|
Exhibit
10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this “ Agreement ”)
dated as of the Effective Date between SILICON VALLEY BANK , a
California corporation (“ Bank ”), and
MIPS TECHNOLOGIES,
INC. , a Delaware corporation (“ Borrower ”),
provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as
follows:
1
ACCOUNTING AND OTHER
TERMS
Accounting
terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations
must be made following GAAP. Capitalized terms not
otherwise defined in this Agreement shall have the meanings
set forth in Section 13. All other terms
contained in this Agreement, unless otherwise indicated, shall
have the meaning provided by the Code to the extent such terms
are defined therein.
2
LOAN AND
TERMS OF PAYMENT
2.1
Promise to Pay . Borrower hereby unconditionally
promises to pay Bank the outstanding principal amount of all Credit
Extensions and accrued and unpaid interest thereon as and when due
in accordance with this Agreement.
2.1.1
Revolving Advances .
(a)
Availability . Subject to the terms and
conditions of this Agreement, Bank shall make Advances not
exceeding the Availability Amount. Amounts borrowed
hereunder may be repaid and, prior to the Revolving Line Maturity
Date, reborrowed, subject to the applicable terms and conditions
precedent herein.
(b)
Termination; Repayment . The Revolving Line
terminates on the Revolving Line Maturity Date, when the principal
amount of all Advances, the unpaid interest thereon, and all other
Obligations relating to the Revolving Line shall be immediately due
and payable. In addition, at Borrower’s option, so
long as an Event of Default has not occurred and is not continuing,
Borrower shall have the option to terminate the Revolving Line
without penalty or premium, provided Borrower (i) provides written
notice to Bank of its election to terminate the
Revolving Line at least fifteen (15) days prior to such
termination, and (ii) pays, on the date of
the termination (A) all accrued and unpaid interest with
respect to the Revolving Line through the date of
termination; (B) all remaining unpaid principal amount owing on the
Revolving Line as of the termination date; and (C) all
other sums, if any, that shall have become due and payable
hereunder with respect to the Revolving Line.
2.1.2
Letters of Credit Sublimit .
(a)
As
part of the Revolving Line, Bank shall issue or have issued Letters
of Credit for Borrower’s account. Such aggregate
amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving
Line. The aggregate amount available to be used for the
issuance of Letters of Credit may not exceed the Availability
Amount. If, on the Revolving Line Maturity Date, there
are any outstanding Letters of Credit, then on such date Borrower
shall provide to Bank cash collateral in an amount equal to 100% of
the face amount of all such Letters of Credit plus all interest,
fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure
all of the Obligations relating to said Letters of
Credit. Upon expiration of each such Letter of Credit,
Bank shall return the cash collateral securing the Obligations
relating to such Letter of Credit, to the extent not applied to
such Obligation. All Letters of Credit shall be in form
and substance acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank’s standard
Application and Letter of Credit Agreement (the “Letter of
Credit Application”). Borrower agrees to execute
any further documentation in connection with the Letters of Credit
as Bank may reasonably request. Borrower further agrees
to be bound by the regulations and interpretations of the issuer of
any Letters of Credit guarantied by Bank and opened for
Borrower’s account or by Bank’s interpretations of any
Letter of Credit issued by Bank for Borrower’s account, and
Borrower understands and agrees that Bank 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 Letters of Credit or any modifications,
amendments, or supplements thereto, except if Bank’s gross
negligence or willful misconduct is the sole reason for such error
or mistake.
(b)
The
obligation of Borrower to immediately reimburse Bank for drawings
made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the
terms of this Agreement, such Letters of Credit, and the Letter of
Credit Application.
(c)
Borrower
may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such
Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus fees and
charges in connection therewith such as wire, cable, SWIFT or
similar charges) in Dollars at the then-prevailing rate of exchange
in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.
(d)
To
guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency,
Bank shall create a reserve (the “ Letter of Credit
Reserve ”) under the Revolving Line in an amount equal
to ten percent (10%) of the face amount of such Letter of
Credit. The amount of the Letter of Credit Reserve may
be adjusted by Bank from time to time to account for fluctuations
in the exchange rate. The availability of funds under
the Revolving Line shall be reduced by the amount of such Letter of
Credit Reserve for as long as such Letter of Credit remains
outstanding.
2.1.3
Foreign Exchange Sublimit . As part of the
Revolving Line, Borrower may enter into foreign exchange contracts
with Bank under which Borrower commits to purchase from or sell to
Bank a specific amount of Foreign Currency (each, a “
FX Forward
Contract ”) on a specified date (the “
Settlement
Date ”). FX Forward Contracts shall have a
Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent
(10%) of each outstanding FX Forward Contract in a maximum
aggregate amount equal to One Million Dollars ($1,000,000) (the
“ FX
Reserve ”). The aggregate amount of FX
Forward Contracts at any one time may not exceed ten (10) times the
amount of the FX Reserve. The amount otherwise available
for Credit Extensions under the Revolving Line shall be reduced by
an amount equal to ten percent (10%) of each outstanding FX Forward
Contract (the “ FX Reduction Amount
”). Any amounts needed to fully reimburse Bank
will be treated as Advances under the Revolving Line and will
accrue interest at the interest rate applicable to
Advances.
2.1.4
Cash Management Services Sublimit . Borrower may
use up to Ten Million Dollars ($10,000,000) of the Revolving Line
for Bank’s cash management services which may include
merchant services, direct deposit of payroll, business credit card,
and check cashing services identified in Bank’s various cash
management services agreements (collectively, the “
Cash Management
Services ”). Any amounts Bank pays on
behalf of Borrower for any Cash Management Services will be treated
as Advances under the Revolving Line and will accrue interest at
the interest rate applicable to Advances.
2.1.5
[Omitted.]
2.1.6
Term Loan .
(a)
Availability . Subject to the satisfaction of the
terms and conditions of this Agreement, Bank shall make one (1)
term loan available to Borrower in an amount up to the Term Loan
Amount on the Effective Date and up to ten (10) days
thereafter.
(b)
Repayment . Borrower shall repay the Term Loan in
(i) forty-eight (48) equal installments of principal, plus (ii)
monthly payments of accrued interest (the “ Term Loan Payment
”). Beginning on the first day of the month
following the month in which the Funding Date occurs, each Term
Loan Payment shall be payable on the first day of each
month. Borrower’s final Term Loan Payment, due on
the Term Loan Maturity Date, shall include all outstanding
principal and accrued and unpaid interest under the Term
Loan
(c)
Prepayment . At Borrower’s option, Borrower
shall have the option to prepay all or any portion of the
outstanding principal balance on the Term Loan, provided Borrower
(a) provides written notice to Bank of its election to prepay the
Term Loan at least fifteen (15) days prior to such prepayment, and
(b) pays, on the date of the prepayment (i) all accrued and unpaid
interest with respect to the portion of the Term Loan being prepaid
through the date the prepayment is made; (ii) the principal amount
to be prepaid; and (iii) all other sums, if any, that shall have
become due and payable hereunder with respect to this
Agreement.
