Exhibit 10.1
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (this “
Agreement ”) dated as of the Effective Date by and
between SILICON VALLEY BANK , a California corporation with
its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at One
Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462 (“ Bank ”), and IBASIS,
INC. , a Delaware corporation with offices located at 20 Second
Avenue, Burlington, Massachusetts 01803 (“ Borrower
”), provides the terms on which Bank shall lend to Borrower
and Borrower shall repay Bank and amends and restates in its
entirety a certain Amended and Restated Loan and Security Agreement
dated as of December 29, 2003 entered into by and between Bank and
Borrower, as amended. The parties agree as follows:
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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.
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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 will make Advances to Borrower up to the
Availability Amount. Amounts borrowed under the Revolving
Line 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.
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. The face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve)
may not exceed $10,000,000 inclusive of Credit Extensions relating
to Sections 2.1.3 and 2.1.4. In accordance with the
definition of Availability Amount, such aggregate amounts utilized
hereunder shall at all times reduce the amount otherwise available
for Advances under the Revolving Line. 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 105% 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. 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 good faith
interpretations of any Letter of Credit issued by Bank for
Borrower’s account (provided such interpretation is not
manifestly erroneous), 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.
(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 proper 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 (the “
FX Reserve ”). The aggregate amount of the FX Reserve
at any one time plus Credit Extensions relating to Sections 2.1.2
and 2.1.4 may not exceed Ten Million Dollars
($10,000,000.00). In accordance with the definition of
Availability Amount, the amount otherwise available for Credit
Extensions under the Revolving Line shall be reduced by the
aggregate amount of all FX Reserves. Any amounts due and
unpaid under an FX Forward Contract 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 ($10,000,000.00) inclusive of Credit
Extensions relating to Sections 2.1.2 and 2.1.3 (the “
Cash Management Services Sublimit ”) 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 ”). In accordance with the
definition of Availability Amount, the dollar amount of any Cash
Management Services provided under this sublimit will reduce the
amount otherwise available under the Revolving Line. Any
amounts owed to Bank which are due and unpaid from 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.
2.2
Overadvances . If at any time or for any reason the
total of all outstanding Advances and all other monetary
Obligations exceeds the Availability Amount (an “
Overadvance ”), Borrower shall immediately pay the
amount of the excess to Bank, without notice or demand.
Without limiting Borrower’s obligation to repay to Bank the
amount of any Overadvance, Borrower agrees to pay Bank interest on
the outstanding amount of any Overadvance, on demand, at the
Default Rate.
2.3
General Provisions Relating to the Advances . Each
Advance shall, at Borrower’s option in accordance with the
terms of this Agreement, be either in the form of a Prime Rate
Advance or a LIBOR Advance; provided that in no event shall
Borrower maintain at any time LIBOR Advances having more than four
(4) different Interest Periods. Borrower shall pay interest
accrued on the Advances at the rates and in the manner set forth in
Section 2.4(a).
2.4
Payment of Interest on the Credit Extensions .
(a)
Advances. Each Advance 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 (i) the Prime Rate plus the applicable Prime
Rate Margin or (ii) the LIBOR Rate plus the applicable LIBOR Rate
Margin. Pursuant to the terms hereof, interest on each
Advance shall be paid in arrears on each Interest Payment
Date. Interest shall also be paid on the date of any
prepayment of any Advance pursuant to this Agreement for the
portion of any Advance so prepaid and upon payment (including
prepayment) in full thereof. All accrued but unpaid interest
on the Advances shall be due and payable on the Revolving Line
Maturity Date.
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(b)
Performance Pricing . Each of the Prime Rate Margin
and the LIBOR Rate Margin shall be adjusted quarterly and shall be
applied on and after the first day of each such fiscal quarter as
follows: for any fiscal quarter, as of the first day of each such
fiscal quarter: (i) if the Total Funded Debt Ratio for the
immediately preceding fiscal quarter is less than 1.50:1.00, then
the Prime Rate Margin for such fiscal quarter shall be 0.00% and
the LIBOR Rate Margin for such fiscal quarter shall be 2.25%, and
(ii) if the Total Funded Debt Ratio for the immediately preceding
fiscal quarter is equal to or greater than 1.50:1.00, then the
Prime Rate Margin for such fiscal quarter shall be 0.50% and the
LIBOR Rate Margin for such fiscal quarter shall be 2.75%.
