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CREDIT AGREEMENT
Dated as of June 3, 1997
between
MICROTEST, INC.
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
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TABLE OF CONTENTS
Section Page
ARTICLE I
Definitions and Financial Requirements ................. 1
1.01 Definitions.......................................................... 1
1.02 Financial Requirements............................................... 6
ARTICLE II
The Credit Facility .......................... 6
2.01 The Revolving Facility .............................................. 6
2.02 Advances Under the Revolving Facility ............................... 6
2.03 Mandatory Payment ................................................... 7
2.04 Facility Fee..... ................................................... 7
2.05 Commitment Fee... ................................................... 7
2.06 Default Rate..... ................................................... 7
2.07 Early Termination of Commitment...... ............................... 7
ARTICLE III
Extensions of Credit, Payments and Interest Calculations ........ 8
3.01 Requests for Credit.................................................. 8
3.02 Disbursements and Payments........................................... 8
3.03 Branch Accounts...................................................... 8
3.04 Evidence of Indebtedness............................................. 8
3.05 Interest Calculation................................................. 8
3.06 Late Payments; Compounding........................................... 8
3.07 Business Day......................................................... 8
3.08 Taxes and Other Charges.............................................. 9
3.09 Illegality........................................................... 10
3.10 Increased Costs...................................................... 10
3.11 Funding Losses....................................................... 10
3.12 Inability to Determine Rates......................................... 11
3.13 Certificate of the Bank.............................................. 11
3.14 Debits to Borrower's Account......................................... 11
3.15 Survival ........................................................... 11
ARTICLE IV
Conditions to Availability of Credit .................. 11
4.01 Conditions to First Extension of Credit.............................. 12
4.02 Conditions to Each Extension of Credit............................... 12
ARTICLE V
Representations and Warranties...................... 13
5.01 Corporate Existence and Power........................................ 13
5.02 Authorization........................................................ 13
5.03 Enforceability....................................................... 13
5.04 Compliance with Laws................................................. 13
5.05 Permits, Franchises.................................................. 14
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Section Page
5.06 Litigation........................................................... 14
5.07 No Event of Default.................................................. 14
5.08 Other Obligations.................................................... 14
5.09 Tax Returns.......................................................... 14
5.10 Information Submitted................................................ 14
5.11 No Material Adverse Effect........................................... 14
5.12 ERISA Compliance..................................................... 15
5.13 Environmental Matters................................................ 15
5.14 Swap Obligations..................................................... 16
ARTICLE VI
Affirmative Covenants ......................... 16
6.01 Notices of Certain Events............................................ 16
6.02 Financial and Other Information...................................... 16
6.03 Books, Records, Audits and Inspections............................... 17
6.04 Use of Facility...................................................... 17
6.05 Insurance ........................................................... 17
6.06 Compliance with Laws................................................. 17
6.07 Change in Name, Structure or Location................................ 18
6.08 Existence and Properties............................................. 18
ARTICLE VII
Negative Covenants ........................... 18
7.01 Other Indebtedness................................................... 18
7.02 Liens ........................................................... 19
7.03 Dividends ........................................................... 19
7.04 Loans ........................................................... 19
7.05 Liquidations; Mergers; Acquisitions.................................. 19
7.06 Sale of Assets....................................................... 20
7.07 Business Activities.................................................. 20
7.08 Regulations G, T, U, and X........................................... 20
7.09 Use of Proceeds - Ineligible Securities.............................. 21
7.10 Modified Quick Ratio................................................. 21
7.11 Tangible Net Worth................................................... 21
7.12 Leverage Ratio....................................................... 21
7.13 Consecutive Quarterly Losses; Losses in One Quarter.................. 21
ARTICLE VIII
Events of Default ........................... 22
8.01 Events of Default.................................................... 22
(a) Failure to Pay.............................................. 22
(b) Breach of Representation or Warranty........................ 22
(c) Specific Defaults........................................... 22
(d) Other Defaults.............................................. 22
(e) Judgments................................................... 22
(f) Failure to Pay Debts; Voluntary Bankruptcy.................. 22
(g) Involuntary Bankruptcy...................................... 22
(h) Default of Other Financial Obligations...................... 23
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(i) Default of Other Bank Obligations........................... 23
(j) Material Adverse Effect..................................... 23
(k) ERISA....................................................... 23
(l) Change of Control........................................... 24
8.02 Remedies ........................................................... 24
ARTICLE IX
Miscellaneous ............................. 25
9.01 Successors and Assigns............................................... 25
9.02 Consents and Waivers................................................. 25
9.04 Costs and Attorneys' Fees............................................ 25
9.05 Integration; Amendment............................................... 25
9.06 Borrower's Documents................................................. 25
9.07 Participations....................................................... 26
9.08 General Indemnification.............................................. 26
9.09 Arbitration; Reference Proceeding.................................... 26
9.10 Notices ........................................................... 28
9.11 Headings; Interpretation............................................. 28
9.12 Severability......................................................... 28
9.13 Counterparts......................................................... 29
9.14 Waiver of Jury Trial................................................. 29
Schedules
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Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
Exhibits
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Exhibit A Form of Compliance Certificate
iii
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of June 3,
1997, between Microtest, Inc., a Delaware corporation (the "Borrower"), and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").
In consideration of the mutual covenants and agreements contained
herein, the Borrower and the Bank agree as follows:
ARTICLE I
Definitions and Financial Requirements
--------------------------------------
1.01 Definitions. The following terms (including plural and singular
versions thereof) have the meanings indicated:
"Advance": an advance hereunder.
"Availability Period": the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) two years from the
Closing Date, (b) March 31, 1999, and (c) the date on which the Bank's
commitment to extend credit hereunder terminates.
"Business Day": any day other than a Saturday, a Sunday, or other day on
which commercial banks in San Francisco, California, are authorized or required
by law to close and, if the applicable Business Day relates to any Offshore Rate
Advance, means such a day on which dealings are carried on in the applicable
offshore interbank market.
"Closing Date": the date on which all conditions to the initial extension
of credit hereunder are satisfied.
"Code": the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder as from time to time in effect.
"Compliance Certificate": a compliance certificate in the form of Exhibit
A.
"Credit Documents": collectively, this Agreement and each other agreement,
documents and instrument now or hereafter delivered to the Bank in connection
with the credits established herein and the transactions contemplated hereby.
"Default": any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or
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otherwise remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$": each, lawful money of the United States.
"Environmental Laws": any foreign, federal, state, local, or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees,
requirements of any governmental authority, any and all requirements of law and
any and all common law requirements, rules, and bases of liability regulating,
relating to, or imposing liability or standards of conduct concerning pollution
or protection of human health or the environment or Hazardous Substances or any
activity involving Hazardous Substances, as now or may at any time hereafter may
be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder as from time to time in
effect.
"ERISA Event": (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as such a
withdrawal under Section 4062(e) of ERISA; (c) the filing of a notice of intent
to terminate, the treatment of a plan amendment as a termination under Section
4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to
terminate a Pension Plan subject to Title IV of ERISA; (d) a failure by the
Borrower to make required contributions to a Pension Plan or other Plan subject
to Section 412 of the Code; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Borrower; or (g) an
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Pension Plan.
"Event of Default": any event listed in Article VIII of this Agreement.
"FDIC": the Federal Deposit Insurance Corporation, or any entity succeeding
to any of its principal functions.