2.1.7
General Provisions Relating to the Advances and the Term
Loan . Each Advance or Term Loan shall, at Borrower’s
option in accordance with the terms of this Agreement, be either in
the form of a Prime Rate Loan or a LIBOR Loan; provided that in no
event shall Borrower maintain at any time LIBOR Loans having more
than two (2) different Interest Periods. Borrower shall
pay interest accrued on the Prime Rate Loans and LIBOR Loans at the
rates and in the manner set forth in Section 2.3(b).
2.3
Payment of Interest on the Credit Extensions .
(a)
Computation of Interest . Interest on the Credit Extensions
and all fees payable hereunder shall be computed on the basis of a
360-day year and the actual number of days elapsed in the period
during which such interest accrues. In computing interest on any
Credit Extension, the date of the making of such Credit Extension
shall be included and the date of payment shall be excluded;
provided, however, that if any Credit Extension is repaid on the
same day on which it is made, such day shall be included in
computing interest on such Credit Extension.
(b)
Prime Rate Loan; LIBOR Loan . Each Prime Rate
Loan and LIBOR Loan shall bear interest on the outstanding
principal amount thereof from the date when made, continued or
converted until paid in full at a rate per annum equal to the Prime
Rate plus the Prime Rate Margin or the LIBOR Rate plus the LIBOR
Rate Margin, as the case may be. On and after the expiration of any
Interest Period applicable to any LIBOR Loan outstanding on the
date of occurrence of an Event of Default or acceleration of the
Obligations, the Effective Amount of such LIBOR Loan shall, at the
option of Bank, during the continuance of such Event of Default or
after acceleration, bear interest at a rate per annum equal to the
Prime Rate plus two percent (2.00%). Pursuant to the terms hereof,
interest on each Prime Rate Loan and LIBOR Loan shall be paid in
arrears on each Interest Payment Date. Interest shall also be paid
on the date of any prepayment of any Prime Rate Loan or LIBOR Loan
pursuant to this Agreement for the portion of any Prime Rate Loan
or LIBOR Loan so prepaid and upon payment (including prepayment) in
full thereof. All accrued but unpaid interest on the Prime Rate
Loan or LIBOR Loan shall be due and payable on the Revolving Line
Maturity Date or the Term Loan Maturity Date, as the case may
be.
(c)
Default Interest . Except as otherwise provided
in Section 2.3(b), after an Event of Default, Obligations, at the
option of Bank, shall bear interest two percent (2.00%) above the
rate that is otherwise applicable thereto (the “ Default Rate ”).
Payment or acceptance of the increased interest provided in this
Section 2.3(c) is not a permitted alternative to timely payment and
shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Bank.
(d)
Prime Rate Loans . Each change in the interest
rate of the Prime Rate Loans based on changes in the Prime Rate
shall be effective on the effective date of such change and to the
extent of such change. Bank shall use its best efforts
to give Borrower prompt notice of any such change in the Prime
Rate; provided, however, that any failure by Bank to provide
Borrower with notice hereunder shall not affect Bank’s right
to make changes in the interest rate of the Prime Rate Loan based
on changes in the Prime Rate.
(e)
LIBOR Loans . The interest rate applicable to each LIBOR
Loan shall be determined in accordance with Section 3.6(a)
hereunder. Subject to Sections 3.6 and 3.7, such rate shall apply
during the entire Interest Period applicable to such LIBOR Loan,
and interest calculated thereon shall be payable on the Interest
Payment Date applicable to such LIBOR Loan.
(f)
Debit of Accounts . Bank may debit any of Borrower’s
deposit accounts, including the Designated Deposit Account, for
principal and interest payments when due, or any other amounts
Borrower owes Bank, when due. Bank shall promptly notify Borrower
after it debits Borrower’s accounts. These debits shall not
constitute a set-off.
2.4
Fees . Borrower shall pay to Bank:
(a)
Loan Fee . A fully earned, non-refundable
commitment fee equal to three-eights percent (0.375%) of the
Revolving Line, on the Effective Date;
(b)
Commitment Fee . A fully earned, non-refundable
commitment fee equal to one half percent (0.50%) of the Term Loan
Amount, on the Effective Date; and
(c)
Bank Expenses . All Bank Expenses (including
reasonable attorneys’ fees and expenses, plus expenses, for
documentation and negotiation of this Agreement) incurred through
and after the Effective Date, when due.
3
CONDITIONS OF
LOANS
3.1
Conditions Precedent to Initial Credit Extension
. Bank’s obligation to make the initial Credit
Extension is subject to the condition precedent that Borrower shall
consent to or shall have delivered, in form and substance
satisfactory to Bank, such documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate,
including, without limitation:
|
(a)
|
duly
executed original signatures to the Loan Documents to which it is a
party;
|
|
(c)
|
its
Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the State of Delaware as of
a date no earlier than thirty (30) days prior to the Effective
Date;
|
|
(d)
|
duly
executed original signatures to the completed Borrowing Resolutions
for Borrower and similar resolutions for MIPS Technologies Holding
LLC;
|
|
(e)
|
a payoff letter from Jefferies Finance,
LLC;
|
|
(f)
|
evidence
that (i) the Liens securing Indebtedness owed by Borrower to
Jefferies Finance, LLC will be terminated and (ii) the documents
and/or filings evidencing the perfection of such Liens, including
without limitation any financing statements and/or control
agreements, have or will, concurrently with the initial Credit
Extension, be terminated.
|
|
(g)
|
certified
copies, dated as of a recent date, of financing statement searches,
as Bank shall request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any
such financing statements either constitute Permitted Liens or have
been or, in connection with the initial Credit Extension, will be
terminated or released;
|
|
(h)
|
the
Perfection Certificate(s) executed by Borrower;
|
|
(i)
|
a
legal opinion of Borrower’s counsel dated as of the Effective
Date together with the duly executed original signatures
thereto;
|
|
(j)
|
a
pledge agreement, in form and substance satisfactory to Bank,
executed by Borrower and pledging to Lender a security interest in
(a) 100% of the shares of the outstanding capital stock, of any
class, of each material Subsidiary of Borrower that is incorporated
under the laws of any State of the United States or the District of
Columbia and (b) 65% of the shares of the outstanding capital
stock, of any class, of each material Subsidiary of Borrower that
is not incorporated under the laws of any State of the United
States or the District of Columbia (the “ Pledge
Agreement ”);
|
|
(k)
|
evidence
satisfactory to Bank that the insurance policies required by
Section 6.5 hereof are in full force and effect, together with
appropriate evidence showing lender loss payable and/or additional
insured clauses or endorsements in favor of Bank;
|
|
(l)
|
payment
of the fees and Bank Expenses then due as specified in Section 2.4
hereof; and
|
|
(m)
|
delivery
to Bank of all stock certificates and promissory notes held by
Borrower within three (3) Business Days;
|
3.1.A Conditions Precedent to
Certain Advances . Bank’s obligation to
make any Advance in excess of $3,000,000 is subject to the prior
completion of the Initial Audit within sixty days of the Effective
Date.