(c)
Default Rate . Immediately upon the occurrence and
during the continuance of an Event of Default, the Obligations
shall bear interest at a rate per annum which is five percentage
points above the rate effective immediately before the Event of
Default (the “ Default Rate ”). Payment or
acceptance of the increased interest rate provided in this
Section 2.4(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 Advances . Each change in the interest rate
of the Prime Rate Advances 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 Advances
based on changes in the Prime Rate.
(e)
LIBOR Advances . The interest rate applicable to each
LIBOR Advance 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
Advance, and interest calculated thereon shall be payable on the
Interest Payment Date applicable to such LIBOR Advance.
(f)
360-Day Year . Interest shall be computed on the basis
of a 360-day year for the actual number of days elapsed.
(g)
Debit of Accounts . Bank may debit the Designated
Deposit Account and account nos. 3300372126, 3300381409 and
3300498404 maintained at Bank, for principal and interest payments
or, after notice to Borrower, any other amounts Borrower owes Bank
when due. These debits shall not constitute a set-off.
(h)
Payment; Interest Computation; Float Charge . In
computing interest on the Credit Extensions, all Payments received
after 12:00 p.m. Pacific time on any day shall be deemed received
on the next Business Day. Bank may charge Borrower’s
Designated Deposit Account for the amount of any item of payment
which is returned to Bank unpaid.
2.5
Fees . Borrower shall pay to Bank:
(a)
Facility Fee . A fully earned, non-refundable facility
fee of $262,500, on or before the Effective Date;
(b)
Letter of Credit Fee . Bank’s customary fees and
expenses for the issuance or renewal of Letters of Credit, upon the
issuance or renewal of such Letter of Credit by Bank, which fees
and expenses shall not exceed 1.25% per annum of the face amount of
such Letter of Credit plus expenses;
(c)
Termination Fee . Subject to the terms of Section 4.1,
a termination fee;
(d)
Unused Revolving Line Facility Fee . A fee (the
“ Unused Revolving Line Facility Fee ”), which
fee shall be paid quarterly, in arrears, on the last day of each
fiscal quarter, calculated as follows: (i) if the Total Funded Debt
Ratio for the fiscal quarter for which the Unused Revolving Line
Facility Fee is due is less than 1.50:1.00, the Unused Revolving
Line Facility Fee for such fiscal quarter shall be 0.375% per annum
of the average unused portion of the Revolving Line for such
quarter, as determined by Bank; and (ii) if the Total Funded Debt
Ratio for the fiscal quarter for which the Unused Revolving Line
Facility Fee is due is greater than or equal to 1.50:1.00, the
Unused Revolving Line Facility Fee for such fiscal quarter shall be
0.625% per annum of the average unused portion of the Revolving
Line for such quarter, as determined by Bank. Borrower shall
not be entitled to any credit, rebate or repayment of any Unused
Revolving Line Facility Fee previously earned by Bank pursuant to
this Section 2.5(d) notwithstanding any suspension or termination
of Bank’s obligation to make Advances hereunder; and
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(e)
Bank Expenses . All Bank Expenses (including
reasonable attorneys’ fees and expenses for documentation and
negotiation of this Agreement) incurred through and after the
Effective Date, when due.
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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 Bank shall have received,
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)
Borrower shall have delivered duly executed original signatures to
the Loan Documents to which it is a party;
(b)
Borrower shall have delivered 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;
(c)
Borrower shall have delivered duly executed original signatures to
the completed Borrowing Resolutions for Borrower;
(d)
Borrower shall have delivered evidence that (i) the Liens securing
Indebtedness owed by Borrower to any party other than the Lender
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.
(e)
Bank shall have received 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;
(f)
Borrower shall have delivered the Perfection Certificates executed
by Borrower and each Guarantor;
(g)
Borrower shall have delivered a legal opinion of Borrower’s
counsel dated as of the Effective Date together with the duly
executed original signatures thereto;
(h)
Borrower shall have delivered the duly executed original signatures
of each Guarantor to each Guaranty and Security Agreement, together
with the Operating Documents and completed Borrowing Resolutions
for each Guarantor;
(i)
Borrower shall have delivered evidence satisfactory to Bank that
the insurance policies required by Section 6.7 hereof are in full
force and effect, together with appropriate evidence showing loss
payable and/or additional insured clauses or endorsements in favor
of Bank; and
(j)
Borrower shall have paid the fees and Bank Expenses then due as
specified in Section 2.5 hereof.