"Floating Rate": specified in subsection 2.02(a).
"FRB": the Board of Governors of the Federal Reserve System, or any entity
succeeding to any of its principal functions.
"Hazardous Substance": any hazardous or toxic substance, material,
pollutant, waste or similar designation, defined, listed, classified, or
regulated as such in or under any
2
Environmental Laws, including asbestos, petroleum, or petroleum products
(including gasoline, crude oil, or any fraction thereof), polychlorinated
biphenyls, and urea-formaldehyde insulation.
"IRS": the Internal Revenue Service or any entity succeeding to any of its
principal functions under the Code.
"Material Adverse Effect": (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole; (b) a material impairment of the ability of the Borrower to
perform under any Credit Document; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability of any Credit Document.
"Offshore Rate": for each Offshore Rate Interest Period, the rate of
interest (rounded upward to the next 1/16th of 1%) determined pursuant to the
following formula:
Offshore Rate = Offered Rate
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1.00 - Eurodollar Reserve Percentage
Where:
"Offered Rate" means the rate of interest at which dollar
deposits in the approximate amount of the Offshore Rate Advance to be
made and having a maturity comparable to such Offshore Rate Interest
Period would be offered by the Bank's London Branch (or such other
office as may be designated for such purpose by the Bank) to major
banks in the London interbank market upon request of such banks at
approximately 11:00 a.m. (London, England time) two Business Days
prior to the first day of such Offshore Rate Interest Period.
"Eurodollar Reserve Percentage" means, for any Offshore Rate
Interest Period, the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on the
first day of such Offshore Rate Interest Period (whether or not
applicable to the Bank) under regulations issued from time to time by
the FRB for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") having a term comparable to such Offshore
Rate Interest Period.
"Offshore Rate Advance": an Advance for which interest is based on the
Offshore Rate.
"Offshore Rate Interest Period": for each Offshore Rate Advance the period
commencing on the date the Offshore Rate
3
Advance begins to bear interest at a rate based on the Offshore Rate and ending
one, two, three, or six months thereafter, as requested by the Borrower;
provided, however, that the last day of each Offshore Rate Interest Period shall
be determined in accordance with the practices of the applicable offshore
interbank markets as from time to time in effect, and provided further that no
such interest period shall extend beyond the last day of the Availability
Period.
"PBGC": the Pension Benefit Guaranty Corporation or any entity succeeding
to any of its principal functions under ERISA.
"Pension Plan": a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five plan years.
"Permitted Swap Obligations": all obligations (contingent or otherwise) of
the Borrower or any Subsidiary existing or arising under Swap Contracts,
provided that each of the following criteria is satisfied: (a) such obligations
are (or were) entered into by such Person in the ordinary course of business for
the purpose of directly mitigating risks associated with liabilities,
commitments or assets held by such Person, or changes in the value of securities
issued by such Person in conjunction with a securities repurchase program not
otherwise prohibited hereunder, and not for purposes of speculation or taking a
"market view;" and (b) such Swap Contracts do not contain (i) any provision
("walk-away" provision) exonerating the non-defaulting party from its obligation
to make payments on outstanding transactions to the defaulting party or (ii)
except in the case of a swap contract with the Bank or an affiliate of the Bank,
any provision creating or permitting the declaration of an event of default,
termination event or similar event upon the occurrence of an Event of Default
hereunder (other than an Event of Default under subsection 8.01(a)).
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or governmental authority.
"Plan": an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower sponsors or maintains or to which the Borrower makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Reference Rate": for any day, the rate of interest in effect for such day
as publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." It is a rate set by the Bank based upon
various factors including the Bank's costs and desired return, general economic
4
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the reference rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Reference Rate Advance": an Advance that bears interest based on the
Reference Rate.
"Reportable Event": any of the events set forth in Section 4043(c) of ERISA
or the regulations thereunder, other than any such event for which the 30-day
notice requirement under ERISA has been waived in regulations issued by the
PBGC.
"Revolving Facility": the line of credit described in Section 2.01.
"Swap Contract": any agreement, whether or not in writing, relating to any
transaction that is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap or option, bond, note or
xxxx option, interest rate option, forward foreign exchange transaction, cap,
collar or floor transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option to enter
into any of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"Subsidiary": of the Borrower, any corporation, association, partnership,
joint venture, or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of entities other than
corporations), is owned or controlled directly or indirectly by the Borrower or
one or more Subsidiaries of the Borrower or a combination thereof.
"Tangible Net Worth": the gross book value of the assets of the Borrower
and its Subsidiaries on a consolidated basis (exclusive of goodwill, patents,
trademarks, trade names, organization expense, treasury stock, unamortized debt
discount and expense, deferred research and development costs, deferred
marketing expenses, other deferred charges and other like intangibles and monies
due from affiliates, officers, directors, or shareholders of the Borrower or any
of its Subsidiaries) less (a) reserves applicable thereto, and (b) all
liabilities (including accrued and deferred income taxes and any subordinated
liabilities). For the purpose of clarity, deferred taxes shall not be treated as
intangible assets.
"Unfunded Pension Liability": the excess of a Plan's benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Plan's
assets, determined in accordance with the assumptions used for funding the
Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
5
1.02 Financial Requirements. Unless otherwise specified in this Agreement,
all accounting terms used in this Agreement shall be interpreted, all financial
computations required under this Agreement shall be made, and all financial
information required under this Agreement shall be prepared, in accordance with
generally accepted accounting principles in effect from time to time in the
United States, consistently applied.
ARTICLE II
The Credit Facility
-------------------
2.01 The Revolving Facility. (a) From time to time during the Availability
Period, subject to the terms and provisions hereof, the Bank, on a revolving
basis, will make dollar Advances to the Borrower.
(b) The aggregate of all Advances may not exceed at any one time the
amount of $10,000,000.
2.02 Advances Under the Revolving Facility. (a) Subject to the other
provisions of this Section, Advances under the Revolving Facility shall bear
interest at a rate per annum equal to the Reference Rate plus 0.00% percentage
points per annum (the Reference Rate plus 0.00% percentage points per annum is
referred to herein as the "Floating Rate"). The Borrower shall pay interest
monthly, on the last day of each month until the last day of the Availability
Period, on which date all accrued and unpaid interest shall be due and payable.
The Borrower shall repay the principal amount of each Reference Rate Advance on
the date such advance is converted into an Offshore Rate Advance under
subsection (b) below, and on the last day of the Availability Period.
(b) In lieu of the interest rate described above, the Borrower may
elect during the Availability Period to have all or portions of Advances under
the Revolving Facility be in dollars and bear interest at the Offshore Rate plus
1.50% per annum during an Offshore Rate Interest Period, subject to the
following requirements:
(i) Each Offshore Rate Advance shall be for an amount not less
than $500,000.
(ii) The Borrower shall pay interest on each Offshore Rate
Advance on the last day of the Offshore Rate Interest Period for such
Advance; provided, however, that if any Interest Period for a Offshore Rate
Advance exceeds three months, interest shall also be payable on the date
which falls three months after the beginning of such Interest Period and on
each date which falls three months after any such interest payment date.
The Borrower shall repay the principal balance of each Offshore Rate
Advance on the last day of the Offshore Rate Interest Period for such
6
Advance, and (if sooner occurring) on the last day of the Availability
Period.