3.2
Conditions Precedent to all Credit Extensions
. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to
the following:
|
(a)
|
for
Advances under the Revolving Line, timely receipt of a Notice of
Borrowing;
|
|
(b)
|
for
any other Credit Extension, timely receipt of any completed and
executed Payment/Advance Form;
|
|
(c)
|
the
representations and warranties in Section 5 shall be true and
accurate in all material respects on the date of the Notice of
Borrowing or Payment/Advance Form, as applicable, and on the
effective date of each Credit Extension, except as disclosed in
writing by Borrower and approved in writing by Bank; provided,
however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material
respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension.
Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in
Section 5 remain true, accurate and complete in all material
respects; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true,
accurate and complete in all material respects as of such date;
and
|
|
(d)
|
in
Bank’s reasonable discretion, there has not been a Material
Adverse Change.
|
3.3
Covenant to Deliver .
Borrower
agrees to deliver to Bank each item required to be delivered
to Bank under this Agreement as a condition to any Credit
Extension. Borrower expressly agrees that a Credit
Extension made prior to the receipt by Bank of any such item
shall not constitute a waiver by Bank of Borrower’s
obligation to deliver such item, and any such Credit Extension
in the absence of a required item shall be made in
Bank’s sole discretion.
3.4
Procedures for Borrowing .
(a)
Subject
to the prior satisfaction of all other applicable conditions to the
making of an Advance set forth in this Agreement, each Advance
shall be made upon Borrower’s irrevocable written notice
delivered to Bank in the form of a Notice of Borrowing, each
executed by a Responsible Officer of Borrower or his or her
designee or without instructions if the Advances are necessary to
meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a
Responsible Officer or designee. Borrower will indemnify Bank for
any loss Bank suffers due to such reliance. Such Notice of
Borrowing must be received by Bank prior to 12:00 p.m. Pacific
time, (i) at least three (3) Business Days prior to the requested
Funding Date, in the case of LIBOR Loans, and (ii) on the requested
Funding Date, in the case of Prime Rate Loans,
specifying:
|
(1)
|
the
amount of the Advance, which, if a LIBOR Loan is requested, shall
be in an aggregate principal amount of not less than
$1,000,000;
|
|
(2)
|
the
requested Funding Date;
|
|
(3)
|
whether
the Advance is to be comprised of LIBOR Loans or Prime Rate Loans;
and
|
|
(4)
|
the
duration of the Interest Period applicable to any such LIBOR Loans
included in such notice; provided that if the Notice of Borrowing
shall fail to specify the duration of the Interest Period for any
Advance comprised of LIBOR Loans, such Interest Period shall be one
(1) month.
|
(b)
The
proceeds of all such Advances will then be made available to
Borrower on the Funding Date by Bank by transfer to the Designated
Deposit Account or to such other account(s) as specified by
Borrower and, subsequently, by wire transfer to such other account
as Borrower may instruct in the Notice of Borrowing. No Advances
shall be deemed made to Borrower, and no interest shall accrue on
any such Advance, until the related funds have been deposited in
the Designated Deposit Account or such other
account(s).
3.5
Conversion and Continuation Elections.
(a)
So
long as (i) no Event of Default or Default exists; (ii) Borrower
shall not have sent any notice of termination of this Agreement;
and (iii) Borrower shall have complied with such customary
procedures as Bank has established from time to time for
Borrower’s requests for LIBOR Loans, Borrower may, upon
irrevocable written notice to Bank:
|
(1)
|
elect
to convert on any Business Day, Prime Rate Loans in an amount equal
to not less than $1,000,000 into LIBOR Loans;
|
|
(2)
|
elect
to continue on any Interest Payment Date any LIBOR Loans maturing
on such Interest Payment Date (or any part thereof in an amount
equal to not less than $1,000,000); provided, that if the aggregate
amount of LIBOR Loans shall have been reduced, by payment,
prepayment, or conversion of part thereof, to be less than
$1,000,000, such LIBOR Loans shall automatically convert into Prime
Rate Loans, and on and after such date the right of Borrower to
continue such LIBOR Loans as, or convert such Prime Rate Loans
into, LIBOR Loans shall terminate; or
|
|
(3)
|
elect
to convert on any Interest Payment Date any LIBOR Loans maturing on
such Interest Payment Date (or any part thereof in an amount equal
to not less than $1,000,000 into Prime Rate Loans.
|
(b)
Borrower
shall deliver a Notice of Conversion/Continuation in accordance
with Section
10 to be received by Bank prior to 12:00 p.m. Pacific time
(i) at least three (3) Business Days in advance of the Conversion
Date or Continuation Date, if any Prime Rate Loans or LIBOR Loans
are to be converted into or continued as LIBOR Loans; and (ii) on
the Conversion Date, if any LIBOR Loans are to be converted into
Prime Rate Loans, in each case specifying the:
|
(1)
|
proposed
Conversion Date or Continuation Date;
|
|
(2)
|
aggregate
amount of the Prime Rate Loans or LIBOR Loans to be converted or
continued which, if any Prime Rate Loans or LIBOR Loans are to be
converted into or continued as LIBOR Loans, shall be in an
aggregate principal amount of not less than
$1,000,000;
|
|
(3)
|
nature
of the proposed conversion or continuation; and
|
|
(4)
|
duration
of the requested Interest Period.
|
(c)
If
upon the expiration of any Interest Period applicable to any LIBOR
Loans, Borrower shall have timely failed to select a new Interest
Period to be applicable to such LIBOR Loans, Borrower shall be
deemed to have elected to convert such LIBOR Loans into Prime Rate
Loans.
(d)
Any
LIBOR Loans shall, at Bank’s option, convert into Prime Rate
Loans in the event that an Event of Default or Default shall
exist. In addition, to the extent the aggregate
principal amount of the Prime Rate Loans which have been previously
converted to LIBOR Loans, or the aggregate principal amount of
existing LIBOR Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such
Interest Period exceed the Revolving Line, then at Bank’s
option, such excess amount of LIBOR Loans shall convert into Prime
Rate Loans. Borrower agrees to pay Bank, upon demand by
Bank (or Bank may, at its option, charge the Designated Deposit
Account or any other account Borrower maintains with Bank) any
amounts required to compensate Bank for any loss (including loss of
anticipated profits), cost, or expense incurred by Bank, as a
result of the conversion of LIBOR Loans to Prime Rate Loans
pursuant to any of the foregoing.