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, timely receipt of an executed Notice of
Borrowing;
(b)
timely receipt of an executed Transaction Report; and
(c)
for any other Credit Extension (other than Letters of Credit),
timely receipt of a completed and executed Payment/Advance
Form;
(d)
the representations and warranties in Section 5 shall be true in
all material respects on the date of the Transaction Report, on the
date of the Notice of Borrowing or Payment/Advance Form, as
applicable, and on the Funding Date of each Credit Extension;
provided , however, that such materiality qualifier shall
not be
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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
(e)
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 the extension of a Credit Extension 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
extension in the absence of a required item shall be 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
shall credit Advances to the Designated Deposit Account. Bank
may rely on any telephone notice given by a person whom Bank
reasonably 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 11:00 a.m. Pacific time (i) on the same day as the
requested Funding Date, in the case of Prime Rate Advances,
and
(ii) at least two (2) Business Days prior to
the requested Funding Date, in the case of LIBOR Advances,
specifying:
(1)
the amount of the Advance, which, if a LIBOR Advance is requested,
shall be in an aggregate minimum principal amount of $500,000 or in
any integral multiple of $500,000 in excess thereof;
(2)
the requested Funding Date; and
(3)
whether the Advance is to be comprised of LIBOR Advances and/or
Prime Rate Advances.
(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 and, subsequently, by wire transfer to such other
account as Borrower may instruct in the Notice of Borrowing or
Payment/Advance Form, as the case may be. 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.
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 Advances, Borrower may, upon
irrevocable written notice to Bank:
(1)
elect to convert on any Business Day, Prime Rate Advances in an
amount equal to $500,000 or any integral multiple of $500,000 in
excess thereof into LIBOR Advances;
(2)
elect to continue on any Interest Payment Date any LIBOR Advances
maturing on such Interest Payment Date (or any part thereof in an
amount equal to $500,000 or any integral multiple of $500,000 in
excess thereof); provided , that if the aggregate amount of
LIBOR Advances shall have been reduced, by payment, prepayment, or
conversion of part thereof, to be less than $500,000 , such
LIBOR
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Advances shall automatically convert into Prime
Rate Advances, and on and after such date the right of Borrower to
continue such Advances as, and convert such Advances into, LIBOR
Advances shall terminate; or
(3)
elect to convert on any Interest Payment Date any LIBOR Advances
maturing on such Interest Payment Date (or any part thereof in an
amount equal to $500,000 or any integral multiple of $500,000 in
excess thereof) into Prime Rate Advances.
(b)
Borrower shall deliver a Notice of Conversion/Continuation to be
received by Bank prior to 11:00 a.m. Pacific time at least
(i) three (3) Business Days
in advance of the Conversion Date or Continuation Date, if any
Advances are to be converted into or continued as LIBOR Advances;
and (ii) one (1) Business Day in
advance of the Conversion Date, if any Advances are to be converted
into Prime Rate Advances, in each case specifying the:
(1)
proposed Conversion Date or Continuation Date; and
(2)
aggregate amount of the Advances to be converted or continued
which, if any Advances are to be converted into or continued as
LIBOR Advances, shall be in an aggregate minimum principal amount
of $1,000,000 or in any integral multiple of $500,000 in excess
thereof.
(c)
If upon the expiration of any Interest Period applicable to any
LIBOR Advances, Borrower shall have timely failed to select a new
Interest Period to be applicable to such LIBOR Advances, Borrower
shall be deemed to have elected to convert such LIBOR Advances into
Prime Rate Advances.
(d)
Any LIBOR Advances shall, at Bank’s option, convert into
Prime Rate Advances in the event that (i) an Event of Default
or Default shall exist, or (ii) the aggregate principal amount
of the Prime Rate Advances which have been previously converted to
LIBOR Advances, or the aggregate principal amount of existing LIBOR
Advances continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period
exceed the Availability Amount. 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 Advances to Prime
Rate Advances pursuant to any of the foregoing.
(e)
Notwithstanding anything to the contrary contained herein, Bank
shall not be required to purchase United States Dollar deposits in
the London interbank market or other applicable LIBOR market to
fund any LIBOR Advances, but the provisions hereof shall be deemed
to apply as if Bank had purchased such deposits to fund the LIBOR
Advances.