(iii) Any payment of an Offshore Rate Advance prior to the last
day of the Offshore Rate Interest Period for such Advance, whether
voluntary, by reason of acceleration or otherwise, including any mandatory
payments required under this Agreement and applied by the Bank to an
Offshore Rate Advance, shall be accompanied by the amount of accrued
interest on the amount repaid and by the amount (if any) required by
Section 3.11.
2.03 Mandatory Payment. If at any time and for any reason the total amount
of credit outstanding under this Agreement exceeds the limitations set forth
herein, the Borrower shall pay to the Bank, upon demand, the amount of the
excess. Payments under this Section may be applied to the obligations of the
Borrower to the Bank in the order and manner as the Bank in its discretion may
determine.
2.04 Facility Fee. The Borrower shall pay to the Bank a non-refundable
facility fee of $20,000 on or before the execution and delivery of this
Agreement by the parties.
2.05 Commitment Fee. The Borrower shall pay to the Bank a commitment fee at
the rate of 0.375% per annum on the average daily unused portion of the credit
provided under this Agreement. The commitment fee shall be computed on a
calendar quarter basis, except for the first period which shall commence on the
Closing Date and end on June 30, 1997 and the last period which shall end on the
last day of the Availability Period. The commitment fee shall be payable in
arrears on July 1, 1997, on the first day of each successive calendar quarter
thereafter, and on the last day of the Availability Period.
2.06 Default Rate. Upon the occurrence and during the continuation of any
Event of Default, and without constituting a waiver of any such Event of
Default, Advances under the Revolving Facility shall at the option of the Bank
bear interest at a rate per annum which is 2% per annum higher than the rate of
interest otherwise provided under this Agreement.
2.07 Early Termination of Commitment. The Borrower may at any time
terminate the Bank's commitment to extend credit hereunder by giving no less
than five Business Days' prior notice to the Bank and paying in full the entire
amount of credit outstanding hereunder, together with any sums due under Section
3.11. All accrued commitment fees to, but not including the effective date of
any termination of the commitment, shall be paid on the effective date of such
termination.
7
ARTICLE III
Extensions of Credit, Payments and Interest Calculations
--------------------------------------------------------
3.01 Requests for Credit. Each request for an extension of credit shall be
made in writing on a form acceptable to the Bank or in any other manner
acceptable to the Bank.
3.02 Disbursements and Payments. Each disbursement by the Bank and each
payment by the Borrower under this Agreement shall be made in the funds and at
such branch of the Bank as the Bank may from time to time select.
3.03 Branch Accounts. Each extension of credit under this Agreement shall
be made for the account of such branch, office, or affiliate of the Bank as the
Bank may from time to time select.
3.04 Evidence of Indebtedness. Principal, interest, and all other sums due
to the Bank under this Agreement shall be evidenced by entries in records
maintained by the Bank, and, if required by the Bank, by a promissory note or
notes. Each payment on and any other credits with respect to principal,
interest, and all other sums due under this Agreement shall be evidenced by
entries to records maintained by the Bank. The loan accounts or records
maintained by the Bank shall be conclusive absent manifest error of the amount
of the credit extended hereunder and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing.
3.05 Interest Calculation. Interest based on the Reference Rate shall be
computed on the basis of a 365/366-day year, actual days elapsed. All other
interest and fees payable under this Agreement shall be computed on the basis of
a 360 day year and actual days elapsed, which results in more interest or a
larger fee than if a 365-366 day year were used.
3.06 Late Payments; Compounding. Any sum payable by the Borrower hereunder
(including unpaid interest) if not paid when due shall bear interest (payable on
demand) from its due date until payment in full at a rate per annum equal to the
Floating Rate plus 2% per annum. At the option of the Bank, in each instance,
any sum payable hereunder which is not paid when due (including unpaid interest)
may be added to principal of the Revolving Facility and shall thereafter bear
interest at the rate applicable to principal.
3.07 Business Day. Any sum payable by the Borrower hereunder which becomes
due on a day which is not a Business Day shall be due on the next Business Day
after such due date, unless, in the case of an Offshore Rate Loan, the result of
such extension would be to carry such Offshore Rate Interest Period into another
calendar month, in which event such Offshore Rate
8
Interest Period shall end on the immediately preceding Business Day. Any
payments received by the Bank on a day which is not a Business Day shall be
deemed to be received on the next Business Day after such date of receipt.
3.08 Taxes and Other Charges. (a) (i) If any taxes (other than taxes on net
income (A) imposed by the country or any subdivision of the country in which the
Bank's principal office or actual lending office is located and (B) measured by
the United States taxable income the Bank would have received if all payments
under or in respect of this Agreement and any instrument or agreement required
hereunder were exempt from taxes levied by the Borrower's country) are at any
time imposed on any payments under or in respect of this Agreement or any
instrument or agreement required hereunder including, but not limited to,
payments made pursuant to this Section, the Borrower shall pay all such taxes
and shall also pay to the Bank, at the time interest is paid, all additional
amounts which the Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such taxes had not been imposed.
(ii) The additional amounts necessary to preserve the after-tax
yield the Bank would have received if such taxes had not been imposed shall be
calculated pursuant to the formula:
(w)(t)(i)
y = -----------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to the Bank
w = withholding tax rate levied by foreign
government
t = the Bank's combined Federal and state tax rate
i = amount of interest to be paid on Credit
(computed by using the Offshore Rate or
Reference Rate or other index rate, as
applicable plus the quoted margin over such
rate)
1 = one
(b) The Borrower will provide the Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules of
Evidence, for all taxes paid by the Borrower pursuant to subsection (a) above.
9
The Borrower will deliver receipts to the Bank within 30 days after the due date
for the related tax.
3.09 Illegality. (a) If the Bank determines that (i) the introduction of
any law, rule, regulation, treaty, or determination of an arbitrator or court or
other governmental authority or any change in or in the interpretation or
administration thereof has made it unlawful, or that any central bank or other
governmental authority has asserted that it is unlawful, for the Bank to make or
extend any Advance or other credit under this Agreement, or (ii) any order,
judgment, or decree of any governmental authority or arbitrator purports by its
terms to enjoin or restrain the Bank from making or extending any Advance or
other credit hereunder, then, on notice thereof by the Bank to the Borrower, the
obligation of the Bank to make or extend such Advance or other credit shall be
suspended until the Bank shall have notified the Borrower that the circumstances
giving rise to such determination no longer exist.
(b) If the Bank determines that it is unlawful for it to maintain any
Offshore Rate Advance hereunder, the Borrower shall prepay in full all Offshore
Rate Advances then outstanding, together with interest accrued thereon, either
on the last day of the applicable Offshore Rate Interest Period if the Bank may
lawfully continue to maintain such Advances to such day and such loans have an
interest period, or immediately, if the Bank may not lawfully continue to
maintain such Advances or such loans have no interest period, together with any
amounts required to be paid in connection therewith pursuant to Section 3.11.
3.10 Increased Costs. The Borrower shall pay to the Bank, on demand, the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to this
facility in a manner determined by the Bank, using any reasonable method. The
costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
3.11 Funding Losses. The Borrower shall reimburse the Bank and hold the
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of the failure of the Borrower to make any payment or prepayment of
principal of any Advance hereunder made at a rate of interest related to the
Offshore Rate (including payments made after any acceleration thereof), or to
borrow at such a rate, or the prepayment of an Advance which bears interest at
such a rate on a day which is not the last day of the interest period with
respect thereto (including payments made after any acceleration thereof or
10
because the total amount of credit exceeds the limitations set forth herein), or
the redenomination and conversion, upon the occurrence of any Event of Default,
of an Advance which bears interest at such a rate; including any such loss or
expense arising from the liquidation or reemployment of funds obtained by it to
maintain its Advances made at a rate related to the Offshore Rate hereunder or
from fees payable to terminate any deposits from which such funds were obtained
or deemed obtained.