3.6
Special Provisions Governing LIBOR Loans.
Notwithstanding any other
provision of this Agreement to the contrary, the following
provisions shall govern with respect to LIBOR Loans as to the
matters covered:
(a)
Determination of Applicable Interest Rate . As soon as
practicable on each Interest Rate Determination Date, Bank shall
determine (which determination shall, absent manifest error in
calculation, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the LIBOR Loans for which an
interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Borrower.
(b)
Inability to Determine Applicable Interest Rate . In the
event that Bank shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto), on any
Interest Rate Determination Date with respect to any LIBOR Loan,
that by reason of circumstances affecting the London interbank
market adequate and fair means do not exist for ascertaining the
interest rate applicable to such Advance or Term Loan on the basis
provided for in the definition of LIBOR, Bank shall on such date
give notice (by facsimile or by telephone confirmed in writing) to
Borrower of such determination, whereupon (i) no Advances or Term
Loans may be made as, or converted to, LIBOR Loans until such time
as Bank notifies Borrower that the circumstances giving rise to
such notice no longer exist, and (ii) any Notice of Borrowing or
Notice of Conversion/Continuation given by Borrower with respect to
Advances or Term Loans in respect of which such determination was
made shall be deemed to be rescinded by Borrower.
(c)
Compensation for Breakage or Non-Commencement of Interest
Periods . Borrower shall compensate Bank, upon written
request by Bank (which request shall set forth the manner and
method of computing such compensation), for all reasonable losses,
expenses and liabilities, if any (including any interest paid by
Bank to lenders of funds borrowed by it to make or carry its LIBOR
Loans and any loss, expense or liability incurred by Bank in
connection with the liquidation or re-employment of such funds)
such that Bank may incur: (i) if for any reason (other than a
default by Bank or due to any failure of Bank to fund LIBOR Loans
due to impracticability or illegality under Sections 3.7(d) and
3.7(e)) a borrowing or a conversion to or continuation of any LIBOR
Loan does not occur on a date specified in a Notice of Borrowing or
a Notice of Conversion/Continuation, as the case may be, or (ii) if
any principal payment or any conversion of any of its LIBOR Loans
occurs on a date prior to the last day of an Interest Period
applicable to that Advance or Term Loan (other than the payment of
an installment of principal in accordance with Section
2.1.6(b).
(d)
Assumptions Concerning Funding of LIBOR Loans . Calculation
of all amounts payable to Bank under this Section 3.6 shall be made
as though Bank had actually funded each of its relevant LIBOR Loans
through the purchase of a Eurodollar deposit bearing interest at
the rate obtained pursuant to the definition of LIBOR Rate in an
amount equal to the amount of such LIBOR Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that
Bank may fund each of its LIBOR Loans in any manner it sees fit and
the foregoing assumptions shall be utilized only for the purposes
of calculating amounts payable under this Section 3.6.
(e)
LIBOR Loans After Default . After the occurrence and during
the continuance of an Event of Default, (i) Borrower may not elect
to have an Advance or Term Loan be made as, or a LIBOR Loan
continued as, or a Prime Rate Loan converted to, a LIBOR Loan after
the expiration of any Interest Period then in effect for such
Advance or Term Loan and (ii) subject to the provisions of Section
3.6(c), any Notice of Conversion/Continuation given by Borrower
with respect to a requested conversion/continuation that has not
yet occurred shall be deemed to be rescinded by Borrower and be
deemed a request to convert into or continue as Prime Rate
Loans.
3.7
Additional Requirements/Provisions Regarding LIBOR Loans
.
(a)
[Reserved]
(b)
Borrower
shall pay Bank, upon demand by Bank, from time to time such amounts
as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its
making or maintaining of any amount receivable by Bank hereunder in
respect of any LIBOR Loan relating thereto (such increases in costs
and reductions in amounts receivable being herein called
“Additional Costs”), in each case resulting from any
Regulatory Change which:
(i)
changes
the basis of taxation of any amounts payable to Bank under this
Agreement in respect of any LIBOR Loan (other than changes which
affect taxes measured by or imposed on the overall net income of
Bank by the jurisdiction in which Bank has its principal
office);
(ii)
imposes
or modifies any reserve, special deposit or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with, or other liabilities of Bank (including any LIBOR
Loan or any deposits referred to in the definition of LIBOR);
or
(iii)
imposes
any other condition affecting this Agreement (or any of such
extensions of credit or liabilities). Bank will notify Borrower of
any event occurring after the Closing Date which will entitle Bank
to compensation pursuant to this Section 3.7 as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation. Bank will furnish Borrower with a
statement setting forth the basis and amount of each request by
Bank for compensation under this Section 3.7. Determinations and
allocations by Bank for purposes of this Section 3.7 of the effect
of any Regulatory Change on its costs of maintaining its
obligations to make LIBOR Loans, of making or maintaining LIBOR
Loans, or on amounts receivable by it in respect of LIBOR Loans,
and of the additional amounts required to compensate Bank in
respect of any Additional Costs, shall be conclusive absent
manifest error.
(c)
If
Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation, or treaty regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or
its applicable lending office) with any respect or directive
regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on capital of
Bank or any person or entity controlling Bank (a
“Parent”) as a consequence of its obligations hereunder
to a level below that which Bank (or its Parent) could have
achieved but for such adoption, change, or compliance (taking into
consideration policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time,
within fifteen (15) days after demand by Bank, Borrower shall pay
to Bank such additional amount or amounts as will compensate Bank
for such reduction. A statement of Bank claiming compensation under
this Section 3.7(c) and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive absent
manifest error.
(d)
If,
at any time, Bank, in its sole and absolute discretion, determines
that (i) the amount of LIBOR Loans for periods equal to the
corresponding Interest Periods are not available to Bank in the
offshore currency interbank markets, or (ii) LIBOR does not
accurately reflect the cost to Bank of lending the LIBOR Loans,
then Bank shall promptly give notice thereof to Borrower. Upon the
giving of such notice, Bank’s obligation to make the LIBOR
Loans shall terminate; provided, however, Advances and Term Loans
shall not terminate if Bank and Borrower agree in writing to a
different interest rate applicable to LIBOR Loans.
(e)
If
it shall become unlawful for Bank to continue to fund or maintain
any LIBOR Loans, or to perform its obligations hereunder, upon
notice to the Borrower, Bank’s obligation to make LIBOR Loans
shall terminate and all outstanding LIBOR Loans shall be
automatically converted into Prime Rate Loans. Notwithstanding the
foregoing, to the extent a determination by Bank as described above
relates to a LIBOR Loan then being requested by Borrower pursuant
to a Notice of Borrowing or a Notice of Conversion/Continuation,
Borrower shall have the option, subject to the provisions of
Section 3.6(c), to (i) rescind such Notice of Borrowing or Notice
of Conversion/Continuation by giving notice (by facsimile or by
telephone confirmed in writing) to Bank of such rescission on the
date on which Bank gives notice of its determination as described
above, or (ii) modify such Notice of Borrowing or Notice of
Conversion/Continuation to obtain a Prime Rate Loan or to have
outstanding LIBOR Loans converted into or continued as Prime Rate
Loans by giving notice (by facsimile or by telephone confirmed in
writing) to Bank of such modification on the date on which Bank
gives notice of its determination as described above.
