LOAN AND SECURITY
AGREEMENT
THIS LOAN AND
SECURITY AGREEMENT (this “ Agreement ”)
dated as of March 29, 2006 (the “ Effective Date
”) by and among SILICON VALLEY BANK , a California
corporation (“ SVB ”), as collateral agent (the
“ Collateral Agent ”) for the Lenders and
administrative agent (the “ Administrative Agent
”) for the Lenders (Collateral Agent and Administrative Agent
are collectively the “ Agent ”), and the Lenders
listed on Schedule 1.1 and otherwise party hereto, including,
without limitation, SVB and JPMORGAN CHASE BANK, N.A.
(“ JPMorgan ”) (SVB and JPMorgan are,
collectively, the “ Joint Bookrunners ”) and
GAIN CAPITAL HOLDINGS, INC ., a Delaware corporation
(“ Borrower ”), provides the terms on which
Lenders shall lend to Borrower and Borrower shall repay Lenders.
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 Lenders
the outstanding principal amount of all Credit Extensions and
accrued and unpaid interest thereon as and when due in accordance
with this Agreement.
(a)
Availability . Lenders shall, jointly and not severally,
shall make one (1) term loan available to Borrower in an
amount up to the Term Loan Amount according to each lender’s
pro rata share of the Term Loan Amount (based upon the respective
Commitment Percentage of each Lender) on or after ten
(10) days after the Effective Date subject to the satisfaction
of the terms and conditions of this Agreement
(b)
Repayment . In addition to monthly payments of interest,
commencing on October 1, 2006, Borrower shall repay the Term
Loan in (i) twelve (12) equal quarterly installments of
principal, plus (ii) monthly payments of accrued interest (the
“ Term Loan Payment ”). 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.
2.2 General
Provisions Relating to the Credit Extensions . Each Credit
Extension shall, at Borrower’s option in accordance with the
terms of this Agreement, be either in the form of a Prime Rate
Credit Extension or a LIBOR Credit Extension; provided that
in no event shall Borrower maintain at any time LIBOR Credit
Extension having more than one (1) different Interest Period.
Borrower shall pay interest accrued on the Credit Extensions at the
rates and in the manner set forth in
Section 2.3(a).
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)
Credit Extensions . Each Credit Extension 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 Credit Extension outstanding on the date of occurrence of
an Event of Default or acceleration of the Obligations, the
Effective Amount of such LIBOR Credit Extension shall, during the
continuance of such Event of Default or after acceleration, bear
interest at a rate per annum equal to the Default Rate (as defined
below). Pursuant to the terms hereof, interest on each Credit
Extension
shall be paid
in arrears on each Interest Payment Date. Interest shall also be
paid on the date of any prepayment of any Credit Extension pursuant
to this Agreement for the portion of any Credit Extension so
prepaid and upon payment (including prepayment) in full thereof.
All accrued but unpaid interest on the Credit Extensions shall be
due and payable on the Term Loan Maturity Date.
(c)
Default Rate . Except as otherwise provided in
Section 2.3(b), after an Event of Default, Obligations shall
bear interest five percent (5.00%) above the Prime Rate (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 Agent or Lenders.
(d)
Prime Rate Credit Extensions . Each change in the interest
rate of the Prime Rate Credit Extensions based on changes in the
Prime Rate shall be effective on the effective date of such change
and to the extent of such change. Agent shall use its best efforts
to give Borrower prompt notice of any such change in the Prime
Rate; provided, however, that any failure by Agent to
provide Borrower with notice hereunder shall not affect
Agent’s right to make changes in the interest rate of the
Prime Rate Credit Extensions based on changes in the Prime
Rate.
(e)
LIBOR Credit Extensions . The interest rate applicable to
each LIBOR Credit Extension 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 Credit Extension, and interest calculated
thereon shall be payable on the Interest Payment Date applicable to
such LIBOR Credit Extension.
(f)
Debit of Accounts . Agent 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 Lenders, when due. These debits shall not constitute
a set-off.
