plan, or (g) providing any security to
any Plan under Section 401(a)(29) of the IRC by Borrower or its Subsidiaries or
any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
---------------- ---------
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and any successor statute thereto.
"FEIN" means Federal Employer Identification Number.
----
"Foothill" means Foothill Capital Corporation, a California
--------
corporation.
"Foothill Loans" has the meaning set forth in Section 2.1(f).
-------------- --------------
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means generally accepted accounting principles as in
----
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
-------------------
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, Permits, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes, billing
software, programs, source codes and systems (in whatever media or form they may
now or hereafter exist), literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
-------------------
certificate or articles of incorporation, by-laws, or other organizational or
governing documents of such Person.
"Governmental Authority" means any nation or government, any
----------------------
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through Stock or capital ownership or otherwise, by any of the
foregoing.
"Guaranty Agreements" means, collectively, any and all of the
-------------------
guaranty agreements with respect to the Obligations which are, or are to be,
executed by a Guarantor in
10
favor of Agent for the benefit of the Lender Group, as required from time to
time by Agent, in form and substance satisfactory to Agent, in each case as the
same may be amended, modified, restated, supplemented, increased, renewed,
extended, substituted for or replaced from time to time.
"Guarantor" means all holding companies and parent companies
---------
of Borrower, including, but not limited to CCI and all subsidiaries of CCI and
all subsidiaries of Borrower, including, but not limited to, CCC and WAI, and
each other Person who may hereafter guarantee payment or performance of the
whole or any part of the Obligations.
"Hazardous Materials" means (a) substances that are defined
-------------------
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of Borrower or CCI,
------------
or any of their respective Subsidiaries, for borrowed money, (b) all obligations
of Borrower or CCI, or any of their respective Subsidiaries, evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of
Borrower or CCI, or any of their respective Subsidiaries, under capital leases,
(d) all obligations or liabilities of others secured by a Lien on any property
or asset of Borrower or CCI, or any of their respective Subsidiaries,
irrespective of whether such obligation or liability is assumed, and (e) any
obligation of Borrower or CCI, or any of their respective Subsidiaries,
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower or CCI, or any of their respective
Subsidiaries) any indebtedness, lease, dividend, letter of credit, or other
obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in
-----------------------
Section 11.3.
------------
"Indemnified Person" has the meaning set forth in Section
------------------ -------
11.3.
----
"Initial Advance Effective Date" means the date of the first
------------------------------
Advance made or the first Letter of Credit issued under this Agreement following
the satisfaction, or waiver in writing by Agent, of all of the conditions
contained in Section 3.1, all of the conditions contained in Section 3.2 and all
----------- -----------
of the conditions contained in Section 3.3.
-----------
"Insolvency Proceeding" means any proceeding commenced by or
---------------------
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or
11
insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
-----------------
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intellectual Property" has the meaning ascribed thereto in
---------------------
Section 5.16.
------------
"Inventory" means all present and future inventory in which
---------
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Inventory Line Conditions" means all of the following: (I)
-------------------------
Agent shall have received and reviewed a current appraisal of Borrower's
Inventory prepared by an appraiser acceptable to Agent in Agent's sole
discretion and such appraisal shall be in form and substance acceptable to
Agent, in Agent's reasonable discretion; (II) Agent shall have reviewed
Borrower's accounting system and Borrower's perpetual inventory accounting
system shall be acceptable to Agent, in Agent's discretion, and (III) Agent
shall have received and reviewed a current audit of Borrower's perpetual
inventory accounting system performed by Foothill's auditors and the results of
such audit shall be acceptable to Agent, in Agent's discretion.
"Inventory Reserves" means reserves (determined from time to
------------------
time by Agent in its discretion) for the estimated reclamation claims of unpaid
sellers of Inventory sold to Borrower.
"Investment Property" means all of a Person's present and
-------------------
hereafter acquired securities, whether certified or uncertified, security
entitlements, securities accounts, commodity contracts and commodity accounts,
together with all "investment property" as that term is defined in Section 9115
of the Code, together with all components thereof, other than the Unsecured
Notes Cash Collateral.
"IRC" means the Internal Revenue Code of 1986, as amended,
---
and the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
--- --------------
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
------------ --------------
"Legal Requirements" means all applicable international,
------------------
foreign, federal, state, and local laws, judgments, decrees, orders, statutes,
ordinances, rules, regulations, or Permits.
12
"Lender" and "Lenders" have the respective meanings set forth
------ -------
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of Section 15.1
------------
hereof.
"Lender Group" means, individually and collectively, each of
------------
the individual Lenders and Agent.
"Lender Group Expenses" means all: costs or expenses
---------------------
(including taxes, and insurance premiums) required to be paid by Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group;
reasonable fees or charges paid or incurred by the Lender Group in connection
with the Lender Group's transactions with Borrower, including, fees or charges
for photocopying, notarization, couriers and messengers, telecommunication,
public record searches (including tax lien, litigation, and UCC (or equivalent)
searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Collateral appraisals), real estate
surveys, real estate title policies and endorsements, and environmental audits;
costs and expenses incurred by Agent in the disbursement of funds to Borrower
(by wire transfer or otherwise); customary charges paid or incurred by Agent
resulting from the dishonor of checks; reasonable costs and expenses paid or
incurred by the Lender Group to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated; reasonable costs and expenses paid or incurred by Agent in
examining the Books; costs and expenses of third party claims or any other suit
paid or incurred by the Lender Group in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with Borrower (or any of its
Subsidiaries party to one or more Loan Documents); and the Lender Group's
reasonable attorneys fees and expenses incurred in advising, structuring,
drafting, reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrower), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"Lender-Related Persons" means, with respect to any Lender,
----------------------
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Lender's Affiliates.
"Letter of Credit" means an L/C or an L/C Guaranty, as the
----------------
context requires.
"Letter of Credit Usage" means the sum of (a) the undrawn
----------------------
amount of Letters of Credit, plus (b) the amount of unreimbursed drawings under
----
Letters of Credit.
"Lien" means any interest in property securing an obligation
----
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest
13
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
------------ ------------
"Loan Documents" means this Agreement, the Security
--------------
Agreements, the Disbursement Letter, the Letters of Credit, the Lockbox
Agreements, the Intercreditor Agreements, any note or notes executed by Borrower
and payable to the Lender Group, and any other agreement entered into, now or in
the future, in connection with this Agreement.
"Loan Party" means Borrower and each Guarantor.
----------
"Lockbox Account" shall mean a depositary account established
---------------
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
------------------
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Agent, each of which is among Borrower, Agent, and
one of the Lockbox Banks.
"Lockbox Banks" means Norwest Bank, N.A., or such other banks
-------------
as may be agreed to by Borrower and Foothill from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
--------- -----------
"Material Adverse Change" means (a) a material adverse change
-----------------------
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower and the Guarantors
taken as a whole, (b) the material impairment of Borrower's ability to perform
its obligations under the Loan Documents to which it is a party or of the Lender
Group to enforce the Obligations or realize upon the Collateral, (c) a material
adverse effect on the value of the Collateral or the amount that the Lender
Group would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of the Collateral, or (d) a
material impairment of the priority of the Agent's Liens with respect to the
Collateral.
"Maximum Revolving Amount" means $50,000,000.
------------------------
"Multiemployer Plan" means a "multiemployer plan" (as defined
------------------
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"Negotiable Collateral" means all of a Person's present and
---------------------
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases
14
(wherein such Person is the lessor), chattel paper, and the Books relating to
any of the foregoing, other than the Unsecured Notes Cash Collateral.
"Obligations" means all loans, Advances, debts, principal,
-----------
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Lender Group Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy Code, would
have accrued), lease payments, guaranties, covenants, and duties owing by
Borrower to the Lender Group of any kind and description (whether pursuant to or
evidenced by the Loan Documents or pursuant to any other agreement between the
Lender Group and Borrower, and irrespective of whether for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including any debt, liability, or
obligation owing from Borrower to others that the Lender Group may have obtained
by assignment or otherwise, and further including all interest not paid when due
and all Lender Group Expenses that Borrower is required to pay or reimburse by
the Loan Documents, by law, or otherwise.
"Orderly Liquidation Value of Eligible Inventory" shall mean
-----------------------------------------------
the orderly liquidation value of Inventory which otherwise constitutes Eligible
Inventory, as determined by an appraiser satisfactory to Agent, in its sole
discretion, and pursuant to an appraisal satisfactory to Agent, in its
reasonable discretion.
"Overadvance" has the meaning set forth in Section 2.5.
----------- -----------
"Participant" has the meaning set forth in Section 15.1(e).
----------- ---------------
"Pay-Off Letter" means a letter, in form and substance
--------------
reasonably satisfactory to Agent, from Existing Lender respecting the amount
necessary to repay in full all of the obligations of Borrower owing to Existing
Lender and obtain a termination or release of all of the Liens existing in favor
of Existing Lender in and to the properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as
----
defined in Title IV of ERISA, or any successor thereto.
"Permits" of a Person shall mean all rights, franchises,
-------
permits, bonds, authorities, licenses, certificates of approval or
authorizations, including licenses and other authorizations issuable by a
Governmental Authority, which pursuant to applicable Legal Requirements are
necessary to permit such Person lawfully to conduct and operate its business as
currently conducted and to own and use its assets.
"Permitted Acquisition" means an acquisition by Borrower or
---------------------
any other Loan Party of substantially all of the assets of another Person, or an
acquisition by Borrower or any other Loan Party of all or substantially all of
the Stock of another Person, as long as:
15
(a) no Default of Event of Default shall have occurred and be
continuing or would result from the consummation of the proposed acquisition,
(b) the assets being acquired, or the Person whose Stock is
being acquired, as the case may be, are useful in or engaged in, as applicable,
the business conducted by Borrower as of the Closing Date or a business
reasonably related thereto,
(c) Borrower shall have provided to Agent (i) written notice
of the acquisition and a summary of the material terms and conditions of the
acquisition at least 10 Business Days prior to the consummation of such
acquisition, (ii) copies of the current drafts of the documentation pertaining
to the acquisition as and when prepared, and (iii) copies of substantially final
drafts of the documentation pertaining to the acquisition at least 1 Business
Day prior to the date that the acquisition is consummated;
(d) Borrower has provided Agent with written confirmation,
supported by reasonably detailed calculations, that on a pro forma basis created
--- -----
by adding the historical combined financial statements of Borrower (including
the combined financial statements of any other Person or assets that were the
subject of a prior Permitted Acquisition during the relevant period) to the
historical consolidated financial statements of the Person to be acquired (or
the historical financial statements related to the assets to be acquired)
pursuant to the proposed acquisition (adjusted to eliminate expense items that
would not have been incurred and include income items that would have been
recognized, in each case, if the combination had been accomplished at the
beginning of the relevant period; such eliminations and inclusions to be
satisfactory to Agent), Borrower would have been in compliance with each of the
financial covenants in Section 7.20 hereof for the 12 months ending as of the
------------
fiscal quarter ended immediately prior to the proposed date of consummation of
such proposed acquisition for which there are available financial statements,
(e) Borrower shall have delivered to Agent any and all
security agreements, guarantees, UCC-1 financing statements, fixture filings,
and other documentation requested by Agent in order to include the newly
acquired assets within the Collateral each duly executed by Borrower, the other
Loan Parties and such other Persons formed, acquired or pertaining to such
acquisition as may be required by Agent,
(f) no Loan Party shall incur, assume or otherwise become
liable for any indebtedness or other liabilities in connection with or resulting
from such acquisition which would cause or result in (i) Borrower's failure to
comply with Section 7.20 on a pro-forma basis as if such Permitted Acquisition
------------
was consummated on the last day of the immediately preceding calendar quarter,
or (ii) the creation or existence of any Lien other than a Permitted Lien; and
(g) immediately upon the consummation of such acquisition and
after giving effect to the payment of all purchase consideration payable in
connection therewith, Borrower shall have not less than $50,000,000 of
Availability and unrestricted immediately available cash on hand.
16
"Permitted Liens" means (a) Liens held by Agent for the
---------------
benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are not
yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) the interests of lessors under operating leases,
------------
purchase money Liens of lessors under capital leases and purchase money Liens
arising after the Closing Date solely for the acquisition of fixed assets to the
extent that the acquisition or lease of the underlying asset is permitted under
Section 7.21 and so long as the Lien only attaches to the asset purchased or
------------
acquired and only secures the purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrower and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (g) Liens or
deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, (h) Liens arising by
reason of security for surety or appeal bonds in the ordinary course of business
of Borrower, (i) Liens of or resulting from any judgment or award that
reasonably could not be expected to result in a Material Adverse Change and as
to which the time for the appeal or petition for rehearing of which has not yet
expired, or in respect of which Borrower is in good faith prosecuting an appeal
or proceeding for a review and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, (j) with respect to any
Real Property, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of any of the Agent's Liens thereon or
therein for the benefit of the Lender Group, or materially interfere with the
ordinary conduct of the business of Borrower, (k) Liens on fixed assets acquired
by Borrower in a Permitted Acquisition securing indebtedness permitted under
Section 7.1(f), provided that such Liens (I) were not created in connection with
--------------
such Permitted Acquisition, (II) attach only to the fixed assets purchased or
acquired with the proceeds of the indebtedness which were in existence prior to
the consummation of the Permitted Acquisition, and (III) secure no Indebtedness
other than the purchase price of such fixed assets, and (l) during only the
period prior to the Initial Advance Effective Date, the Liens of Deutsche
Financial Services Corporation disclosed on the UCC financing statements naming
Deutsche Financial Services Corporation as secured party which are listed on
Exhibit 3.2(e) attached hereto and made a part hereof.
-------------
"Permitted Protest" means the right of Borrower to protest
-----------------
any Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Agent, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Agent's Liens in and to the
Collateral.
17
"Person" means and includes natural persons, corporations,
------
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other
----------------------------
than the Real Property.
"Plan" means any employee benefit plan, program, or
----
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"Pro Rata Share" means, with respect to a Lender, a fraction
--------------
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments.
"Qualifying Lease Financing Transfers" means the following
------------------------------------
transfers by CCC or Borrower, as the case may be, in the ordinary course of its
business for value to third party financing sources that are not an Affiliate of
any Loan Party: (i) transfers by CCC of voice and data communications equipment
lease agreements originated by CCC, as lessor thereunder, entered into with
lessees thereunder which are not an Affiliate of any Loan Party, provided that
the goods which are the subject of such lease agreements shall not constitute
Eligible Inventory and that the rights to payment under such lease agreements
shall not constitute Eligible Accounts, and (ii) transfers by Borrower in the
ordinary course of its business of its Enterprise Management Services (f/k/a
Enterprise Network Services) agreements originated by Borrower, as the service
provider thereunder, with customers which are not an Affiliate of any Loan
Party, provided that such agreements shall be in substantially the form which
has been provided by Borrower to Agent and that the rights to payment under such
agreements shall not constitute Eligible Accounts.