4
CREATION OF SECURITY INTEREST
4.1
Grant of Security Interest . Borrower hereby
grants Bank, to secure the payment and performance in full of all
of the Obligations, a continuing security interest in, and pledges
to Bank, the Collateral, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products
thereof. Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior
priority to Bank’s Lien under this Agreement). If
Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general
details thereof and grant to Bank in such writing a security
interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.
If
this Agreement is terminated, Bank’s Lien in the
Collateral shall continue until the Obligations (other than
inchoate indemnity obligations) are repaid in full in
cash. Upon payment in full in cash of the
Obligations and at such time as Bank’s obligation to
make Credit Extensions has terminated, Bank shall, at
Borrower’s sole cost and expense, release its Liens in
the Collateral and all rights therein shall revert to
Borrower.
4.2
Authorization to File Financing Statements
. Borrower hereby authorizes Bank to file financing
statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights
hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed
to violate the rights of Bank under the Code. Such
financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being
of an equal or lesser scope, or with greater detail, all in
Bank’s discretion.
5
REPRESENTATIONS AND
WARRANTIES
Borrower
represents and warrants as follows:
5.1
Due Organization, Authorization; Power and Authority
. Borrower is duly existing and in good standing as a
Registered Organization in its jurisdiction of formation and is
qualified and licensed to do business and is in good standing in
any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where
the failure to do so could not reasonably be expected to have a
material adverse effect on Borrower’s business. In
connection with this Agreement, Borrower has delivered to Bank a
completed certificate signed by Borrower, entitled “
Perfection
Certificate ”. Borrower represents and
warrants to Bank that (a) Borrower’s exact legal name is
that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and
is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately
states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower’s place of business, or, if
more than one, its chief executive office as well as
Borrower’s mailing address (if different than its chief
executive office); (e) Borrower (and each of its predecessors)
has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational
number assigned by its jurisdiction; and (f) all other information
set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries is accurate and complete in all material
respects (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If
Borrower is not now a Registered Organization but later becomes
one, Borrower shall promptly notify Bank of such occurrence and
provide Bank with Borrower’s organizational identification
number.
The
execution, delivery and performance by Borrower of the Loan
Documents to which it is a party have been duly authorized,
and do not (i) conflict with any of Borrower’s
organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement
of Law, (iii) contravene, conflict or violate any
applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which
Borrower or any its Subsidiaries or any of their property or
assets may be bound or affected, (iv) require any action
by, filing, registration, or qualification with, or
Governmental Approval from, any Governmental Authority (except
such Governmental Approvals which have already been obtained
and are in full force and effect ) or
(v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is
not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower’s
business.
5.2
Collateral . Borrower has good title to, has
rights or leasehold interests in, and the power to transfer each
item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted
Liens. Borrower has no deposit accounts other than the
deposit accounts with Bank, the deposit accounts, if any, described
in the Perfection Certificate delivered to Bank in connection
herewith, or of which Borrower has given Bank notice and taken such
actions as are necessary to give Bank a perfected security interest
therein. The Accounts are bona fide, existing
obligations of the Account Debtors.
The Collateral is not in
the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection
Certificate. None of the components of the
Collateral shall be maintained at locations other than as
provided in the Perfection Certificate; provided that
Borrower may maintain at any location not more than $100,000
in the aggregate of inventory or equipment in transit,
equipment used by employees at off-site locations or other
such Collateral. In the event that Borrower, after
the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Bank and such bailee
must execute and deliver a bailee agreement in form and
substance satisfactory to Bank in its sole
discretion.
Borrower owns, or is
licensed to use, or could obtain ownership or rights to use
on terms not materially adverse to it, the intellectual
property necessary for the conduct of its business as
currently conducted. To the knowledge of Borrower,
each patent owned by Borrower is valid and enforceable, and
no part of the intellectual property owned by Borrower has
been judged invalid or unenforceable, in whole or in part,
and to the best of Borrower’s knowledge, no claim has
been made that the use by Borrower of its intellectual
property violates the rights of any third party except to the
extent such claim could not reasonably be expected to have a
material adverse effect on Borrower’s
business. Except as noted on the Perfection
Certificate (as updated from time to time by notice to Bank)
and other than over-the-counter software that is commercially
available to the public, Borrower is not a party to, nor is
bound by, any material license or other agreement with
respect to which Borrower is the licensee that prohibits or
otherwise restricts Borrower from granting a security
interest in Borrower’s interest in such license or
agreement or any other property except to the extent such
prohibition on assignment is subject to 9-406(d) or 9-408 the
Code. Borrower shall provide written notice to
Bank within ten (10) days of entering or becoming bound by
any such material license or agreement (other than
over-the-counter software that is commercially available to
the public).
Other
than those listed on Schedule 5.2, Borrower does not own or
hold any certificated securities.
5.3
Accounts Receivable; Inventory . For any Eligible
Account or Recurring Royalty Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing
in all invoices, instruments and other documents evidencing such
Eligible Accounts or Recurring Royalty Accounts are and shall be
true and correct and all such invoices, instruments and other
documents, and all of Borrower's Books are genuine and in all
respects what they purport to be. Whether or not an
Event of Default has occurred and is continuing, Bank may notify
any Account Debtor owing Borrower money of Bank’s security
interest in such funds and verify the amount of such Eligible
Account or Recurring Royalty Account by (i) mail, electronic mail
or facsimile transmission with Borrowers initiating the
verification and Bank receiving such verification directly from the
relevant Account Debtor, or (ii) telephone, provided that one or
more officers, employees or other representatives of a Borrower
initiates and conducts any telephone call regarding any such
verification while Bank is present on such call. All
sales and other transactions underlying or giving rise to each
Eligible Account or Recurring Royalty Account shall comply in all
material respects with all applicable laws and governmental rules
and regulations. Borrower has no knowledge of any actual
or imminent Insolvency Proceeding of any Account Debtor whose
accounts are Eligible Accounts or Recurring Royalty Accounts in any
Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all
documents, instruments, and agreements relating to all Eligible
Accounts or Recurring Royalty Accounts are genuine, and all such
documents, instruments and agreements are legally enforceable in
accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting
creditors’ rights and remedies generally, and general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.4
Litigation . Except as disclosed on the
Perfection Certificate, there are no actions or proceedings pending
or, to the knowledge of the Responsible Officers, threatened in
writing by or against Borrower or any of its Subsidiaries involving
more than One Million Dollars ($1,000,000).
