Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Pre-Effective Amendment to Registration Statement 161 737K
(General Form)
2: EX-4.5 Instrument Defining the Rights of Security Holders 132 197K
3: EX-4.6 Instrument Defining the Rights of Security Holders 133 186K
4: EX-4.7 Instrument Defining the Rights of Security Holders 44 168K
7: EX-10.10-1 Material Contract 24 106K
8: EX-10.10-2 Material Contract 4 16K
9: EX-10.10-3 Material Contract 3 16K
10: EX-10.11 Material Contract 23 102K
11: EX-10.12 Material Contract 4 16K
12: EX-10.18-2 Material Contract 3 13K
13: EX-10.19 Material Contract 10 45K
14: EX-10.20-2 Material Contract 3 14K
15: EX-10.25 Material Contract 15 62K
5: EX-10.7 Material Contract 21 120K
6: EX-10.9 Material Contract 26 94K
16: EX-21.1 Subsidiaries of the Registrant 1 6K
17: EX-23.1 Consent of Experts or Counsel 1 8K
18: EX-27.1 Financial Data Schedule (Pre-XBRL) 2 11K
EX-4.7 — Instrument Defining the Rights of Security Holders
Exhibit Table of Contents
EXHIBIT 4.7
CREDIT AGREEMENT
BY AND BETWEEN
COMERICA BANK-TEXAS ("BANK")
AND
DIGITALCONVERGENCE.:COM INC. ("BORROWER")
DATED MAY 16, 2000
[Enlarge/Download Table]
INDEX
PAGE
SECTION 1. DEFINITIONS.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Accounting Terms................................................................................1
1.3 Singular and Plural.............................................................................1
SECTION 2. TERMS, CONDITIONS AND PROCEDURES FOR CREDIT FACILITIES..........................................1
SECTION 3. REPRESENTATIONS AND WARRANTIES..................................................................2
3.1 Authority.......................................................................................2
3.2 Due Authorization...............................................................................2
3.3 Title to Property...............................................................................2
3.4 Encumbrances....................................................................................2
3.5 Subsidiaries....................................................................................2
3.6 Taxes...........................................................................................2
3.7 No-Defaults.....................................................................................2
3.8 Enforceability of Agreement and Loan Documents..................................................3
3.9 Non-contravention...............................................................................3
3.10 Actions, Suits, Litigation or Proceedings.......................................................3
3.11 Compliance with Laws............................................................................3
3.12 Consents, Approvals and Filings, Etc............................................................3
3.13 Contracts, Agreements and Leases................................................................3
3.14 ERISA...........................................................................................4
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3.15 No Investment Company...........................................................................4
3.16 Left blank intentionally........................................................................4
3.17 Environmental Representations...................................................................4
3.18 Accuracy of Information.........................................................................5
3.19 Left blank intentionally........................................................................5
3.20 Intellectual Property...........................................................................5
SECTION 4. AFFIRMATIVE COVENANTS...........................................................................5
4.1 Preservation of Existence, Etc..................................................................5
4.2 Keeping of Books................................................................................6
4.3 Reporting Requirements..........................................................................6
4.4 Financial Covenants.............................................................................8
4.5 Inspections.....................................................................................8
4.6 Further Assurances; Financing Statements........................................................8
4.7 Funds Used to Provide Collateral................................................................8
4.8 Indemnification.................................................................................8
4.9 Governmental and Other Approvals................................................................8
4.10 Insurance.......................................................................................9
4.11 Compliance with ERISA...........................................................................9
4.12 Environmental Covenants.........................................................................9
4.13 Prior Notice of Encumbrances...................................................................10
4.14 Registration of Intellectual Property Rights...................................................10
4.15 Intellectual Property..........................................................................11
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SECTION 5. NEGATIVE COVENANTS.............................................................................11
5.1 Capital Structure, Business Objects or Purpose.................................................11
5.2 Mergers or Dispositions........................................................................11
5.3 Comerica Bank Trust Account....................................................................12
5.4 Acquisitions...................................................................................12
5.5 Defaults on Other Obligations..................................................................12
5.6 No Further Negative Pledges....................................................................12
SECTION 6. EVENTS OF DEFAULT..............................................................................12
6.1 Events of Default..............................................................................12
6.2 Remedies Upon Event of Default.................................................................14
6.3 Setoff.........................................................................................15
6.4 Waiver of Certain Laws.........................................................................15
6.5 Waiver of Defaults.............................................................................15
6.6 Receiver.......................................................................................15
6.7 Discretionary Credit and Credit Payable Upon Demand............................................15
6.8 Application of Proceeds of Collateral..........................................................16
SECTION 7. MISCELLANEOUS..................................................................................16
7.1 Accounting Principles..........................................................................16
7.2 Taxes and Fees.................................................................................16
7.3 Governing Law..................................................................................16
7.4 Audits of Collateral; Fees.....................................................................16
7.5 Costs and Expenses.............................................................................17
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7.6 Notices........................................................................................17
7.7 Further Action.................................................................................17
7.8 Successors and Assigns; Participation..........................................................17
7.9 Indulgence.....................................................................................18
7.10 Amendment and Waiver...........................................................................18
7.11 Severability...................................................................................18
7.12 Headings and Construction of Terms.............................................................18
7.13 Independence of Covenants......................................................................18
7.14 Reliance on and Survival of Various Provisions.................................................18
7.15 Effective Upon Execution.......................................................................18
7.16 Complete Agreement; Conflicts..................................................................19
7.17 Exhibits and Addenda...........................................................................19
7.18 Left blank intentionally.......................................................................19
7.19 WAIVER OF JURY TRIAL...........................................................................19
7.20 ORAL AGREEMENTS INEFFECTIVE....................................................................19
ADDENDA:
Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum
EXHIBITS:
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Borrowing Base Certificate
SCHEDULES:
Schedule 3.5 Subsidiaries
Schedule 3.14 Employee Benefit Plans
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Schedule 3.17 Environmental Disclosures
Schedule 3.20 Intellectual Property
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EXHIBIT 4.7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "AGREEMENT") is made and delivered
effective as of the 16th day of May, 2000, by and between
DIGITALCONVERGENCE.:COM INC., a Delaware corporation ("BORROWER"), and
COMERICA BANK-TEXAS, a Texas banking association ("BANK").
RECITALS
A. Borrower desires to obtain certain credit facilities from the
Bank, and the Bank is willing to provide such credit facilities to and in favor
of Borrower.
B. Such credit facilities are subject to the terms and conditions
set forth herein and in every other Loan Document.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, Borrower and Bank agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. The terms as used in this Agreement shall have
the meanings assigned to such terms in the Defined Terms Addendum.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement shall be determined and construed in accordance with
GAAP.
1.3 SINGULAR AND PLURAL. Where the context herein requires, the
singular number shall be deemed to include the plural, the masculine gender
shall include the feminine and neuter genders, and vice versa.
SECTION 2. TERMS, CONDITIONS AND PROCEDURES FOR CREDIT
FACILITIES
Subject to the terms, conditions and procedures of this Agreement and
each other Loan Document including, but not limited to, the terms, conditions
and procedures set forth in the Defined Terms Addendum and Loan Terms,
Conditions and Procedures Addendum, Bank agrees to make credit available to the
Borrower on such dates and in such amounts as the Borrower shall request from
time to time or as may otherwise be agreed to by Borrower and Bank.
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SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants, and such representations and
warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement, and so long as Bank shall have any
commitment or obligation to issue any Letters of Credit hereunder, and so long
as any Indebtedness remains unpaid and outstanding under any Loan Document, as
follows:
3.1 AUTHORITY. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified and authorized to do business in each other
jurisdiction in which the character of its assets or the nature of its business
makes such qualification necessary.
3.2 DUE AUTHORIZATION. Each Loan Party has all requisite power and
authority to execute, deliver and perform its obligations under each Loan
Document to which it is a party or is otherwise bound, all of which have been
duly authorized by all necessary action, and are not in contravention of law or
the terms of any Loan Party's organizational or other governing documents.
3.3 TITLE TO PROPERTY. Each Loan Party has good title to all
property and assets purported to be owned by it, including those assets
identified on the Financial Statements most recently delivered by Borrower to
Bank.
3.4 ENCUMBRANCES. There are no security interests or other Liens
or encumbrances on, and no financing statements on file with respect to, any of
the property or assets of any Loan Party, except for those previously disclosed
in writing to Bank.
3.5 SUBSIDIARIES. Borrower has no Subsidiaries, except as set
forth in SCHEDULE 3.5 which Schedule sets forth the percentage of ownership of
Borrower in each such Subsidiary as of the date of this Agreement.
3.6 TAXES. Each Loan Party has filed, on or before their
respective due dates, all federal, state, local and foreign tax returns which
are required to be filed, or has obtained extensions for filing such tax
returns, and is not delinquent in filing such returns in accordance with such
extensions, and has paid all taxes which have become due pursuant to those
returns or pursuant to any assessments received by any such party, as the case
may be, to the extent such taxes have become due, except to the extent such tax
payments are being actively and diligently contested in good faith by
appropriate proceedings, and if requested by Bank, have been bonded or reserved
in an amount and manner satisfactory to Bank.
3.7 NO-DEFAULTS. There exists no default (or event which, with the
giving of notice or passage of time, or both, would result in a default) under
the provisions of any instrument or agreement evidencing, governing, securing or
otherwise relating to any Debt of any Loan Party.
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3.8 ENFORCEABILITY OF AGREEMENT AND LOAN DOCUMENTS. Each Loan
Document has been duly executed and delivered by duly authorized officer(s) or
other representative(s) of each Loan Party, and constitutes the valid and
binding obligations of each Loan Party, enforceable in accordance with their
respective terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally at the time in effect.
3.9 NON-CONTRAVENTION. The execution, delivery and performance by
each Loan Party of the Loan Documents to which such Loan Party is a party or
otherwise bound, are not in contravention of the terms of any indenture,
agreement or undertaking to which any such Loan Party is a party or by which it
is bound, except to the extent that such terms have been waived of that failure
to comply with any such terms would not have a Material Adverse Effect.
3.10 ACTIONS, SUITS, LITIGATION OR PROCEEDINGS. There are no
actions, suits, litigation or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any Governmental Authority,
pending, or, to the best knowledge of Borrower, threatened against or affecting
any Loan Party, which, if adversely determined, could materially impair the
right of any Loan Party to carry on its business substantially as now conducted
or could have a Material Adverse Effect. No Loan Party is under investigation
by, or is operating under any restrictions imposed by, any Governmental
Authority.