(g)
Payments . Unless otherwise provided, interest is payable
monthly on the first calendar day of each month. Payments of
principal and/or interest received after 12:00 noon Eastern time
are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees
or interest, as applicable, shall continue to accrue.
2.4 Fees .
Borrower shall pay to Agent:
(a)
Commitment Fee . A fully earned, non-refundable commitment
fee of Two Hundred Twenty-Five Thousand Dollars ($225,000.00) (to
be shared between Lenders pursuant to their respective Commitment
Percentages), on the Effective Date;
(b)
Prepayment Fee . The Prepayment Fee, when due hereunder
(unless the prepayment occurs in connection with any prepayment
required by regulatory actions, in which case no Prepayment Fee
shall be due or owing hereunder); and
(c)
Lenders’ Expenses . All Lenders’ 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.
3.1 Conditions
Precedent to Initial Credit Extension . The Lenders’
obligation to make the initial Credit Extension is subject to the
condition precedent that Agent shall have received, in form and
substance satisfactory to Agent, such documents, and completion of
such other matters, as Agent may reasonably deem necessary or
appropriate, including, without limitation:
(a) Duly
executed original signatures to the Loan Documents to which it is a
party;
(b) Duly
executed original signatures by each Lender to each Loan Document
to which it is a party;
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(c) Duly
executed original signatures to the Control Agreements;
(d) Borrower,
Gain Holdings, LLC, Gain Capital Group, Inc. and Gain Capital, Inc.
shall have delivered their Operating Documents and good standing
certificate of Borrower, Gain Holdings, LLC, Gain Capital Group,
Inc. and Gain Capital, Inc. 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;
(e) Duly
executed Guaranty by Guarantor;
(f) Duly
executed Pledge Agreement by Borrower (with respect to membership
interest in Gain Holdings, LLC);
(g) Duly
executed original signatures to the completed Borrowing Resolutions
for Borrower;
(h) Agent
shall have received certified copies, dated as of a recent date, of
financing statement searches, as Agent 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, together
with any other searches that either Lender may require;
(i) Borrower
shall have delivered a solvency certificate in favor of Lenders in
form and substance acceptable to Lenders;
(j) Borrower
shall have delivered a legal opinion of Borrower’s and
Guarantor’s counsel dated as of the Effective Date together
with the duly executed original signatures thereto;
(k) Solvency
opinion, from an independent issuer acceptable to Lenders and their
sole and absolute discretion;
(l) Evidence
that the Capitalization Event has occurred or will occur with
funding of Credit Extension; and
(m) Borrower
shall have paid the fees and Lenders’ Expenses then due as
specified in Section 2.4 hereof.
3.2 Conditions
Precedent to all Credit Extensions . The obligations of Lenders
to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely
receipt of a Notice of Borrowing by each Lender;
(b) the
representations and warranties in Section 5 shall be true in
all material respects on the date of the Notice of Borrowing and on
the Funding Date of each Credit Extension; 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 Default or 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 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
(c) in
each Lenders’ sole discretion, there has not been any
material impairment in the general affairs, management, results of
operation, financial condition or the prospect of repayment of the
Obligations, or there has not been any material adverse deviation
by Borrower from the most recent business plan of Borrower
presented to and accepted by Agent.
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Borrower agrees to
deliver to Agent each item required to be delivered to Agent under
this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to
the receipt by Agent of any such item shall not constitute a waiver
by Agent of Borrower’s obligation to deliver such item, and
any such extension in the absence of a required item shall be in
Agent’s sole discretion.
3.4 Procedure
for the Borrowing of Credit Extensions.
(a) Subject
to the prior satisfaction of all other applicable conditions to the
making of a Credit Extension set forth in this Agreement, each
Credit Extension shall be made upon Borrower’s irrevocable
written notice delivered to Agent 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 Credit
Extensions are necessary to meet Obligations which have become due.