"Real Property" means any estates or interests in real
-------------
property now owned or hereafter acquired by Borrower.
"Reference Rate" means the variable rate of interest, per
--------------
annum, most recently announced by ▇▇▇▇▇ Fargo Bank, N.A., or any successor
thereto, as its "base rate," irrespective of whether such announced rate is the
best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.5.
------------ -----------
"Reportable Event" means any of the events described in
----------------
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Required Lenders" means, at any time, Lenders whose Pro Rata
----------------
Shares aggregate 51% or more of the Commitments, or, if the Commitments have
been terminated irrevocably, 51% of the Obligations then outstanding.
18
"Retiree Health Plan" means an "employee welfare benefit
-------------------
plan" within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of determination,
------------------------
the sum of (a) the aggregate amount of Advances outstanding, plus (b) the Letter
----
of Credit Usage.
"SCM" means, collectively, Sandler Capital Management, a New
---
York corporation.
"SEC" means the United States Securities and Exchange
---
Commission and any successor Federal agency having similar powers.
"Security Agreements" means, collectively, any and all of the
-------------------
security agreements, guaranties, pledges, mortgages, deeds of trust,
assignments, stock pledge agreements and such other agreements, documents and
instruments, in form and substance satisfactory to Agent, which are, or are to
be, executed by Borrower, CCI and/or any one or more of the Subsidiaries and
Affiliates of either of them in favor of Agent and/or the Lenders as may be
required from time to time by Agent to provide Agent for the benefit of the
Lender Group with Liens upon all of the assets and properties of Borrower, CCI
and each of the Subsidiaries and Affiliates of either of them and as security
for the payment and performance in full of the Obligations, in each case as the
same may be amended, modified, restated, supplemented, increased, renewed,
extended, substituted for or replaced from time to time.
"Securities Account" means a "securities account" as that
------------------
term is defined in Section 8501 of the Code.
"Series B Preferred Stock" means the Series B Senior
------------------------
Cumulative Convertible Preferred Stock, no par value, of CCI.
"Settlement" has the meaning set forth in Section 2.1(h)(i).
---------- -----------------
"Settlement Date" has the meaning set forth in Section
--------------- -------
2.1(h)(i).
---------
"Solvent" means, with respect to any Person on a particular
-------
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and 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 is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's
19
properties and assets would constitute unreasonably small capital after giving
due consideration to the prevailing practices in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount that,
in light of all the facts and circumstances existing at such time, represents
the amount that reasonably can be expected to become an actual or matured
liability.
"Stock" means all shares, options, warrants, interests,
-----
participations, or other equivalents (regardless of how designated) of or in a
corporation 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 SEC under
the Exchange Act).
"Stock Pledge Agreements" means, collectively, (a) a stock
-----------------------
pledge agreement, in form and substance satisfactory to Agent, executed by CCI
in favor of Agent for the benefit of the Lenders, pursuant to which CCI grants
to Agent for the benefit of the Lenders a first priority Lien and security
interest in all of the shares of capital stock of Borrower and CCC, and (b) a
stock pledge agreement, in form and substance satisfactory to Agent, executed by
Borrower in favor of Agent for the benefit of the Lenders, pursuant to which
Borrower grants to Agent for the benefit of the Lenders a first priority Lien
and security interest in all of the shares of stock of WAI and all of the shares
owned by Borrower of stock of Cavion Technologies, Inc., a Colorado corporation
"Subsidiary" of a Person means a corporation, partnership,
----------
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Tangible Net Worth" means, as of any date of determination,
------------------
the difference of (a) Borrower's total stockholder's equity (including for this
purpose the Series B Preferred Stock, no par value, of CCI), minus (b) the sum
-----
of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid
expenses, and (iii) all amounts due to Borrower from Affiliates.
"TPG" means TPG Partners III, L.P., a Delaware limited
---
partnership, T3 Partners, L.P., a Delaware limited partnership, and their
respective Affiliates.
"Unsecured Notes" means those certain 13% unsecured notes in
---------------
the aggregate original principal amount of $160,000,000 dated as of April 2,
1998, and maturing on April 1, 2008, issued under the Unsecured Notes Indenture,
as amended, modified, renewed or restated from time to time.
"Unsecured Notes Cash Collateral" means all of CCI's right,
-------------------------------
title and interest in and to (i) all securities, assets and property held in or
credited to account number 1180808511 of CCI maintained with Norwest Bank
Colorado, N.A., whose office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, which account contains only the portion of the
20
cash proceeds from the initial sale of the Unsecured Notes that are restricted
by the terms of the Unsecured Notes Indenture for the payment of interest on the
Unsecured Notes and proceeds thereof (the "Unsecured Notes Cash Collateral
Account"), (ii) any certificates or other evidence of ownership representing any
property in the Unsecured Notes Cash Collateral Account and (iii) all products
and proceeds of any of the foregoing, including, without limitation, all
dividends, interest, principal payments, cash options, warrants, rights,
instruments, subscriptions and other property or proceeds from time to time
received, receivable or otherwise distributed or distributable in respect of or
in exchange for any or all of the securities and cash held in or credited to the
Unsecured Notes Cash Collateral Account and any other property held in or
credited thereto.
"Unsecured Notes Indebtedness Limitation" means at any
---------------------------------------
particular date the maximum amount of Obligations which may at such time be
outstanding pursuant to this Agreement that constitute "Permitted Indebtedness"
(as such term is defined in the Unsecured Notes Indenture) under the Unsecured
Notes Indenture and does not cause or result in a violation of the Unsecured
Notes Indenture or cause or result in any holders of the Unsecured Notes (or any
trustee or agent for the benefit thereof) having the right to demand repayment,
repurchase, retirement or redemption thereof or any similar right with respect
thereto.
"Unsecured Notes Indenture" means that certain Indenture
-------------------------
dated as of April 2, 1998 among CCI and Norwest Bank Colorado, N.A., pursuant to
which the Unsecured Notes have been issued, as amended, modified, renewed or
restated from time to time.
"Voidable Transfer" has the meaning set forth in Section
----------------- -------
15.8.
----
"WAI" means World Access, Inc., a Colorado corporation.
---
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or any other Loan Documents,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the Loan Documents to
this Agreement or any of
21
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement
and during the term of this Agreement, each Lender agrees to make advances
("Advances") to Borrower in an amount at any one time outstanding not to exceed
such Lender's Pro Rata Share of an amount equal to the least of (i) the Maximum
Revolving Amount less the Letter of Credit Usage, or (ii) the Borrowing Base
----
less the aggregate amount of all Letter of Credit Usage, or (iii) the Unsecured
----
Notes Indebtedness Limitation less the Letter of Credit Usage. For purposes of
----
this Agreement, "Borrowing Base", as of any date of determination, shall mean
the result of:
(x) the lesser of (i) 85% of Eligible Accounts, less
----
the amount, if any, of the Dilution Reserve, and (ii) an amount equal
to Borrower's Collections with respect to Accounts for the immediately
preceding 60 day period, plus
(y) upon and after satisfaction of all of the Inventory
Line Conditions in a manner satisfactory to Agent, in its sole
discretion, the least of (i) $12,000,000, (ii) 50% of the value of
Eligible Inventory less the aggregate amount of the Inventory
----
Reserves, (iii) 80% of the Orderly Liquidation Value of the Eligible
Inventory less the aggregate amount of the Inventory Reserves, and
----
(iv) 50% of the amount of credit availability created by clause (x)
----------
above, minus
(z) the aggregate amount of reserves, if any,
established by Agent under Section 2.1(b).
--------------
The Lenders shall have no obligation to make further Advances hereunder to the
extent they would cause the outstanding Revolving Facility Usage to exceed the
Maximum Revolving Amount.
Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the
-----------
terms and conditions of this Agreement, reborrowed at any time during the term
of this Agreement.
(b) Anything to the contrary in this Section 2
notwithstanding, Agent shall have the right to establish reserves against the
Borrowing Base in such amounts as Agent, in its reasonable credit judgement
(from the perspective of an asset-based lender) shall deem necessary or
appropriate, including reserves on account of (A) sums that Borrower is required
to pay (such as taxes, assessments, insurance premiums, or, in the case of
leased assets, rents or other amounts payable under such leases) and has failed
to pay under any Section of this Agreement or any other Loan Document, (B)
without duplication of the foregoing, past due or accrued taxes or other
22
governmental charges, including ad valorem, personal property and other taxes
which, in the reasonable determination of Agent (from the perspective of an
asset-based lender), could have a priority superior to the Liens or security
interests of Agent in any of the Collateral (such as ad valorem taxes or sales
taxes where given a priority under applicable law), and (C) without duplication
of the foregoing, amounts owing by Borrower to any Person to the extent secured
by a Lien on, or trust over, any of the Collateral, which Lien or trust, in the
reasonable determination of Agent (from the perspective of an asset-based
lender), could have a priority superior to the Agent's Liens (such as landlord
liens) in and to such item of Collateral.
(c) Procedure for Borrowing. Each Borrowing shall be made
-----------------------
upon Borrower's irrevocable request therefor either delivered in writing or made
by telephone to Agent (which notice must be received by Agent (x) no later than
10:00 a.m. (California time) on the Business Day immediately preceding the
requested Funding Date if the aggregate amount requested to be borrowed on such
day by Borrower exceeds $5,000,000, and (y) no later than 10:00 a.m. (California
time) on the same Business Day as the requested Funding Date if the aggregate
amount requested to be borrowed on such day by Borrower is less than $5,000,000)
specifying (i) the amount of the Borrowing; and (ii) the requested Funding Date,
which shall be a Business Day.
(d) Agent's Election. Promptly after receipt of a request
for a Borrowing pursuant to Section 2.1(c), Agent shall elect, in its
--------------
discretion, (i) to have the terms of Section 2.1(e) apply to such requested
--------------
Borrowing, or (ii) to request Foothill to make a Foothill Loan pursuant to the
terms of Section 2.1(f) in the amount of the requested Borrowing; provided,
-------------- --------
however, that if Foothill declines in its sole discretion to make a Foothill
-------
Loan pursuant to Section 2.1(f), Agent shall elect to have the terms of Section
-------------- -------
2.1(e) apply to such requested Borrowing.
-----
(e) Making of Advances.
------------------
(i) In the event that Agent shall elect to have the
terms of this Section 2.1(e) apply to a requested Borrowing as described in
--------------
Section 2.1(d), then promptly after receipt of a request for a Borrowing
--------------
pursuant to Section 2.1(c), Agent shall notify the Lenders, not later than 1:00
--------------
p.m. (California time) on the Business Day immediately preceding the Funding
Date applicable thereto, by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to such account of Agent as Agent may designate,
not later than 10:00 a.m. (California time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such Advances, upon
satisfaction of the applicable conditions precedent set forth in Section 3
---------
hereof, Agent shall make the proceeds of such Advances available to Borrower on
the applicable Funding Date by transferring same day funds equal to the proceeds
of such Advances received by Agent to Borrower's Designated Account; provided,
however, that, subject to the provisions of Section 2.1(k), Agent shall not
--------------
request any Lender to make, and no Lender shall have the obligation to make, any
Advance if Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that (1) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on the
---------
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (2) the requested Borrowing would exceed the Availability of
Borrower on such Funding Date.
23
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Initial
Advance Effective Date, at least 1 Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to Agent for the account of Borrower the amount of that Lender's Pro
Rata Share of the Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrower on such date a corresponding amount. If
and to the extent any Lender shall not have made its full amount available to
Agent in immediately available funds and Agent in such circumstances has made
available to Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Agent, together with
interest at the Defaulting Lenders Rate for each day during such period. A
notice submitted by Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such Lender's Advance on the
date of Borrowing for all purposes of this Agreement. If such amount is not made
available to Agent on the Business Day following the Funding Date, Agent will
notify Borrower of such failure to fund and, upon demand by Agent, Borrower
shall pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make any Advance on any
Funding Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on any Funding Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to
Borrower the amount of all such payments received or retained by it for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Lender's Commitment shall be deemed to be zero (-0-). This section shall
remain effective with respect to such Lender until (x) the Obligations under
this Agreement shall have been declared or shall have become immediately due and
payable or (y) the requisite non-Defaulting Lenders and Agent shall have waived
such Lender's default in writing. The operation of this section shall not be
construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by Borrower of its duties and obligations
hereunder.
(f) Making of Foothill Loans.
-----------------------------
(i) In the event Agent shall elect, with the consent of
Foothill as a Lender, to have the terms of this Section 2.1(f) apply to a
--------------
requested Borrowing as described in Section 2.1(d), Foothill as a Lender shall
--------------
make an Advance in the amount of such Borrowing (any
24
such Advance made solely by Foothill as a Lender pursuant to this Section 2.1(f)
--------------
being referred to as a "Foothill Loan" and such Advances being referred to
collectively as "Foothill Loans") available to Borrower on the Funding Date
applicable thereto by transferring same day funds to Borrower's Designated
Account. Each Foothill Loan is an Advance hereunder and shall be subject to all
the terms and conditions applicable to other Advances, except that all payments
thereon shall be payable to Foothill as a Lender solely for its own account (and
for the account of the holder of any participation interest with respect to such
Advance). Subject to the provisions of Section 2.1(k), Agent shall not request
--------------
Foothill as a Lender to make, and Foothill as a Lender shall not make, any
Foothill Loan if Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that (i) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on the
---------
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (ii) the requested Borrowing would exceed the Availability of
Borrower on such Funding Date. Foothill as a Lender shall not otherwise be
required to determine whether the applicable conditions precedent set forth in
Section 3 have been satisfied on the Funding Date applicable thereto prior to
---------
making, in its sole discretion, any Foothill Loan.
(ii) The Foothill Loans shall be secured by the
Collateral and shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to Advances pursuant to
Section 2.6 hereof.
-----------
(g) Agent Advances.
--------------
(i) Subject to the limitations set forth in the proviso
contained in this Section 2.1(g), Agent hereby is authorized by Borrower and the
--------------
Lenders, from time to time in Agent's sole discretion, (1) after the occurrence
and during the continuance of a Default or an Event of Default, or (2) at any
time that any of the other applicable conditions precedent set forth in Section
-------
3 have not been satisfied, to make Advances to Borrower on behalf of the Lenders
-
that Agent, in its reasonable business judgment, deems necessary or desirable
(A) to preserve or protect the Collateral, or any portion thereof, (B) to
enhance the likelihood of repayment of the Obligations, or (C) to pay any other
amount chargeable to Borrower pursuant to the terms of this Agreement, including
Lender Group Expenses and the costs, fees, and expenses described in Section 10
----------
(any of the Advances described in this Section 2.1(g) being hereinafter referred
--------------
to as "Agent Advances"); provided, that the Required Lenders may at any time
--------
revoke Agent's authorization contained in this Section 2.1(g) to make Agent
--------------
Advances, any such revocation to be in writing and to become effective upon
Agent's receipt thereof.