3.11 COMPLIANCE WITH LAWS. Each Loan Party has complied with all
Governmental Requirements, including, without limitation, Environmental Laws, to
the extent that failure to so comply could have a Material Adverse Effect.
3.12 CONSENTS, APPROVALS AND FILINGS, ETC. Except as have been
previously obtained or as otherwise expressly provided in this Agreement, no
authorization, consent, approval, license, qualification or formal exemption
from, nor any filing, declaration or registration with, any Governmental
Authority and no material authorization, consent or approval from any other
Person, is required in connection with the execution, delivery and performance
by each Loan Party of any Loan Document to which it is a party. All such
authorizations, consents, approvals, licenses, qualifications, exemptions,
filings, declarations and registrations which have previously been obtained or
made, as the case may be, are in full force and effect and are not the subject
of any attack, or to the knowledge of Borrower, any threatened attack, in any
material respect, by appeal, direct proceeding or otherwise.
3.13 CONTRACTS, AGREEMENTS AND LEASES. To Borrower's knowledge, no
Loan Party is in default (beyond any applicable period of grace or cure) in
complying with any provision of any material contract, agreement, indenture,
lease or instrument to which it is a party or by which it or any of its
properties or assets are bound, where such default would have a Material Adverse
Effect. To Borrower's knowledge, each such contract, commitment, undertaking,
agreement, indenture and instrument is in full force and effect and is valid and
legally binding.
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3.14 ERISA. Except as shown on SCHEDULE 3.14, no Loan Party
maintains or contributes to any employee benefit plan subject to Title IV of
ERISA. Furthermore, no Loan Party has incurred any accumulated funding
deficiency within the meaning of ERISA or incurred any liability to the PBGC in
connection with any employee benefit plan established or maintained by such Loan
Party, and no reportable event or prohibited transaction, as defined in ERISA,
has occurred with respect to such plans.
3.15 NO INVESTMENT COMPANY. No Loan Party is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
nor is any Loan Party "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
3.16 LEFT BLANK INTENTIONALLY.
3.17 ENVIRONMENTAL REPRESENTATIONS.
(a) No Loan Party has received any notice of any
violation of any Environmental Law(s); and no Loan
Party is a party to any litigation or administrative
proceeding, nor, so far as is known by Borrower, is
any litigation or administrative proceeding
threatened against any Loan Party which, in any case,
(i) asserts or alleges that any Loan Party violated
any Environmental Law(s), (ii) asserts or alleges
that any Loan Party is required to clean up, remove
or take any other remedial or response action due to
the disposal, depositing, discharge, leaking or other
release of any Hazardous Materials, or (iii) asserts
or alleges that any Loan Party is required to pay all
or a portion of any past, present or future clean-up,
removal or other remedial or response action which
arises out of or is related to the disposal,
depositing, discharge, leaking or other release of
any Hazardous Materials by any Loan Party, and which,
either singularly or in the aggregate, could have a
Material Adverse Effect.
(b) To Borrower's knowledge, there are no conditions
existing currently which could subject any Loan Party
to damages, penalties, injunctive relief or clean-up
costs under any applicable Environmental Law(s), or
which require, or are likely to require, clean-up,
removal, remedial action or other response pursuant
to any applicable Environmental Law(s) by any Loan
Party, and which, in any case, either singularly or
in aggregate, could have a Material Adverse Effect.
(c) No Loan Party is subject to any judgment, decree,
order or citation related to or arising out of any
applicable Environmental Law(s), which, either
singularly or in the aggregate, could have a Material
Adverse Effect; and, to Borrower's knowledge, no Loan
Party has been named or listed as a
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potentially responsible party by any Governmental
Authority in any matter arising under any applicable
Environmental Law(s), except as disclosed in SCHEDULE
3.17, and, in the event that any such matters are
disclosed in said SCHEDULE 3.17 they will not, either
singularly or in the aggregate, have a Material
Adverse Effect.
(d) Each Loan Party has all permits, licenses and
approvals required under applicable Environmental
Laws, where the failure to so obtain or maintain any
such permits, licenses or approvals could have a
Material Adverse Effect.
3.18 ACCURACY OF INFORMATION. The Financial Statements previously
furnished to Bank have been prepared in accordance with GAAP and fairly present
the financial condition of Borrower and, as applicable, the consolidated
financial condition of Borrower and such other Person(s) as such Financial
Statements purport to present, and the results of their respective operations as
of the dates and for the periods covered thereby; and since the date(s) of said
Financial Statements, there has been no material adverse change in the financial
condition of Borrower or any other Person covered by such Financial Statements.
No Loan Party, nor any such other Person has any material contingent
obligations, liabilities for taxes, long-term leases or long-term commitments
not disclosed by, or reserved against in, such Financial Statements. Each Loan
Party is solvent, able to pay its respective debts as they mature, has capital
sufficient to carry on its business and has assets the fair market value of
which exceed its liabilities, and no Loan Party will be rendered insolvent,
under-capitalized or unable to pay debts generally as they become due by the
execution or performance of any Loan Document to which it is a party or by which
it is otherwise bound.
3.19 LEFT BLANK INTENTIONALLY.
3.20 INTELLECTUAL PROPERTY. Borrower and each Loan Party own or
have rights to use all Intellectual Property necessary to continue to conduct
their respective businesses as now or heretofore conducted or proposed to be
conducted, and each patent, trademark, copyright and license held by Borrower or
such other Loan Party is listed, together with application or registration,
numbers, as applicable, on SCHEDULE 3.20.
SECTION 4. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to
issue any Letter of Credit under this Agreement, and until all instruments and
agreements evidencing any Loan which is payable on demand or which conditions
advances upon the Bank's discretion are fully discharge and terminated, and
thereafter, so long as any Indebtedness remains outstanding, it will, and, as
applicable, it will cause each Loan Party within its control or under common
control to:
4.1 PRESERVATION OF EXISTENCE, ETC. Preserve and maintain its
existence and preserve and maintain such of its rights, licenses, and privileges
as are material to the business and operations conducted by it; qualify and
remain qualified to do business in each jurisdiction in which such
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qualification is material to its business and operations or ownership of its
properties, continue to conduct and operate its business substantially as
conducted and operated during the present and preceding calendar year; at all
times maintain, preserve and protect all of its franchises and trade names and
preserve all the remainder of its property and keep the same in good repair,
working order and condition; and from time to time make, or cause to be made,
all needed and proper repairs, renewals, replacements, betterments and
improvements thereto.
4.2 KEEPING OF BOOKS. Keep proper books of record and account in
which full and correct entries shall be made of all of its financial
transactions and its assets and businesses so as to permit the presentation of
financial statements (including, without limitation, those Financial Statements
to be delivered to Bank pursuant SECTION 4.3 hereof) prepared in accordance with
GAAP; and permit Bank, or its representatives, at reasonable times and
intervals, at Borrower's cost and expense, to visit any office of any Loan
Party, discuss its financial matters with its officers, employees and
independent certified public accountants, and by this provision, Borrower
authorizes such officers, employees and accountants to discuss the finances and
affairs of any Loan Party and to examine any of its books and other corporate
records.
4.3 REPORTING REQUIREMENTS. Furnish to Bank, or cause to be
furnished to Bank, the following:
(a) as soon as possible, and in any event within three
(3) calendar days after becoming aware of the
occurrence or existence of each Default or Event of
Default hereunder or any material adverse change in
the financial condition of any Loan Party, a written
statement of the chief financial officer of Borrower
(or in his or her absence, a responsible senior
officer of Borrower), setting forth details of such
Default, Event of Default or change, and the action
which Borrower has taken, or has caused to be taken,
or proposes to take, or to cause to be taken, with
respect thereto;
(b) as soon as available, and in any event within
ninety (90) days after and as of the end of each
fiscal year of Borrower, audited Financial
Statements of Borrower and such other of the Loan
Parties as may be required by the Bank,
consolidated, as applicable, including a balance
sheet, income statement, statement of profit and
loss, surplus reconciliation statement and
statement of cash flows, for and as of such fiscal
year then ending, with comparative numbers for the
preceding fiscal year, and such other comments and
financial details as are usually included in
similar reports. Such audited Financial Statements
shall be prepared in accordance with GAAP by
independent certified public accountants of
recognized standing selected by Borrower and
approved by Bank and shall contain unqualified
opinions as to the fairness of the statements
therein contained.
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(c) as soon as available, and in any event within thirty
(30) days after and as of the end of each calendar
month, including the last such reporting period of
each of Borrower's fiscal years, balance sheets and
income statements of Borrower and such of the other
Loan Parties as may be required by the Bank,
consolidated, as applicable, for and as of such
reporting period then ending and for and as of that
portion of the fiscal year then ending, with
comparative numbers for the same period of the
preceding fiscal year, in each case, certified by the
chief financial officer of Borrower and, as
applicable, each other Loan Party as to consistency
with prior financial reports and accounting periods,
accuracy and fairness of presentation;
(d) promptly upon the request of the Bank, agings and
reports of accounts receivable of Borrower and such
of the Loan Parties as may be required by the Bank,
in form and detail satisfactory to Bank;
(e) promptly upon the request of the Bank, agings and
reports of accounts payable of Borrower and such of
the other Loan Parties as may be required by the
Bank, in form and detail satisfactory to Bank;
(f) simultaneously with any request by Borrower from time
to time that a Letter of Credit be issued pursuant to
the terms of this Agreement, a Borrowing Base
Certificate dated as of the date of such request for
issuance of a Letter of Credit;
(g) promptly upon receipt thereof, copies of all
management letters and other substantive reports
submitted to any Loan Party by independent certified
public accountants in connection with any annual
audit of any such party;
(h) within thirty (30) days after the end of each
calendar quarter, a Compliance Certificate dated as
of the end of such calendar quarter.
(i) promptly after filing the same, a copy of Borrower's
annual federal income tax return; and
(j) as soon as available, but in no event more than forty
(45) days after the end of each fiscal quarter, a
copy of Borrower's Form 10-Q as filed with the United
States Securities and Exchange Commission (the "Form
10-Q"); provided that Borrower shall not be required
to provide the Bank with a copy of the initial Form
10-Q until such time as Borrower is first required by
applicable law to file the same; and
(k) promptly, and in form and detail reasonably
satisfactory to Bank, such other Information as Bank
may reasonably request from time to time.
7
4.4 FINANCIAL COVENANTS. Borrower will maintain all financial
covenants set forth in the Financial Covenants Addendum.