3.12 Inability to Determine Rates. The Bank has no obligation to accept an
election for an Offshore Rate Advance if (a) deposits in the applicable currency
and in the principal amount, and for the period equal to the interest period,
for such Advance are not available in the applicable funding market; or (b) the
Offshore Rate does not accurately reflect the cost of such Advance. Nothing
contained herein shall, however, obligate the Bank to obtain the funds for any
Advance in any particular manner.
3.13 Certificate of the Bank. If the Bank claims any reimbursement or
compensation pursuant to Section 3.10 or Section 3.11, then the Bank shall
deliver to the Borrower a certificate setting forth in reasonable detail the
amount payable to the Bank thereunder and such certificate shall be conclusive
and binding on the Borrower in the absence of manifest error.
3.14 Debits to Borrower's Account. The Borrower hereby authorizes the Bank
to debit the Borrower's deposit account number 235336440 at the Phoenix, Arizona
office of the Bank in the amount of principal, interest, fees, or any other
amount due under this Agreement or under any instrument or agreement required
under this Agreement. The Bank may, at its option, debit the account on the date
such amounts become due, or, if such due date is not a Business Day, on the next
Business Day after such due date. If there are insufficient funds in the account
to cover the amount debited to the accounts in accordance with this Section,
such debit may be reversed in whole or in part, at the option of the Bank in its
sole discretion, and the amount not debited shall be deemed to remain unpaid.
3.15 Survival. The agreements and obligations of the Borrower under
Sections 3.08 through 3.11 shall survive the expiration or termination of the
commitment to extend credit hereunder and the payment of all other obligations
of the Borrower hereunder.
11
ARTICLE IV
Conditions to Availability of Credit.
-------------------------------------
The Bank's obligation to extend credit under this Agreement is subject to
the Bank's receipt of the following, each in form and substance satisfactory to
the Bank:
4.01 Conditions to First Extension of Credit. Before the first extension of
credit:
(a) This Agreement, executed by the Borrower;
(b) Satisfactory evidence of due authorization of the execution,
delivery, and performance by the Borrower of this Agreement and any other Credit
Documents, including certified resolutions, incumbency certificate, articles of
incorporation and bylaws;
(c) If requested by the Bank, an opinion of counsel for the Borrower
(which counsel must be satisfactory to the Bank) with respect to such legal
matters relating hereto as the Bank may request;
(d) Certificates of state officials showing that the Borrower is in
good standing or qualified to conduct business under the laws of the state of
its organization and, if requested by the Bank, in any other state in which the
Borrower is required to be so qualified;
(e) A certificate of an appropriate officer of the Borrower as to the
matters set forth in Section 4.02(a) and (b);
(f) Payment of any fee or expense required hereunder prior to the
first extension of credit (including the fee referenced in Section 2.04); and
(g) Such other approvals, opinions, documents or instruments as the
Bank may request.
4.02 Conditions to Each Extension of Credit. Before each extension or
renewal of credit (including pursuant to any election under Section 2.02(b)),
including the first:
(a) The representations and warranties of the Borrower contained in
this Agreement shall be true on and as of the date of each extension of credit;
(b) Immediately prior to and immediately after giving effect to such
extension of credit, no Default or Event of Default shall exist; and
(c) The Bank shall have received a request for extension of credit in
accordance with Section 3.01.
12
Each request for an extension of credit hereunder shall constitute a
representation and warranty by the Borrower, as of the date of each such request
and as of the date of each extension of credit, that the conditions in this
Section are satisfied.
ARTICLE V
Representations and Warranties
------------------------------
The Borrower represents and warrants that:
5.01 Corporate Existence and Power. The Borrower and each of its
Subsidiaries: (a) is a corporation duly organized and existing under the laws of
the jurisdiction of its organization; (b) has the power and authority and all
governmental licenses, authorizations, consents, and approvals to own its
assets, carry on its business, and to execute, deliver, and perform its
obligations under, the Credit Documents to which it is a party; and (c) is duly
qualified and properly licensed and in good standing under the laws of each
jurisdiction where its ownership, lease, or operation of property or the conduct
of its business requires such license or qualification.
5.02 Authorization. The execution, delivery, and performance by the
Borrower of this Agreement and any other Credit Document have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any organizational or charter documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any lien, security interest, or charge under, any agreement,
contract, indenture, document, or instrument to which the Borrower is a party or
by which any property is bound, or any order, injunction, writ, or decree of any
governmental authority to which the Borrower or any property is subject; or
(c) violate any law, rule, regulation, or determination of an
arbitrator or of a court or other governmental authority, in each case
applicable to or binding upon the Borrower or any of its property.
5.03 Enforceability. This Agreement is a legal, valid, and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and the other Credit Documents and any other instrument or agreement
required under this Agreement, when executed and delivered, will be legal,
valid, binding, and enforceable in accordance with its terms against the
Borrower.
5.04 Compliance with Laws. The Borrower and each of its Subsidiaries is in
compliance with all foreign, federal, state
13
and local laws, rules, regulations and determinations of arbitrators, courts and
other governmental authorities materially affecting the business, operations or
property of the Borrower and its Subsidiaries (including Environmental Laws).
5.05 Permits, Franchises. The Borrower and its Subsidiaries possess all
permits, memberships, franchises, contracts, and licenses required and all
trademark rights, trade name rights, patent rights, and fictitious name rights
necessary to enable the Borrower and its Subsidiaries to conduct the businesses
in which they are now engaged.
5.06 Litigation. Except as disclosed in Borrower's SEC Form 10-K Annual
Report for the year ending December 31, 1996, and Borrower's SEC Form 10-Q for
the quarter ending March 31, 1997, copies of which have been furnished to the
Bank, there is no litigation, tax claim, proceeding, governmental or
administrative action, investigation, arbitration proceeding or dispute pending,
or, to the knowledge of the Borrower, threatened, against or affecting the
Borrower or any of its Subsidiaries or any of their properties, the adverse
determination of which would result in a Material Adverse Effect.
5.07 No Event of Default. There exists no Default or Event of Default.
5.08 Other Obligations. As of the Closing Date, the Borrower and its
Subsidiaries are not in default under any other agreement involving the
borrowing of money, the extension of credit, or the lease of real or personal
property, to which the Borrower or any of its Subsidiaries is a party as
borrower, guarantor, installment purchaser, or lessee, except as disclosed in
writing to the Bank prior to the Closing Date.
5.09 Tax Returns. The Borrower has no knowledge of any material pending
assessments or adjustments with respect to its or its Subsidiaries' income tax
liabilities for any year, except as disclosed in writing to the Bank prior to
the Closing Date.
5.10 Information Submitted. All financial and other information that has
been submitted by the Borrower or any of its Subsidiaries to the Bank, including
the Borrower's financial statement delivered to the Bank most recently prior to
the Closing Date: (a) in the case of financial statements, is prepared in
accordance with generally accepted accounting principles consistently applied;
and (b) is true and correct in all material respects and is complete insofar as
may be necessary to give the Bank true and accurate knowledge of the subject
matter thereof.