Agent may rely on any telephone notice given by a person whom Agent
believes is a Responsible Officer or designee. Borrower will
indemnify Lenders for any loss Lenders suffer due to such reliance
by Agent. Such Notice of Borrowing must be received by Agent prior
to 11:00 a.m. Eastern time, (i) at least three
(3) Business Days prior to the requested Funding Date, in the
case of LIBOR Credit Extensions, and (ii) at least one
(1) Business Day prior to the requested Funding Date, in the
case of Prime Rate Credit Extensions, specifying:
(i) the
amount of the Credit Extension, which, if a LIBOR Credit Extension
is requested, shall be in an aggregate minimum principal amount of
$1,000,000 or in any integral multiple of S1,000,000 in excess
thereof;
(ii) the
requested Funding Date; and
(iii) whether
the Credit Extension is to be comprised of LIBOR Credit Extensions
or Prime Rate Credit Extensions.
(b) The
proceeds of all such Credit Extensions will then be made available
to Borrower on the Funding Date by Lenders by transfer to the
Designated Deposit Account and, subsequently, by wire transfer to
such other account as Borrower may instruct in the Notice of
Borrowing. No Credit Extensions shall be deemed made to Borrower,
and no interest shall accrue on any such Credit Extension, until
the related funds have been deposited in the Designated Deposit
Account.
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 Lenders have established from time to
time for Borrower’s requests for LIBOR Credit Extensions,
Borrower may, upon irrevocable written notice to Agent:
(i) elect
to convert on any Business Day, Prime Rate Credit Extensions in an
amount equal to $1,000,000 or any integral multiple of $1,000,000
in excess thereof into LIBOR Credit Extensions;
(ii) elect
to continue on any Interest Payment Date any LIBOR Credit
Extensions maturing on such Interest Payment Date (or any part
thereof in an amount equal to $1,000,000 or any integral multiple
of $1,000,000 in excess thereof); provided, that if the
aggregate amount of LIBOR Credit Extensions shall have been
reduced, by payment, prepayment, or conversion of part thereof, to
be less than $1,000,000, such LIBOR Credit Extensions shall
automatically convert into Prime Rate Credit Extensions, and on and
after such date the right of Borrower to continue such Credit
Extensions as, and convert such Credit Extensions into, LIBOR
Credit Extensions shall terminate; or
(iii) elect
to convert on any Interest Payment Date any LIBOR Credit Extensions
maturing on such Interest Payment Date (or any part thereof in an
amount equal to $1,000,000 or any integral multiple of $1,000,000
in excess thereof) into Prime Rate Credit Extensions.
(b) Borrower
shall deliver a Notice of Conversion/Continuation in accordance
with Section 10 to be received by Agent prior to
11:00 a.m. Eastern time at least (i) three (3) Business
Days in advance of the Conversion Date or Continuation Date, if any
Credit Extensions are to be converted into or continued as LIBOR
Credit Extensions; and (ii) one (1) Business Day in
advance of the Conversion Date, if any Credit Extensions are to be
converted into Prime Rate Credit Extensions, in each case
specifying the:
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(i) proposed
Conversion Date or Continuation Date;
(ii) aggregate
amount of the Credit Extensions to be converted or continued which,
if any Credit Extensions are to be converted into or continued as
LIBOR Credit Extensions, shall be in an aggregate minimum principal
amount of $1,000,000 or in any integral multiple of $1,000,000 in
excess thereof; and
(iii) nature
of the proposed conversion or continuation.
(c) If
upon the expiration of any Interest Period applicable to any LIBOR
Credit Extensions, Borrower shall have failed to timely select a
new Interest Period to be applicable to such LIBOR Credit
Extensions, Borrower shall be deemed to have elected to convert
such LIBOR Credit Extensions into Prime Rate Credit
Extensions.
(d) Any
LIBOR Credit Extensions shall, at Agent’s option, convert
into Prime Rate Credit Extensions in the event that (i) an
Event of Default or Default shall exist, or (ii) the aggregate
principal amount of the Prime Rate Credit Extensions which have
been previously converted to LIBOR Credit Extensions, or the
aggregate principal amount of existing LIBOR Credit Extensions
continued, as the case may be, at the beginning of an Interest
Period shall at any time during such Interest Period exceed the
Term Loan Amount. Borrower agrees to pay Agent, upon demand by
Agent (or Agent or Lenders may, at their option, charge the
Designated Deposit Account or any other account Borrower maintains
with Lenders) any amounts required to compensate Agent and Lenders
for any loss {including loss of anticipated profits), cost, or
expense incurred by Agent or Lenders, as a result of the conversion
of LIBOR Credit Extensions to Prime Rate Credit Extensions pursuant
to any of the foregoing.