5.5
No Material Deviation in Financial Statements
. All consolidated financial statements for Borrower and
any of its Subsidiaries delivered to Bank fairly present in all
material respects Borrower’s consolidated financial condition
and Borrower’s consolidated results of
operations. There has not been any material
deterioration in Borrower’s consolidated financial condition
since the date of the most recent financial statements submitted to
Bank.
5.6
Solvency . The fair salable value of
Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not
left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.
5.7
Regulatory Compliance . Borrower is not an
“investment company” or a company
“controlled” by an “investment company”
under the Investment Company Act of 1940, as
amended. Borrower is not engaged as one of its important
activities in extending credit for margin stock (under Regulations
X, T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards
Act. Except as noted in the Perfection Certificate,
Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to have a material
adverse effect on its business. None of Borrower’s
or any of its Subsidiaries’ properties or assets has been
used by Borrower or any Subsidiary or, to the best of
Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous
substance other than in compliance with applicable laws or as would
not reasonably be expected to result in a material liability to
Borrower. Borrower and each of its Subsidiaries have
obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all
Government Authorities that are necessary to continue their
respective businesses as currently conducted.
5.8
Subsidiaries; Investments . Except as disclosed
on the Perfection Certificate, Borrower does not own any stock,
partnership interest or other equity securities except for
Permitted Investments.
5.9
Tax Returns and Payments; Pension Contributions
. Borrower has timely filed all required material tax
returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and
contributions owed by Borrower, except for taxes, assessments,
deposits and contributions contest in good faith by appropriate
proceedings as set forth below. Borrower may defer
payment of any contested taxes, assessments, deposits and
contributions, provided that Borrower (a) in good faith contests
its obligation to pay the taxes, assessments, deposits and
contributions by appropriate proceedings promptly and diligently
instituted and conducted, and (b) posts bonds or takes any other
steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral
that is other than a “Permitted
Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which
could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to
fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or
complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be
expected to result in any material liability of Borrower, including
any material liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency.
5.10
Use of Proceeds . Borrower shall use the proceeds
of the Credit Extensions solely for debt repayment and as working
capital and to fund its general business requirements and not for
personal, family, household or agricultural purposes.
5.11 [Omitted.]
5.12
Full
Disclosure . No written representation, warranty
or other statement of Borrower in any certificate or written
statement given to Bank, as of the date such representation,
warranty, or other statement was made, taken together with all such
written certificates and written statements given to Bank, contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the
certificates or statements not misleading (it being recognized by
Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as
facts and that actual results during the period or periods covered
by such projections and forecasts may differ from the projected or
forecasted results).
6
AFFIRMATIVE
COVENANTS
Borrower
shall do all of the following:
6.1
Government Compliance. Borrower shall, and shall
cause each of its Subsidiaries to, maintain its legal existence and
good standing in its jurisdiction of formation and each
jurisdiction in which the nature of its business requires them to
be so qualified, except where the failure to take such action would
not reasonably be expected to have a material adverse effect on
Borrower’s and its Subsidiaries’ business or
operations, taken as a whole; provided, that (a) the legal
existence of any Subsidiary that is not a Guarantor may be
terminated or permitted to lapse, and any qualification of such
Subsidiary to do business may be terminated or permitted to lapse,
if, in the good faith judgment of Borrower, such termination or
lapse is in the best interests of Borrower and its Subsidiaries,
taken as a whole, and (b) Borrower may not permit its qualification
to do business in the jurisdiction of its chief executive office to
terminate or lapse; and provided, further, that this Section 6.1
shall not be construed to prohibit any other transaction that is
otherwise expressly permitted in Section 7 of this Agreement.
Borrower shall comply, and shall have each Subsidiary comply, with
all laws, ordinances and regulations to which it is subject,
noncompliance with which could have a material adverse effect on
Borrower’s business.
6.2
Financial Statements, Reports, Certificates .
|
(a)
|
10Q and 10K Reports .
|
|
(i)
|
As
soon as available, but no later than the earlier of (x) five (5)
days after filing with the Securities Exchange Commission or (y)
forty-five (45) days after the fiscal quarter end (other than a
fiscal quarter end that is also a fiscal year end), deliver to Bank
Borrower’s quarterly reports on Form 10-Q (”
10Q Reports
”); Borrower may deliver 10Q Reports by providing a link
thereto on Borrower’s or another website on the Internet;
and
|
|
(ii)
|
As
soon as available, but no later than the earlier of (x) five (5)
days after filing with the Securities Exchange Commission or (y)
ninety (90) days after the fiscal year end, deliver to Bank
Borrower’s annual reports on Form 10-K (“ 10K Reports ”);
provided, however, that Borrower may delay sending a 10K Report if
Borrower has filed for an extension to file such 10K Report
pursuant to Rule 12b-25 under the Securities Exchange
Act of 1934, as amended, but only if Borrower provides to Bank (1)
company prepared, consolidated financial statements together with
the completed Form 12b-25 (including all attachments) within the
original time prescribed in the first sentence of this Section
6.2(a)(ii) and (2) the 10K Report upon filing with the Securities
Exchange Commission. Borrower may deliver 10K Reports by
providing a link thereto on Borrower’s or another website on
the Internet.
|
|
(b)
|
Compliance Certificate . Together with the
delivery of any 10Q Report, 10K Report or, in case a 10K Report is
delayed as permitted in Section 6.2(a), company prepared financial
statements together with the filed Form 12b-25 (including
attachments) (or delivery of the link, as the case may be), deliver
to Bank a duly completed Compliance Certificate signed by a
Responsible Officer setting forth calculations showing compliance
with the financial covenants set forth in this
Agreement;
|
|
(c)
|
Consolidating Financial Statements . Together
with the delivery of any 10Q Report, 10K Report or, in case a 10K
Report is delayed as permitted in Section 6.2(a), company prepared,
consolidated financial statements together with the filed Form
12b-25 (including attachments) (or delivery of the link, as the
case may be), deliver to Bank Borrower’s
consolidating financial statements to the extent not included in
the 10Q Report or 10K Report.
|
|
(d)
|
Annual Financial Projections . No later than ten
(10) days after approval by Borrower’s board of directors
(but in any event within ninety (90) days after the end of each
fiscal year), deliver to Bank Borrower’s annual financial
projections for the following fiscal year (on a quarterly basis) as
approved by Borrower’s board of directors, together with any
related business forecasts used in the preparation of such annual
financial projections;
|
|
(e)
|
Borrowing Base Certificate; Accounts Receivable and Accounts
Payable Aging; Deferred Revenue . If any Advances
are outstanding under the Revolving Line, within thirty (30) days
after the last day of each month, deliver to Bank a duly completed
Borrowing Base Certificate signed by a Responsible Officer, with
(i) aged listings of accounts receivable (by invoice date, for
domestic U.S. account receivables and previously approved foreign
accounts only), (ii) aged listing of accounts payable (by invoice
date) and (iii) a report detailing Borrower’s Deferred
Revenue. If no Advance is outstanding under the
Revolving Line, the Borrowing Base Certificate together with the
reports required under Section 6.2(e)(i)-(iii) shall be due no
later than five (5) days prior to the next Revolving Line
Advance.