4.5 INSPECTIONS. Permit Bank, through its authorized attorneys,
accountants and representatives, at Borrower's cost and expense, to examine each
Loan Party's books, accounts, records, ledgers, assets and properties of every
kind and description, wherever located, at all reasonable times during normal
business hours, upon oral or written request of Bank.
4.6 FURTHER ASSURANCES; FINANCING STATEMENTS. Furnish Bank, at
Borrower's expense, upon Bank's request and in form satisfactory to Bank (and
execute and deliver or cause to be executed and delivered), such additional
pledges, assignments, lien instruments or other security instruments, consents,
acknowledgments, subordinations and financing statements covering any or all of
the Collateral pledged, assigned or encumbered pursuant to any Loan Document, of
every nature and description, whether now owned or hereafter acquired by
Borrower or any other Person providing such Collateral, together with such other
documents or instruments as Bank may require to effectuate more fully the
purposes of any Loan Document.
4.7 FUNDS USED TO PROVIDE COLLATERAL. Use funds to obtain Comerica
Bank-Texas certificates of deposit, which certificates of deposit are to be
provided to Bank as Collateral for the issuance of any Letter of Credit
hereunder, which are: (i) not be subject to the prior Lien of any Person other
than Bank, (ii) obtained solely from the proceeds of sale by Borrower of equity
interests in Borrower, which proceeds of sale shall have been deposited in
Comerica Bank-Texas Custodial Account No. 43-01-100-0569808. Promptly upon the
request of the Bank, the Borrower shall provide to Bank such documentation and
other evidence satisfactory to Bank that such funds comply with this Section
4.7.
4.8 INDEMNIFICATION. Indemnify, defend and save Bank harmless from
any and all claims, losses, costs, damages, liabilities, obligations and
expenses, including, without limitation, reasonable attorneys' fees (whether
inside or outside counsel is used), incurred by Bank by reason of any Default or
Event of Default, in defending or protecting the Liens which secure or purport
to secure all or any portion of the Indebtedness, whether existing under any
Loan Document or otherwise or the priority thereof, or in enforcing the
obligations of Borrower or any other Person under or pursuant to any Loan
Document, or in the prosecution or defense of any action proceeding concerning
any matter growing out of or connected with the Collateral or any Loan Document,
INCLUDING ANY CLAIMS, LOSES, COSTS, DAMAGES, LIABILITIES, OBLIGATIONS, AND
EXPENSES RESULTING FROM BANK'S OWN NEGLIGENCE, except and to the extent but only
to the extent caused by Bank's gross negligence or willful misconduct.
4.9 GOVERNMENTAL AND OTHER APPROVALS. Apply for, obtain and/or
maintain in effect, as applicable, all authorizations, consents, approvals,
licenses, qualifications, exemptions, filings, declarations and registrations
(whether with any court, governmental agency, regulatory authority, securities
exchange or otherwise) which are necessary in connection with the execution,
delivery and/or performance by any Loan Party of any Loan Document to which it
is a party.
8
4.10 INSURANCE. Maintain insurance coverage on its physical assets
and against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature (including, without
limitation, loss of rent and/or business interruption insurance and boiler and
machinery insurance), and in the event of acquisition of additional property,
real or personal, or of the incurrence of additional risks of any nature,
increase such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate; and in the case of all
policies covering property subject to any Loan Document or property in which the
Bank shall have a Lien of any kind whatsoever, other than those policies
protecting against casualty liabilities to strangers, all such insurance
policies shall provide that the loss payable thereunder shall be payable to
Borrower (or other Person providing Collateral), and such policies shall also
provide that they may not be canceled or changed without thirty (30) days' prior
written notice to Bank. Upon the request of Bank, all of said policies, or
copies thereof, including all endorsements thereon and those required hereunder,
shall be deposited with Bank.
4.11 COMPLIANCE WITH ERISA. In the event that any Loan Party or any
of its Subsidiaries maintain(s) or establish(es) a Pension Plan subject to
ERISA, (a) comply in all material respects with all requirements imposed by
ERISA as presently in effect or hereafter promulgated, including, but not
limited to, the minimum funding requirements thereof; (b) promptly notify Bank
upon the occurrence of a "reportable event" or "prohibited transaction" within
the meaning of ERISA, or that the PBGC or any Loan Party has instituted or will
institute proceedings to terminate any Pension Plan, together with a copy of any
proposed notice of such event which may be required to be filed with the PBGC;
and (c) furnish to Bank (or cause the plan administrator to furnish Bank) a copy
of the annual return (including all schedules and attachments) for each Pension
Plan covered by ERISA, and filed with the Internal Revenue Service by any Loan
Party not later than thirty (30) days after such report has been so filed.
4.12 ENVIRONMENTAL COVENANTS.
(a) Comply with all applicable Environmental Laws, and
maintain all permits, licenses and approvals required
under applicable Environmental Laws, where the
failure to do so could have a Material Adverse
Effect.
(b) Promptly notify Bank, in writing, as soon as Borrower
becomes aware of any condition or circumstance which
makes any of the environmental representations or
warranties set forth in this Agreement incomplete,
incorrect or inaccurate in any material respect as of
any date; and promptly provide to Bank, immediately
upon receipt thereof, copies of any material
correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other
document from any source asserting or alleging a
violation of any Environmental Laws by any Loan
Party, or of any circumstance or condition which
requires or may require, a financial contribution by
any Loan Party, or a clean-up, removal, remedial
action or other response by or on behalf of any Loan
Party, under applicable Environmental Law(s), or
which
9
seeks damages or civil, criminal or punitive
penalties from any Loan Party or any violation or
alleged violation of Environmental Law(s).
(c) Borrower hereby agrees to indemnify, defend and hold
Bank, and any of Bank's past, present and future
officers, directors, shareholders, employees,
representatives and consultants, harmless from any
and all claims, losses, damages, suits, penalties,
costs, liabilities, obligations and expenses
(including, without limitation, reasonable legal
expenses and attorneys' fees, whether inside or
outside counsel is used) incurred or arising out of
any claim, loss or damage of any property, injuries
to or death of any persons, contamination of or
adverse effects on the environment, or other
violation of any applicable Environmental Law(s), in
any case, caused by any Loan Party or in any way
related to any property owned or operated by any Loan
Party or due to any acts of any Loan Party or any of
its officers, directors, shareholders, employees,
consultants and/or representatives INCLUDING ANY
CLAIMS, LOSSES, DAMAGES, SUITS, PENALTIES, COSTS,
LIABILITIES, OBLIGATIONS OR EXPENSES, RESULTING FROM
BANK'S OWN NEGLIGENCE; provided however, that the
foregoing indemnification shall not be applicable,
and Borrower shall not be liable for any such claims,
losses, damages, suits, penalties, costs,
liabilities, obligations or expenses, to the extent
(but only to the extent) the same arise or result
from any gross negligence or willful misconduct of
Bank or any of its agents or employees.
4.13 PRIOR NOTICE OF ENCUMBRANCES. Provide Bank with prior written
notice of any Encumbrance on the property or assets of Borrower or any Loan
Party.
4.14 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS. Borrower and
each other Loan Party shall register or cause to be registered (to the extent
not already registered) with the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, those Intellectual Property
rights listed in SCHEDULE 3.20 to this Agreement or in any security agreement
now or hereafter securing or purporting to secure any of the Indebtedness within
thirty (30) days of the date of such agreement. Borrower and each other Loan
Party shall register or cause to be registered with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, those
additional Intellectual Property rights developed or acquired by Borrower or
such other Loan Party from time to time prior to the sale or licensing of such
product to any third party including, without limitation, revisions or additions
to the Intellectual Property rights listed in SCHEDULE 3.20 to this Agreement or
in any agreement now or hereafter securing or purporting to secure any of the
Indebtedness.
(a) Left blank intentionally.
10
(b) Borrower and each other Loans Party shall (i)
protect, defend and maintain the validity and
enforceability of all trademarks, patents and
copyrights and other Intellectual Property now or
hereafter securing or purporting to secure any of the
Indebtedness, (ii) use commercially reasonable
efforts to detect infringements of the same and
promptly advise Bank in writing of material
infringements detected and not allow any of the same
to be abandoned, forfeited or dedicated to the
public.
(c) Left blank intentionally.
4.15 INTELLECTUAL PROPERTY. Borrower and each Loan Party will
conduct their respective businesses and affairs without infringement of or
interference with any Intellectual Property of any other Person.
SECTION 5. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to
issue any Letter of Credit under this Agreement, and thereafter, so long as any
Indebtedness remains outstanding, it will not, and it will not allow any Loan
Party within its control or under common control to, without the
prior written consent of the Bank:
5.1 CAPITAL STRUCTURE, BUSINESS OBJECTS OR PURPOSE. Purchase,
acquire or redeem any of its equity ownership interests, or enter into any
reorganization or recapitalization or reclassify its equity ownership interests,
or make any material change in its capital structure or general business objects
or purpose; PROVIDED, HOWEVER, that Borrower shall (i) be permitted to receive
capital contributions (not loans) from investors, (ii) be permitted to establish
a holding company which may own 100% of the issued and outstanding shares of
Borrower, provided, however, that the property and assets of Borrower may not be
transferred to such holding company, and (iii) be permitted to proceed with the
initial public offering of stock pursuant to the terms of that certain
registration statement of Borrower dated April 28, 2000 and filed with the
United States Securities and Exchange Commission.
5.2 MERGERS OR DISPOSITIONS. Change its name, enter into any
merger or consolidation, or sell, lease, transfer, relocate or dispose of all,
substantially all, or any material part of its assets (whether in a single
transaction or in a series of transactions), PROVIDED, HOWEVER, that Borrower
may enter into a merger or consolidation without the prior approval of Bank if
as a result of such merger: (i) Borrower is the surviving entity, (ii) The
majority of the management of Borrower immediately prior to such merger or
consolidation shall be the management of the surviving entity, and the Borrower
is not in violation of any covenant contained in this Agreement or the Loan
Documents at the time of such merger or consolidation, nor projected to be in
violation of any covenant following the consummation of such merger or
consolidation. Borrower shall promptly notify Bank of such merger or
consolidation upon consummation of the same.