(e) Notwithstanding
anything to the contrary contained herein, Lenders shall not be
required to purchase United States Dollar deposits in the London
interbank market or other applicable LIBOR market to fund any LIBOR
Credit Extensions, but the provisions hereof shall be deemed to
apply as if Lenders had purchased such deposits to fund the LIBOR
Credit Extensions.
3.6 Special
Provisions Governing LIBOR Credit Extensions.
Notwithstanding
any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to LIBOR Credit
Extensions as to the matters covered:
(a)
Determination of Applicable Interest Rate . As soon as
practicable on each Interest Rate Determination Date, Agent 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 Credit Extensions 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 Agent 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
Credit Extension, 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 Credit Extension
on the basis provided for in the definition of LIBOR, Agent shall
on such date give notice (by facsimile or by telephone confirmed in
writing) to Borrower of such determination, whereupon (i) no
Credit Extensions may be made as, or converted to, LIBOR Credit
Extensions until such time as Agent 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 Credit
Extensions 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 Agent and Lenders, upon
written request by Agent and/or Lenders (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 Agent and/or Lenders to lenders of funds
borrowed by it to make or carry its LIBOR Credit Extensions and any
loss, expense or liability incurred by Agent and/or Lenders in
connection with the liquidation or re-employment of such funds)
such that Agent and/or Lenders may incur: (i) if for any
reason (other than a default by Agent and/or Lenders or due to any
failure of Lenders to fund LIBOR Credit Extensions 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
Credit Extension does not occur on a date specified in a Notice of
Borrowing or a Notice of
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Conversion/Continuation, as the case may be, or
(ii) if any principal payment or any conversion of any of its
LIBOR Credit Extensions occurs on a date prior to the last day of
an Interest Period applicable to that Credit Extension.
(d)
Assumptions Concerning Funding of LIBOR Credit Extensions .
Calculation of all amounts payable to Lenders under this
Section 3.6 and under Section 3.4 shall be made as though
Lenders had actually funded each of its relevant LIBOR Credit
Extensions 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 Credit
Extension and having a maturity comparable to the relevant Interest
Period; provided, however, that Lenders may fund each of
their LIBOR Credit Extensions 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 and under
Section 3.4.
(e)
LIBOR Credit Extensions After Default . After the occurrence
and during the continuance of an Event of Default,
(i) Borrower may not elect to have a Credit Extension be made
or continued as, or converted to, a LIBOR Credit Extension after
the expiration of any Interest Period then in effect for such
Credit Extension 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 or continue Credit Extensions
referred to therein as Prime Rate Credit Extensions.
3.7 Additional
Requirements/Provisions Regarding LIBOR Credit
Extensions.
(a) If
for any reason (including voluntary or mandatory prepayment or
acceleration), any Lender receives all or part of the principal
amount of a LIBOR Credit Extension prior to the last day of the
Interest Period for such Credit Extension, Borrower shall
immediately notify Borrower’s account officer at Agent and,
on demand by Agent, pay Lenders the amount (if any) by which
(i) the additional interest which would have been payable on
the amount so received had it not been received until the last day
of such Interest Period exceeds (ii) the interest which would
have been recoverable by Lenders by placing the amount so received
on deposit in the certificate of deposit markets, the offshore
currency markets, or United States Treasury investment products, as
the case may be, for a period starting on the date on which it was
so received and ending on the last day of such Interest Period at
the interest rate determined by each Lender in such Lender’s
reasonable discretion. Lenders’ determination as to such
amount shall be conclusive absent manifest error.