|
|
(f)
|
Royalty Trend Report . Within thirty (30) days of
the end of each fiscal quarter, provide to Bank a royalty trend
report for Borrower’s Recurring Royalty Accounts, which
report shall include (i) a listing, by customer, of all royalty
revenue received during such quarter and (ii) the total of all
royalties generated during such quarter.
|
|
(g)
|
Legal Action Report . Deliver to Bank a prompt
report of any legal actions pending or threatened against Borrower
or any Subsidiary that is reasonably expected to result in damages
or costs to Borrower or any Subsidiary of One Million Dollars
($1,00,000) or more;
|
|
(h)
|
Collateral Audit . Allow Bank to audit
Borrower’s Collateral at Borrower’s
expense. Such audits shall be conducted no more often
than once every year unless an Event of Default has occurred and is
continuing.
|
|
(i)
|
Other . Deliver to Bank all budgets, sales projections,
operating plans or other financial information Bank reasonably
requests;
|
6.3 Control Agreement.
Within thirty (30) days of the Effective Date, deliver
to Bank a duly executed original Control Agreement for each account
for which a Control Agreement is required pursuant to Section
6.6(b) of the Agreement.
6.4
Taxes; Pensions . Timely file or be granted an
extension to file, and require each of its Subsidiaries to timely
file or be granted an extension to file, all required tax returns
and reports and timely pay, and require each of its Subsidiaries to
timely file, all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower and each
of its Subsidiaries, except for deferred payment of any taxes,
assessments, deposits and contributions contested pursuant to the
terms of Section 5.9 hereof, and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their
terms.
6.5
Insurance. Keep its business and the Collateral
insured for risks and in amounts standard for companies in
Borrower’s industry and location and as Bank may reasonably
request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to
Bank. All property policies shall have a lender’s
loss payable endorsement showing Bank as lender loss payee and
waive subrogation against Bank, and all liability policies shall
show, or have endorsements showing, Bank as an additional
insured. All policies (or the loss payable and
additional insured endorsements) shall provide that the insurer
shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its
policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium
payments. After the occurrence and during the
continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Bank, be payable to Bank on
account of the Obligations. If Borrower fails to obtain
insurance as required under this Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons
and Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section 6.5, and take any
action under the policies Bank deems prudent.
6.6
Operating Accounts .
(a)
No later than ninety (90) days from the Effective Date, and
at all times thereafter, maintain its primary and its
Subsidiaries’ primary domestic operating and other deposit
accounts and securities accounts with Bank and Bank’s
Affiliates.
(b)
Provide
Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution
other than Bank or Bank’s Affiliates. For each
Domestic Collateral Account that Borrower at any time maintains,
Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Domestic Collateral Account
is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Domestic Collateral
Account to perfect Bank’s Lien in such Domestic Collateral
Account in accordance with the terms hereunder. The
provisions of the previous sentence shall not apply to deposit
accounts exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of
Borrower’s employees and identified to Bank by Borrower as
such.
6.7
Financial Covenants .
Borrower
shall maintain on a consolidated basis with respect to
Borrower and its Subsidiaries:
|
(a)
|
Fixed Charge Coverage . As of the end of each
fiscal quarter, a ratio of (x) EBITDA for the quarter then ended
and the immediately preceding quarter minus unfunded capital
expenditures during such two (2) quarters divided
by (y) the sum of the same rolling 2 quarters’
scheduled payments of principal and interest on all Indebtedness
(excluding the pay-off or pre-payment of Indebtedness to Jefferies
Finance LLC on or before the Effective Date), which ratio shall be
not less than (a) 1.25 to 1.00 for the quarters ending September
30, 2008 and December 31, 2008 and (b) 1.50 to 1.00 for all
quarters ending thereafter;
|
|
(b)
|
Senior Debt Leverage Ratio . As of the end of
each fiscal quarter, a ratio of (x) the sum of all Indebtedness
consisting of all amounts owed to banks (including the Advances and
Term Loan hereunder) plus all capital lease obligations
divided by (y) the annualized EBITDA calculated from the
EBITDA for the quarter then ended and the immediately preceding
quarter, which ratio shall be not more than 2.00 to 1.00;
and
|
|
(c)
|
Adjusted Quick Ratio . As of the end of each
fiscal quarter, a ratio of (x) the sum of Quick Assets divided
by (y) Current Liabilities minus Deferred Revenue, which
ratio shall be not less than (a) 0.65 to 1.00, for the quarter
ending September 30, 2008, (b) 0.75 to 1.00, for the quarters
ending December 31, 2008 and March 31, 2009 and (c) 1.00 to 1.00
for each quarter ending thereafter.
|
6.8
Protection and Registration of Intellectual Property Rights
. Borrower shall: (a) use commercially
reasonable efforts to protect, defend and maintain the validity and
enforceability of its intellectual property; (b) promptly advise
Bank in writing of material infringements of its intellectual
property; and (c) not allow any intellectual property owned by
Borrower and material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written
consent unless Borrower shall reasonably determine that any
intellectual property is not of material value or has no business
value and such abandonment, forfeiture or dedication would not
result in a Material Adverse Change.
6.9
Litigation Cooperation . From the date hereof and
continuing through the termination of this Agreement, make
available to Bank, without expense to Bank, Borrower and its
officers, employees and agents and Borrower's books and records, to
the extent that Bank may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted
by or against Bank with respect to any Collateral or relating to
Borrower.
6.10
[Omitted.]
6.11
Designated Senior Indebtedness . Borrower shall
designate all principal of, interest (including all interest
accruing after the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition interest is
allowable as a claim in any such proceeding), and all fees, costs,
expenses and other amounts accrued or due under this Agreement as
“Designated Senior Indebtedness”, or such similar term,
in any future Subordinated Debt incurred by Borrower after the date
hereof.
6.12
Further Assurances . Execute any further
instruments and take further action as Bank reasonably requests to
perfect or continue Bank’s Lien in the Collateral or to
effect the purposes of this Agreement. Deliver to Bank,
within five (5) days after the same are sent or received, copies of
all correspondence, reports, documents and other filings with any
Governmental Authority regarding compliance with or maintenance of
Governmental Approvals or Requirements of Law that could reasonably
be expected to have a material effect on the operations of Borrower
or any of its Subsidiaries (other than anything available to the
general public without charge on Borrower’s or another
website).