5.11 No Material Adverse Effect. Except as disclosed in Borrower's SEC Form
10-K Annual Report for the year ending December 31, 1996, and Borrower's SEC
Form 10-Q for the quarter ending March 31, 1997, copies of which have been
furnished to
14
the Bank, since December 31, 1996, there has been no Material Adverse Effect.
5.12 ERISA Compliance. Except as specifically disclosed to the Bank in
writing prior to the Closing Date: (a) each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) there are no pending, or to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any governmental
authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect; (c) there has been no
prohibited transaction or other violation of the fiduciary responsibility rule
with respect to any Plan which could reasonably result in a Material Adverse
Effect; (d) no ERISA Event has occurred or is reasonably expected to occur with
respect to any Pension Plan; (e) no Pension Plan has any Unfunded Pension
Liability; (f) the Borrower has not incurred, nor does it reasonably expect to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (g) no
trade or business (whether or not incorporated under common control with the
Borrower within the meaning of Section 414(b), (c), (m) or (o) of the Code)
maintains or contributes to any Pension Plan or other Plan subject to Section
412 of the Code; and (h) neither the Borrower or entity under common control
with the Borrower in the preceding sentence has ever contributed to any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
5.13 Environmental Matters. (a) Except to the extent that, in the
aggregate, a Material Adverse Effect could not result therefrom, (i) the
properties of the Borrower and its Subsidiaries do not contain and have not
previously contained (at, under, or about any such property) any Hazardous
Substances or other contamination (A) in amounts or concentrations that
constitute or constituted a violation of, or could give rise to liability under,
any Environmental Laws, (B) which could interfere with the continued use,
occupation or operation of such property, (C) which could impair the fair market
value thereof, or (D) in levels or concentrations requiring cleanup or other
management under applicable standards or guidelines of foreign, federal, state,
or local environmental agencies; and (ii) there has been no transportation or
disposal of Hazardous Substances from, nor any release or threatened release of
Hazardous Substances at or from, any property of the Borrower or any of its
Subsidiaries in violation of or in any manner which could give rise to liability
under any Environmental Laws.
(b) Neither the Borrower nor any of its Subsidiaries has received or is
aware of any material claim or notice of material violation, alleged material
violation, non-compliance, liability or potential liability regarding
environmental matters, Hazardous Substances or compliance with Environmental
Laws with regard to the properties or operations of the Borrower or any of its
Subsidiaries, nor does the Borrower have knowledge
15
or reason to believe that any such action is being contemplated, considered, or
threatened.
5.14 Swap Obligations. Neither the Borrower nor any of its Subsidiaries has
incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations.
ARTICLE VI
Affirmative Covenants
---------------------
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's obligations under this Agreement and any
other Credit Document:
6.01 Notices of Certain Events. The Borrower shall promptly give written
notice to the Bank of:
(a) all litigation, proceedings or actions affecting the Borrower or
its Subsidiaries where the amount claimed is $1,000,000 or more;
(b) any substantial dispute which may exist between the Borrower or
its Subsidiaries and any governmental regulatory body or law enforcement
authority;
(c) any Default or Event of Default;
(d) any of the representations and warranties in Article V ceases to
be true and correct; and
(e) any other matter which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
6.02 Financial and Other Information. The Borrower shall deliver to the
Bank in form and detail satisfactory to the Bank, and in such number of copies
as the Bank may request:
(a) Within 100 days after the end of each fiscal year, the Borrower's
consolidated financial statements for such year audited by a certified public
accountant together with an unqualified opinion of such certified public
accountant and including, at a minimum, the Borrower's balance sheet and
statements of income, retained earnings, and cash flow;
(b) Within 45 days after the end of each fiscal quarter, the
Borrower's consolidated financial statements for such period prepared by the
Borrower and including, at a minimum, the Borrower's balance sheet and
statements of income, retained earnings, and cash flow;
(c) Concurrently with the delivery of the financial statements
referred to in subsections 6.02(a) and (b), a completed Compliance Certificate
executed by the chief financial
16
officer or controller of the Borrower or other officer having substantially the
same authority and responsibility;
(d) Within 15 days after the date of filing with the Securities and
Exchange Commission, copies of any of the Borrower's Form 10-K Annual Reports,
Form 10-Q Quarterly Reports and Form 8-K Current Reports;
(e) Promptly upon release thereof, a copy of any press release issued
by the Borrower or any of its Subsidiaries; and
(f) Promptly upon request, such other materials and information
relating to the Borrower or its Subsidiaries as the Bank may request.
6.03 Books, Records, Audits and Inspections. The Borrower shall, and shall
cause its Subsidiaries to, maintain adequate books, accounts and records, and
prepare all financial statements required hereunder in accordance with generally
accepted accounting principles consistently applied, and in compliance with the
regulations of any governmental regulatory body having jurisdiction over the
Borrower or its Subsidiaries, or the Borrower's or its Subsidiaries' businesses,
and permit employees or agents of the Bank at any reasonable time to inspect the
Borrower's and its Subsidiaries' properties, and to examine or audit the
Borrower's and its Subsidiaries' books, accounts, and records and make copies
and memoranda thereof.
6.04 Use of Facility. The Borrower shall use the credit facility provided
herein solely for working capital and other general corporate purposes not in
contravention of any requirement of law.
6.05 Insurance. The Borrower shall, and shall cause its Subsidiaries to,
maintain and keep in force insurance of the types and in amounts customarily
carried in lines of businesses similar to those of the Borrower and its
Subsidiaries, including fire, extended coverage, public liability (including
coverage for contractual liability), property damage (including use and
occupance), business interruption, and workers' compensation, all carried by
insurers and in amounts satisfactory to the Bank, with loss payable endorsements
on such types of insurance as the Bank may request, and deliver to the Bank from
time to time, at the Bank's request, a copy of each insurance policy, or if
permitted by the Bank, a certificate of insurance setting forth all insurance
then in effect.
6.06 Compliance with Laws. The Borrower shall at all times comply with, and
cause its Subsidiaries to comply with, all laws, statutes (including any
fictitious name statute), rules, regulations, orders, and directions of any
governmental authority having jurisdiction over the Borrower or any of its
Subsidiaries or the business of the Borrower or any of its Subsidiaries
(including all Environmental Laws).
17
6.07 Change in Name, Structure or Location. The Borrower shall notify the
Bank in writing prior to any change in (a) the Borrower's name, (b) the
Borrower's business or legal structure, or (c) the Borrower's place of business
or chief executive office if the Borrower has more than one place of business.
6.08 Existence and Properties. The Borrower shall, and shall cause each of
its Subsidiaries to, maintain and preserve its existence and all rights,
privileges, and franchises now enjoyed, conduct its business in an orderly,
efficient, and customary manner, keep all the its properties in good working
order and condition, and from time to time make all needed repairs, renewals, or
replacements thereto and thereof so that the efficiency of such property shall
be fully maintained and preserved.