(b) Borrower
shall pay Lenders, upon demand by Agent, from time to time such
amounts as Lenders may determine to be necessary to compensate it
for any costs incurred by Lenders that Lenders determine are
attributable to its making or maintaining of any amount receivable
by Lenders hereunder in respect of any Credit Extensions 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 Lenders under this
Agreement in respect of any Credit Extensions (other than changes
which affect taxes measured by or imposed on the overall net income
of Lenders by the jurisdiction in which Lenders have their
respective principal offices);
(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 Lenders (including any
Credit Extensions 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).
Agent will notify
Borrower of any event occurring after the Closing Date which will
entitle Lenders to compensation pursuant to this Section 3.7
as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. Agent will furnish
Borrower with a statement setting forth the basis and amount of
each request by Lenders for compensation under this
Section 3.7. Determinations and allocations by Lenders for
purposes of this Section 3.7 of the effect of any Regulatory
Change on its costs of maintaining its obligations to make Credit
Extensions, of making or maintaining Credit Extensions, or on
amounts receivable by it in respect of Credit Extensions, and of
the additional amounts required to compensate Lenders in respect of
any Additional Costs, shall be conclusive absent manifest
error.
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(c) If
Lenders 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 Lenders
(or their applicable respective lending offices) 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 Lenders or any person, or entity controlling any
Lender (a “Parent” ) as a consequence of its
obligations hereunder to a level below that which any Lender (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 any Lender to be material,
then from time to time, within fifteen (15) days after demand
by Agent, Borrower shall pay to Lenders such additional amount or
amounts as will compensate Lenders for such reduction. A statement
of Agent 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, any Lender, in its sole and absolute discretion,
determines that (i) the amount of LIBOR Credit Extensions for
periods equal to the corresponding Interest Periods are not
available to such Lender in the offshore currency interbank
markets, or (ii) LIBOR does not accurately reflect the cost to
Lenders of lending the LIBOR Credit Extensions, then Agent shall
promptly give notice thereof to Borrower. Upon the giving of such
notice, each Lender’s obligation to make the LIBOR Credit
Extensions shall terminate; provided, however, Credit
Extensions shall not terminate if Agent, each Lender and Borrower
agree in writing to a different interest rate applicable to LIBOR
Credit Extensions.
(e) If
it shall become unlawful for Agent or Lenders to continue to fund
or maintain any LIBOR Credit Extensions, or to perform its
obligations hereunder, upon demand by Agent, Borrower shall prepay
the Credit Extensions in full with accrued interest thereon and all
other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment
pursuant to Section 3.7(a)). Notwithstanding the foregoing, to
the extent a determination by Agent as described above relates to a
LIBOR Credit Extension 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 Agent of such rescission
on the date on which Agent 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 Credit
Extension or to have outstanding Credit Extensions converted into
or continued as Prime Rate Credit Extensions by giving notice (by
facsimile or by telephone confirmed in writing) to Agent of such
modification on the date on which Agent gives notice of its
determination as described above.
3.8
Notices . Any information delivered to Agent pursuant to this
Section 3 shall promptly be delivered by Agent to each Lender
in order to satisfy each Lender’s obligations
hereunder.
4 CREATION
OF SECURITY INTEREST
4.1 Grant of
Security Interest . Borrower hereby grants Agent, for the
ratable benefit of the Lenders, and to each Lender, to secure the
payment and performance in full of all of the Obligations, a
continuing security interest in, and pledges to Agent, for the
ratable benefit of the Lenders, and to each Lender, 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
Lenders’ Lien under this Agreement). If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify
Agent in a writing signed by Borrower of the general details
thereof and grant to Agent and Lenders 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 Agent.
If this Agreement
is terminated, Lenders’ 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 Lenders’ obligation to make
Credit Extensions has terminated, Lenders 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 Agent to file financing statements, without notice to
Borrower, with all appropriate jurisdictions to perfect or protect
Agent’s and
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Lenders’
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 the Lenders under
the Code.