7
NEGATIVE
COVENANTS
Borrower
shall not do any of the following without Bank’s prior
written consent (which shall not be unreasonably withheld or
delayed):
7.1
Dispositions
. Convey, sell, lease, transfer or otherwise dispose of
(collectively “ Transfer ”), or
permit any of its Subsidiaries to Transfer, all or any part of its
business or property, except for:
(a) Transfers
in the ordinary course of business for reasonably equivalent
consideration;
(b) Transfers
to Borrower or any of its Subsidiaries from Borrower or any of
its Subsidiaries;
(c) Transfers
of property in connection with sale-leaseback
transactions;
|
|
(d)
|
Transfers
of property to the extent such property is exchanged for credit
against, or proceeds are promptly applied to, the purchase price of
other property used or useful in the business of Borrower or its
Subsidiaries;
|
|
|
(e)
|
Transfers
constituting non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the
ordinary course of business and other non-perpetual licenses that
may be exclusive in some respects other than territory (and/or that
may be exclusive as to territory only in discreet geographical
areas outside of the United States), but that could not result in a
legal transfer of Borrower’s title in the licensed
property;
|
|
|
(f)
|
Transfers
otherwise permitted by the Loan Documents;
|
|
|
(g)
|
sales
or discounting of delinquent accounts or notes receivables in the
ordinary course of business;
|
|
|
(h)
|
Transfers
associated with the making or disposition of a Permitted
Investment;
|
|
|
(i)
|
Transfers
in connection with a permitted acquisition of a portion of the
assets or rights acquired;
|
|
|
(j)
|
dispositions
of worn out, obsolete, uneconomic or surplus property;
|
|
|
(k)
|
leases
or subleases of the real property located at Tagus Park, Av. Dr.
Mario Soarez 33, 2740-119 Portu Salvo;
|
|
|
(l)
|
Transfers
of intellectual property immaterial to Borrower’s business
and which, in the aggregate, accounted for no more than $500,000 of
revenue in the calendar year preceding each such disposition;
and
|
|
|
(n)
|
Transfers
of assets (other than Accounts, and Inventory (unless such Transfer
is in the ordinary course of Borrower’s business)) not
otherwise permitted in this Section 7.1, provided, that the
aggregate book value of all such Transfers by Borrower and its
Subsidiaries, together, shall not exceed in any fiscal year,
$500,000.
|
7.2 Changes in Business; Change in
Control; Jurisdiction of Formation .
Engage
in any material line of business other than those lines of
business conducted by Borrower and its Subsidiaries on the
date hereof and any businesses reasonably related,
complementary or incidental thereto or reasonable extensions
thereof; or
permit or suffer any Change in Control. Borrower
will not, without prior written notice, change its
jurisdiction of formation.
7.3 Mergers or Acquisitions
. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any Person other than
with Borrower or any Subsidiary, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital
stock or property of a Person other than Borrower or any
Subsidiary, except where no Event of Default has occurred and is
continuing or would result from such action during the term of this
Agreement, and (a) if Borrower is a party to the merger, Borrower
is the surviving entity or (b) such merger or consolidation is not
a Transfer prohibited by Section 7.1 hereof.
7.4 Indebtedness
. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than
Permitted Indebtedness.
7.5
Encumbrance . (i) Create, incur, allow, or suffer
any Lien on any of its property, or assign or convey any right to
receive income, including the sale of any Accounts, or permit any
of its Subsidiaries to do so, except as is otherwise permitted by
Section 7.1 hereof and except for Permitted Liens, (ii) permit any
Collateral not to be subject to the first priority security
interest granted herein, except to the extent any Permitted Liens
have priority over the security interests granted herein, or (iii)
enter into any agreement, document, instrument or other arrangement
(except with or in favor of Bank) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s intellectual property,
except in connection with Transfers permitted in Section 7.1
hereof, customary non-assignment provisions contained in licenses
or sublicenses and Permitted Liens.
7.6
Maintenance of Collateral Accounts . Maintain any
Collateral Account except pursuant to the terms of Section 6.6(b)
hereof.
7.7
Distributions; Investments . (a) Pay any
dividends or make any distribution or payment in respect of, or
redeem, retire or purchase any capital stock other than Permitted
Distributions; or (b) directly or indirectly acquire or own any
Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do
so.
7.8
Transactions with Affiliates . Directly or
indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower or permit Guarantor directly or
indirectly to enter into or permit to exist any material
transactions between Guarantor and any Affiliate of Guarantor
except for (a) transactions that are in the ordinary course of
Borrower’s or Guarantor’s business, upon fair and
reasonable terms (when viewed in the context of any series of
transactions of which it may be a part, if applicable); or
(b) transactions among Borrower or Guarantor and its
Subsidiaries and among Borrower’s or Guarantor’s
Subsidiaries so long as no Event of Default exists or could result
therefrom.
7.9
Subordinated Debt . Make or permit any payment on
or amendments of any Subordinated Debt, except (a) payments
pursuant to the terms of the Subordinated Debt; (b) payments made
with Borrower’s capital stock or other Subordinated Debt; or
(c) amendments to Subordinated Debt so long as such
Subordinated Debt remains subordinated in right of payment to this
Agreement and any Liens securing such Subordinated Debt remain
subordinate in priority to Bank’s Lien
hereunder.
7.10
Compliance . Become an “investment
company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending
credit to purchase or carry margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System), or use
the proceeds of any Credit Extension for that purpose; fail to meet
the minimum funding requirements of ERISA, permit a Reportable
Event (other than those events as to which the thirty day notice
period is waived under subsections .27, .28, .29, .30, .31, .32,
.34 or .35 of Pension Benefit Guaranty Corporation Reg. §4043)
or Prohibited Transaction, as defined in ERISA, to occur; fail to
comply with the Federal Fair Labor Standards Act or violate any
other law or regulation, if such failure to comply or such
violation could reasonably be expected to have a material adverse
effect on Borrower’s business, or permit any of its
Subsidiaries to do so; withdraw or permit any Subsidiary to
withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred
compensation plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other
governmental agency.
8
EVENTS OF
DEFAULT
Any
one of the following shall constitute an event of default (an
“ Event
of Default ”) under this Agreement:
8.1
Payment Default . Borrower fails to (a) make
any payment of principal on any Credit Extension on its due date,
or (b) pay any interest or other Obligations within three (3)
Business Days after such interest or other Obligations are due and
payable (which three (3) day grace period shall not apply to
payments due on the Revolving Line Maturity Date or the Term
Loan Maturity Date). During the cure period, the failure
to cure the payment default is not an Event of Default (but no
Credit Extension will be made during the cure period);
8.2
Covenant Default .
(a)
Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.11 or violates any
covenant in Section 7; or
(b)
Borrower fails or neglects to perform, keep, or observe any
other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Documents, and as to
any de
|