ARTICLE VII
Negative Covenants
------------------
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's obligations under this Agreement and any
other Credit Document:
7.01 Other Indebtedness. The Borrower shall not, and shall not suffer or
permit any Subsidiary to, create, incur, assume, or permit to exist any
indebtedness or liabilities for or resulting from borrowed money, loans, or
advances, or for the deferred purchase price of property under capital leases,
or under or in connection with any Swap Contract, whether secured or unsecured,
matured or unmatured, liquidated or unliquidated, joint or several, or become
liable as a surety, guarantor, accommodation endorser, or otherwise for or upon
the obligation of any other Person; provided, however, that this Section shall
not prohibit:
(a) indebtedness and guarantees in favor of the Bank or any affiliate
of the Bank;
(b) indebtedness, liabilities, and guarantees outstanding as of the
date of this Agreement and specifically disclosed in Schedule 7.01;
(c) the acquisition of goods, supplies, or merchandise on normal trade
credit;
(d) the execution of bonds or undertakings in the ordinary course of
its business as presently conducted;
(e) the endorsement of negotiable instruments received in the ordinary
course of its business as presently conducted;
(f) Permitted Swap Obligations; and
18
(g) indebtedness secured by liens permitted under subsection 7.02(f).
7.02 Liens. The Borrower shall not, and shall not suffer or permit any of
its Subsidiaries to, create, assume, or suffer to exist any security interest,
deed of trust, mortgage, lien (including the lien of an attachment, judgment, or
execution), or encumbrance, securing a charge or obligation, on or of any of its
or their property, real or personal, whether now owned or hereafter acquired,
except: (a) security interests and deeds of trust in favor of the Bank; (b)
liens, security interests, and encumbrances in existence as of the date of this
Agreement and specifically disclosed in Schedule 7.02; (c) liens for current
taxes, assessments, or other governmental charges which are not delinquent or
remain payable without any penalty; (d) liens in connection with workers'
compensation, unemployment insurance, or other social security obligations; (e)
mechanics', worker's, materialmen's, landlords', carriers', or other like liens
arising in the ordinary and normal course of business with respect to
obligations which are not due; and (f) purchase money security interests in
personal or real property hereafter acquired when the security interest does not
extend beyond the property purchased.
7.03 Dividends. The Borrower shall not, and shall not suffer or permit, any
of its Subsidiaries that is not wholly-owned by the Borrower to, declare or pay
any dividends or distributions on any of its shares now or hereafter existing,
or purchase, repurchase, redeem or otherwise acquire for value any of its
shares, or create any sinking fund in relation thereto, except for dividends
payable solely in its capital stock.
7.04 Loans. The Borrower shall not, and shall not suffer or permit any of
its Subsidiaries to, make any loans, advances, or other extensions of credit to
any of the Borrower's or such Subsidiary's executives, officers, or directors or
shareholders (or any relatives of any of the foregoing), or make loans, advances
or other extensions of credit to or invest in any other Person, other than (a)
investments in cash equivalents; (b) extensions of credit in the nature of
accounts receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business; (c) extensions of credit by the
Borrower to any of its Subsidiaries or by any of its Subsidiaries to another of
its Subsidiaries; (d) investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations; (e) investments incurred in order to consummate acquisitions
otherwise permitted under subsection 7.05(b); and (f) employee relocation loans
made in the ordinary course of business in an aggregate outstanding principal
amount not to exceed $250,000 at any time.
7.05 Liquidations; Mergers; Acquisitions. The Borrower shall not, and shall
not suffer or permit any of its Subsidiaries to, liquidate or dissolve or enter
into any
19
consolidation, merger, partnership, joint venture, or other combination, or
acquire or purchase control of, or the assets or business of, any other Person,
except that (a) any Subsidiary may merge (i) with the Borrower, provided that
the Borrower shall be the continuing or surviving corporation, or (ii) with any
one or more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a wholly-owned Subsidiary, the wholly-owned Subsidiary shall be
the continuing or surviving corporation, and (b) the Borrower or any Subsidiary
may enter into any consolidation, merger, partnership, joint venture or other
combination, or acquire or purchase control of, or the assets or business of,
any other Person; provided that (i) such transaction does not involve the
payment of consideration in cash (other than cash payments, not in excess of the
aggregate amount of $400,000, made in connection with the acquisition of
Logicraft to its minority shareholders), (ii) any such acquisition has been
approved by the board of directors of the Person to be acquired or whose assets
are to be acquired, (iii) any such transaction is undertaken in accordance with
all applicable requirements of law, (iv) in the case of any consolidation,
merger or other combination, the Borrower or the applicable Subsidiary shall be
the continuing or surviving corporation, and (iv) immediately prior to and after
giving effect to any such transaction, there shall be no Default or Event of
Default.
7.06 Sale of Assets. The Borrower shall not, and shall not suffer or permit
any of its Subsidiaries to, (a) sell, lease, or otherwise dispose of its
business or assets as a whole or such as in the opinion of the Bank constitutes
a substantial portion of its business or assets; (b) sell or otherwise dispose
of any of its accounts receivable except in connection with the collection of
same in the ordinary course of business; (c) sell or otherwise dispose of any of
its other current assets; (d) sell or otherwise dispose of any of its assets
except for full, fair and reasonable consideration; or (d) enter into any sale
and leaseback agreement covering any of its fixed or capital assets.
7.07 Business Activities. The Borrower shall not, and shall not suffer or
permit any of its Subsidiaries to, engage in any business activities or
operations substantially different from or unrelated to present business
activities and operations.
7.08 Regulations G, T, U, and X. The Borrower shall not, and shall not
suffer or permit any of its Subsidiaries to, use any portion of the proceeds of
any Advances or extensions of credit hereunder, directly or indirectly, (i) to
purchase or carry margin stock (within the meanings of Regulations G, T, U, and
X of the FRB), (ii) to repay or otherwise refinance indebtedness of the Borrower
or others incurred to purchase or carry any such margin stock, (iii) to extend
credit for the purpose of purchasing or carrying any such margin stock, or (iv)
to acquire any security in any transaction that is subject to
20
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
7.09 Use of Proceeds - Ineligible Securities. The Borrower shall not, and
shall not suffer or permit any of its Subsidiaries to, directly or indirectly,
use any portion of the proceeds of any Advances or extensions of credit
hereunder (i) knowingly to purchase Ineligible Securities from BASI during any
period in which BASI makes a market in such Ineligible Securities, (ii)
knowingly to purchase during the underwriting or placement period Ineligible
Securities being underwritten or privately placed by BASI, or (iii) to make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by BASI and issued by or for the benefit of the Borrower or any
affiliate of the Borrower. As used in this Section, "BASI" means BancAmerica
Securities, Inc., a wholly-owned subsidiary of BankAmerica Corporation. BASI is
a registered broker-dealer and permitted to underwrite and deal in certain
Ineligible Securities; and "Ineligible Securities" means securities which may
not be underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as
amended.
7.10 Modified Quick Ratio. The Borrower shall not permit at any time on a
consolidated basis the sum of cash, short-term investments, marketable
securities not classified as long-term investments and net accounts receivable
carried as current assets to be less than 1.50 times current liabilities
(including Advances hereunder).
7.11 Tangible Net Worth. The Borrower shall not permit at any time on a
consolidated basis its Tangible Net Worth to be less than 90% of its Tangible
Net Worth as of December 31, 1996 plus the sum of (i) 75% of net income after
income taxes (without subtracting losses) earned in each quarterly accounting
period commencing after December 31, 1996, (ii) the net proceeds from any equity
securities issued after December 31, 1996, and (iii) any increase in
stockholders' equity resulting from the conversion of debt securities to equity
securities after December 31, 1996.