5
REPRESENTATIONS AND WARRANTIES
Borrower
represents and warrants, with respect to itself, and its
Subsidiaries:
5.1 Due
Organization and Authorization . Borrower and each of its
Subsidiaries are duly existing arid in good standing, as Registered
Organizations in their respective jurisdictions of formation and
are qualified and licensed to do business and are in good standing
in any jurisdiction in which the conduct of their business or their
ownership of property requires that they 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 Agent and Lenders a
completed certificate signed by Borrower (the “Perfection
Certificate”). Borrower represents and warrants to Agent and
each Lender 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. If
Borrower is not now a Registered Organization but later becomes
one, Borrower shall promptly notify Agent of such occurrence and
provide Agent with Borrower’s organizational identification
number.
The execution,
delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s or its
Subsidiaries’ organizational documents, nor constitute an
event of default under any material agreement by which Borrower or
any one of its Subsidiaries is bound. Borrower and its Subsidiaries
are not in default under any agreement to which it is a party or by
which it is bound in which the default could have a material
adverse effect on Borrower’s or such Subsidiary’s
business.
5.2
Collateral. Borrower has good title to, has rights 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 Lenders, the deposit accounts,
if any, described in the Perfection Certificate delivered to Agent
and Lenders in connection herewith, or of which Borrower has given
Agent notice and taken such actions as are necessary to give Agent
and Lenders a perfected security interest therein.
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 or as Borrower has given Agent notice pursuant to
Section 7.2. 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 Lenders and such bailee must execute and deliver
a bailee agreement in form and substance satisfactory to Lenders in
their sole discretion.
All Inventory is
in all material respects of good and marketable quality, free from
material defects.
Except as noted on
the Perfection Certificate, Borrower is not a party to, nor is
bound by, any 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.
Borrower shall provide written notice to Agent within ten
(10) days of entering or becoming bound by any such license or
agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition (other than
over-the-counter software that is commercially available to the
public). Borrower shall take such steps as Lenders request to
obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for all such licenses or contract rights to be
deemed “Collateral” and for Lenders to have a security
interest in it that might otherwise be restricted or prohibited by
law or by the terms of any such license or agreement (such consent
or authorization may include a licensor’s agreement to a
contingent assignment of the license to Lenders if Lenders
determine that is necessary in their good faith judgment), whether
now existing or entered into in the future.
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5.3
Litigation. 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
Fifty Thousand Dollars ($50,000.00).
5.4 No
Material Deviation in Financial Statements. All consolidated
financial statements for Borrower and any of its Subsidiaries
delivered to Agent 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 Agent.
5.5
Solvency. The fair salable value of Borrower’s and each
of its Subsidiaries’ assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities and
will continue to exceed the fair value of its liabilities
immediately after the Term Loan advance and Dividend hereunder;
Borrower and each of its Subsidiaries are not left with
unreasonably small capital after the transactions in this
Agreement; and Borrower and each of its Subsidiaries are able to
pay their debts (including trade debts) as they mature.
5.6 Regulatory
Compliance. Borrower is not an “investment company”
or a company “controlled” by an “investment
company” under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for
margin stock (under Regulations T and U of the Federal Reserve
Board of Governors). Borrower has complied in all material respects
with the Federal Fair Labor Standards Act. 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 legally. 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 its business as currently conducted.
5.7
Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted
Investments.
5.8 Tax
Returns and Payments; Pension Contributions. Borrower has
timely filed all required tax returns and reports, and Borrower and
its Subsidiaries have timely paid all foreign, federal, state and
local taxes, assessments, deposits and contributions owed by
Borrower. Borrower and its Subsidiaries may defer payment of any
contested taxes, provided that Borrower or such Subsidiaries, as
appropriate (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Agent in writing of the
commencement of, and any material development in, the proceedings,
(c) 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 or its
Subsidiaries’ prior tax years which could result in
additional taxes becoming due and payable by Borrower or such
Subsidiaries. Borrower or its Subsidiaries have paid all amounts
necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower and
its Subsidiaries have 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 liability of Borrower
or such Subsidiaries, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other
governmental agency.
5.9 Use of
Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely to fund the Dividend.
5.10 Source of
Repayment. Based upon written agreements with Borrower’s
Subsidiaries, in the event that Borrower does not have sufficient
funds to repay the Obligations when due, Borrower’s
Subsidiaries will distribute to Borrower sufficient amounts to
repay its Obligations. Such agreements are attached hereto as
Schedule 5.10 . The Obligations of Borrower hereunder
shall not be affected by such agreements.