3.6
Special Provisions Governing LIBOR Advances . Notwithstanding
any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to LIBOR Advances 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 Advances 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 in good faith (which
determination shall, absent manifest error, be final and conclusive
and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any LIBOR Advance, 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 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 may be made as, or
converted to, LIBOR Advances 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
in respect of which such determination was made shall be deemed to
be rescinded by Borrower.
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(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
Advances 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
Advances 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 Advance 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 Advances
occurs on a date prior to the last day of an Interest Period
applicable to that Advance.
(d)
Assumptions Concerning Funding of LIBOR Advances .
Calculation of all amounts payable to Bank under this
Section 3.6 and under Section 3.4 shall be made as though
Bank had actually funded each of its relevant LIBOR Advances
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 Advance and having a
maturity comparable to the relevant Interest Period;
provided , however , that Bank may fund each of its
LIBOR Advances 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 Advances After Default . After the occurrence
and during the continuance of an Event of Default,
(i) Borrower may not elect to have an Advance be made or
continued as, or converted to, a LIBOR Advance after the expiration
of any Interest Period then in effect for such Advance 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 Advances referred to therein as Prime Rate
Advances.
3.7
Additional Requirements/Provisions Regarding LIBOR Advances
.
(a)
If for any reason (including voluntary or mandatory prepayment or
acceleration), Bank receives all or part of the principal amount of
a LIBOR Advance prior to the last day of the Interest Period for
such Advance, Borrower shall immediately notify Borrower’s
account officer at Bank and, on demand by Bank, pay Bank 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 Bank 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 Bank in its
reasonable discretion. Bank’s determination as to such
amount shall be conclusive absent manifest error.
(b)
Borrower shall pay Bank, upon demand by Bank, from time to time
such amounts as Bank may reasonably 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 Advances 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:
(1)
changes the basis of taxation of any amounts payable to Bank under
this Agreement in respect of any Advances (other than changes which
affect taxes measured by or imposed on the overall net income of
Bank);
(2)
imposes or modifies any reserve, special deposit or similar
requirements relating to any Credit Extensions based upon a LIBOR
Rate; or
(3)
imposes any other material condition affecting this Agreement (or
any of such extensions of credit or liabilities).
Bank will notify Borrower of any event
occurring after the Effective 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
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make Advances, of making or maintaining
Advances, or on amounts receivable by it in respect of
Advances, 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 reasonably 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 commercially reasonable discretion,
determines that (i) the amount of LIBOR Advances 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 Advances,
then Bank shall promptly give notice thereof to Borrower.
Upon the giving of such notice, Bank’s obligation to make the
LIBOR Advances shall terminate; provided, however, Advances
shall not terminate if Bank and Borrower agree in writing to a
different interest rate applicable to LIBOR Advances.
(e)
If it shall become unlawful for Bank to continue to fund or
maintain any LIBOR Advances, or to perform its obligations
hereunder, upon demand by Bank, Borrower shall prepay the Advances
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 Bank as described above relates to a LIBOR Advance
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 Advance or to have outstanding Advances converted into or
continued as Prime Rate Advances 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 .
(a)
Borrower hereby grants Bank, to secure the payment and performance
in full of all of the Obligations, a continuing security interest
in, pledges and charges by way of security, 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 material 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.
(b)
Borrower hereby ratifies that certain Intellectual Property
Security Agreement, dated as of December 30, 2002 by and among by
and Borrower and Lender, and such Intellectual Property Security
Agreement remains in full force and effect.
(c)
This Agreement may be terminated prior to the Revolving Line
Maturity Date by Borrower, effective three (3) Business Days after
written notice of termination is given to Bank.
Notwithstanding any such termination, Bank’s lien and
security interest in the Collateral shall continue until Borrower
fully satisfies its Obligations arising out of the Loan
Documents. If such termination is at Borrower’s
election or at Bank’s
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election due to the occurrence and continuance
of an Event of Default, Borrower shall pay to Bank, in addition to
the payment of any other expenses or fees then-owing, a termination
fee in an amount equal to (i) for any termination within six (6)
months of the Effective Date, one percent (1%) of $35,000,000, and
(ii) for any termination during the period from six (6) months
after the Effective Date up to but not including the first
anniversary of the Effective Date, one-half of one percent (0.50%)
of $35,000,000, provided that no termination fee shall be charged
if (i) the credit facility hereunder is replaced with a new
facility from Silicon Valley Bank, (ii) the credit facility
hereunder is terminated for any reason after the first anniversary
of the Effective Date, or (iii) the credit facility hereunder is
terminated by Borrower solely as a result of Bank’s
determination to no longer offer LIBOR Advances pursuant to the
provisions of Sections 3.6(b) or 3.7(d). Upon payment in full
of the Obligations and at such time as Bank’s obligation to
make Credit Extensions has terminated, Bank shall release its liens
and security interests in the Collateral and all rights therein
shall revert to Borrower and each Guarantor, as
applicable.