11
5.3 COMERICA BANK TRUST ACCOUNT. Permit funds from its operations
or any source other than the sale of equity interests in Borrower to be
deposited in Comerica Bank-Texas Custodial Account No. 43-01-100-0569808 (the
"Trust Account"), which Trust Account shall be the sole source of funds for
obtaining the certificates of deposit which are to be provided to Bank as
Collateral hereunder. Promptly upon the request of the Bank, Borrower shall
provide to Bank such documentation and other evidence satisfactory to Bank that
the funds on deposit in the Trust Account originate solely from the sale of
equity interests in Borrower.
5.4 ACQUISITIONS. Purchase or otherwise acquire or become
obligated for the purchase of all or substantially all of the assets or business
interests of any Person or any shares of stock or other ownership interests of
any Person or in any other manner effectuate or attempt to effectuate an
expansion of present business by acquisition, PROVIDED, HOWEVER, that Borrower
may purchase or otherwise acquire or become obligated for the purchase of all or
substantially all of the assets or business interests of any Person or any
shares of stock or other ownership interests of any Person or in any other
manner effectuate or attempt to effectuate an expansion of present business by
acquisition without the prior approval of Bank if as a result of such
transaction: (i) Borrower is the surviving entity, (ii) the majority of the
management of Borrower immediately prior to such transaction shall be the
management of the surviving entity, and (iii) Borrower is not in violation of
any covenant contained in this Agreement or the Loan Documents at the time of
the transaction, nor projected to be in violation of any covenant following the
consummation of such transaction. Borrower shall promptly notify Bank of such
transaction upon consummation of the same.
5.5 DEFAULTS ON OTHER OBLIGATIONS. Fail to perform, observe or
comply duly with any covenant, agreement or other obligation to be performed,
observed or complied with by any Loan Party, subject to any grace periods
provided therein, which failure could have a Material Adverse Effect.
5.6 NO FURTHER NEGATIVE PLEDGES. Enter info or become subject to
any agreement (other than this Agreement or the Loan Documents) (a) prohibiting
the guaranteeing by any Loan Party of any obligations, (b) prohibiting the
creation or assumption of any Lien upon the properties or assets of any Loan
Party, whether now owned or hereafter acquired or (c) requiring an obligation to
become secured (or further secured) if another obligation is secured or further
secured.
SECTION 6. EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence or existence of any of the
following conditions or events shall constitute an "Event of Default" hereunder:
(a) upon non-payment of any principal, interest or other
sums due under the terms of this Agreement, or under
any other instrument or evidence of Indebtedness,
whether under this Agreement, or otherwise, in any
case, when due in accordance with the terms hereof or
thereof;
12
(b) default in the observance or performance of any of
the other conditions, covenants or agreements of
Borrower set forth in this Agreement;
(c) any representation or warranty made by any Loan Party
in any Loan Document shall be untrue or incorrect in
any material respect;
(d) any default or event of default, as the case may be,
in the observance or performance of any of the
conditions, covenants or agreements of any Loan Party
set forth in any Loan Document and continuation
thereof beyond any applicable period of grace or cure
provided with respect thereto;
(e) any default by any Loan Party, in the payment of any
Debt (other than Debt owing to Bank), or in the
observance or performance of any conditions,
covenants or agreements related or given with respect
thereto and, in each such case, continuation thereof
beyond any applicable grace or cure period;
(f) the rendering of one or more judgments or decrees for
the payment of money, against any Loan Party, and
such judgment(s) or decree(s) shall remain unvacated,
unbonded or unstayed, by appeal or otherwise, for
period of sixty (60) consecutive days after the date
of entry;
(g) if there shall be any change in the management,
ownership or control of Borrower, whether by reason
of incapacity, death, resignation, termination or
otherwise, which, in Bank's sole judgment, shall have
a material adverse effect upon the future prospects
for the successful operation by Borrower, of its
businesses as conducted before such change, or its
ability to pay and perform its liabilities and
obligations under this Agreement, the Indebtedness,
or the Loan Documents;
(h) the failure by any Loan Party, to meet the minimum
funding requirements under ERISA with respect to any
Pension Plan established or maintained by it; the
occurrence of any "reportable event", as defined in
ERISA, which could constitute grounds for termination
by the PBGC of any Pension Plan or for the
appointment by the appropriate United States District
Court of a trustee to administer such Pension Plan,
and such reportable event is not corrected and such
determination is not revoked within thirty (30) days
after notice thereof has been given to the plan
administrator or any Loan Party, as the case may be;
or the institution of any proceedings by the PBGC to
terminate any such Pension Plan or to appoint a
trustee by the appropriate United States District
Court to administer any such Pension Plan;
(i) if any Loan Party, becomes insolvent or generally
fails to pay, or admits in writing its inability to
pay, its debts as they mature, or applies for,
consents
13
to, or acquiesces in the appointment of a trustee,
receiver, liquidator, conservator or other custodian
for any Loan Party, or a substantial part of its
property, or makes a general assignment for the
benefit of creditors; or in the absence of such
application, consent or acquiescence, a trustee,
receiver, liquidator, conservator or other custodian
is appointed for any Loan Party, or for a substantial
part of its property, and the same is not discharged
within thirty (30) days; or any bankruptcy,
reorganization, debt arrangement, or other
proceedings under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding, is
instituted by or against any Loan Party, and, if
instituted against any Loan Party, the same is
consented to or acquiesced in by any such Loan Party
or otherwise remains undismissed for thirty (30)
days; or any warrant of attachment is issued against
any substantial part of the property of any Loan
Party, which is not released within thirty (30) days
of service thereof; or
(j) if any Loan Document shall be terminated, revoked, or
otherwise rendered void or unenforceable, in any
case, without Bank's prior written consent.
6.2 REMEDIES UPON EVENT OF DEFAULT. At any time during the
existence of any Event of Default as it is defined in Section 6.1(b) or Section
6.1(d), which default remains uncured for a period of five (5) business days, or
upon the occurrence and at any time during the existence or continuance of any
other Event of Default, but in either occurrence without impairing or otherwise
limiting the Bank's right to demand payment of all or any portion of the
Indebtedness which is payable on demand, at Bank's option, Bank may give notice
to Borrower declaring all or any portion of the Indebtedness remaining unpaid
and outstanding, to be due and payable in full without presentation, demand,
protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby expressly
waived, whereupon all such Indebtedness shall immediately become due and
payable. Furthermore, upon the occurrence of a Default or Event of Default and
at any time during the existence or continuance of any Default or Event of
Default, but without impairing or otherwise limiting the right of Bank, if
reserved under any Loan Document, to make or withhold financial accommodations
at its discretion, to the extent not yet disbursed, any commitment by Bank to
issue any further Letters of Credit for Borrower's account under this Agreement
shall automatically terminate; provided, should such Default or Event of Default
be cured to Bank's satisfaction, Bank may, but shall be under no obligation to,
reinstate any such commitment by written notice to Borrower. Notwithstanding the
foregoing, in the case of an Event of Default under Section 6.1(i), and
notwithstanding the lack of any notice, demand or declaration by Bank, the
entire Indebtedness remaining unpaid and outstanding shall become automatically
due and payable in full, and any commitment by Bank to issue any further Letters
of Credit for Borrower's account shall be automatically and immediately
terminated, without any requirement of notice or demand by Bank upon Borrower,
each of which are hereby expressly waived by Borrower. The foregoing rights and
remedies are in addition to any other rights, remedies and privileges Bank may
otherwise have or which may be available to it, whether under this Agreement,
any other Loan Document, by law, or otherwise.
14
6.3 SETOFF. In addition to any other rights or remedies of Bank
under any Loan Document, by law or otherwise, upon the occurrence and during the
continuance or existence of any Event of Default, Bank may, at any time and from
time to time, without notice to Borrower (any requirements for such notice being
expressly waived by Borrower), setoff and apply against any or all of the
Indebtedness (whether or not then due), any or all deposits (general or special,
time or demand, provisional or final) at any time held by Borrower and other
indebtedness at any time owing by Bank to or for the credit or for the account
of Borrower, and any property of Borrower from time to time in possession or
control of Bank, irrespective of whether or not Bank shall have made any demand
hereunder or for payment of the Indebtedness and although such obligations ma be
contingent or unmatured, and regardless of whether any Collateral then held by
Bank is adequate to cover the Indebtedness. The rights of Bank under this
Section are in addition to any other rights and remedies (including, without
limitation, other rights of setoff) which Bank may otherwise have. Borrower
hereby grants Bank a Lien on and security interest in all such deposits
indebtedness and other property as additional collateral for the payment and
performance of the Indebtedness.
6.4 WAIVER OF CERTAIN LAWS. To the extent permitted by applicable
law, Borrower hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish, the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any sale made under
the judgment, order or decree of any court, on any claim to any security
interest or other Lien contemplated by or granted under or in connection with
this Agreement or the Indebtedness.
6.5 WAIVER OF DEFAULTS. No Default or Event of Default shall be
waived by Bank except in a written instrument specifying the scope and terms of
such waiver and signed by an authorized officer of Bank, and such waiver shall
be effective only for the specific time(s) and purpose(s) given. No single or
partial exercise of any right, power or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of Bank's rights.
No waiver of any Default or Event of Default shall extend to any other or
further Default or Event of Default. No forbearance on the part of Bank in
enforcing any of Bank's rights or remedies under any Loan Document shall
constitute a waiver of any of its rights or remedies. Borrower expressly agrees
that this Section may not be waived or modified by Bank by course of
performance, estoppel or otherwise.
6.6 RECEIVER. Bank, in any action or suit to foreclose upon any of
the Collateral, shall be entitled, without notice or consent, and completely
without regard to the adequacy of any security for the Indebtedness, to the
appointment of a receiver of the business and premises in question, and of the
rents and profits derived therefrom. This appointment shall be in addition to
any other rights, relief or remedies afforded Bank. Such receiver, in addition
to any other rights to which he shall be entitled, shall be authorized to sell,
foreclose or complete foreclosure on Collateral for the benefit of Bank,
pursuant to provisions of applicable law.
6.7 DISCRETIONARY CREDIT AND CREDIT PAYABLE UPON DEMAND. To the
extent that any of the Indebtedness shall, at anytime, be payable upon demand,
nothing contained in this Agreement, or any other Loan Document, shall be
construed to prevent Bank from making demand, without notice
15
and with or without reason, for immediate payment of all or any part of such
Indebtedness at any time or times, whether or not a Default or Event of Default
has occurred or exists. In the event that such demand is made upon any portion
of the Indebtedness, the Bank, at its election, may terminate any commitment by
Bank to issue any further Letters of Credit for Borrower's account under this
Agreement or otherwise. Furthermore, to the extent any Loan Document authorizes
the Bank, at its discretion, to make or to decline to make financial
accommodations to the Borrower, nothing contained in this Agreement or any other
Loan Document shall be construed to limit or impair such discretion or to commit
or otherwise obligate the Bank to make any such financial accommodation.