5.11
Organizational Structure. The organizational and capital
structure of Borrower and its Subsidiaries, as detailed on
Schedule 5.11 , will not change without the
prior written consent of the Lenders.
5.12 Full
Disclosure. No written representation, warranty or other
statement of Borrower or its Subsidiaries in any certificate or
written statement given to Agent or any Lender, as of the date such
representations,
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warranties, or
other statements were made, taken together with all such written
certificates and written statements given to Agent or any Lender,
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
Agent that the projections and forecasts provided by Borrower (with
respect to the Borrower or its Subsidiaries) 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).
Borrower shall do
all of the following, with respect to itself, and (other than with
respect to Section 6.6) its Subsidiaries:
6.1 Government
Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of
formation and maintain qualification in each jurisdiction in which
the failure to so qualify would reasonably be expected to have a
material adverse effect on Borrower’s or its
Subsidiaries’ business or operations. Borrower shall comply,
and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, the noncompliance with which
could have a material adverse effect on Borrower’s or its
Subsidiaries’ business.
6.2 Financial
Statements, Reports, Certificates.
(a) Deliver
to Agent: (i) as soon as available, but no later than thirty
(30) days after the last day of each month, a company prepared
consolidated and consolidating balance sheet and income statement
covering Borrower’s consolidated and consolidating operations
during the period certified by a Responsible Officer and in a form
acceptable to Agent; (ii) as soon as available, but no later
than one hundred fifty (150) days after the last day of
Borrower’s fiscal year, audited consolidated and
consolidating financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public
accounting firm acceptable to Agent in its reasonable discretion;
(iii) within five (5) days of delivery, copies of all
financial statements and reports made available to Borrower’s
security holders or to any holders of Subordinated Debt;
(iv) in the event that Borrower becomes subject to the
reporting requirements under the Securities Exchange Act of 1934,
as amended, within five (5) days of filing, all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower’s or another website
on the internet; (v) contemporaneously with the submission of
such filings or the delivery of such reports, copies of all filings
submitted to regulators including, without limitation, the monthly
reports delivered to the Commodity Futures Trading Commission;
(vi) a prompt report of any legal actions pending or
threatened against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries
of Fifty Thousand Dollars ($50,000) or more; and
(vii) budgets, sales projections, operating plans and other
financial information reasonably requested by Agent.
(b) Within
thirty (30) days after the last day of each month, deliver to
Agent with the monthly financial statements, a duly completed
Compliance Certificate signed by a Responsible Officer setting
forth calculations showing compliance with the financial covenants
set forth in this Agreement.
6.3
Intentionally omitted.
6.4 Taxes;
Pensions. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or
assessments (other than taxes and assessments which Borrower or its
Subsidiaries are contesting pursuant to the terms of
Section 5.8 hereof) and shall deliver to Agent, 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 and
each Subsidiary’s industry and location and as Lenders may
reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to
Lenders.
(a) Maintain
an operating account with Agent.
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(b) Provide
Agent five (5) days prior written notice before establishing
any Collateral Account at or with any bank or financial institution
other than Agent or its Affiliates. In addition, for each
Collateral Account that Borrower or Guarantor at any time
maintains, Borrower shall cause the applicable bank or financial
institution (other than Agent) at or with which any Collateral
Account is maintained to execute and deliver a Control Agreement or
other appropriate instrument with respect to such Collateral
Account to perfect Lenders’ Lien in such 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 Agent by Borrower as such,
Borrower
and its Subsidiaries shall maintain at all times, to be tested as
of the last day of each quarter, on a consolidated basis, unless
otherwise noted:
(a)
Debt Service Coverage Ratio . A ratio of EBITDA (plus all
other non-cash and/or non-recurring expenses) for the subject
quarter to the aggregate amount of Borrower’s quarterly
principal payment and monthly interest payments for borrowed money
(with respect to the three (3) months during such quarter), in
each case calculated as of the last day of each fiscal quarter, of
at least (i) 2.0 to 1.0 as of the quarters ending
March 31, 2006, June 30, 2006, and September 30,
2006, (ii) 1.50 to 1.0 as of the quarters ending
December 31, 2006 and March 31, 2007, (iii) 1.75 to
1.0 as of the quarter ending June 30, 2007, and (iv) 2.0
to 1.0 as of the quarter ending September 30, 2007 and as of
the last day of each subsequent fiscal quarter.