(ii) Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Advances and Obligations hereunder,
and shall bear interest at the rate applicable from time to time to the Advances
pursuant to Section 2.6 hereof.
-----------
(h) Settlement. It is agreed that each Lender's funded
----------
portion of the Advances is intended by the Lenders to equal, at all times, such
Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Foothill, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among
25
them as to the Advances, the Foothill Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with
the Lenders on a weekly basis, or on a more frequent basis if so determined by
Agent, (1) on behalf of Foothill, with respect to each outstanding Foothill
Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect
to Collections received, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement,
no later than 2:00 p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such requested Settlement
being the "Settlement Date"). Such notice of a Settlement Date shall include a
summary statement of the amount of outstanding Advances, Foothill Loans, and
Agent Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each Lender of
the interest, fees, and other charges for such period. Subject to the terms and
conditions contained herein (including Section 2.1(e)(iii)): (y) if a Lender's
-------------------
balance of the Advances, Foothill Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Foothill Loans, and Agent Advances as
of a Settlement Date, then Agent shall by no later than 12:00 p.m. (California
time) on the Settlement Date transfer in immediately available funds to the
account of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Foothill Loans, and Agent Advances; and (z)
if a Lender's balance of the Advances, Foothill Loans, and Agent Advances is
less than such Lender's Pro Rata Share of the Advances, Foothill Loans, and
Agent Advances as of a Settlement Date, such Lender shall no later than 12:00
p.m. (California time) on the Settlement Date transfer in immediately available
funds to such account of Agent as Agent may designate, an amount such that each
such Lender shall, upon transfer of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Foothill Loans, and Agent Advances. Such
amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Foothill Loan or
Agent Advance and, together with the portion of such Foothill Loan or Agent
Advance representing Foothill's Pro Rata Share thereof, shall constitute
Advances of such Lenders. If any such amount is not made available to Agent by
any Lender on the Settlement Date applicable thereto to the extent required by
the terms hereof, Agent shall be entitled to recover for its account such amount
on demand from such Lender together with interest thereon at the Defaulting
Lenders Rate.
(ii) In determining whether a Lender's balance of the
Advances, Foothill Loans, and Agent Advances is less than, equal to, or greater
than such Lender's Pro Rata Share of the Advances, Foothill Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in
good funds by Agent or Foothill with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any such Lender after
such application, such net amount shall be distributed by Agent or Foothill to
that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no
Agent Advances or Foothill Loans are outstanding, may pay over to Foothill any
payments received by
26
Agent, that in accordance with the terms of this Agreement would be applied to
the reduction of the Advances, for application to Foothill's Pro Rata Share of
the Advances. If, as of any Settlement Date, Collections received since the then
immediately preceding Settlement Date have been applied to Foothill's Pro Rata
Share of the Advances other than to Foothill Loans or Agent Advances, as
provided for in the previous sentence, Foothill shall pay to Agent for the
accounts of the Lenders, and Agent shall pay to the Lenders, to be applied to
the outstanding Advances of such Lenders, an amount such that each Lender shall,
upon receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Foothill with
respect to Foothill Loans, Agent with respect to Agent Advances, and each Lender
with respect to the Advances other than Foothill Loans and Agent Advances, shall
be entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Foothill, Agent, or the
Lenders, as applicable.
(i) Notation. Agent shall record on its books the principal
--------
amount of the Advances owing to each Lender, including the Foothill Loans owing
to Foothill, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting rebuttably presumptive evidence,
absent manifest error, of the accuracy of the information contained therein.
(j) Lenders' Failure to Perform. All Advances (other than
---------------------------
Foothill Loans and Agent Advances) shall be made by the Lenders simultaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligation to make any Advances hereunder, and (ii) no failure by
any Lender to perform its obligation to make any Advances hereunder shall excuse
any other Lender from its obligation to make any Advances hereunder.
(k) Optional Overadvances. Any contrary provision of this
---------------------
Agreement notwithstanding, if the condition for borrowing under Section 3.2(d)
--------------
cannot be fulfilled, the Lenders nonetheless hereby authorize Agent or Foothill,
as applicable, and Agent or Foothill, as applicable, may, but is not obligated
to, knowingly and intentionally continue to make Advances (including Foothill
Loans) to Borrower such failure of condition notwithstanding, so long as, at any
time, (i) the outstanding Revolving Facility Usage does not exceed the Borrowing
Base by more than five percent (5%) and (ii) the outstanding Revolving Facility
Usage (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolving
Amount. The foregoing provisions are for the sole and exclusive benefit of
Agent, Foothill, and the Lenders and are not intended to benefit Borrower in any
way. The Advances and Foothill Loans, as applicable, that are made pursuant to
this Section 2.1(k) shall be subject to the same terms and conditions as any
--------------
other Advance or Foothill Loan, as applicable, except that the rate of interest
applicable thereto shall be the rates set forth in Section 2.6(c) hereof without
--------------
regard to the presence or absence of a Default or Event of Default; provided,
--------
that the Required Lenders may, at any time during the continuance of an Event of
Default or if Borrower
27
fails to satisfy any other material lending condition, revoke Agent's
authorization contained in this Section 2.1(k) to make Overadvances (except for
--------------
and excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses), any such revocation to be in writing and to become effective
upon Agent's receipt thereof.
In the event Agent obtains actual knowledge that Revolving
Facility Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its value),
and the Lenders thereupon shall, together with Agent, jointly determine the
terms of arrangements that shall be implemented with Borrower intended to
reduce, within a reasonable time, the outstanding principal amount of the
Advances to Borrower to an amount permitted by the preceding paragraph. In the
event any Lender disagrees over the terms of reduction and/or repayment of any
Overadvance, the terms of reduction and/or repayment thereof shall be
implemented according to the determination of the Required Lenders.
Each Lender shall be obligated to settle with Agent as provided in
Section 2.1(h) for the amount of such Lender's Pro Rata Share of any
--------------
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.1(k), and any Overadvances
--------------
resulting from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
(l) Effect of Bankruptcy. If a case is commenced by or
--------------------
against Borrower under the U.S. Bankruptcy Code, or other statute providing for
debtor relief, then, unless otherwise agreed by all Lenders, the Lender Group
shall not make additional loans or provide additional financial accommodations
under the Loan Documents to Borrower as debtor or debtor-in-possession, or to
any trustee for Borrower, nor consent to the use of cash collateral (provided
that the Loan Account shall continue to be charged, to the fullest extent
permitted by law, for accruing interest, fees, and Lender Group Expenses).
2.2 Letter of Credit Subfacility.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration
--------------------------------------------------------
Date. Subject to the terms and conditions of this Agreement, Agent agrees to
----
issue letters of credit for the account of Borrower (each, an "L/C") or to issue
guarantees of payment, indemnities, participations and/or undertakings (each
such guaranty, indemnity, participation or undertaking, an "L/C Guaranty") with
respect to letters of credit issued by an issuing bank for the account of
Borrower. Agent shall have no obligation to issue a Letter of Credit if any of
the following would result:
(i) the sum of 100% of the aggregate amount of all Letter
of Credit Usage would exceed the Borrowing Base less the amount of
outstanding Advances; or
28
(ii) the aggregate amount of all Letter of Credit Usage
would exceed the lower of: (x) the Maximum Revolving Amount less the
----
amount of outstanding Advances; or (y) $10,000,000; or
(iii) the outstanding Obligations would exceed the Maximum
Revolving Amount.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrower and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date or the Initial Advance
Effective Date. Each Letter of Credit shall have an expiry date no later than
60 days prior to the date on which this Agreement is scheduled to terminate
under Section 3.5 (without regard to any potential renewal term) and all such
-----------
Letters of Credit shall be in form and substance acceptable to Agent in its sole
discretion. If the Lender Group is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such amount to Agent and, in the
absence of such reimbursement, the amount so advanced immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to such Advances under Section 2.6.
-----------
(b) Indemnification. Borrower hereby agrees to indemnify,
---------------
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, including payments made by the Lender Group, expenses, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit. Borrower agrees to be bound by the issuing
bank's regulations and interpretations of any Letters of Credit guarantied by
the Lender Group and opened to or for Borrower's account or by Agent's
interpretations of any L/C issued by the Lender Group to or for Borrower's
account, even though this interpretation may be different from Borrower's own,
and Borrower understands and agrees that the Lender Group shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
the L/C Guarantees may require the Lender Group to indemnify the issuing bank
for certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under any
L/C Guaranty as a result of the Lender Group's indemnification of any such
issuing bank.
(c) Supporting Materials. Borrower hereby authorizes and
--------------------
directs any bank that issues a letter of credit guaranteed by the Lender Group
to deliver to Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with such letter of credit and the related application.
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
29
(d) Compensation for Letters of Credit. Any and all charges,
----------------------------------
commissions, fees, and costs incurred by Agent relating to the letters of credit
guaranteed by the Lender Group shall be considered Lender Group Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrower to
Agent.
(e) Cash Collateral. Immediately upon the termination of
---------------
this Agreement, Borrower agrees to either (i) provide cash collateral to be held
by Agent in an amount equal to 105% of the maximum amount of the Lender Group's
obligations under Letters of Credit, or (ii) cause to be delivered to Agent
releases of all of the Lender Group's obligations under outstanding Letters of
Credit. At Agent's discretion, any proceeds of Collateral received by Agent
after the occurrence and during the continuation of an Event of Default may be
held as the cash collateral required by this Section 2.2(e).
-------------
(f) Increased Costs. If by reason of (i) any change in any
---------------
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any governmental authority of any such applicable law, treaty,
rule, or regulation, or (ii) compliance by the issuing bank or Agent with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
a. any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
b. there shall be imposed on the issuing bank or any
other condition regarding any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto; and the result of the foregoing is to
increase, directly or indirectly, the cost to the issuing bank or the Lender
Group of issuing, making, guaranteeing, or maintaining any letter of credit, or
Letter of Credit, as applicable, or to reduce the amount receivable in respect
thereof by such issuing bank or the Lender Group, then, and in any such case,
the Lender Group may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as the issuing bank or Agent may
specify to be necessary to compensate the issuing bank or the Lender Group for
such additional cost or reduced receipt, together with interest on such amount
from the date of such demand until payment in full thereof at the rate set forth
in Section 2.6(a) or (c)(i), as applicable. The determination by the issuing
------------------------
bank or Agent, as the case may be, of any amount due pursuant to this Section
-------
2.2(f), as set forth in a certificate setting forth the calculation thereof in
------
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
(g) Participations.
--------------
(1) Purchase of Participations. Immediately upon
--------------------------
issuance of any Letter of Credit in accordance with this Section 2.2, each
-----------
Lender shall be deemed to have
30
irrevocably and unconditionally purchased and received without recourse or
warranty, an undivided interest and participation in the credit support or
enhancement provided through Agent to such issuer in connection with the
issuance of such Letter of Credit, equal to such Lender's Pro Rata Share of the
face amount of such Letter of Credit (including, without limitation, all
obligations of Borrower with respect thereto, and any security therefor or
guaranty pertaining thereto).
(2) Documentation. Upon the request of any Lender,
-------------
Agent shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through Agent in connection
with the issuance of any Letter of Credit, and such other documentation as may
reasonably be requested by such Lender.
(3) Obligations Irrevocable. The obligations of each
-----------------------
Lender to make payments to Agent with respect to any Letter of Credit or with
respect to any credit support or enhancement provided through Agent with respect
to a Letter of Credit, and the obligations of Borrower to make payments to
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including any of the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or
other right which Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), any Lender, Agent, the issuer of such
Letter of Credit, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions between Borrower
or any other Person and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document
presented under the 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) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan Documents;
or
(v) the occurrence of any Default or Event of
Default.
(g) Recovery or Avoidance of Payments. In the event
---------------------------------
any payment by or on behalf of Borrower received by Agent with respect to any
Letter of Credit (or any guaranty by Borrower or reimbursement obligation of
Borrower relating thereto) and distributed by the Agent to the Lenders on
account of their respective participations therein, is thereafter set aside,
avoided or recovered from Agent in connection with any receivership, liquidation
or bankruptcy proceeding, the Lenders shall, upon demand by Agent, pay to Agent
their respective Pro Rata Shares of such
31
amount set aside, avoided or recovered, together with interest at the rate
required to be paid by Agent upon the amount required to be repaid by it.
2.3 [Intentionally Omitted.]
2.4 Payments.
(a) Payments by Borrower.
--------------------
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim, except as otherwise
required by law. Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Agent for the account of the Lenders at Agent's
address set forth in Section 12, and shall be made in immediately available
----------
funds, no later than 11:00 a.m. (California time) on the date specified herein.
Any payment received by Agent later than 11:00 a.m. (California time), at the
option of Agent, shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue until such
following Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior
to the date on which any payment is due to the Lenders that Borrower will not
make such payment in full as and when required, Agent may assume that Borrower
has made such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrower has not made such
payment in full to Agent, each Lender shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the Reference Rate
for each day from the date such amount is distributed to such Lender until the
date repaid.
(b) Apportionment, Application, and Reversal of Payments.
Except as otherwise provided with respect to Defaulting Lenders, aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Advances to which such
payments relate held by each Lender) and payments of the fees (other than fees
designated for Agent's sole and separate account) shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be remitted to Agent
and all such payments not relating to principal or interest of specific
Advances, or not constituting payment of specific fees, and all proceeds of
Accounts or other Collateral received by Agent, shall be applied, first, to pay
-----
any fees, or expense reimbursements then due to Agent from Borrower; second, to
------
pay any fees or expense reimbursements then due to the Lenders from Borrower;
third, to pay interest due in respect of all Advances (including Foothill Loans
-----
and Agent Advances); fourth, to pay or prepay principal of Foothill Loans and
------
Agent Advances; fifth, ratably to pay principal of the Advances (other than
-----
Foothill Loans and Agent Advances); sixth, to be held by Agent as cash
-----
collateral in accordance
32
with Section 2.2(e) hereof with respect to unreimbursed obligations in respect
--------------
of Letters of Credit; and seventh, ratably to pay any other Obligations due to
Agent or any Lender by Borrower.
2.5 Overadvances. If, at any time or for any reason, the amount
of Obligations pursuant to Sections 2.1 and 2.2 is greater than either the
--------------------
Dollar or percentage limitations set forth in Sections 2.1 or 2.2 (an
-------------------
"Overadvance"), Borrower immediately (or in the case of an Overadvance that is
caused by the charging of interest, fees or Lender Group Expenses to the Loan
Account, within 5 Business Days of incurring such Overadvance) shall pay to
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priority set forth in Section
-------
2.4(b).