7.12 Leverage Ratio. The Borrower shall not permit at any time on a
consolidated basis the Borrower's total liabilities to exceed 0.75 times
Tangible Net Worth.
7.13 Consecutive Quarterly Losses; Losses in One Quarter. The Borrower on a
consolidated basis shall not incur, (a) any quarterly net or operating loss in
any two consecutive fiscal quarters; provided, that the Borrower may incur such
a two- quarter consecutive net and operating loss solely with respect to the two
fiscal quarter period ended March 29, 1997, or (b) any quarterly net or
operating loss in excess of $2,500,000. For purposes of this Section 7.13, net
income (or loss) shall mean net profit (or loss) after taxes, and operating
income (or
21
loss) shall mean income (or loss) before interest expense, interest and other
income, and taxes.
ARTICLE VIII
Events of Default
-----------------
8.01 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement:
(a) Failure to Pay. The Borrower fails to pay, when due, any
installment of principal, or within five days after the date when due any
interest, fee or any other sum due under this Agreement or any other Credit
Document in accordance with the terms hereof or thereof.
(b) Breach of Representation or Warranty. Any representation or
warranty herein or in any other Credit Document proves to have been false or
misleading in any material respect when made.
(c) Specific Defaults. The Borrower fails to perform or observe any
term, covenant or agreement contained in Section 6.01 or 6.03 or Article VII.
(d) Other Defaults. The Borrower fails to perform or observe any other
term or covenant contained in this Agreement or any Credit Document, and such
default shall continue unremedied for a period of 20 days after the earlier of
(i) the date upon which the chief executive or chief financial officer of the
Borrower knew or should have known of such failure or (ii) the date upon which
written notice thereof is given to the Borrower by the Bank.
(e) Judgments. One or more judgments or arbitration awards are entered
against the Borrower or any of its Subsidiaries, or the Borrower or any of its
Subsidiaries enters into any settlement agreement with respect to any litigation
or arbitration, in the aggregate amount of $1,000,000 or more on a claim or
claims not covered by insurance.
(f) Failure to Pay Debts; Voluntary Bankruptcy. The Borrower or any
Subsidiary (i) fails to pay the Borrower's or such Subsidiary's debts generally
as they come due, or (ii) files any petition, proceeding, case, or action for
relief under any bankruptcy, reorganization, insolvency, or moratorium law, or
any other law or laws for the relief of, or relating to, debtors.
(g) Involuntary Bankruptcy. An involuntary petition is filed under any
bankruptcy or similar statute against the Borrower or any Subsidiary, or a
receiver, trustee, liquidator, assignee, custodian, sequestrator, or other
similar official is
22
appointed to take possession of the properties of the Borrower or any
Subsidiary; provided, however, that such Event of Default shall be deemed cured
if such petition or appointment is set aside or withdrawn or ceases to be in
effect within 60 days from the date of said filing or appointment.
(h) Default of Other Financial Obligations. (i) Any default occurs
under any other agreement involving the borrowing of money or the extension of
credit having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $500,000 to which the
Borrower or any Subsidiary may be a party as borrower, guarantor, or installment
purchaser, if such default consists of the failure to pay any obligation when
due or if such default gives to the holder of the obligation concerned the right
to accelerate the obligation or (ii) there occurs under any Swap Contract an
Early Termination Date resulting from (1) any event of default under such Swap
Contract as to which the Borrower or any Subsidiary is the Defaulting Party or
(2) any Termination Event as to which the Borrower or any Subsidiary is an
Affected Party, and, in either event, the Swap Termination Value owed by the
Borrower or such Subsidiary as a result thereof is greater than $500,000 (for
purposes of this clause (ii), the terms "Early Termination Date", "Defaulting
Party", "Termination Event", and "Affected Party" shall have the meanings
assigned to them in the relevant Swap Contract, it being understood that such
definitions contemplate Swap Contracts documented on International Swaps and
Derivatives Association ("ISDA") standard forms; if such Swap Contract is not
documented on an ISDA standard form, such terms shall be given similar or
analogous meanings as used in such non-ISDA standard agreements).
(i) Default of Other Bank Obligations. Any default occurs under any
other obligation of the Borrower or any Subsidiary to the Bank or to any
affiliate of the Bank.
(j) Material Adverse Effect. There occurs a Material Adverse Effect.
(k) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan which has resulted or could reasonably be expected to result in liability
of the Borrower under Title IV of ERISA to the Pension Plan or PBGC in an
aggregate amount in excess of 2% of Tangible Net Worth; (ii) the commencement or
increase of contributions to, or the adoption of or the amendment of a Pension
Plan by the Borrower which has resulted or could reasonably be expected to
result in an increase in Unfunded Pension Liability among all Pension Plans in
an aggregate amount in excess of 2% of Tangible Net Worth; or (iii) any of the
representations and warranties contained in Section 5.12 shall cease to be true
and correct which, individually or in combination, has resulted or could
reasonably be expected to result in a Material Adverse Effect.
23
(l) Change of Control. (i) any Person or two or more Persons acting in
concert shall acquire beneficial ownership, directly or indirectly, of
securities of the Borrower (or other securities convertible into such
securities) representing 30% or more of the combined voting power of all
securities of the Borrower entitled to vote in the election of directors; or
(ii) during any period of up to 12 consecutive months, commencing after the
Closing Date, individuals who at the beginning of such 12-month period were
directors of the Borrower shall cease for any reason to constitute a majority of
the Board of Directors of the Borrower unless the persons replacing such
individuals were nominated by the Board of Directors of the Borrower; or (iii)
any Person or two or more Persons acting in concert acquiring by contract or
otherwise, or entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over, securities of the
Borrower (or other securities convertible into such securities) representing 30%
or more of the combined voting power of all securities of the Borrower entitled
to vote in the election of directors.
8.02 Remedies. If any Event of Default occurs,
(a) any indebtedness of the Borrower under any of the Credit
Documents, any term thereof to the contrary notwithstanding, shall at the Bank's
option (but automatically upon the occurrence of an Event of Default described
in subsection 8.01(f)(ii) or subsection 8.01(g) and without notice become
immediately due and payable without presentment, demand, protest, or notice of
dishonor, or any other notice, all of which are hereby expressly waived by the
Borrower to the full extent permitted by law;
(b) the obligation, if any, of the Bank to make further loans or
extensions of credit hereunder shall immediately cease and terminate; and
(c) the Bank shall have all rights, powers, and remedies available
under each of the Credit Documents, or accorded by law, including the right to
resort to any or all security for any credit accommodation described herein, and
to exercise any or all of the rights of a beneficiary or secured party pursuant
to applicable law.
All rights, powers, and remedies of the Bank may be exercised at any time by the
Bank and from time to time after the occurrence of an Event of Default. All
rights, powers, and remedies of the Bank in connection with each of the Credit
Documents are cumulative and not exclusive and shall be in addition to any other
rights, powers, or remedies provided by law or equity.
24
ARTICLE IX
Miscellaneous
-------------
9.01 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrower shall not assign this Agreement or any
other Credit Document or any of the rights, duties or obligations of the
Borrower hereunder without the prior written consent of the Bank.
9.02 Consents and Waivers. No failure to exercise and no delay in
exercising, on the part of the Bank, any right, remedy, power, or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power,
or privilege. No consent or waiver under this Agreement shall be effective
unless in writing. No waiver of any breach or default shall be deemed a waiver
of any breach or default thereafter occurring.