6.8 APPLICATION OF PROCEEDS OF COLLATERAL. Notwithstanding
anything to the contrary set forth in any Loan Document, after an Event of
Default, the proceeds of any of the Collateral, together with any offsets,
voluntary payments, and any other sums received or collected in respect of the
Indebtedness, may be applied in such order and manner as determined by Bank in
its sole and absolute discretion.
SECTION 7. MISCELLANEOUS
7.1 ACCOUNTING PRINCIPLES. Except to the extent expressly stated
to the contrary herein, where the character or amount of any asset or liability
or item of income or expense is required to be determined, or any consolidation
or other accounting computation is required to be made for purposes of this
Agreement, it shall be done in accordance with GAAP, and all accounting terms
not specifically defined in this Agreement shall be construed in accordance with
GAAP.
7.2 TAXES AND FEES. Unless otherwise prohibited by applicable law,
should any tax (other than a tax based upon the net income of Bank,) or
recording or filing fee become payable in respect of any Loan Document, any of
the Collateral, any of the Indebtedness or any amendment, modification or
supplement hereof or thereof, Borrower agrees to pay such taxes (or reimburse
Bank therefor upon demand for reimbursement), together with any interest or
penalties thereon, and agrees to hold Bank harmless with respect thereto.
7.3 GOVERNING LAW. Each Loan Document shall be deemed to have been
delivered in the State of Texas, and shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, except to the extent
that the Uniform Commercial Code, other personal property law or real property
law of another jurisdiction where Collateral is located is applicable, and
except to the extent expressed to the contrary in any Loan Document. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
7.4 AUDITS OF COLLATERAL; FEES. Bank shall have the right from
time to time to audit Collateral pledged by any Loan Party, provided that such
audits will be conducted no more than one (1) time(s) in any fiscal year unless
an Event of Default has occurred. Borrower agrees to reimburse
16
Bank, on demand, for customary and reasonable fees and costs incurred by Bank
for such audits and for each appraisal of Collateral and financial analysis and
examination of Borrower or any other
Loan Party performed from time to time.
7.5 COSTS AND EXPENSES. Borrower shall pay Bank, on demand, all
costs and expenses, including, without limitation, reasonable attorneys' fees
and legal expenses (whether inside or outside counsel is used), incurred by Bank
in perfecting, revising, protecting or enforcing any of its rights or remedies
against any Loan Party or any Collateral, or otherwise incurred by Bank in
connection with any Default or Event of Default or the enforcement of the Loan
Documents or the Indebtedness. Following Bank's demand upon Borrower for the
payment of any such costs and expenses, and until the same are paid in full, the
unpaid amount of such costs and expenses shall constitute Indebtedness and shall
bear interest at the Default Rate.
7.6 NOTICES. All notices and other communications provided for in
any Loan Document (unless otherwise expressly stipulated therein) ox
contemplated thereby, given thereunder or required by law to be given, shall be
in writing (unless expressly provided to the contrary). If personally delivered,
such notices shall be effective when delivered, and in the case of mailing or
delivery by overnight courier, such notices shall be effective when placed in an
envelope and deposited at a post office or official depository under the
exclusive care and custody of the United States Postal Service or delivered to
an overnight courier, postage prepaid, in each case addressed to the parties as
set forth on the signature page of this Agreement, or to such other address as a
party shall have designated to the other in writing in accordance with this
Section. In the case of mailing, the mailing shall be by certified or first
class mail. The giving of at least five (5) days' notice before Bank shall take
any action described in any notice shall conclusively be deemed reasonable for
all purposes; provided, that this shall not be deemed to require Bank to give
such five (5) days' notice, or any notice, if not specifically required to do so
in this Agreement.
7.7 FURTHER ACTION. Borrower, from time to time, upon written
request of Bank, will promptly make, execute, acknowledge and deliver, or cause
to be made, executed, acknowledged and delivered, all such further and
additional instruments, and promptly take all such further action as may be
reasonably required to carry out the intent and purpose of the Loan Documents,
and to provide for the Letters of Credit thereunder, according to the intent and
purpose therein expressed.
7.8 SUCCESSORS AND ASSIGNS; PARTICIPATION. This Agreement shall be
binding upon and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns. The foregoing shall not authorize any
assignment or transfer by Borrower, of any of its respective rights, duties or
obligations hereunder, such assignments or transfers being expressly prohibited.
Bank, however, may freely assign, whether by assignment, participation or
otherwise, its rights and obligations hereunder, and is hereby authorized to
disclose to any such assignee or participant (or proposed assignee or
participant) any financial or other information in its knowledge or possession
regarding any Loan Party or the Indebtedness.
17
7.9 INDULGENCE. No delay or failure of Bank in exercising any
right, power or privilege hereunder or under any of the Loan Documents shall
affect such right, power or privilege, nor shall any single or partial exercise
thereof preclude any further exercise thereof, nor the exercise of any other
right, power or privilege available to Bank. The rights and remedies of Bank
hereunder are cumulative and are not exclusive of any rights or remedies of
Bank.
7.10 AMENDMENT AND WAIVER. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by any Loan Party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Bank, and then such waiver or consent shall be effective only in the specific
instance(s) and for the specific time(s) and purpose(s) for which given.
7.11 SEVERABILITY. In case any one or more of the obligations of
any Loan Party under any Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of such Loan Party shall not in any way be affected or
impaired thereby, and such invalidity, illegally or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of such Loan Party under any Loan Document in any other
jurisdiction.
7.12 HEADINGS AND CONSTRUCTION OF TERMS. The headings of the
various sub-Sections hereof are for convenience of reference only and shall in
no way modify or affect any of the terms or provisions hereof. Where the context
herein requires, the singular number shall include the plural, and any gender
shall include any other gender.
7.13 INDEPENDENCE OF COVENANTS. Each covenant hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of any Default or Event of Default.
7.14 RELIANCE ON AND SURVIVAL OF VARIOUS PROVISIONS. All terms,
covenants, agreements, representations and warranties of any Loan Party made in
any Loan Document, or in any certificate, report, financial statement or other
document furnished by or on behalf of any Loan Party in connection with any Loan
Document, shall be deemed to have been relied upon by Bank, notwithstanding any
investigation heretofore or hereafter made by Bank or on Bank's behalf, and
those covenants and agreements of Borrower set forth in Sections 4.8 and 4.12
hereof (together with any other indemnities of Borrower contained elsewhere in
any Loan Document) shall survive the termination of this Agreement and the
repayment in full of the Indebtedness.
7.15 EFFECTIVE UPON EXECUTION. This Agreement shall become
effective upon the execution hereof by Bank and Borrower, and shall remain
effective until the Indebtedness under this Agreement and each Letter of Credit
and the related Loan Documents shall have been repaid and discharged in full and
no commitment to extend any credit hereunder (whether optional or obligatory)
remains outstanding.
18
7.16 COMPLETE AGREEMENT; CONFLICTS. The Loan Documents contain the
entire agreement of the parties thereto, and none of the parties shall be bound
by anything not expressed in writing. In the event that and to the extent that
any of the terms, conditions or provisions of any of the other Loan Documents
are inconsistent with or in conflict with any of the terms, conditions or
provisions of this Agreement, the applicable terms, conditions and provisions of
this Agreement shall govern and control.
7.17 EXHIBITS AND ADDENDA. The following Addenda, Exhibits and
Schedules are attached to this Agreement and are incorporated into this
Agreement by this reference and made a part hereof for all purposes:
ADDENDA:
Defined Terms Addendum
Financial Covenants Addendum
Loan Terms, Conditions and Procedures Addendum
EXHIBITS:
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Borrowing Base Certificate
SCHEDULES:
Schedule 3.5 Subsidiaries
Schedule 3.14 Employee Benefit Plans
Schedule 3.17 Environmental Disclosures
Schedule 3.20 Intellectual Property
7.18 LEFT BLANK INTENTIONALLY.
7.19 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH ACKNOWLEDGE THAT
THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.
EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTION OF EITHER OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
7.20 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
"LOAN AGREEMENTS" (AS DEFINED IN SECTION 26.02 A (2) OF THE TEXAS
19
BUSINESS & COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN AGREEMENTS MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Remainder of the Page
Intentionally Left Blank
Signature Page to Follow
20
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK - TEXAS DIGITALCONVERGENCE.:COM INC.
By: /s/ Steven M. Moiles By: /s/ William S. Leftwich
------------------------------- ------------------------------------
Name: Steven M. Moiles Name: William S. Leftwich
Title: Vice President Title: CFO
Address: 1601 Elm Street Address: 9101 N. Central Expressway
Dallas, Texas 75201 6th Floor
P.O. Box 650282 Dallas, Texas 75231
Dallas, Texas 75262-0282
Attn: Steven M. Moiles Attn: William Leftwich
Telefax No.: 214/890-4369 Telefax No.: 214/292-6914
21
DEFINED TERMS ADDENDUM
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following respective meanings:
"ACCOUNT DEBTOR" shall mean the party who is obligated on or under any
Account.
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS", "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" and "INVENTORY" shall have the
respective meanings assigned to them in the UCC on the date of this Agreement.
"ACCOUNTS RECEIVABLE" shall mean and include all Accounts, Chattel
Paper, General Intangibles, contract rights, deposit accounts, documents and
Instruments now owned or hereafter acquired by Borrower and, to the extent
applicable, any other Loan Party pledging or purporting to pledge the same as
security for all or any part of the Indebtedness.
"AFFILIATE" shall mean, when used with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AFFILIATE RECEIVABLES" shall mean, as of any time of determination,
any amounts in respect of loans or advances owing to Borrower or another Loan
Party from any of its Subsidiaries or
Affiliates at such time.
"AGREEMENT" shall mean this Credit Agreement, including the Defined
Terms Addendum, the Financial Covenants Addendum and the Loan Terms, Conditions
and Procedures Addendum, together with all exhibits and schedules, as it may be
amended from time to time.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
EXHIBIT B.
"BORROWING BASE LIMITATION" shall mean the lesser of:
(a) ONE HUNDRED MILLION DOLLARS ($100,000,000.00); or
1
(b) The value of Comerica Bank-Texas certificates of
deposit issued in the name of Borrower and delivered
and pledged to Bank as Collateral.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or
holiday, on which the Bank is open to carry on all or substantially all of its
normal commercial lending business in Dallas, Texas.