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 by Bank to violate the rights
of Bank under the Code. Without limiting the foregoing,
Borrower hereby authorizes Bank to file financing statements which
describe the Collateral as “all assets” and/or
“all personal property” of Borrower or words of similar
import.
5
REPRESENTATIONS AND WARRANTIES
Borrower
represents and warrants as follows:
5.1
Due Organization and Authorization . Borrower and each of
its Subsidiaries are duly existing and 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 and
each Guarantor have delivered to Bank a completed certificate
substantially in the form attached hereto as Exhibit C signed by
Borrower and each Guarantor, as applicable, entitled “
Perfection Certificate ”. Borrower represents
and warrants to Bank that (a) Borrower’s and each
Guarantor’s exact legal name is that indicated on the
applicable Perfection Certificate and, in the case of the Borrower,
on the signature page hereof; (b) Borrower and each Guarantor
is an organization of the type and is organized in the jurisdiction
set forth in the applicable Perfection Certificate; (c) each
applicable Perfection Certificate accurately sets forth
Borrower’s and each Guarantor’s organizational
identification number or accurately states that Borrower or such
Guarantor has none; (d) each applicable Perfection Certificate
accurately sets forth Borrower’s and each Guarantor’s
place of business, or, if more than one, each chief executive
office as well as Borrower’s and each Guarantor’s
mailing address (if different than its chief executive office);
(e) Borrower, each Guarantor (and each of their 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 each Perfection Certificate pertaining to Borrower and
each Guarantor is accurate and complete. If Borrower or any
Guarantor is not now a Registered Organization but later becomes
one, Borrower or such Guarantor, as the case may be, shall promptly
notify Bank of such occurrence and provide Bank with
Borrower’s or such Guarantor’s organizational
identification number.
The execution,
delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s
organizational documents, nor 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 have a material
adverse effect on Borrower’s business.
5.2
Collateral . Borrower has good title to, has rights in,
and the power to transfer each item of Collateral upon which it
purports to grant a Lien hereunder, free and clear of any and all
Liens except Permitted Liens. Borrower and each Guarantor
have no Deposit Accounts other than the Deposit Accounts with Bank
and Deposit Accounts described in the applicable Perfection
Certificate delivered to Bank in connection herewith.
The
Collateral is not in the possession of any third party bailee (such
as a warehouse) except as otherwise provided in the applicable
Perfection Certificate. None of the material components of
the Collateral are maintained at locations other than as provided
in the applicable Perfection Certificate unless Borrower has
notified Bank of such other locations. In the event that
Borrower or any Guarantor, after the date hereof, intends to store
or otherwise deliver any material portion of the Collateral to a
bailee, then Borrower will first receive the written consent of
Bank
9
and
such bailee must execute and deliver a bailee agreement in form and
substance satisfactory to Bank in its sole discretion.
All
Inventory is in all material respects of good and marketable
quality, free from material defects.
Borrower and each Guarantor is a licensee or
the sole owner of its respective intellectual property, except for
non-exclusive licenses granted to Affiliates or its customers in
the ordinary course of business. To Borrower’s
knowledge, each patent is valid and enforceable and no part of the
intellectual property 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 any part of the intellectual property
owned by Borrower violates the rights of any third
party.
Except as disclosed to Bank in writing, neither
Borrower nor any Guarantor is a party to, nor is bound by, any
license or other agreement with respect to which Borrower or any
Guarantor is the licensee that prohibits or otherwise restricts
Borrower or such Guarantor from granting a security interest in
Borrower’s or such Guarantor’s interest in such license
or agreement or any other property.
5.3
Accounts Receivable .
(a)
For each Account with respect to which
Advances are requested, on the date each Advance is requested and
made, such Account shall meet the minimum eligibility requirements
set forth in the definition of “Eligible Accounts” in
Section 13 below.