-------
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (c) below,
all Obligations (except for the amounts undrawn under Letters of Credit) shall
bear interest on the Daily Balance at a per annum rate of one percentage point
above the Reference Rate.
(b) Letter of Credit Fee. Borrower shall pay Agent, for the
ratable benefit of the Lender Group a fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.2(d)) equal to 1.5% per
--------------
annum times the Daily Balance of the amount of the undrawn Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for the amounts
undrawn under Letters of Credit) shall bear interest on the Daily Balance at a
per annum rate equal to four percentage points above the Reference Rate, and
(ii) the Letter of Credit fee provided in Section 2.6(b) shall be increased to
--------------
4.5% per annum times the amount of the undrawn Letters of Credit that were
outstanding during the immediately preceding month.
(d) Minimum Interest. In no event shall the rate of interest
chargeable under Section 2.6(a) for any day be less than 8% per annum. To the
--------------
extent that interest accrued hereunder at the rate set forth in such section
would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.
(e) Payments. Interest and Letter of Credit fees payable
--------
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Agent, at its option, without
prior notice to Borrower, to charge such interest and Letter of Credit fees, all
Lender Group Expenses (as and when incurred), the charges, commissions, fees,
and costs provided for in Section 2.2(d) (as and when accrued or incurred), the
--------------
fees and charges provided for in Section 2.11 (as and when accrued or incurred),
------------
and all installments or other payments due under any Loan Document to Borrower's
Loan Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.
33
(f) Computation. The Reference Rate as of the date of this
-----------
Agreement is 9% per annum. In the event the Reference Rate is changed from time
to time hereafter, the rate of interest provided for in Section 2.6(a) and
--------------
Section 2.6(c)(i) and (ii) automatically and immediately shall be increased or
--------------------------
decreased by an amount equal to such change in the Reference Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of a
360 day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
-------- -------
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
---- -----
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 Collection of Accounts. Borrower shall at all times maintain
lockboxes (the "Lockboxes") and, promptly after the Closing Date, (i) shall, and
shall cause each of CCI and the respective Subsidiaries of Borrower and CCI to,
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower or CCI, or any of their respective
Subsidiaries, as the case may be, to remit all Collections in respect thereof to
such Lockboxes, and (ii) shall, and shall cause each of CCI and the respective
Subsidiaries of Borrower and CCI to, deposit all other Collections received by
Borrower or CCI, or any of their respective Subsidiaries, from any source
immediately upon receipt into the Lockboxes. Borrower, Agent, and the Lockbox
Banks shall enter into the Lockbox Agreements, which among other things shall
provide for the opening of a Lockbox Account for the deposit of Collections at a
Lockbox Bank. Borrower agrees that all Collections and other amounts received by
Borrower or CCI, or any of their respective Subsidiaries, from any Account
Debtor or any other source immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby shall
be modified by Borrower or CCI, or any of their respective Subsidiaries, without
the prior written consent of Agent. Upon the terms and subject to the conditions
set forth in the Lockbox Agreements, all amounts received in each Lockbox
Account (a) prior to the Initial Advance Effective Date, as long as no Default
or Event of Default has occurred which is continuing, shall be wired each
Business Day to the Designated Account, (b) from and after the Initial Advance
Effective Date, or at any time during which a Default or Event of Default has
occurred which is continuing, shall be wired each Business Day into an account
(the "Agent Account") maintained by Agent at a depositary selected by Agent
which is a financial institution that is a member of the Federal Reserve System
and has combined capital and surplus and undivided profits (or any similar
capital concept) of not less than $500,000,000 and whose senior unsecured debt
is rated at least "A-1" by Standard and Poor's Ratings Corporation or "P-1" by
▇▇▇▇▇'▇ Investors Service.
34
2.8 Crediting Payments; Application of Collections. The receipt
of any Collections by Agent (whether from transfers to Agent by the Lockbox
Banks pursuant to the Lockbox Agreements or otherwise) immediately shall be
applied provisionally to reduce the Obligations outstanding under Section 2.1,
-----------
but shall not be considered a payment on account unless such Collection item is
a wire transfer of immediately available federal funds and is made to the Agent
Account or unless and until such Collection item is honored when presented for
payment. From and after the Closing Date, Agent shall be entitled to charge
Borrower for one Business Day of 'clearance' or 'float' at the rate set forth in
Section 2.6(a) or Section 2.6(c)(i), as applicable, on all Collections that are
-------------- -----------------
received by Borrower, CCI or any other Loan Party, or any of their respective
Subsidiaries, or Agent (regardless of whether forwarded by the Lockbox Banks to
Agent, whether provisionally applied to reduce the Obligations under Section
-------
2.1, whether wire transferred or otherwise paid to the Agent Account, or
---
otherwise). This across-the-board one Business Day clearance or float charge on
all Collections is acknowledged by the parties to constitute an integral aspect
of the pricing of the Lender Group's financing of Borrower, and shall apply
irrespective of the characterization of whether receipts are owned by Borrower,
CCI, any other Loan Party, or any of their respective Subsidiaries, or Agent,
and whether or not there are any outstanding Advances, the effect of such
clearance or float charge being the equivalent of charging one Business Day of
interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Agent only if it is received into the Agent Account on a Business
Day on or before 11:00 a.m. California time. If any Collection item is received
into the Agent Account on a non-Business Day or after 11:00 a.m. California time
on a Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day. Anything
contained herein to the contrary notwithstanding, the economic benefit of the
one Business Day clearance or float charge provided for in this Section 2.8 is
-----------
not for the ratable benefit of the Lenders, but instead shall be for the sole
and separate account of Agent.
2.9 Designated Account. Agent, Foothill, and the Lenders are
authorized to make the Advances and the Letters of Credit under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Person, or without instructions if pursuant to Section 2.6(e).
--------------
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Agent, Foothill or the Lenders
hereunder. Unless otherwise agreed by Agent and Borrower, any Advance requested
by Borrower and made hereunder shall be made to the Designated Account. If as
the result of the receipt of any Collections into the Agent Account a credit
balance exists in the Loan Account, such credit balance shall not receive
interest in favor of Borrower, but shall be returned to Borrower prior to the
Initial Advance Effective Date, and thereafter as long as no Default or Event of
Default has occurred which is continuing, as follows: (i) a credit balance in
the Loan Account which results from a Collection received into the Agent Account
on a Business Day on or before 11:00 a.m. California time shall be forwarded to
the Designated Account on the same Business Day as received; and (ii) a credit
balance in the Loan Account which results from a Collection received into the
Agent Account on a non-Business Day
35
or after 11:00 a.m. California time on a Business Day shall be forwarded to the
Designated Account on the immediately following Business Day.
2.10 Maintenance of Loan Account; Statements of Obligations. Agent
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances made by Agent,
Foothill, or the Lenders to Borrower or for Borrower's account, including,
accrued interest, Lender Group Expenses, and any other payment Obligations of
Borrower. In accordance with Section 2.8, the Loan Account will be credited with
-----------
all payments received by Agent from Borrower or for Borrower's account,
including all amounts received in the Agent Account from any Lockbox Bank. Agent
shall render statements regarding the Loan Account to Borrower, including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Agent for the ratable benefit of
the Lender Group (except as otherwise indicated) the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of
$375,000 less the $187,500 commitment fee heretofore paid by Borrower or CCI to
Foothill pursuant to that certain letter agreement dated as of on or about March
21, 2000, by and among Foothill, CCI and Borrower;
(b) Unused Line Fee. On the first day of each month after
the Closing Date during the term of this Agreement, an unused line fee in an
amount equal to one quarter of one percent (0.25%) per annum times the Average
Unused Portion of the Maximum Revolving Amount.
(c) Loan Servicing Fee. On the first day of each month
after the Closing Date during the term of this Agreement, a loan servicing fee
in an amount equal to $7,500 per month, which amount shall be fully earned and
nonrefundable and be payable in arrears on the first day of each month;
(d) Financial Examination, Documentation, and Appraisal
Fees. Agent's customary fee of $750 per day per examiner, plus Agent's
reasonable out-of-pocket expenses for each financial analysis and examination
(i.e., audits) of Borrower performed by personnel employed by Agent; Agent's
customary one-time electronic reporting setup fee of $3,000, plus Agent's
out-of-pocket expenses relating thereto; the actual charges paid or incurred by
Agent if it elects to employ the services of one or more third Persons to
perform such financial analyses and examinations (i.e., audits) of Borrower or
to appraise the Collateral. Unless a Default has occurred, the number of audits
and appraisals per calendar year for which Borrower shall be responsible for
paying of the above described appraisal fees and out-of-pocket expenses of Agent
shall not exceed four.
36
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Closing Date. The Closing Date is
subject to the fulfillment, to the satisfaction of Agent and its counsel, of
each of the following conditions on or before April 28, 2000 (or such earlier
date as may be specified below):
(a) Agent shall have received all financing statements and
fixture filings required by Agent, duly executed by Borrower and each of the
other Loan Parties;
(b) Agent shall have received each of the following
documents, in form and substance satisfactory to Agent, duly executed, and each
such document shall be in full force and effect:
i. the Lockbox Agreements;
ii. the Pay-Off Letters executed by each of ▇▇▇▇▇▇▇ Sachs
Credit Partners, L.P., and its Affiliates under which such
Persons are obligated to deliver to Agent UCC termination
statements and other documentation evidencing the termination
by each of them of its respective Liens in and to the
properties and assets of Borrower and the other Loan Parties;
iii. the Guaranty Agreements;
iv. the Stock Pledge Agreements;
v. the Security Agreements; and
vi. such other documents as shall be required by
Agent;
(c) Agent shall have received a certificate from the
Secretary of Borrower and each other Loan Party attesting to the resolutions of
Borrower's and each other Loan Party's Board of Directors authorizing its
execution, delivery, and performance of this Agreement and the other Loan
Documents to which it is a party and authorizing specific officers of it to
execute the same;
(d) Agent shall have received copies of Borrower's and each
other Loan Party's Governing Documents, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of Borrower and each other Loan
Party, as the case may be;
(e) Agent shall have received a certificate of status with
respect to Borrower and each other Loan Party, dated within 10 days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of Borrower and each other Loan Party, which
certificate shall indicate that Borrower and each other Loan Party is in good
standing in such jurisdiction;
37
(f) Agent shall have received certificates of status with
respect to Borrower and each other Loan Party, each dated within 15 days of the
Closing Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
Borrower and each other Loan Party is in good standing in such jurisdictions;
(g) [Intentionally omitted];
(h) Agent shall have received an opinion of Borrower's
counsel and each Guarantor's counsel in form and substance satisfactory to Agent
in its sole discretion;
(i) Borrower or CCI shall have not less than $125,000,000 of
Availability and unrestricted immediately available cash on hand after making
the payments described in Section 7.17(a) and the $187,500 due on the Closing
---------------
Date pursuant to Section 2.11(a), as determined by Agent;
---------------
(j) Agent shall have received and reviewed (i) Borrower's
consolidated December 31, 1999 financial statements prepared by Borrower's
accountants which they are prepared to issue as audited provided that such
financial statements would be subject to a going concern qualification, and the
results of such review shall be satisfactory to Agent, and (ii) Borrower's
consolidated February 29, 2000 financial statements prepared by Borrower's
management, and the results of such review shall be satisfactory to Agent, in
its sole discretion;
(k) Agent shall have completed its legal due diligence,
including a review of material contracts (including the indentures with respect
to all material debt), and the results thereof shall be satisfactory to Agent,
in its sole discretion;
(l) there shall have been no material adverse change in the
business, operations, assets, financial condition or prospects of Borrower and
guarantors since December 31, 1999 which is not set forth in Borrower's business
plan and financial projections dated as of February 15, 2000 which Borrower
delivered to Agent prior to March 21, 2000;
(m) at least $150,000,000 of additional equity capital shall
have been contributed to Borrower or CCI, on terms and conditions and pursuant
to documentation mutually acceptable to Borrower and Agent;
(n) Agent and counsel to Agent shall have received and
reviewed all documentation relating to the Unsecured Notes, including, without
limitation, the Unsecured Notes Indenture, and all of such documentation, and
the terms and provisions of such documentation, including, without limitation,
the Unsecured Notes and the Unsecured Notes Indenture, shall be acceptable to
Agent and its counsel;
(o) Agent shall have received payment in full in immediately
available funds of all amounts due on the Closing Date pursuant to Section
-------
2.11(a);
-------
38
(p) Agent shall have received evidence satisfactory to Agent
in its sole discretion that the Lien securing any and all present or future
Indebtedness or obligations of any Loan Party to Cisco Systems, Inc., Cisco
Systems Capital Corporation or any of their respective Affiliates is limited to
the specific items and property described on Exhibit 3.1(p) attached hereto and
--------------
made a part hereof, and that all security agreements pertaining to such
Indebtedness or other obligations shall have been amended to provide that such
Lien is so limited;
(q) Agent shall have received the original stock
certificates evidencing all shares of stock of Cavion Technologies, Inc. owned
or controlled by any Loan Party, together with stock powers covering such shares
duly executed in blank by each Loan Party which owns or controls any such
shares; and
(r) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent
and its counsel.
3.2 Conditions Precedent to the Initial Advance and Letter of
Credit. The obligation of the Lender Group (or any member thereof) to make the
initial Advance or to issue the initial Letter of Credit is subject to the
fulfillment, to the satisfaction of Agent and its counsel, of each of the
following conditions on or before the Initial Advance Effective Date (or such
earlier date as may be specified below):
(a) Agent shall have received searches reflecting the filing
of all financing statements and fixture filings of Borrower and the other Loan
Parties required by Agent;
(b) Agent shall have received each of the following
documents, in form and substance satisfactory to Agent, duly executed, and each
such document shall be in full force and effect:
i. the Disbursement Letter;
ii. the Pay-Off Letter of Deutsche Financial Services
Corporation and its Affiliates, together with UCC
termination statements and other documentation evidencing
the termination by such Persons of their respective Liens in
and to the properties and assets of Borrower and the other
Loan Parties; and
iii. an estoppel letter of Norwest Bank Colorado, N.A.
in favor of Agent for the benefit of the Lender Group,
pursuant to which such bank agrees that it has no present or
future Lien on the Collateral other than specifically
identified deposit accounts at such bank which are consented
to by Agent;
39
(c) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
------------
form and substance of which shall be satisfactory to Agent and its counsel;
(d) Agent shall have received satisfactory evidence that
all tax returns required to be filed by Borrower and each other Loan Party have
been timely filed and all taxes upon Borrower and each other Loan Party, or its
respective properties, assets, income, and franchises (including real property
taxes and payroll taxes), have been paid prior to delinquency, except such taxes
that are the subject of a Permitted Protest;
(e) Agent shall have received UCC terminations, UCC
amendments, UCC releases and other documentation evidencing the termination,
amendment and release, as the case may be, of all UCC financing statements and
other documents which disclose a Lien on any of the Collateral other than a
Permitted Lien as are requested by Agent, including those listed on Exhibit
-------
3.2(e) attached hereto and made a part hereof;
------
(f) Agent shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as Agent
may require; and
(g) Agent shall have received and reviewed a current audit
of Borrower performed recently by Foothill's auditors, the results of such audit
shall be acceptable to Agent, in Agent's discretion, and Agent shall have
received from Borrower since the date of such audit current collateral reporting
acceptable to Agent, in Agent's reasonable discretion.