"CAPITAL EXPENDITURE" shall mean any expenditure by a Person for (a) an
asset which will be used in a year or years subsequent to the year in which the
expenditure is made and which asset is properly classified in relevant financial
statements of such Person as equipment, real property, a fixed asset or a
similar type of capitalized asset in accordance with GAAP or (b) an asset
relating to or acquired in connection with an acquired business, and any and all
acquisition costs related to (a) or (b) above.
"COLLATERAL" shall mean all property, assets and rights in which a Lien
or other encumbrance in favor of or for the benefit of Bank is or has been
granted or arises or has arisen, or may hereafter be granted or arise, under or
in connection with any Loan Document, or otherwise, to secure the
payment or performance of the Indebtedness.
"COMPLIANCE CERTIFICATE" shall mean a certificate to be furnished by
Borrower to Bank, in the form of EXHIBIT A, certified by the chief financial
officer of Borrower (or in such officer' absence, another responsible officer of
Borrower) pursuant to SECTION 4.3 of this Agreement, certifying that, as of the
date thereof, no Default or Event of Default shall have occurred and be
continuing, or if any Default or Event of Default shall have occurred and be
continuing, specifying in detail the nature and period of existence thereof and
any action taken or proposed to be taken by Borrower with respect thereto, also
certifying as to whether Borrower is in compliance with the financial covenants
in the Financial Covenants Addendum to this Agreement (which certificate shall
set forth in reasonable detail the calculations and resultant ratios and
financial tests determined thereunder).
"CONSOLIDATED" or "CONSOLIDATED" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more persons
of the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to "consolidated" financial statements or data of the Borrower
includes consolidation with its Subsidiaries in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of determination thereof,
all items of indebtedness, obligation or liability of a Person, whether matured
or unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP. In the case of Borrower, the term "Debt" shall include,
without limitation, the Indebtedness.
"DEFAULT" shall mean, any condition or event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
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"DEFAULT RATE" shall mean, at any time of determination thereof with
respect to the applicable portion of the Indebtedness, a per annum rate of
interest equal to the sum of the contractual rate of interest which would
apply to such Indebtedness if the Default Rate was not then in effect plus
three percent (3%).
"DISBURSEMENT DATE" shall mean the date upon which Bank issues a Letter
of Credit under this Agreement.
"DISTRIBUTION" shall mean any dividend on or other distribution
(whether by reduction of capital or otherwise) with respect to any shares of
capital stock (or other ownership interests), except for dividends from a
Subsidiary of a Loan Party to another of its Subsidiaries.
"ENVIRONMENTAL LAW(S)" shall mean all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal, state, local,
foreign or other governmental or quasi governmental authority or body (or any
agency, instrumentality or political subdivision thereof) pertaining to
Hazardous Materials or otherwise intended to regulate or improve health, safety
or the environment, including, without limitation, any hazardous materials or
wastes, toxic substances, flammable, explosive or radioactive materials,
asbestos, and/or other similar materials; any so-called "superfund" or
"superlien" law, pertaining to Hazardous Materials on or about any of the
Collateral, or any other property at any time owned, leased or otherwise used by
any Loan Party, or any portion thereof, including, without limitation, those
relating to soil, surface, subsurface ground water conditions and the condition
of the ambient air; and any other federal, state, foreign or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic,
radioactive, flammable or dangerous waste, substance or material, as now or at
anytime hereafter in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in Section 6.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all balance sheets, income
statements, statements of profit and loss, surplus reconciliation statements,
statements of cash flow and other financial data, statements and reports
(whether of Borrower, any of its Subsidiaries, or any other Loan Party or
otherwise) which are required to, have been, or may from time to time hereafter,
be furnished to Bank, for the purposes of, or in connection with, this
Agreement, the transactions contemplated hereby or any of the Indebtedness.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"GOOD FAITH" or "good faith" shall have the meaning ascribed to the
term "good faith" in Article 1.201 (19) of the UCC on the date of this
Agreement.
3
"GOVERNMENTAL AUTHORITY" shall mean the United States, each state, each
county, each city, and each other political subdivision in which all or any
portion of the Collateral is located, and each other political subdivision,
agency, or instrumentality exercising jurisdiction over Bank, any Loan Party or
any Collateral.
"GOVERNMENTAL REQUIREMENTS" shall mean all laws, ordinances, rules, and
regulations of any Governmental Authority applicable to any Loan Party, any of
the Indebtedness or any
Collateral.
"HAZARDOUS MATERIAL" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in, or for purposes of,
any Environmental Law(s).
"INDEBTEDNESS" shall mean all loans, advances, indebtedness,
obligations and liabilities of any Loan Party to Bank under any Loan Document,
together with all other indebtedness, obligations and liabilities whatsoever of
Borrower to Bank, whether matured or unmatured, liquidated or unliquidated,
direct or indirect, absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, voluntary or involuntary, known or
unknown, originally payable to Bank or to a third party and subsequently
acquired by Bank including, without limitation, any: late charges; loan fees or
charges; overdraft indebtedness; costs incurred by Bank in establishing,
determining, continuing or defending the validity or priority of any Lien or in
pursuing any of its rights or remedies under any Loan Document or in connection
with any proceeding involving Bank as a result of any financial accommodation to
Borrower; debts, obligations and liabilities for which Borrower would otherwise
be liable to the Bank were it not for the invalidity or enforceability of them
by reason of any bankruptcy, insolvency or other law or for any other reason;
and reasonable costs and expenses of attorneys and paralegals, whether any suit
or other action is instituted, and to court costs if suit or action is
instituted, and whether any such fees, costs or expenses are incurred at the
trial court level or on appeal, in bankruptcy, in administrative proceedings, in
probate proceedings or otherwise; provided, however, that the term Indebtedness
shall not include any consumer loan to the extent treatment of such loan as part
of the Indebtedness would violate any Governmental Requirement.
"INTELLECTUAL PROPERTY" shall mean:
(a) copyright rights, copyright applications, copyright
registrations and like protections in work or
authorship and derivative work thereof, whether
published or unpublished and whether or not the same
also constitutes a trade secret (collectively, the
"COPYRIGHTS");
(b) trade secrets and any and all intellectual property
rights in computer software and computer software
products;
(c) design rights;
4
(d) patents, patent applications and like protections
including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and
continuations-in-part of the same;
(e) trademark and servicemark rights, whether registered
or not, applications to register and registrations of
the same and like protections, and the entire
goodwill of the business connected with and
symbolized by such trademarks or servicemarks
(collectively, the "TRADEMARKS");
(f) rights to the proceeds (excluding attorneys' and
other professional and expert fees and expenses)
arising from any and all claims or damages by way of
past, present and future infringement of any of the
rights included above, with the right, but not the
obligation, to sue on behalf of and collect such
damages for said use or infringement of the
intellectual property rights identified above;
(g) licenses and other rights to use any of the
Copyrights, Patents or Trademarks, and all license
fees and royalties arising from such use to the
extent permitted by any such license or right;
(h) amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(i) proceeds and products of the foregoing, including
without limitation all payments under insurance or
any indemnity or warranty payable in respect of
any of the foregoing.
"LETTER OF CREDIT" shall mean a letter of credit issued by the Bank for
the account of and/or upon the application of any Loan Party in accordance with
this Agreement, as such Letter of Credit may be amended, supplemented, extended
or confirmed from time to time.
"LETTER OF CREDIT LIABILITIES" shall mean, at any time and in respect
of all Letters of Credit, the sum of (a) the aggregate amount available to be
drawn under all such Letters of Credit plus (b) the aggregate unpaid amount of
all Reimbursement Obligations then due and payable in respect of previous
drawings under such Letters of Credit.
"LETTER OF CREDIT MATURITY DATE" shall mean February 1, 2001 or such
earlier date as established in a particular Letter of Credit on which date such
Letter of Credit terminates whether by the lapse of time, demand for payment,
acceleration or otherwise; provided, however, if any such date is not a Business
Day, then the Letter of Credit Maturity Date shall be the next succeeding
Business Day.
5
"LETTER OF CREDIT MAXIMUM AMOUNT" shall mean the lesser of (a) ONE
HUNDRED MILLION DOLLARS ($100,000,000.00), or (b) the Borrowing Base Limitation.
"LIEN" shall mean any valid and enforceable interest in any property,
whether real, personal or mixed, securing an indebtedness, obligation or
liability owed to or claimed by any Person other than the owner of such
property, whether such indebtedness is based on the common law or any statute or
contract and including, but not limited to, a security interest, pledge
mortgage, assignment, conditional sale, trust receipt, lease, consignment or
bailment for security purposes.
"LOAN DOCUMENTS" shall mean collectively, this Agreement, any Letter of
Credit, any reimbursement agreement or other documentation executed in
connection with any Letter of Credit, and any other documents, instruments or
agreements evidencing, governing, securing, guaranteeing or otherwise relating
to or executed pursuant to or in connection with any of the Indebtedness or any
Loan Document (whether executed and delivered prior to, concurrently with or
subsequent to this Agreement), as such documents may have been or may hereafter
be amended from time to time.
"LOAN PARTY" shall mean Borrower, each of its Subsidiaries (whether or
not a party to any Loan Document) and each other Person who or which shall be
liable for the payment or performance of all or any portion of the Indebtedness
or who or which shall own any property that is subject to (or purported to be
subject to) a Lien which secured all or any portion of the Indebtedness.
"MATERIAL ADVERSE EFFECT" shall mean any act, event, condition or
circumstance which could materially and adversely affect the business,
operations, condition (financial or otherwise), performance or assets of any
Loan Party, the ability of any Loan Party to perform its obligations under any
Loan Document to which it is a party or by which it 'is bound or the
enforceability of any Loan Document.
"MAXIMUM LEGAL RATE" shall mean the maximum rate of nonusurious
interest per annum permitted to be paid by Borrower or, if applicable, another
Loan Party or received by Bank with respect to the applicable portion of the
Indebtedness from time to time under applicable state or federal law as now or
as may be hereafter in effect, including, as to Chapter 1 D of Title 79 Vernon's
Texas Civil Statutes (and as the same may be incorporated by reference in other
Texas statutes), but otherwise without limitation, that rate based upon the
"WEEKLY CEILING RATE" (defined in Chapter 303 of the Texas Finance Code).
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
Person succeeding to the present powers and functions of the Pension Benefit
Guaranty Corporation.