(b)
All statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing the 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. All
sales and other transactions underlying or giving rise to each
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 an Eligible Account 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 Accounts are genuine,
and all such documents, instruments and agreements are legally
enforceable in accordance with their terms.
5.4
Litigation . Except as set forth in Borrower’s
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 in which
an adverse decision could reasonably be expected to cause a
Material Adverse Change.
5.5
No Material Deviation in Financial Statements . All
consolidated and consolidating 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” nor 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 Change 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.
5.8
Subsidiaries; Investments . Borrower does not own any
stock, partnership interest or other equity securities except for
Permitted Investments.
10
5.9
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 provided that Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good
faith contests its obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (b)
notifies Bank in writing of the commencement of, and any material
development in, the proceedings, and (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 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 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 as (i) working capital, (ii) to fund its
general business requirements and (iii) to fund dividends declared
by the Borrower in connection with a transaction in which, among
other things, KPN, B.V. will become the owner of 51% of the equity
of the Borrower, and not for personal, family, household or
agricultural purposes,.
5.11
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 representations, warranties, or
other statements were 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 . 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 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
business.
6.2
Financial Statements, Reports, Certificates .
(a)
Borrower shall provide Bank with the following:
(i) as soon as
available, and in any event within thirty (30) days after the end
of each month, and upon each request for a Credit Extension, a
Transaction Report together with such supporting information as
Bank may reasonably request;
(ii) as soon as
available, and in any event within thirty (30) days after the end
of each month, (A) monthly accounts receivable agings, aged by
invoice date, (B) monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers, if any, and (C)
monthly reconciliations of accounts receivable agings (aged by
invoice date), transaction reports, deferred revenue report and
general ledger;
(iii) within five
(5) days after the filing of quarterly financial statements with
the SEC, a monthly Compliance Certificate signed by a Responsible
Officer, certifying that as of the end of such quarter, Borrower
was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with
the financial covenants set forth in this Agreement and such other
information as Bank shall reasonably request, including, without
limitation, a statement that at the end of such quarter there were
no held checks;
11
(iv) as soon
as available, and in any event within forty-five (45) days after
the end of each fiscal quarter of Borrower and its Subsidiaries
(including, without limitation, each fiscal quarter ending December
31 of each fiscal year), consolidated and consolidating quarterly
unaudited financial statements of the Borrower and its
Subsidiaries;
(v) as soon
as available, and in any event upon the earlier of (A) one hundred
twenty (120) days following the end of Borrower’s fiscal year
or (B) five (5) days after filing with the SEC, annual audited
financial statements certified by, and with an unqualified opinion
of, independent certified public accountants acceptable to
Bank;
(vi) within
sixty (60) days after the end of each fiscal year of Borrower,
annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal
year of Borrower, as approved by Borrower’s board of
directors, together with any related business forecasts used in the
preparation of such annual financial projections;
(vii) as soon
as available, and in any event within five (5) days after filing
with the SEC, copies of each Form 10-Q and each Form 10-K, and any
amendments thereto, or a link thereto on Borrower’s or
another website on the Internet;
(viii) as
soon as available, and in any event within ten (10) days after
filing with the SEC or any other regulatory agency, copies of any
reports filed with any such agencies; and
(b)
Prompt written notice of (i) any material change in the composition
of the intellectual property of the Borrower or any Guarantor, (ii)
the registration of any copyright, patent or trademark including
any subsequent ownership right of Borrower or any Guarantor in or
to any copyright, patent or trademark not previously disclosed to
Bank, or (iii) Borrower’s knowledge of an event that
materially adversely affects the value of any intellectual property
of the Borrower or any Guarantor.
6.3
Accounts Receivable .
(a)
Schedules and Documents Relating to
Accounts . Borrower shall deliver to Bank transaction
reports and schedules of collections, as provided in Section 6.2;
provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and
other rights in all of Borrower’s Accounts, nor shall
Bank’s failure to advance or lend against a specific Account
affect or limit Bank’s Lien and other rights therein.
If requested by Bank, Borrower shall furnish Bank with copies (or,
at Bank’s commercially reasonable request, originals) of all
contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition
of which gave rise to such Accounts. In addition, Borrower
shall deliver to Bank, on its commercially reasonable request, the
originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary
endorsements, and copies of all credit memos.
(b)
Disputes . Borrower shall promptly notify Bank of
all material disputes or claims relating to Accounts.