3.3 Conditions Precedent to all Advances and all Letters of
Credit. The following shall be conditions precedent to all Advances and all
Letters of Credit hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either result
from the making thereof;
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Agent, the Lender Group, or any of their Affiliates; and
(d) the amount of the Revolving Facility Usage, after giving
effect to the requested Advance or Letter of Credit, shall not exceed the
Availability.
The foregoing conditions precedent are not conditions to each Lender (i)
participating in or reimbursing Agent for such Lenders' Pro Rata Share of any
drawings under Letters of Credit as
40
provided herein, or (ii) participating in or reimbursing Foothill or the Agent
for such Lenders' Pro Rata Share of any Foothill Loan or Agent Advance as
provided herein.
3.4 Condition Subsequent. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.10, the form and substance of which shall
------------
be satisfactory to Agent and its counsel; and
(b) within 10 days of the Closing Date, deliver to Agent UCC
amendments and other documentation evidencing the amendment of each UCC
financing statement and other instrument disclosing a Lien of Cisco Systems,
Inc., Cisco Systems Capital Corporation, and any of its respective Affiliates,
to limit the Lien disclosed thereby to the specific items and property described
on Exhibit 3.1(p) attached hereto and made a part hereof.
--------------
3.5 Term; Automatic Renewal.
(a) This Agreement shall become effective upon the execution
and delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on the date (the "Renewal Date") that is
three (3) years from the Closing Date and automatically shall be renewed for
successive one year periods thereafter, unless sooner terminated pursuant to the
terms hereof.
(b) Either party may terminate this Agreement effective on
the Renewal Date or on any one year anniversary of the Renewal Date by giving
the other party at least 90 days prior written notice. The foregoing
notwithstanding, the Lender Group shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.6 Effect of Termination.
(a) On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrower with
respect to any outstanding Letters of Credit) immediately shall become due and
payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrower of Borrower's duties, Obligations, or
covenants hereunder or under the other Loan Documents, and Agent's continuing
security interests in the Collateral, for the benefit of the Lender Group, shall
remain in effect until all Obligations have been fully and finally discharged
and the Lender Group's obligations to provide additional credit hereunder have
been terminated.
(b) If Borrower has sent a notice of termination pursuant to
the provisions of Section 3.5, but fails to pay the Obligations in full on the
-----------
date set forth in said notice,
41
then the Lender Group may, but shall not be required to, renew this Agreement
for an additional term of one year.
3.7 Early Termination by Borrower. The provisions of Section 3.5
-----------
that allow termination of this Agreement by Borrower only on the Renewal Date
and certain anniversaries thereof notwithstanding, Borrower has the option, at
any time upon 90 days prior written notice to Agent, to terminate this Agreement
by paying to Agent, for the ratable benefit of the Lender Group, in cash, the
Obligations (including an amount equal to 105% of the undrawn amount of the
Letters of Credit except for such Letters of Credit as are replaced or
guaranteed in full by financial institutions acceptable to Agent pursuant to
documentation acceptable to Agent), in full, together with a premium (the "Early
Termination Premium") equal to (a) if the termination occurs on or before the
first anniversary of the Closing Date, an amount equal to three percent (3%) of
the Maximum Revolving Amount, (b) if the termination occurs after the first
anniversary of the Closing Date, but on or before the second anniversary of the
Closing Date, an amount equal to one and one-half percent (1.50%), and (c) if
the termination occurs after the second anniversary of the Closing Date (other
than during the 30 day period immediately preceding the Renewal Date) an amount
equal to one-half of one percent (0.50%) of the Maximum Revolving Amount.
3.8 Termination Upon Event of Default. If the Lender Group
terminates this Agreement upon the occurrence of an Event of Default, in view of
the impracticability and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of the Lender
Group's lost profits as a result thereof, Borrower shall pay to Agent, for the
ratable benefit of the Lender Group, upon the effective date of such
termination, a premium in an amount equal to the Early Termination Premium. The
Early Termination Premium shall be presumed to be the amount of damages
sustained by the Lender Group as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.8 shall
-----------
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to
Agent, for the benefit of the Lender Group, continuing Liens on all right,
title, and interest of Borrower in and to all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents (the "Agent's Liens"). The
Agent's Liens in and to the Collateral shall attach to all Collateral without
further act on the part of the Lender Group or Borrower. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding,
except for the sale of Inventory to buyers in the ordinary course of business,
the use of Equipment in the ordinary course of business and dispositions of
Equipment that is obsolete or no longer useful in any Loan Party's business to
the extent permitted in Section 7.4 and other dispositions permitted under
-----------
Section 7.4 hereof, Borrower has no authority, express or implied, to dispose of
-----------
any item or portion of the Collateral. Subject to Section 2.4(b), the secured
--------------
claims of the Lender Group secured by the Collateral shall be of equal priority,
and ratable according to the respective Obligations due each member of the
Lender Group.
42
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower promptly shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time, Agent or Agent's designee may at any time after the
occurrence of an Event of Default which is continuing (a) notify customers or
Account Debtors that the Accounts, General Intangibles, or Negotiable Collateral
have been assigned to Agent for the benefit of the Lender Group, or that Agent,
for the benefit of the Lender Group, has a security interest therein and (b)
collect the Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to the Loan Account. Borrower
agrees that it will hold in trust for the Lender Group, as the Lender Group's
trustee, any Collections that it receives and immediately will deliver said
Collections to Agent in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time
upon the request of Agent, Borrower shall execute and deliver to Agent all
financing statements, collateral assignments, continuation financing statements,
fixture filings, security agreements, pledges, assignments, mortgages, leasehold
mortgages, deeds of trust, leasehold deeds of trust, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in form satisfactory to Agent, to perfect and continue
perfected the Agent's Liens on the Collateral (whether now owned or hereafter
arising or acquired), and in order to consummate fully all of the transactions
contemplated hereby and under the other the Loan Documents; provided, however,
that until such time as Agent or the Lenders have accelerated all or any part of
the Obligations following the occurrence of an Event of Default, Borrower shall
not be required to obtain any Control Agreements for the benefit of Agent or
perfect Agent's Liens on any deposit account (other than with respect to the
Lockbox Accounts and other deposit accounts and/or Securities Accounts which may
contain proceeds of Collateral).
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as Borrower's true and lawful attorney, with power
to (a) if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower on any of the
-----------
documents described in Section 4.4, (b) at any time that an Event of Default has
-----------
occurred and is continuing or Agent deems itself insecure, sign Borrower's name
on any invoice or ▇▇▇▇ of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors, (c) send requests for verification of Accounts (with
respect to such requests sent prior to the occurrence of an Event of Default,
such requests shall be styled in the name of either Borrower or another Person
other than Agent) (d) endorse Borrower's name on any Collection item that may
come into the Lender Group's possession, (e) at any time that an Event of
Default has occurred and is continuing or the Lender Group deems itself
insecure, notify the post office authorities to change the address for delivery
of Borrower's mail to an address designated by Agent, to receive and open all
mail addressed to Borrower, and to retain all mail relating to the Collateral
and forward all other mail to Borrower, (f)
43
at any time that an Event of Default has occurred and is continuing or Agent
deems itself insecure, make, settle, and adjust all claims under Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Agent deems itself insecure, settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as Borrower's attorney, and
each and every one of Agent's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and the Lender Groups' obligations to extend credit hereunder are
terminated.
4.6 Right to Inspect. Agent (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect the Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral; provided, however, that
prior to the occurrence on an Event of Default that is continuing, such right
shall be exercisable only during ordinary business hours.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete in all respects as of the date
hereof, and shall be true, correct, and complete in all respects as of the
Closing Date, and at and as of the date of the making of each Advance or Letter
of Credit made thereafter, as though made on and as of the date of the making of
such Advance or Letter of Credit (except to the extent that such representations
and warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation, except for ordinary product
and service warranty claims in the ordinary cause of business which have not
been asserted by the Account Debtor thereunder and contract terminations in the
ordinary course of business which have not been asserted by the Account Debtor
thereunder. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. Borrower has not
received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any Account Debtor regarding any
Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory, other than
Inventory manufactured or assembled by Persons that are not a Loan Party, is of
good and merchantable
44
quality, free from defects. To the best of Borrower's knowledge, all Eligible
Inventory manufactured or assembled by Persons that are not a Loan Party is of
good and merchantable quality, free from defects.
5.4 Equipment. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party and are
located only at the locations identified on Schedule 6.12 or otherwise permitted
by Section 6.12.
------------
5.6 Inventory Records. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrower's cost therefor.
5.7 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇. The chief executive office of each
of CCI, CCC, and WAI, is located at the same location as Borrower's address
indicated in the preamble to this Agreement, CCI's FEIN is ▇▇-▇▇▇▇▇▇▇, CCC's
FEIN is ▇▇-▇▇▇▇▇▇▇, and WAI's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower and each other Loan Party is duly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified reasonably could
be expected to constitute a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate
------------
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding and the number of such shares that are held in
Borrower's treasury. All such outstanding shares have been validly issued and,
as of the Closing Date, are fully paid, nonassessable shares free of contractual
preemptive rights. The issuance and sale of all such shares have been in
compliance with all applicable federal and state securities laws. Other than as
described on Schedule 5.8, there are no subscriptions, options, warrants, or
------------
calls relating to any shares of Borrower's or any of its Subsidiaries' capital
Stock, including any right of conversion or exchange under any outstanding
security or other instrument. Except as set forth on Schedule 5.8, neither
------------
Borrower nor any of its Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.
(c) Set forth on Schedule 5.8, is a complete and accurate
------------
list of Borrower's and each other Loan Party's direct and indirect Subsidiaries,
as of the Closing Date, showing: (i) the jurisdiction of their incorporation;
(ii) the number of shares of each class of common and preferred Stock authorized
for each of such Subsidiaries; and (iii) the number and the percentage of the
outstanding shares of each such class owned directly or indirectly by Borrower
45
and such Loan Party, as the case may be. All of the outstanding capital Stock of
each such Subsidiary has been validly issued and is fully paid and non-
assessable.
(d) Except as set forth on Schedule 5.8, no capital Stock
------------
(or any securities, instruments, warrants, options, purchase rights, conversion
or exchange rights, calls, commitments or claims of any character convertible
into or exercisable for capital Stock) of any direct or indirect Subsidiary of
Borrower or any of its Subsidiaries is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right, call,
commitment or claim of any right, title, or interest therein or thereto.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower and
each other Loan Party of this Agreement and the Loan Documents to which it is a
party have been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower and
each other Loan Party of this Agreement and the Loan Documents to which it is a
party do not and will not (i) violate any provision of federal, state, or local
law or regulation (including Regulations T, U, and X of the Federal Reserve
Board) applicable to Borrower or such Loan Party, the Governing Documents of
Borrower or such Loan Party, or any order, judgment, or decree of any court or
other Governmental Authority binding on Borrower or such Loan Party, as the case
may be, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation or material lease of Borrower or such Loan Party, as the case may be,
(iii) result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Borrower or such Loan Party, as the
case may be, other than Permitted Liens, or (iv) require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of Borrower or such Loan Party, as the case may be.
(c) Other than the taking of any action expressly required
under this Agreement and the Loan Documents, the execution, delivery, and
performance by Borrower and each other Loan Party of this Agreement and the Loan
Documents to which it is a party do not and will not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
federal, state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Agent's Liens granted by Borrower and/or other Loan
Parties to Agent, for the benefit of the Lender Group, in and to its properties
and assets pursuant to this
46
Agreement and the other Loan Documents are validly created, perfected, and first
priority Liens, subject only to Permitted Liens and except with respect to
deposit accounts other than the Lockbox Accounts and other deposit accounts
which may contain proceeds of Collateral.
5.10 Litigation. There are no actions or proceedings pending by or
against Borrower or any Loan Party before any court or administrative agency and
neither Borrower nor any other Loan Party has knowledge or belief of any pending
or threatened litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Borrower, any other Loan Party or any
guarantor of the Ob ligations, except for: (a) ongoing collection matters in
which Borrower or such other Loan Party is the plaintiff; (b) matters disclosed
on Schedule 5.10; and (c) matters arising after the date hereof which reasonably
-------------
could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.
5.12 No Fraudulent Transfer.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries,
any other Loan Party, or any of their ERISA Affiliates maintains or contributes
to any Benefit Plan, other than those listed on Schedule 5.13. Borrower, each of
-------------
its Subsidiaries, each other Loan Party and each ERISA Affiliate have satisfied
the minimum funding standards of ERISA and the IRC with respect to each Benefit
Plan to which it is obligated to contribute. No ERISA Event has occurred nor has
any other event occurred that may result in an ERISA Event that reasonably could
be expected to result in a Material Adverse Change. None of Borrower or its
Subsidiaries, any other Loan Party, any ERISA Affiliate, or any fiduciary of any
Plan is subject to any direct or indirect liability in excess of $1,000,000
individually or in the aggregate with respect to any Plan under any applicable
law, treaty, rule, regulation, or agreement. None of Borrower or its
Subsidiaries or any ERISA Affiliate is required to provide security to any Plan
under Section 401(a)(29) of the IRC.
5.14 Environmental Condition. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or
47
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. None of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Except for matters arising
after the Closing Date which reasonably could not be expected to result in a
Material Adverse Change, Borrower has not received a summons, citation, notice,
or directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by Borrower
resulting in the releasing or disposing of Hazardous Materials into the
environment.
5.15 Brokerage Fees. No brokerage commission or finders fees has
or shall be incurred or payable in connection with or as a result of Borrower's
obtaining financing from the Lender Group under this Agreement, and Borrower has
not utilized the services of any broker or finder in connection with Borrower's
obtaining financing from the Lender Group under this Agreement. Agent
acknowledges that Agent has not hired any broker that would be entitled to any
brokerage commission or finders fee in connection with the transactions
contemplated herein.