"PENSION PLAN(S)" shall mean any and all employee benefit pension plans
of Borrower and/or any of its Subsidiaries in effect from time to time, as such
term is defined in ERISA.
6
"PERSON" or "PERSON" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time and in respect of
all Letters of Credit, the aggregate obligations any Loan Party, then
outstanding or which may thereafter arise, to reimburse the Bank for any amount
paid or incurred by the Bank in respect of any and all drawings under such
Letter of Credit, together with any and all other Indebtedness, obligations and
liabilities of any Loan Party to Bank related to such Letter of Credit arising
under this Agreement, any Letter of Credit application or any other Loan
Document.
"SUBSIDIARY" shall mean as to any particular parent entity, any
corporation, partnership, limited liability company or other entity (whether now
existing or hereafter organized or acquired) in which more than fifty percent
(50%) of the outstanding equity ownership interests having voting rights as of
any applicable date of determination, shall be owned directly, or indirectly
through one or more Subsidiaries, by such parent entity.
"TANGIBLE NET WORTH" shall mean, with respect to any Person and as
of any applicable date of determination, (a) the net book value of all assets
of such Person (excluding Affiliate Receivables, patent rights, trademarks,
trade names, franchises, copyrights, licenses, goodwill, an all other
intangible assets of such Person), after all appropriate deductions in
accordance with GAAP (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization), less (b) all Debt
of such Person at such time.
"TAX REFUNDS" shall mean refunds or claims for refunds of any taxes at
any time paid by Borrower to the United States of America or any state, city,
county or other governmental entity.
"TELEPHONE NOTICE AUTHORIZATION" shall mean an agreement in form
satisfactory to Bank authorizing telephonic and facsimile notices of
borrowing and establishing a codeword system of identification in connection
therewith.
"UCC" shall mean the Uniform Commercial Code as adopted and in force in
the State of Texas, as amended.
7
FINANCIAL COVENANTS ADDENDUM
SECTION 1. FINANCIAL COVENANTS.
1.1 TANGIBLE NET WORTH. Maintain a Tangible Net Worth at all times
of not less than the amount set forth below during the corresponding period set
forth below:
[Download Table]
Period Amount
------ ------
As of April 30, 2000 $ 95,000,000.00
As of June 30, 2000 $ 80,000,000.00
As of September 30, 2000 $120,000,000.00
As of December 31, 2000 $ 65,000,000.00
1
LOAN TERMS. CONDITIONS AND PROCEDURES ADDENDUM
SECTION 1. LETTER OF CREDIT FACILITY
1.1 LETTERS OF CREDIT.
(a) LETTERS OF CREDIT. Subject to the terms and
conditions of this Agreement and the other Loan
Documents, the Bank shall, upon request from Borrower
from time to time prior to the Letter of Credit
Maturity Date, issue one or more Letters of Credit.
The Letter of Credit Liabilities shall not exceed the
Letter of Credit Maximum Amount. Letters of Credit
may be issued to facilitate orders by Borrower for
Tandy Corporation to manufacture the :Cue:C.A.T.
product. No Letter of Credit shall have a stated
expiration date later than February 1, 2001.
(b) LETTER OF CREDIT FEE. Borrower shall pay to Bank a
fee based upon the following fee schedule:
1% per annum on that portion of Letter of
Credit Liabilities between $0 and
$19,999,999, and
0.75% per annum on that portion of Letter of
Credit Liabilities between $20,000,000 and
$29,999,999, and
0.375% per annum on that portion of Letter
of Credit Liabilities at or above
$30,000,000.
Such fee shall be computed on a daily basis and shall
be payable monthly in arrears. Bank shall invoice
Borrower for such fees, which invoice shall be due
and payable within fifteen (15) days after receipt.
(c) Notwithstanding anything contained in this Agreement
to the contrary, the Letter of Credit Liabilities
shall not exceed the Letter of Credit Maximum Amount.
If said limitations are exceeded at anytime, Borrower
shall immediately, without demand by Bank, pay to
Bank an amount not less than such excess, or, if
Bank, in its sole discretion, shall so agree,
Borrower shall provide Bank cash collateral in an
amount not less than such excess, and Borrower hereby
pledges and grants to Bank a security interest in
such cash collateral so provided to Bank.
(d) ADDITIONAL PROVISIONS. The following additional
provisions shall apply to each Letter of Credit:
1
(i) Borrower shall give the Bank written notice
requesting each issuance of a Letter of
Credit hereunder not less than five (5)
Business Days prior to the requested
issuance date and shall furnish such
additional information regarding such
transaction as Bank may request. The
issuance by Bank of each Letter of Credit
shall, in addition to the conditions
precedent set forth elsewhere in this
Agreement, be subject to the conditions
precedent that:
(A) such Letter of Credit shall be in
form and substance satisfactory to
Bank;
(B) Borrower shall have delivered to
Bank (a) one or more certificates
of deposit issued by Comerica
Bank-Texas in the name of Borrower
in an aggregate amount equal to or
greater than the aggregate amount
available to be drawn under such
Letter of Credit, and (b) a
Security Agreement in form and
substance acceptable to Bank
evidencing the pledge of such
certificate(s) of deposit as
Collateral for the issuance of the
Letter of Credit;
(C) Borrower shall have executed and
delivered such applications and
other instruments and agreements
relating to such Letter of Credit as
Bank shall have requested and are
not inconsistent with the terms of
this Agreement;
(D) each of the following statements
are true as of the date of issuance
of such Letter of Credit with
respect to issuance of the same and
constitute representations,
warranties and certifications by
Borrower that (1) both before and
after the issuance of such Letter
of Credit, the obligations set
forth in the Loan Documents are and
shall be valid, binding and
enforceable obligations of each
Loan Party, as applicable; (2) all
terms and conditions precedent to
the issuance of such Letter of
Credit have been satisfied, and
shall remain satisfied through the
date of such Letter of Credit; (3)
the issuance of such Letter of
Credit will not cause the Letter of
Credit Liabilities to exceed the
Letter of Credit Maximum Amount;
(4) no Default or Event of Default
shall have occurred or be in
existence, and none will exist or
arise upon the issuance of such
Letter of Credit; (5) the
representations and warranties
contained in the Loan Documents are
true and correct in all material
respects and shall be true and
correct in all material respects as
of the issuance of such Letter of
Credit; and (6) the
2
issuance of such Letter of Credit
will not violate the terms or
conditions of any contract,
indenture, agreement or other
borrowing of any Loan Party, and the
submission of an application for
issuance of a Letter of Credit shall
constitute a representation,
warranty and certification of
Borrower to that effect; and
(E) no Letter of Credit may be issued if
after giving effect thereto, the
Letter of Credit Liabilities would
exceed the Letter of Credit Maximum
Amount.
(ii) Borrower shall be irrevocably and
unconditionally obligated forthwith to
reimburse Bank for any amount paid by Bank
upon any drawing under any Letter of Credit,
without presentment, demand, protest or
other formalities of any kind, all of which
are hereby waived.
(e) INDEMNIFICATION; RELEASE. Borrower hereby indemnifies
and agrees to defend and hold harmless Bank and its
officers, directors, employees, agents and
representatives from and against any and all claims
and damages, losses, liabilities, costs or expenses
which any such indemnified party may incur (or which
may be claimed against Bank or any such indemnified
party by any person whatsoever), REGARDLESS OF
WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE
OF ANY OF THE INDEMNIFIED PARTIES, in connection with
the execution and delivery of any Letter of Credit or
transfer of or payment or failure to pay under any
Letter of Credit; PROVIDED that Borrower shall not be
required to indemnify any party seeking
indemnification for any claims, damages, losses,
liabilities, costs or expenses to the extent, but
only to the extent, caused by (i) the willful
misconduct or gross negligence of the party seeking
indemnification, or (ii) by the failure by the party
seeking indemnification to pay under any Letter of
Credit after the presentation to it of a request
required to be paid under application law.
SECTION 2. PAYMENTS, RECOVERIES AND COLLECTIONS
2.1 LEFT BLANK INTENTIONALLY.
2.2 BANK'S BOOKS AND RECORDS. The amount and date of each Letter
of Credit hereunder and the amount of Letter of Credit Liabilities shall be
noted on Bank's books and records, which shall be conclusive evidence thereof,
absent manifest error; provided, however, any failure by Bank to make any such
notation, or any error in any such notation, shall not relieve Borrower of its
obligations to pay to Bank all amounts owing to Bank under or pursuant to the
Loan Documents, in each case, when due in accordance with the terms hereof or
thereof.
3
2.3 PAYMENTS ON NON-BUSINESS DAY. In the event that any payment of
any principal, interest, fees or any other amounts payable by Borrower under or
pursuant to any Loan Document shall become due on any day which is not a
Business Day, such due date shall be extended to the next succeeding Business
Day, and, to the extent applicable, interest shall continue to accrue and be
payable at the Applicable Interest Rate(s) for and during any such extension.
2.4 PAYMENT PROCEDURES. Unless otherwise expressly provided in a
Loan Document, all sums payable by Borrower to Bank under or pursuant to any
Loan Document, whether principal, interest, or otherwise, shall be paid, when
due, directly to Bank at the office of Bank identified on the signature page of
this Agreement, or at such other office of Bank as Bank may designate in writing
to Borrower from time to time, in immediately available United States funds, and
without setoff, deduction or counterclaim. Bank may, in its discretion, charge
any and all deposit or other accounts (including, without limitation, any
account evidenced by a certificate of deposit or time deposit) of Borrower
maintained with Bank for all or any part of any Indebtedness then due and
payable; provided, however, that such authorization shall not affect Borrower's
obligations to pay all Indebtedness, when due, whether or not any such account
balances maintained by Borrower with Bank are insufficient to pay any amounts
then due,
2.5 MAXIMUM INTEREST RATE. At no time shall any Default Rate
under this Agreement, or otherwise in respect of any Indebtedness hereunder,
exceed the Maximum Legal Rate, giving due consideration to the execution of
this Agreement. In the event that any interest is charged or otherwise
received by Bank in excess of the Maximum Legal Rate, Borrower hereby
acknowledges and agrees that any such excess interest shall be the result of
an accidental and bona fide error, and any such excess shall be deemed to
have been payments of principal, and not of interest, and shall be applied,
first, to reduce the principal Indebtedness then outstanding, second, any
remaining excess, if any, shall be applied to reduce any other Indebtedness,
and third, any remaining excess, if any, shall be returned to Borrower.