Borrower may forgive (completely or partially), compromise, or
settle any Account for less than payment in full, or agree to do
any of the foregoing so long as (i) Borrower does so in good
faith, in a commercially reasonable manner, in the ordinary course
of business, in arm’s-length transactions, and reports the
same to Bank in the regular reports provided to Bank; (ii) no
Default or Event of Default has occurred and is continuing; and
(iii) after taking into account all such discounts,
settlements and forgiveness, the total outstanding Advances will
not exceed the Availability Amount.
(c)
Collection of Accounts
. Borrower shall have the right
to collect all Accounts, unless and until a Default or an Event of
Default has occurred and is continuing. Accounts shall be
deposited by Borrower into a lockbox account, or such other
“blocked account” as Bank may specify, pursuant to a
blocked account agreement in such form as Bank may specify in its
good faith business judgment. Whether or not an Event of
Default has occurred and is continuing, Borrower shall hold all
Payments on, and proceeds of, Accounts in trust for Bank, and
Borrower shall immediately deliver all such payments and proceeds
to Bank in their original form, duly endorsed, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof, provided,
however, in the event no Default or Event of Default has occurred
and is continuing and Borrower maintains unrestricted cash and Cash
Equivalents at Bank plus the Availability Amount under the
Revolving Line of no less than $15,000,000, all Payments on, and
proceeds of, Accounts shall be transferred by Bank to an operating
account of Borrower maintained at Bank.
12
(d)
Verification
. Bank may, from time to time, verify
directly with the respective Account Debtors the validity, amount
and other matters relating to the Accounts, either in the name of
Borrower or Bank. Such verification shall be accomplished in
a commercially reasonable manner.
(e)
No Liability . Bank shall not be responsible
or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which
gives rise to an Account, or for any error, act, omission, or delay
of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor
shall Bank be deemed to be responsible for any of Borrower’s
obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Bank from
liability for its own gross negligence or willful misconduct.
6.4
Remittance of Proceeds . Except as otherwise provided in
Section 6.3(c), deliver, in kind, all proceeds arising from the
disposition of any Collateral to Bank in the original form in which
received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations
pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing,
Borrower shall not be obligated to remit to Bank the proceeds of
the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s length transaction for an aggregate
purchase price of $500,000 or less (for all such transactions in
any fiscal year). Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower’s other funds or
property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Bank.
Nothing in this Section 6.4 limits the restrictions on disposition
of Collateral set forth elsewhere in this Agreement.
6.5
Taxes;
Pensions . Make, and
cause each of its Subsidiaries, if any, to make, timely
payment of all foreign, federal, state and local taxes or
assessments (other than taxes and assessment which Borrower is
contesting 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 provided that Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good
faith contests its obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (b)
notifies Bank 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”.
6.6
Access to Collateral; Books and Records; Field Exam . At
reasonable times, on three (3) Business Day’s notice
(provided no notice is required if an Event of Default has occurred
and is continuing), Bank, or its agents, shall have the right to
inspect the Collateral and the right to audit and copy
Borrower’s Books. The foregoing inspections and audits
shall be at Borrower’s expense, and the charge therefor shall
be $750 per person per day (or such higher amount as shall
represent Bank’s then-current standard charge for the same),
plus reasonable out-of-pocket expenses, but the total amount of any
such audit shall not exceed $7,500 plus reasonable out-of-pocket
expenses. Absent the occurrence of an Event of Default, no
more than one such inspection or audit may occur in any fiscal
quarter. In the event Borrower and Bank schedule an audit
more than ten (10) days in advance, and Borrower cancels or seeks
to reschedule the audit with less than ten (10) days written notice
to Bank, then (without limiting any of Bank’s rights or
remedies), Borrower shall pay Bank a fee of $1,000 plus any
out-of-pocket expenses incurred by Bank to compensate Bank for the
anticipated costs and expenses of the cancellation or
rescheduling. The first such inspection and audit shall be
scheduled to occur with sixty (60) days of the Effective Date.
6.7
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 reasonably satisfactory to
Bank. All property policies shall have a lender’s loss
payable endorsement showing Bank as the sole 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 must give Bank
at least twenty (20) days notice before canceling, amending, or
declining to renew its policy. At Bank’s request,
Borrower shall deliver copies of policies and evidence of all
premium payments. Proceeds payable under any policy shall, at
Bank’s option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, (a) so long as
no
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