5.16 Permits and other Intellectual Property. Borrower and each
other Loan Party owns or possesses adequate licenses or other rights to use all
Permits, patents, patent applications, trademarks, trademark applications,
service marks, service ▇▇▇▇ applications, trade names, copyrights, trade secrets
and know-how (collectively, the "Intellectual Property") that are necessary for
the operation of its business as currently conducted. Except for matters arising
after the Closing Date which reasonably could not be expected to result in a
Material Adverse Change, no claim is pending or threatened to the effect that
Borrower or any other Loan Party infringes upon, or conflicts with, the asserted
rights of any other Person under any Intellectual Property, and to the best of
Borrower's knowledge there is no basis for any such claim (whether pending or
threatened). No claim is pending or threatened to the effect that any material
Intellectual Property owned or licensed by Borrower, or in which Borrower
otherwise has the right to use is invalid or unenforceable by Borrower, and to
the best of Borrower's knowledge there is not basis for any such claim (whether
or not pending or threatened).
5.17 Outstanding Balance of Unsecured Notes. The outstanding
balance owing under the Unsecured Notes and the Unsecured Notes Indenture is a
total of $160,000,000 plus interest which has accrued thereon since October 15,
1999 at the rate of 13% per year.
5.18 Filing of Tax Returns and Payment of Taxes. Borrower and each
other Loan Party has timely filed all tax returns required of it and all taxes
upon Borrower and each other Loan Party, or its respective properties, assets,
income, and franchises (including real property taxes and payroll taxes), have
been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest.
Borrower may, at any time and from time to time and subject to Section 6.12,
------------
amend any one or more of the Schedules referred to in this Section 5 to provide
---------
supplemental information that is acceptable to Agent, and any representation or
warranty contained herein which refers to any
48
such Schedule shall, from and after the date of any such amendment, refer to
such Schedule as so amended; provided, however, that in no event may Borrower
amend any such Schedule if such amendment would reflect or evidence a Default or
Event of Default; provided further, however, that no amendment to a Schedule
shall cure any misrepresentation prior thereto, nor shall it in any way affect
or limit Agent's or any Lender's rights and remedies with respect to any Default
or Event of Default disclosed thereby or resulting from such misrepresentation.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall, and shall cause each Loan Party to, do all of the following:
6.1 Accounting System. Maintain a standard and modern system of
accounting that enables Borrower and each Loan Party to produce financial
statements in accordance with GAAP, and maintain records pertaining to the
Collateral that contain information as from time to time may be requested by
Agent. Borrower and each Loan Party also shall keep a modern inventory reporting
system that shows all additions, sales, claims, returns, and allowances with
respect to the Inventory.
6.2 Collateral Reporting.
(a) Provide Agent, on a weekly basis, Collections reports
specifying Borrower's, CCI's and each other Loan Party's, and each of their
respective Subsidiaries', Collections for the immediately preceding calendar
week; and
(b) From and after the Initial Advance Effective Date,
provide Agent with the following documents at the following times in form
satisfactory to Agent: (i) on each Business Day, or less frequently if agreed to
by Agent, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Eligible Accounts component of the
Borrowing Base as of such date, (ii) on a monthly basis and, in any event, by no
later than the 15th day of each month during the term of this Agreement, (A) a
detailed calculation of the Borrowing Base as of the last day of the immediately
preceding month, (B) a detailed aging, by total, of the Accounts as of the last
day of the immediately preceding month, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Agent, and (C)
a detailed calculation of the Unsecured Notes Indebtedness Limitation, (iii) on
a monthly basis and, in any event, by no later than the 15th day of each month
during the term of this Agreement, a summary aging, by vendor, of Borrower's
accounts payable and any book overdraft as of the last day of the immediately
preceding month, (iv) on a monthly basis, Inventory reports specifying
Borrower's cost and the wholesale market value of its Inventory by category,
with additional detail showing additions to and deletions from the Inventory,
(v) upon reasonable request by Agent, notice of all outstanding returns,
disputes, or claims, (vi) upon reasonable request, copies of invoices in
connection with the Accounts, customer statements, credit memos, remittance
advices and reports, deposit slips, shipping and delivery documents in
connection with the Accounts and for Inventory and Equipment acquired by
Borrower, purchase orders and invoices, (vii) on a quarterly basis, a
49
detailed list of Borrower's customers, (viii) on a monthly basis, a calculation
of the Dilution for the prior month; and (ix) such electronic data or other
reports as to the Collateral or the financial condition of Borrower as Agent may
reasonably request from time to time.
6.3 Financial Statements, Reports, Certificates. Deliver to
Agent, with copies to each Lender: (a) as soon as available, but in any event
within 30 days after the end of each month during each of CCI's fiscal years, a
company prepared balance sheet, income statement, and statement of cash flow
covering CCI's operations during such period; and (b) as soon as available, but
in any event within 90 days after the end of each of CCI's fiscal years,
financial statements of CCI and its Subsidiaries for each such fiscal year,
audited by independent certified public accountants reasonably acceptable to
Agent and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Agent stating that such accountants do not have
knowledge of the existence of any Default or Event of Default. Such audited
financial statements shall include a balance sheet, profit and loss statement,
and statement of cash flow and, if prepared, such accountants' letter to
management. Borrower agrees to deliver financial statements prepared on a
consolidating basis so as to present Borrower and each such related entity
separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Agent,
with copies to each Lender, CCI's Form 10-Q Quarterly Reports, Form 10-K Annual
Reports, and Form 8-K Current Reports, and any other filings made by CCI with
the SEC, if any, as soon as the same are filed, or any other information that is
provided by CCI to its shareholders, and any other report reasonably requested
by the Lender Group relating to the financial condition of Borrower or any other
Loan Party.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Agent, with copies to each
--------------
Lender, a certificate signed by its chief financial officer to the effect that:
(i) all financial statements delivered or caused to be delivered to any one or
more members of the Lender Group hereunder have been prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of CCI, (ii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (iii) for each
month that also is the date on which a financial covenant in Section 7.20 is to
------------
be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such certificate
------------
to Agent there does not exist, to the knowledge of such officer, any condition
or event that constitutes a Default or Event of Default (or, in the case of
clauses (i), (ii), or (iii), to the extent of any non-compliance, describing
such non-compliance as to which he or she may have knowledge and what action
Borrower has taken, is taking, or proposes to take with respect thereto).
50
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Agent and to
release to Agent whatever financial information concerning Borrower that Agent
may request. Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Agent, at Borrower's expense,
copies of Borrower's financial statements, papers related thereto (except that
audit workpapers shall not be required to be delivered unless there has occurred
an Event of Default which is continuing), and other accounting records of any
nature in their possession, and to disclose to Agent any information they may
have regarding Borrower's business affairs and financial conditions.
6.4 Tax Returns. Deliver to Agent copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 [Intentionally Omitted].
6.6 Returns. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Agent) in the appropriate amount to such Account Debtor. If, at a time when
an Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Agent consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Agent) in the
appropriate amount to such Account Debtor.
6.7 [Intentionally Omitted.]
6.8 Maintenance of Equipment. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.9 Taxes.
(a) Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property or assets to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax (other than payroll taxes or taxes that are
the subject of a United States federal tax lien) shall be the subject of a
Permitted Protest.
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(b) Make due and timely payment or deposit of all such
federal, state, and local taxes, assessments, or contributions required of it by
law (except for items subject to a Permitted Protest), and will execute and
deliver to Agent, on demand, appropriate certificates attesting to the payment
thereof or deposit with respect thereto.
(c) Make timely payment or deposit of all payroll taxes,
excise taxes, withholding taxes and third-party collection taxes required of it
by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Agent with proof satisfactory to Agent indicating that Borrower has made
such payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other special perils,
and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating to
Borrower's ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the
type necessary to insure the Inventory and Equipment, and each location of the
Loan Parties, for the full replacement cost thereof, against any loss by fire,
lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage,
and other risks from time to time included under "special perils coverage"
policies, in such amounts as Agent may require, but in any event in amounts
sufficient to prevent Borrower from becoming a co-insurer under such policies,
(ii) combined single limit bodily injury and property damages insurance against
any loss, liability, or damages on, about, or relating to each of the Loan
Parties' locations, in an amount of not less than $1,000,000 per occurrence and
$2,000,000 in the aggregate; and (iii) insurance for such other risks as Agent
may require.
(c) [Intentionally Omitted.]
(d) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Agent. All insurance required herein shall be written by companies which have a
Best's rating of A for capital and X for financial stability. All hazard
insurance and such other insurance as Agent shall specify, shall contain a Form
438BFU (NS) mortgagee endorsement, or an equivalent endorsement satisfactory to
Agent, showing Agent as sole loss payee thereof as to all of the Collateral
covered thereby, and shall contain a waiver of warranties. Every policy of
insurance referred to in this Section 6.10 shall contain an agreement by the
------------
insurer that it will not cancel such policy except after 10 days prior written
notice to Agent if cancellation is for nonpayment of premium and 30 days prior
written notice to Agent if the cancellation is for any other reason, and that
any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrower or the Lender Group which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
52
notwithstanding (i) occupancy or use of the Real Property for purposes more
hazardous than permitted by the terms of such policy, (ii) any foreclosure or
other action or proceeding taken by the Lender Group pursuant to the Security
Documents upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Collateral. Borrower shall deliver to Agent certified
copies of such policies of insurance and evidence of the payment of all premiums
therefor.
(e) Original policies or certificates thereof satisfactory
to Agent evidencing such insurance shall be delivered to Agent prior to the
expiration of the existing or preceding policies. Borrower shall give Agent
prompt notice of any loss covered by such insurance which exceeds $100,000
individually or collectively with all other related losses. Prior to the
occurrence of an Event of Default which is continuing, Borrower shall have the
right to adjust any loss which, (i) individually or collectively with all other
related losses, is less than $100,000, (ii) is a property loss to Equipment, or
(iii) is a loss covered under Borrower's liability insurance policies. Except
for property losses to Equipment and losses covered under Borrower's liability
insurance policies, Agent shall have the exclusive right to adjust (A) any loss
which, individually or collectively with all other related losses, is $100,000
or greater, and (B) any loss from and after the occurrence of an Event of
Default which is continuing, in each case without any liability to Borrower
whatsoever in respect of such adjustments. Borrower shall be permitted to
discuss proposed adjustments of losses with its insurance carriers; provided,
however, that (I) Borrower shall not have the authority to agree to or settle
without Agent's prior written approval any loss which Agent has the exclusive
right to adjust hereunder, and (II) Agent reserves the right to adjust such
losses independently of Borrower at any time. Any monies received as payment for
any loss of or affecting any Collateral under any insurance policy including the
insurance policies mentioned above, shall be paid over to Agent for deposit into
the Agent Account to be applied, subject to the terms of the last sentence of
Section 2.9, to the Obligations in such order or manner as Agent may elect.
-----------
(f) Borrower shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 6.10, unless Agent is included thereon as named insured with the
loss payable to Agent under a standard 438BFU (NS) Mortgagee endorsement, or its
local equivalent. Borrower immediately shall notify Agent whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and originals of such policies
immediately shall be provided to Agent.
6.11 No Setoffs or Counterclaims. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.12; provided, however,
------------- -------- -------
that Borrower may amend Schedule 6.12 so long as such amendment occurs by
written notice to Agent not less than 30 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such
53
written notification, Borrower provides any financing statements or fixture
filings necessary or advisable to perfect and continue perfected the Agent's
Liens on such assets and also provides to Agent a Collateral Access Agreement.
6.13 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.14 Employee Benefits.
(a) Cause to be delivered to Agent: (i) promptly, and in any
event within 10 Business Days after Borrower or any of its Subsidiaries knows or
has reason to know that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement of the
chief financial officer of Borrower describing such ERISA Event and any action
that is being taking with respect thereto by Borrower, any such Subsidiary or
ERISA Affiliate, and any action taken or threatened by the IRS, Department of
Labor, or PBGC. Borrower or such Subsidiary, as applicable, shall be deemed to
know all facts known by the administrator of any Benefit Plan of which it is the
plan sponsor, (ii) promptly, and in any event within 3 Business Days after the
filing thereof with the IRS, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by Borrower, any of
its Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with
respect to such request, and (iii) promptly, and in any event within 3 Business
Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
(b) Cause to be delivered to Agent, upon Agent's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such
54
payments are the subject of a Permitted Protest. To the extent that Borrower
fails timely to make payment of such rents and other amounts payable when due
under its leases, Agent shall be entitled, in its discretion, to reserve an
amount equal to such unpaid amounts against the Borrowing Base.
6.16 Broker Commissions. Pay any and all brokerage commission or
finders fees incurred or payable in connection with or as a result of Borrower's
obtaining financing from the Lender Group under this Agreement.
6.17 Certain Notices. Promptly, and in any event within 10
Business Days, immediately after Borrower or any other Loan Party becoming aware
thereof, notify Agent of (i) any actions or proceedings pending or threatened by
or against Borrower or any other Loan Party before any court or administrative
agency and any pending or threatened litigation, governmental investigation, or
claims, complaints, actions or projections involving Borrower or any other Loan
Party, (ii) Borrower's, or any other Loan Party's receipt of any summons,
citation, notice or directive from the Environmental Protection Agency or any
other federal or state governmental agency concerning any action or omission by
Borrower or any other Loan Party resulting in the releasing or disposing of
Hazardous Materials and (iii) any claim pending or threatened to the effect that
Borrower or any other Loan Party infringes upon, or conflicts with, the asserted
rights of any other Person under any Intellectual Property, which in any such
case reasonably could be expected to result in a Material Adverse Change.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not, and will not permit any Loan Party to, do any of the following without
the Required Lenders' prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth on Schedule 7.1;
------------
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness of Borrower to any of its Subsidiaries and
of any Subsidiary of Borrower to Borrower;
(e) Indebtedness of Borrower to any Loan Party and of any
Loan Party to Borrower, provided that at all times during which such
Indebtedness is outstanding Borrower has not less than $50,000,000 of
Availability and unrestricted immediately available cash on hand and the Loan
Party incurring such Indebtedness is Solvent at the time that the same is
incurred and after giving effect thereto;
55
(f) Indebtedness of a Loan Party assumed by such Loan Party
in a Permitted Acquisition from the Person the subject of the Permitted
Acquisition, provided that such indebtedness existed at the time of the
Permitted Acquisition and was not created in contemplation of such Permitted
Acquisition;
(g) unsecured Indebtedness of CCI which is not guaranteed or
secured by any other Loan Party or assets thereof, in an aggregate amount which
does not exceed $10,000,000 outstanding at any time;
(h) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), (d), (e), (f) and (g) of this Section 7.1 (and
-----------
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, refundings,
or extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(h) and so long as the replacement Liens only encumber those assets
--------------
or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its capital Stock, except for (i) a merger into
Borrower of one or more of the other Loan Parties, provided that Borrower is the
sole surviving entity and (ii) mergers of Persons the subject of a Permitted
Acquisition into Acquisition Sub or Subsidiaries of CCI which are newly-formed
for the purpose of consummating such Permitted Acquisition.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets, except for (i) transfers to Borrower
of property or assets by one or more of the other Loan Parties, (ii) sales of
Inventory to buyers in the ordinary course of business as currently conducted
and (iii) Qualifying Lease Financing Transfers.