Notwithstanding the foregoing or anything to the contrary contained in this
Agreement or any other Loan Document, but subject to all limitations
contained in this paragraph, if at anytime any Default Rate or other rate of
interest applicable to any portion of the Indebtedness is computed on the
basis of the Maximum Legal Rate, any subsequent reduction in the Default Rate
or such other rate of interest shall not reduce such interest rate thereafter
payable below the Maximum Legal Rate until the aggregate amount of interest
accrued equals the total amount of interest that would have accrued if
interest had, at all times, been computed solely on the basis of the Default
Rate or such other interest rate. This paragraph shall control all agreements
between the Borrower and the Bank.
2.6 RECEIPT OF PAYMENTS BY BANK. Any payment by Borrower of any
of the Indebtedness made by mail will be deemed tendered and received by Bank
only upon actual receipt thereof by Bank at the address designated for such
payment, whether or not Bank has authorized payment by mail or in any other
manner, and such payment shall not be deemed to have been made in a timely
manner unless actually received by Bank on or before the date due for such
payment, time being of the essence. Borrower expressly assumes all risks of
loss or liability resulting from non-delivery or delay of delivery of any
item of payment transmitted by mail or in any other manner. Acceptance by
4
Bank of any payment in an amount less than the amount then due shall be
deemed an acceptance on account only, and any failure to pay the entire
amount then due shall constitute and continue to be an Event of Default
hereunder. Bank shall be entitled to exercise any and all rights and remedies
conferred upon and otherwise available to Bank under any Loan Document upon
the occurrence and during the continuance of any such Event of Default. Prior
to the occurrence of any Default, Borrower shall have the right to direct the
application of any and all payments made to Bank hereunder to the
Indebtedness. Borrower waives the right to direct the application of any and
all payments received by Bank hereunder at any time or times after the
occurrence and during the continuance of any Default. Borrower further agrees
that after the occurrence and during the continuance of any Default, or prior
to the occurrence of any Default if Borrower has failed to direct such
application, Bank shall have the continuing exclusive right to apply and to
reapply any and all payments received by Bank at any time or times, whether
as voluntary payments, proceeds from any Collateral, offsets, or otherwise,
against the Indebtedness in such order and in such manner as Bank may, in its
sole discretion, deem advisable, notwithstanding any entry by Bank upon any
of its books and records. Borrower hereby expressly agrees that, to the
extent that Bank receives any payment or benefit of or otherwise upon any of
the Indebtedness, and such payment or benefit, or any part thereof, is
subsequently invalidated, declared to be fraudulent or preferential, set
aside, or required to be repaid to a trustee, receiver, or any other Person
under any bankruptcy act, state or federal law, common law, equitable cause
or otherwise, then to the extent of such payment or benefit, the
Indebtedness, or part thereof, intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made or received by Bank, and, further, any such repayment by Bank shall be
added to and be deemed to be additional Indebtedness.
2.7 SECURITY. Payment and performance of the Indebtedness shall
be secured by Liens on the Collateral of Borrower and such other Loan Parties
as Bank may require from time to time.
SECTION 3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT TO FIRST LETTER OF CREDIT. The
obligation of the Bank to issue the first Letter of Credit under or pursuant
to this Agreement shall be subject to the following conditions precedent:
(a) EXECUTION OF THIS AGREEMENT AND OTHER LOAN DOCUMENTS.
Borrower shall have executed and delivered to Bank,
or caused to have been executed and delivered to
Bank, this Agreement and all other Loan Documents,
and this Agreement (including all addenda, schedules,
exhibits, certificates, opinions, financial
statements and other documents to be delivered
pursuant hereto) and all other Loan Documents shall
be in full force and effect and binding and
enforceable obligations of Borrower and, to the
extent that it is a party thereto or otherwise bound
thereby, of each other Person who may be a party
thereto or bound thereby.
5
(b) AUTHORITY DOCUMENTS. Bank shall have received: (i)
copies of resolutions of the board of directors,
partners or members or managers, as applicable, of
each Loan Party evidencing approval of the borrowing
hereunder and the transactions contemplated by the
Loan Documents, and authorizing the execution,
delivery and performance by each Loan Party of each
Loan Document to which it is a party or by which it
is otherwise bound, which resolutions shall have been
certified by a duly authorized officer, partner or
other representative, as applicable, of each Loan
Party as of the date of this Agreement as being
complete, accurate and in full force and effect; (ii)
incumbency certifications of a duly authorized
officer, partner or other representative, as
applicable, of each Loan Party, in each case,
identifying those individuals who are authorized to
execute the Loan Documents for and on behalf of such
Person(s), respectively, and to otherwise act for and
on behalf of such Person(s); (iii) certified copies
of each of such Person(s)' articles of incorporation
and bylaws, partnership agreement, certificate of
limited partnership, articles of organization,
regulations or operating agreement, as applicable,
and all amendments thereto; and (iv) certificates of
existence, good standing and authority to do
business, as applicable, certified substantially
contemporaneously with the date of this Agreement,
from the state or other jurisdiction of each of such
Person(s)' organization and from every other state or
jurisdiction in which such Person is required, under
applicable law, to be qualified to do business.
(c) COLLATERAL DOCUMENTS. As security and support for the
payment and performance of all Indebtedness of
Borrower to Bank, Borrower shall have furnished,
executed and delivered to Bank, or shall have caused
to have been furnished, executed and delivered to
Bank, prior to or concurrently with the Disbursement
Date for the initial Letter of Credit hereunder, in
form satisfactory to Bank, the following documents,
and Bank shall have received proof that appropriate
security agreements, financing statements, mortgages,
deeds of trust, collateral and other documents
covering the Collateral shall have been executed and
delivered by the appropriate Persons and recorded or
filed in such jurisdictions and such other steps
shall have been taken as necessary to perfect the
Liens granted thereby:
(i) one or more certificates of deposit issued
by Comerica Bank-Texas in the name of
Borrower in an aggregate amount equal to or
greater than the amount available to be
drawn under such initial Letter of Credit;
(ii) security agreement in form and substance
acceptable to Bank evidencing the pledge of
the certificate(s) of deposit referenced in
(i) above as Collateral for the issuance of
the initial Letter of Credit;
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(iii) financing statements required or requested
by Bank to perfect all security interests to
be conferred upon Bank under the Loan
Documents and to accord Bank a perfected
security position in the Collateral;
(iv) such additional documents or certificates as
may be required by Bank and/or required
under the terms of any and every Loan
Document; and
(v) such other documents or agreements of
security and appropriate assurances of
validity, perfection and priority of Lien as
Bank may request.
(d) LEGAL OPINION LETTER. Borrower shall have furnished
to Bank an opinion of Borrower's legal counsel, dated
as of the date of this Agreement, and covering such
matters as are required by Bank and which is
otherwise satisfactory in form and substance to Bank.
(e) LICENSES, PERMITS, APPROVALS, ETC. To the extent
necessary and applicable, Borrower shall have
received any and all necessary authorizations,
approvals and consents from all applicable
Governmental Authorities in respect of the issuance
of any Letters of Credit hereunder, the Loan
Documents and the transactions contemplated by any
Loan Document; and Bank shall have also received
copies of each authorization, license, permit,
consent, order or approval of, or registration,
declaration or filing with, any Governmental
Authority or any securities exchange or other Person
obtained or made by Borrower or any other Person in
connection with the transactions contemplated by the
Loan Documents and which is material to the financial
condition of Borrower or such other Person or the
conduct of its business or the transactions
contemplated hereby or the Collateral.
(f) UCC LIEN SEARCH. Bank shall have received UCC, tax
lien and judgment lien record and copy searches (and,
if any collateral constitutes Intellectual Property,
patent, copyright and trademark searches), disclosing
no notice of any Liens or encumbrances filed against
any of the Collateral.
(g) CASUALTY INSURANCE. Borrower shall have furnished to
Bank, or cause to have been furnished to Bank, in
form and content and in amounts and with companies
satisfactory to Bank, certificates evidencing
casualty insurance policies relating to the assets
and properties (including, but not limited to, the
Collateral) of Borrower and any applicable Loan
Party.
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(h) APPROVAL OF BANK COUNSEL. All actions, proceedings,
instruments and documents required to carry out the
borrowings and transactions contemplated by this
Agreement or any other Loan Document or incidental
thereto, and all other related legal matters, shall
have been satisfactory to and approved by legal
counsel for Bank, and said counsel shall have been
furnished with such certified copies of actions and
proceedings and such other instruments and documents
as they shall have requested.
(i) COMPLIANCE WITH CERTAIN DOCUMENTS AND AGREEMENTS.
Each Loan Party shall have each performed and
complied with all agreements and conditions contained
in the Loan Documents applicable to it and which are
then in
effect.
(j) OTHER DOCUMENTS AND INSTRUMENTS. Bank shall have
received such other instruments and documents (not
inconsistent with the terms hereof) as Bank may
request in connection with the issuance of any
Letters of Credit hereunder, and all such instruments
and documents shall be satisfactory in
form and substance to Bank.
3.2 CONDITIONS PRECEDENT TO ISSUANCE OF ALL LETTERS OF CREDIT.
In addition to any other terms and conditions set forth in this Agreement,
including, without limitation, those set forth in SECTION 3.1 above, the
obligation of Bank to issue any Letter of Credit under this Agreement,
including, without limitation, the initial Letter of Credit hereunder, shall
be further subject to the satisfaction of each of the following conditions
precedent on or before the Disbursement Date for such Letter of Credit:
(a) LOAN DOCUMENTS BINDING AND ENFORCEABLE. All Loan
Documents shall be in full force and effect and
binding and enforceable obligations of each Loan
Party.
(b) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of each Loan Party
under any Loan Document shall be true and correct in
all material respects.
(c) NO DEFAULT OR MATERIAL ADVERSE CHANGE. No Default or
Event of Default shall have occurred and be
continuing; there shall have been no material adverse
change in the condition (financial or otherwise),
properties, business, or operations of any Loan Party
since the date of the Financial Statements most
recently delivered to Bank prior to the date of this
Agreement; and no provision of law, any order of any
Governmental Authority, or any regulation, rule or
interpretation thereof, shall have had any material
adverse effect on the validity or enforceability of
any Loan Document.
8
(d) COLLATERAL SOURCE. Borrower shall provide to Bank
such documentation and other evidence satisfactory to
Bank that the source of funds utilized by the
Borrower to provide Collateral for any Letter of
Credit complies with covenants set forth in Section
4.7 and Section 5.3 of the Agreement.
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Dates Referenced Herein and Documents Incorporated by Reference
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