(b)
Total Funded Debt/EBITDA . A Total Funded Debt Ratio (with
respect to the immediately preceding twelve (12) month period)
of a maximum of (i) 2.0 to 1.0 as of the quarters ending
March 31, 2006, June 30, 2006, and September 30,
2006, (ii) 1.75 to 1.0 as of the quarter ending
December 31, 2006, and (iii) 1.50 to 1.0 as of the
quarter ending March 31, 2007 and as of each subsequent
quarter ending thereafter.
6.8 Litigation
Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Agent, without
expense to Agent, Borrower and its Subsidiaries, and each of their
officers, employees and agents and books and records, to the extent
that Agent may deem them reasonably necessary to prosecute or
defend any third-party suit or proceeding instituted by or against
Agent or any Lender with respect to any Collateral or relating to
Borrower or its Subsidiaries.
6.9 Regulatory
Change. Pursuant to a certain Stock Purchase Agreement dated as
of March 27, 2006, VantagePoint has entered into an agreement
with Borrower to invest additional funds or pay off the Obligations
if any regulatory change classifies the Obligations hereunder as
obligations of any of its Subsidiaries, and cause VantagePoint to
invest additional funds or pay off the Obligations pursuant to such
agreement. It is hereby agreed that the Lenders will be third party
beneficiaries of any agreement between Borrower and VantagePoint
pertaining to the actions required by the preceding sentence.
Borrower hereby agrees: (i) not to amend the provisions of
Section 2.3 of the Stock Purchase Agreement without the prior
written consent of the Lenders, (ii) if any events giving rise
to the “Second Closing” (as defined in the Stock
Purchase Agreement) occur, then Borrower will exercise its rights
to cause the Second Closing to occur, subject to the terms of the
Stock Purchase Agreement, and (iii) upon receipt of such
proceeds, Borrower shall, at the request of the Lenders, repay the
Obligations hereunder.
6.10 Further
Assurances. Borrower shall execute any further instruments and
take further action as Agent and/or Lenders reasonably request to
perfect or continue Agent’s and Lenders’ Lien in the
Collateral or to effect the purposes of this Agreement.
Borrower and
(other than with respect to Section 7.6) its Subsidiaries
shall not do any of the following without Agent’s prior
written consent:
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 Transfers (a) of Inventory in
the ordinary course of business; (b) of worn-out or obsolete
Equipment; (c) in connection with Permitted Liens and
Permitted Investments; and (d) of non-exclusive licenses for
the use of the property of Borrower or its Subsidiaries in the
ordinary course of business and licenses that could not result in a
legal transfer of
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title of the
licensed property but that may be exclusive in respects other than
territory and that may be exclusive as to territory only as to
discreet geographical areas outside of the United States. Borrower
shall not enter into an agreement with any Person other than
Lenders which restricts the subsequent granting of a security
interest in the Intellectual Property.
7.2 Changes in
Business, Management, Ownership, Control, or Business
Locations. (a) Engage in or permit any of its Subsidiaries
to engage in any business other than the businesses currently
engaged in by Borrower and such Subsidiary, as applicable, or
reasonably related thereto; (b) liquidate or dissolve; or (c)
(i) have a change in management, such that a Key Person
departs and a replacement, reasonably acceptable to Lenders, is not
made within ninety (90) days of such departure, or (ii) in
addition to and subject to Section 5.11, enter into any
transaction or series of related transactions in which the
stockholders of Borrower immediately prior to the first such
transaction own less than 50% of the voting stock of Borrower
immediately after giving effect to such transaction or related
series of such transactions (other than by the sale of
Borrower’s equity securities in a public offering or to
venture c
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