56
7.4 Disposal of Assets. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than (a) sales
of Inventory to buyers in the ordinary course of Borrower's business, (b) sales
of Equipment in the ordinary course of Borrower's business that is obsolete or
no longer useful in any Loan Party's business, (c) Qualifying Lease Financing
Transfers and (d) as long as no Default or Event of Default has occurred which
is continuing, sales of shares of Stock of Cavion Technologies, Inc.
7.5 Change Name. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity, or
add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable
with respect to the obligations of any Person except (i) by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent, and (ii) pursuant to the Guaranty
Agreements.
7.7 Nature of Business. Make any change in the principal nature
of Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(h) to the extent permitted therein, prepay, redeem, retire, defease,
--------------
purchase, or otherwise acquire any Indebtedness owing to any Person (including,
but not limited to, the Unsecured Notes), prior to the original scheduled
maturity date thereof, other than the Obligations in accordance with this
Agreement, or
(b) Except in connection with a refinancing permitted by
Section 7.1(h) to the extent permitted therein, directly or indirectly, amend,
--------------
modify, alter, increase, or change any of the terms or conditions of (i) any
agreement, instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Sections 7.1(b), (c), (d), (e), (f) or
-----------------------------------
(g) in any manner which creates collateral security for such Indebtedness or
---
expands or provides additional collateral security for such Indebtedness, or if
it results in, or reasonably could be executed to result in, a Material Adverse
Change, without the prior written consent of Agent, which shall not be withheld
unreasonably (except that (A) purchase money financing documentation may be
modified to include purchase money Liens on Equipment acquired with the proceeds
of such financing, (B) prior to the Initial Advance Effective Date, the purchase
money Inventory financing documentation with Deutsche Financial Services
Corporation may be modified to include purchase money Liens on Inventory
acquired with the proceeds of such financing, and (C) prior to the occurrence of
an Event of Default which is continuing, the documentation evidencing the
Qualifying Lease Financing Transfers may be modified to include Liens on the
leases purchased by the transferees of such leases thereunder (except that this
Section 7.8(b) shall not prohibit the creation of Indebtedness permitted
--------------
under Section 7.1 and shall not prohibit the creation of Permitted Liens
-----------
permitted under Section 7.2), or (ii) the Unsecured Notes or the Unsecured
-----------
Notes Indenture, or any agreement, instrument or document pertaining to any
of them.
57
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital Stock) on, or purchase,
acquire, redeem, or retire any of Loan Party's capital Stock, of any class,
whether now or hereafter outstanding; except that:
(a) any Subsidiary of Borrower may make distributions or pay
dividends to Borrower;
(b) CCI may repurchase capital Stock of CCI solely in
connection with cashless exercises of options, warrants and other convertible
securities,
(c) provided that there has not occurred a Default or Event
of Default which is continuing, and no Default or Event of Default would exist
after giving effect thereto or result therefrom, Borrower may make distributions
to CCI (i) to the extent necessary to permit CCI to pay ordinary general
administrative costs and expenses, (ii) to the extent necessary to permit CCI to
discharge the consolidated tax liabilities of CCI attributable to Borrower and
the Subsidiaries of Borrower, (iii) to the extent necessary to permit CCI to pay
cash in lieu of fractional shares of common stock pursuant to the terms of any
options, warrants or other rights to acquire shares of any class of capital
Stock of CCI, in an aggregate amount which does not exceed $150,000 in the
aggregate during any fiscal year of Borrower; and (iv) to the extent necessary
to permit CCI to pay interest, principal and mandatory repurchases under the
Unsecured Notes and the Unsecured Notes Indenture in accordance with the terms
thereof, and only to the extent required thereby, as and when the same come due;
and
(d) provided that there has not occurred a Default or Event
of Default which is continuing, no Default or Event of Default would exist after
giving effect thereto or result therefrom, and after giving effect thereto
Borrower would have Availability and unrestricted immediately available cash on
hand of at least $50,000,000:
(i) CCI may make regularly scheduled ordinary
dividend payments on the Series B Preferred Stock, no par value, of CCI, in
accordance with the terms thereof, and only to the extent required thereby, as
and when the same come due; and
(ii) Borrower may make distributions to CCI (A)
to the extent necessary to permit CCI to pay amounts required for any
repurchase, redemption or other acquisition or retirement for value of any
capital Stock of CCI or any options or rights to acquire such capital Stock
owned by any director, officer or employee of CCI pursuant to any management
equity subscription agreement or similar agreement, or otherwise upon death,
disability, retirement or termination of employment or departure from the board,
provided that the aggregate price paid
58
for all such repurchased, redeemed, acquired or retired capital Stock of CCI or
options shall not exceed in the aggregate $500,000 in any calendar year.
7.12 Accounting Methods. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agrees that Agent
may contact directly any such accounting firm or service bureau in order to
obtain such information.
7.13 Investments. Directly or indirectly establish, make, acquire,
or incur any liabilities (including contingent obligations) for or in connection
with (a) any Subsidiary or the acquisition of securities (whether debt or
equity) of, or other interests in, a Person, (b) loans, advances, capital
contributions, or investments to or in a Person, or (c) the acquisition of all
or substantially all of the properties or assets of a Person; except for (i)
Permitted Acquisitions, (ii) investments made by CCI to Borrower, (iii) provided
that there has not occurred a Default or Event of Default which is continuing
and no Default or Event of Default would exist after giving effect thereto or
result therefrom, investments made by Borrower or CCI to any Subsidiary of
Borrower, (iv) investments in money market instruments which have an average
maturity of 365 days or less and are rated at least "A-1" by Standard and Poor's
Ratings Corporation or "P-1" by ▇▇▇▇▇'▇ Investors Service, (v) the Indebtedness
permitted under Section 7.1, (vi) loans to employees of any of the Loan Parties
-----------
in an aggregate principal amount not to exceed $500,000 in the aggregate at any
time outstanding, (vii) provided that there has not occurred a Default or Event
of Default which is continuing and no Default or Event of Default would exist
after giving effect thereto or result therefrom and after giving effect thereto
Borrower would have Availability and unrestricted immediately available cash on
hand of at least $50,000,000, other investments in an aggregate amount not to
exceed $1,000,000, and (viii) Borrower's investment in existence on the date of
this Agreement of less than 1% of the issued and outstanding common Stock of
Cavion Technologies, Inc., a Colorado corporation.
7.14 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Agent, and that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate; except for (a) any transaction between
Borrower and any Loan Party in the ordinary course of business, (b) reasonable
and customary indemnifications paid to members of the Boards of Directors of
CCI, Borrower and any Subsidiary of Borrower, (c) director, officer and other
employee of CCI, Borrower and any Subsidiary of Borrower compensation and other
customary arrangements entered into in the ordinary course of business as
currently conducted which do not violate Section 7.16 and are approved by the
------------
Board of Directors of CCI, (d) the transactions existing on the Closing Date
which are described on Schedule 7.14, (e) the payments permitted to be paid to
-------------
by Borrower to CCI under Section 7.11 above, and (f) loans or advances to
------------
59
officers or employees of any Loan Party for reasonable moving, business
entertainment and business travel expenses, drawing accounts and similar
expenditures made in the ordinary course of business as currently conducted
which are permitted under Section 7.13.
------------
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
7.16 Compensation. Increase the annual fee or per-meeting fees
paid to directors during any year by more than 15% over the prior year; pay or
accrue total cash compensation, during any year, to officers and senior
management employees in an aggregate amount in excess of 115% of that paid,
accrued or targeted in the prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances made
hereunder for any purpose other than (a) on the Initial Advance Effective Date,
(i) to repay in full the outstanding principal, accrued interest, and accrued
fees and expenses owing to Deutsche Financial Services Corporation, and (ii) to
pay transactional fees, costs, and expenses incurred in connection with this
Agreement, and (b) thereafter, consistent with the terms and conditions hereof,
for its lawful and permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Agent and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time on or after the Initial Advance Effective Date be stored with a
bailee, warehouseman, or similar party without Agent's prior written consent
unless such party shall have executed a Collateral Access Agreement in favor of
Agent covering such Inventory and Equipment located at such location.
7.19 No Prohibited Transactions Under ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
60
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to
pay any required installment or any other payment required under Section 412 of
the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $250,000.
7.20 Tangible Net Worth. Fail to maintain Tangible Net Worth as
of any date set forth below of at least the corresponding amount set forth
below:
Period Amount
------ ------
June 30, 2000 $41,400,000
September 30, 2000 $16,250,000
December 31, 2000 <$6,600,000>
March 31, 2001 <$34,000,000>
June 30, 2001 <$58,800,000>
September 30, 2001 <$76,650,000>
December 31, 2001 <$90,450,000>
March 31, 2002 <$102,000,000>
61
June 30, 2002 and the last day of each September, <$102,000,000>
December, March and June thereafter
7.21 Capital Expenditures. Make capital expenditures in any
period set forth below in excess of the corresponding amount set forth below:
Period Amount
------ ------
January 1, 2000 through December 31, 2000 $56,000,000
January 1, 2001 through December 31, 2001 $65,000,000
January 1, 2002 through December 31, 2002 $75,000,000
Each calendar year commencing on or after $82,000,000
January 1, 2002
7.22 Benefit Plans. Directly or indirectly establish, maintain
or contribute to any Benefit Plan, except for those described on Schedule 5.13
-------------
as the same are in effect on the date of this Agreement.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower or any other Loan Party fails to pay when due and
payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due the Lender Group, reimbursement of Lender Group Expenses, or other
amounts constituting Obligations); provided, however, that in the case of
Overadvances that are caused by the charging of interest, fees or Lender Group
Expenses to the Loan Account, such event shall not constitute an Event of
Default if, within 5 Business Days of incurring such Overadvance, Borrower or
any other Loan Party repays, or otherwise eliminates such Overadvance;
8.2 (a) If Borrower or any other Loan Party fails or neglects to
perform, keep, or observe any term, provision, condition, covenant, or agreement
contained in Section 6.2 (Collateral Reporting) or Section 6.3 (Financial
----------- -----------
Statements, Reports, Certificates) of this Agreement and such failure continues
for a period of 5 Business Days; (b) If Borrower or any other Loan Party fails
or neglects to perform, keep, or observe any term, provision, condition,
covenant, or agreement contained in Section 4.4 (Delivery of Additional
-----------
Documentation Required), Section 6.4 (Tax Returns), Section 6.6 (Returns),
----------- -----------
Section 6.7 (Title to Equipment), Section 6.9 (Taxes), Section 6.12 (Location of
----------- ----------- ------------
Inventory and Equipment), Section 6.13 (Compliance with Laws), Section 6.14
------------ ------------
(Employee Benefits), or Section 6.15 (Leases) of this
------------
62
Agreement and such failure continues for a period of 5 Business Days following
the earlier of (i) the date upon which Borrower or any other Loan Party first
became aware of the occurrence of such failure or neglect, or (ii) the date on
which Borrower is notified in writing of such failure or neglect by Agent or any
of the Lender Group; (c) If Borrower or any other Loan Party fails or neglects
to perform, keep, or observe any term, provision, condition, covenant, or
agreement contained in this Agreement or in any of the other Loan Documents
(except for any such term, provision, condition, covenant or agreement that is
the subject of subclause (a), (b) or (d) of this Section 8.2 or is the subject
-----------
of another provision of this Section 8, in which event such other subclause or
---------
provision, as the case may be, shall govern) and such failure continues for a
period of 15 Business Days (without duplication, and without addition thereto,
of any grace periods, cure periods or required notices, if any, provided for in
such Loan Document) following the earlier of (i) the date upon which Borrower or
any other Loan Party first became aware of the occurrence of such failure or
neglect, or (ii) the date on which Borrower is notified in writing of such
failure or neglect by Agent or any of the Lender Group; or (d) If Borrower or
any other Loan Party fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in any other term,
provision, condition, covenant, or agreement contained in Section 2.7
-----------
(Collection of Accounts), Section 2.9 (Designated Account), Section 4.1 (Grant
----------- -----------
of Security Interest), Section 4.2 (Negotiable Collateral), Section 4.3
----------- -----------
(Collection of Accounts, General Intangibles, and Negotiable Collateral),
Section 4.5 (Power of Attorney), Section 4.6 (Right to Inspect), Section 6.10
----------- ----------- ------------
(Insurance), Section 6.11 (No Setoffs of Counterclaims), Section 6.17 (Certain
------------ ------------
Notices), or Section 7 (Negative Covenants) of this Agreement; in each case,
---------
other than any such term, provision, condition, covenant, or agreement that is
the subject of another provision of this Section 8, in which event such other
---------
provision of this Section 8 shall govern; provided that, during any period of
--------- --------
time that any such failure or neglect of Borrower or such other Loan Party
referred to in this paragraph exists, even if such failure or neglect is not yet
an Event of Default by virtue of the existence of a grace or cure period or the
pre-condition of the giving of a notice, neither Agent nor any Lender shall be
required during such period to make Advances to Borrower or issue any Letter of
Credit;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's or any other Loan
Party's properties or assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession of any third
Person;
8.5 If an Insolvency Proceeding is commenced by Borrower or any
other Loan Party;
8.6 If an Insolvency Proceeding is commenced against Borrower or
any other Loan Party and any of the following events occur: (a) Borrower or such
Loan Party consents to the institution of the Insolvency Proceeding against it;
(b) the petition commencing the Insolvency Proceeding is not timely
controverted; (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; provided,
--------
however, that, during the pendency of such period, Agent, Foothill, and any
-------
other member of the Lender Group shall be relieved of its obligation to extend
credit hereunder; (d) an interim trustee is appointed to
63
take possession of all or a substantial portion of the properties or assets of,
or to operate all or any substantial portion of the business of, Borrower or
such Loan Party, as the case may be; or (e) an order for relief shall have been
issued or entered therein;
8.7 If Borrower or any other Loan Party is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's or any other Loan Party's properties or assets
by the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's or any other
Loan Party's properties or assets and the same is not paid on the payment date
thereof (except to the extent that the same is the subject of a Permitted
Protest);
8.9 If a judgment or other claim, in excess of $100,000
individually or in the aggregate, becomes a Lien or encumbrance upon any
material portion of Borrower's or any other Loan Party's properties or assets
and such Lien or encumbrance remains unpaid or the enforcement or execution
thereof is not bonded and stayed in an amount and manner satisfactory to Agent;
8.10 If there is (a) a default in any material agreement to which
Borrower or any other Loan Party is a party with one or more third Persons which
reasonably could be expected to result in a Material Adverse Change, or (b) any
default under the Unsecured Notes or the Unsecured Notes Indenture which results
in a right by any one or more Persons, irrespective of whether exercised, to
accelerate the maturity of Borrower's or any other Loan Party's obligations
thereunder or require any payment or redemption thereunder other than regularly
scheduled payments of interest when due in accordance with the terms thereof, or
(c) any occurrence or existence of any event or condition which results in a
right of any one or more Persons, irrespective of whether exercised, to require
any payment or redemption (other than payments or redemptions payable only in
shares of common Stock of CCI or Series B Senior Cumulative Convertible
Preferred Stock of CCI) on, of or with respect to any shares of the Series B
Preferred Stock other than regularly scheduled payments of ordinary dividends
when due in accordance with the terms thereof;
8.11 If Borrower or any other Loan Party makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or misrepresentation exists now
or hereafter in any warranty, representation, certificate, or report made to the
Lender Group by Borrower any other Loan Party, or any officer, employee, agent,
or director of Borrower, or any other Loan Party, or if any such warranty or
representation is withdrawn;
64
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by operation
of law or by the guarantor or other third Person thereunder, or any such
guarantor or other third Person becomes the subject of an Insolvency Proceeding;
or
8.14 If there occurs or exists any (a) "Change of Control" as such
term is defined in the Unsecured Notes Indenture or (b) any "Change of Control"
as such term is defined in the Articles of Amendment to the Amended and Restated
Articles of Incorporation of Convergent Communications, Inc. filed with the
Secretary of State of the State of Colorado on or about April 18, 2000 which
designate the Series B Preferred Stock and have been provided by Borrower to
Agent prior to the date of this Agreement.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group (and
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of the
Lender Group, in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit Borrower's Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other property
of Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of the Lender Group;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Personal Property Collateral if Agent so
65
requires, and to make the Personal Property Collateral available to Agent as
Agent may designate. Borrower authorizes Agent to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or Lien that in Agent's determination
appears to conflict with the Agent's Liens and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned or leased
premises, Borrower hereby grants Agent a license to enter into possession of
such premises and to occupy the same, without charge, for up to 120 days in
order to exercise any of the Lender Group's rights or remedies provided herein,
at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by the Lender Group (including any amounts received in the Lockbox Accounts), or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, sell (in the manner provided for herein),
▇▇▇▇ as to and effect collection of the Personal Property Collateral. Borrower
hereby grants to Agent a license and right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks and advertising matter, or any property of a
similar nature as it pertains to the Personal Property Collateral, in completing
production of, advertising for sale, selling, billing as to and collection of
any Personal Property Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to the Lender Group's benefit;
(j) Sell the Personal Property Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Agent determines is commercially reasonable. It is not necessary
that the Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(1) Agent shall give Borrower and each holder of a
security interest in the Personal Property Collateral who has filed with Agent a
written request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Personal Property Collateral, then the time on
or after which the private sale or other disposition is to be made;
66
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least 5 days
----------
before the date fixed for the sale, or at least 5 days before the date on or
after which the private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market. Notice to Persons other
than Borrower claiming an interest in the Personal Property Collateral shall be
sent to such addresses as they have furnished to Agent;
(3) If the sale is to be a public sale, Agent also
shall give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) The Lender Group may credit bid and purchase at any
public sale;
(m) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(n) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrower.
9.2 Remedies Cumulative. The rights and remedies of the Lender
Group under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Agent may do any
or all of the following: (a) make payment of the same or any part thereof; (b)
set up such reserves in Borrower's Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.10,
------------
and take any action with respect to such policies as Agent deems prudent. Any
such amounts paid by Agent shall constitute Lender Group Expenses. Any such
payments made by Agent shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
67
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under Section 9207 of the Code, the Lender Group shall not in any way or
manner be liable or responsible for: (i) the safekeeping of the Collateral; (ii)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (iii) any diminution in the value thereof; or (iv) any act or default
of any carrier, warehouseman, bailee, forwarding agency, or other Person; and
(b) all risk of loss, damage, or destruction of the Collateral shall be borne by
Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and
hold the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
------------
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the other Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to the relevant party at
its address set forth below:
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If to Borrower: CONVERGENT COMMUNICATIONS
SERVICES, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
If to Agent or
the Lender Group
in care of Agent: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: ▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to all other
parties. All notices or demands sent in accordance with this Section 12, other
----------
than notices by the Lender Group in connection with Sections 9504 or 9505 of the
Code, shall be deemed received (a) if delivered in person, when received; (b) if
delivered by telefacsimile, on the date of transmission, answerback received, if
transmitted on a Business Day before 3:00 p.m. (California time), or, if not, on
the next succeeding Business Day following such transmission, answerback
received; (c) if delivered by overnight courier that obtains signed proof of
delivery, two (2) Business Days after delivery to such courier properly
addressed; or (d) if by registered or certified mail, upon receipt. Borrower
acknowledges and agrees that notices sent by the Lender Group in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or personally delivered, or, where permitted by law, transmitted
telefacsimile or other similar method set forth above.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
-------- -------
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
--------------------
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
----------
BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to any one or more members of the Lender Group may be destroyed or otherwise
disposed of by such member of the Lender Group 4 months after they are delivered
to or received by such member of the Lender Group, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
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15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 Assignments and Participations.
(a) Any Lender may, with the written consent of Agent, assign
and delegate to one or more assignees (provided that no written consent of Agent
shall be required in connection with any assignment and delegation by a Lender
to an Eligible Transferee) (each an "Assignee") all, or any ratable part of all,
of the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrower and Agent may continue to deal
-------- -------
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to Borrower and Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to Borrower and
Agent an Assignment and Acceptance ("Assignment and Acceptance") in form and
substance satisfactory to Agent; and (iii) the assignor Lender or Assignee has
paid to Agent for Agent's sole and separate account a processing fee in the
amount of $5,000. Anything contained herein to the contrary notwithstanding, the
consent of Agent shall not be required (and payment of any fees shall not be
required) if such assignment is in connection with any merger, consolidation,
sale, transfer, or other disposition of all or any substantial portion of the
business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 11.3 hereof)
------------
and be released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto; (3)
such Assignee
71
confirms that it has received a copy of this Agreement, together with such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (4) such
Assignee will, independently and without reliance upon Agent, such assigning
Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (5) such Assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (6) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
--- -----
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in the Obligations, the Commitment, and the other rights and interests of that
Lender (the "originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the originating Lender's obligations
-------- -------
under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrower and Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to this Agreement or
of any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating; (B) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating; (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender; or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the originating Lender with whom such Participant
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participates and no Participant shall have any direct rights as to the other
Lenders, Agent, Borrower, the Collections, the Collateral, or otherwise in
respect of the Obligations. No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
15.2 Successors. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
--------
however, that Borrower may not assign this Agreement or any rights or duties
-------
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 15.1 hereof and, except as expressly required
------------
pursuant to Section 15.1 hereof, no consent or approval by Borrower is required
------------
in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
-------- -------
shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments that is required
for the Lenders or any of them to take any action hereunder;
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(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section 17.11;
-------------
(h) increase the sublimit for credit available against Eligible
Inventory (currently contained in clause (y) of Section 2.1(a));
--------------
(i) change the definition of "Required Lenders";
(j) release Borrower from any Obligation for the payment of
money; or
(k) amend any of the provisions of Article 17.
----------
and, provided further, however, that no amendment, waiver or consent shall,
-------- ------- -------
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document; and, provided further, however,
-------- ------- -------
that no amendment, waiver or consent shall, unless in writing and signed by
Foothill in its individual capacity as a Lender, affect the specific rights or
duties of Foothill in its individual capacity as a Lender (as contrasted with
rights or duties of Foothill as a member of the Lender Group) under this
Agreement or any other Loan Document. The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
16.2 No Waivers; Cumulative Remedies. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any other
Loan Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among Borrower and Agent or any Lender, or delay by
Agent or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1 Appointment and Authorization of Agent. Each Lender hereby
designates and appoints Foothill as its agent under this Agreement and the other
Loan Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other
74
Loan Document, together with such powers as are reasonably incidental thereto.
Agent agrees to act as such on the express conditions contained in this Article
-------
17. The provisions of this Article 17 are solely for the benefit of Agent and
-- ----------
the Lenders, and Borrower shall have no rights as a third party beneficiary of
any of the provisions contained herein; provided, however, that certain of the
-------- -------
provisions of Section 17.10 hereof also shall be for the benefit of Borrower.
-------------
Any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience only, that Foothill is merely the representative of
the Lenders, and has only the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which Agent
is expressly entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, or
of any other provision of the Loan Documents that provides rights or powers to
Agent, Lenders agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain, in accordance
with its customary business practices, ledgers and records reflecting the status
of the Advances and the Letters of Credit, the Collateral, the Collections, and
related matters; (b) execute or file any and all financing or similar statements
or notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan Documents;
(c) make Advances and the Letters of Credit, for itself or on behalf of Lenders
as provided in the Loan Documents; (d) exclusively receive, apply, and
distribute the Collections as provided in the Loan Documents; (e) open and
maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents; and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
17.2 Delegation of Duties. Except as otherwise provided in this
section, Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this section and without gross negligence or willful misconduct.
17.3 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary
75
or Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of Borrower or any of
Borrower's Subsidiaries or Affiliates.
17.4 Reliance by Agent. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless it shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
17.5 Notice of Default or Event of Default. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a "notice of default." Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Section 17.4, Agent shall take
------------
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Section 9; provided, however, that
--------- -------- -------
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
17.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent
76
hereinafter taken, including any review of the affairs of Borrower and its
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrower and any other Person (other than the Lender Group) party to a Loan
Document, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
17.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
Group Expenses to the extent Agent deems reasonably necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including without limiting the generality of the
foregoing, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrower is obligated to reimburse Agent or Lenders for such expenses
pursuant to the Loan Agreement or otherwise. Agent is authorized and directed
to deduct and retain sufficient amounts from Collections to reimburse Agent for
such out-of-pocket costs and expenses prior to the distribution of any amounts
to Lenders. In the event Agent is not reimbursed for such costs and expenses
from Collections, each Lender hereby agrees that it is and shall be obligated to
pay to or reimburse Agent for the amount of such Lender's Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrower and without limiting the obligation
of Borrower to do so), according to their Pro Rata Shares, from and against any
and all Indemnified Liabilities; provided, however, that no Lender shall be
-------- -------
liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including attorneys fees and expenses) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such expenses
by or on behalf of Borrower. The
77
undertaking in this section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
17.8 Agent in Individual Capacity. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though Foothill were not Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Foothill or its Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall be under no obligation to provide such information to them. With
respect to the Foothill Loans and Agent Advances, Foothill shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not Agent, and the terms "Lender" and "Lenders" include
Foothill in its individual capacity.
17.9 Successor Agent. Agent may resign as Agent upon 45 days notice to
the Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 17 shall
----------
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
17.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the IRC, such Lender agrees with and in favor of Agent and Borrower, to
deliver to Agent and Borrower:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
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(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under
the IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of Borrower to such Lender, such Lender agrees to
notify Agent of the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrower to such Lender. To the extent of such
percentage amount, Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
Agent under this Section, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
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17.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrower of all Obligations; (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under Section 7 of
---------
this Agreement or the other Loan Documents (and Agent may rely conclusively on
any such certificate, without further inquiry); (iii) constituting property in
which Borrower owned no interest at the time the security interest was granted
or at any time thereafter; or (iv) constituting property leased to Borrower
under a lease that has expired or is terminated in a transaction permitted under
this Agreement. Except as provided above, Agent will not execute and deliver a
release of any Lien on any Collateral without the prior written authorization of
(y) if the release is of all or substantially all of the Collateral, of all of
the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or
Borrower at any time, the Lenders will confirm in writing Agent's authority to
release any such Liens on particular types or items of Collateral pursuant to
this Section 17.11; provided, however, that (1) Agent shall not be required
------------- -------- -------
to execute any document necessary to evidence such release on terms that, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrower in respect of) all
interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
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17.12 Restrictions on Actions by Lenders; Sharing of Payments. (a)
Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to Borrower or any accounts of Borrower now or hereafter maintained with
such Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Agent, take or cause to be taken any action,
including, the commencement of any legal or equitable proceedings, to foreclose
any Lien on, or otherwise enforce any security interest in, any of the
Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times any
------------
Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from Agent pursuant to the
terms of this Agreement, or (ii) payments from Agent in excess of such Lender's
ratable portion of all such distributions by Agent, such Lender promptly shall
(1) turn the same over to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in same day funds, as applicable,
for the account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
-------- -------
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
17.13 Agency for Perfection. Agent and each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Agent's Liens in assets
which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14 Payments by Agent to the Lenders. All payments to be made by Agent
to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to:
If to Foothill: The Chase Manhattan Bank
ABA # ▇▇▇-▇▇▇-▇▇▇
Credit: Foothill Capital Corporation
Account No. 323-266193
Re: Convergent Communications
81
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Agent. Concurrently with each such payment,
Agent shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15 Concerning the Collateral and Related Loan Documents. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by Agent or all Lenders, as applicable, of their respective
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
17.16 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information. By signing this
Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that neither Foothill
nor Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon Borrower's books and records, as well as on
representations of Borrower's personnel;
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner;
it being understood and agreed by Borrower that in any event such Lender may
make disclosures (a) to counsel for and other advisors, accountants, and
auditors to such Lender, (b) reasonably required by any bona fide potential
---- ----
or actual Assignee, transferee, or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
-------- -------
applicable law, statute, regulation, or court order, such Lender shall notify
Borrower of any request by any court, governmental or administrative agency, or
pursuant to any subpoena or other legal process for
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disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrower; and (ii) to pay and protect, and indemnify,
defend and hold Agent and any such other Lender preparing a Report harmless from
and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts (including, attorney costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under any provision of the
Loan Documents, to request additional reports or information from Borrower, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender's notice to Agent, whereupon Agent promptly shall
request of Borrower the additional reports or information specified by such
Lender, and, upon receipt thereof from Borrower, Agent promptly shall provide a
copy of same to such Lender; and (z) Any time that Agent renders to Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
17.17 Several Obligations; No Liability. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 17.7, no member of the Lender Group shall
------------
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
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18. GENERAL PROVISIONS.
18.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and each member of the Lender Group whose
signature is provided for on the signature pages hereof.
18.2 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
18.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
18.5 Amendments in Writing. This Agreement can only be amended by a
writing signed by Agent, the requisite Lenders, and Borrower.
18.6 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The forgoing shall apply to each other Loan Document mutatis
mutandis.
18.7 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to the Lender Group of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
the Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Lender
Group is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or such guarantor automatically shall be
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revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
18.8 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
CONVERGENT COMMUNICATIONS
SERVICES, INC., a Colorado corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President and Chief Financial Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent for the Lenders
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation, as a Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