9.03 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California.
9.04 Costs and Attorneys' Fees. The Borrower shall, whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the Bank
on demand for all costs and expenses incurred by the Bank in connection with the
development, preparation, delivery, administration, and execution of, and any
amendment, supplement, waiver or modification to, this Agreement and any other
Credit Document and the consummation of the transactions contemplated hereby and
thereby, including reasonable attorney fees and disbursements and the allocated
cost of internal counsel and disbursements, incurred by the Bank with respect
thereto; and in connection with the enforcement, attempted enforcement or
preservation of any rights or remedies hereunder or under any Credit Document,
including any "workout" or restructuring under this Agreement, including
attorney fees and disbursements and the allocated cost of internal counsel and
disbursements. The agreements and obligations of the Borrower under this Section
shall survive the expiration or termination of the commitment to extend credit
hereunder and the payment of all other obligations of the Borrower hereunder.
9.05 Integration; Amendment. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding between the Borrower
and the Bank. This Agreement may be amended or modified only in writing, signed
by the Borrower and the Bank.
9.06 Borrower's Documents. The Bank shall be under no obligation to return
any schedules, invoices, statements,
25
budgets, forecasts, reports or other papers delivered by the Borrower and shall
destroy or otherwise dispose of same at such time as the Bank, in its
discretion, deems appropriate.
9.07 Participations. The Bank may at any time sell, assign, grant
participations in, or otherwise transfer to any other Person (a "Participant")
all or part of the obligations of the Borrower under this Agreement and any
other Credit Document. The Borrower authorizes the Bank and each Participant,
upon the occurrence of an Event of Default, to proceed directly by right of
setoff, banker's lien, or otherwise, against any assets of the Borrower which
may be in the hands of the Bank or such Participant, respectively. The Borrower
authorizes the Bank to disclose to any prospective Participant and any
Participant any and all information in the Bank's possession concerning the
Borrower and its Subsidiaries, this Agreement or any other Credit Document.
9.08 General Indemnification. The Borrower shall pay and indemnify the
Bank, the Bank's parent company and affiliates, and each of their respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses, or disbursements (including attorneys' fees and disbursements
and the allocated costs of internal counsel) of any kind or nature whatsoever
with respect to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Credit Documents, or the
transactions contemplated hereby and thereby, and with respect to any
investigation, litigation, or proceeding related to this Agreement, any
violation of any Environmental Law by the Borrower or its Subsidiaries, any use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence (whether actual or alleged) of a Hazardous
Substance on, under or about the property or operations of or property leased to
the Borrower or any of its Subsidiaries, any transportation from or other
off-site management of any Hazardous Substance generated or used by the Borrower
or any of its Subsidiaries, or the loans and other extensions of credit
hereunder or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person. The
agreements and obligations of the Borrower under this Section shall survive the
expiration or termination of the commitment to extend credit hereunder and the
payment of all other obligations of the Borrower hereunder.
9.09 Arbitration; Reference Proceeding. (a) Any controversy or claim
between or among the parties, including but not limited to those arising out of
or relating to this Agreement or any other Credit Document or other agreements
or
26
instruments relating hereto or delivered in connection herewith and any claim
based on or arising from an alleged tort, shall at the request of any party be
determined by arbitration. The arbitration shall be conducted in accordance with
the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Agreement, and under the Commercial Rules of the
American Arbitration Association ("AAA"). The arbitration shall be conducted
within the following California county or counties: San Francisco, Santa Xxxxx.
The arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) Notwithstanding the provisions of subsection (a) of this Section,
no controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation to the Bank which is secured by
real property collateral located in California. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in subsection (c) of this Section.
(c) A controversy or claim which is not submitted to arbitration as
provided and limited in subsections (a) and (b) of this Section shall, at the
request of any party, be determined by a reference in accordance with California
Code of Civil Procedure Sections 638 et seq. If such an election is made, the
parties shall designate to the court a referee or referees selected under the
auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(d) No provision of this paragraph shall limit the right of any party
to this Agreement to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration or reference. At the Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of
27
power of sale under the deed of trust or mortgage or by judicial foreclosure.
9.10 Notices. (a) All notices, requests and other communications provided
for hereunder shall be in writing and mailed or delivered to a party at its
address specified on the signature pages hereof, or to such other address as
shall be designated by such party in a written notice to the other parties.
(b) All such notices and communications shall, when transmitted by
overnight delivery, be effective when delivered for overnight delivery, or if
personally delivered, upon such personal delivery, except that notices pursuant
to Article II shall not be effective until actually received by the Bank.
(c) The Borrower acknowledges and agrees that any agreement of the
Bank pursuant to Article II to receive notices by telephone or facsimile is
solely for the convenience and at the request of the Borrower. Telephone
requests may be made by any individual identified in writing to the Bank on a
form acceptable to the Bank as being authorized to make such requests. The Bank
shall be entitled to rely upon any written or telephone request from persons it
reasonably believes to be authorized by the Borrower to make such requests
without making independent inquiry. The Borrower assumes the full risk of, and
the Bank shall not be responsible for, any delays or errors in transmission, and
the obligation of the Borrower to repay the loans and other extensions of credit
hereunder shall not be affected in any way or to any extent by any failure by
the Bank to receive written confirmation of any telephonic or facsimile notice
or the receipt by the Bank of a confirmation which is at variance with the terms
understood by the Bank to be contained in the telephonic or facsimile notice.
9.11 Headings; Interpretation. Article, section, and paragraph headings are
for reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement. The meaning of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. The words
"hereof", "herein", "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; and Article, subsection, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The term
"including" is not limiting and means "including without limitation." In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including."
9.12 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the
28
legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
9.13 Counterparts. This Agreement may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
9.14 Waiver of Jury Trial. IF A CONTROVERSY OR CLAIM IS NOT SUBMITTED TO
ARBITRATION AS PROVIDED AND LIMITED IN SUBSECTIONS (a) AND (b) OF SECTION 9.09
OR IS NOT DETERMINED BY A REFERENCE AS PROVIDED IN SUBSECTION (c) OF SUBSECTION
9.09, THEN THE BORROWER AND THE BANK WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS.
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MICROTEST, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
-----------------------------------
Title: CHAIRMAN, CEO & PRESIDENT
----------------------------------
By: /s/ R. R. Douglad
-------------------------------------
Name: X. X. Xxxxxxx
-----------------------------------
Title: CFO
----------------------------------
Address where notices to
Borrower are to be sent:
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention:
----------------------------
Telephone:
----------------------------
Telecopier:
----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Xxxxx X Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------------
Title: Vice President
----------------------------------
Address where notices to
Bank are to be sent:
Bank of America National Trust
and Savings Association
The Mid-Cap Technology Group
#5974
000 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Vice President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
30
SCHEDULE 7.01
EXISTING INDEBTEDNESS
---------------------
None
SCHEDULE 7.02
EXISTING LIENS
--------------
None
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
June 24, 1997, effective as of June 3, 1997, is entered into by and between
MICROTEST, INC. (the "Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank").
RECITALS
--------
A. The Borrower and the Bank are parties to a Credit Agreement dated as of
June 3, 1997 (the "Credit Agreement"), pursuant to which the Bank has extended
certain credit facilities to the Borrower.
B. The Borrower has requested that the Bank agree to certain amendments of
the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 7.01 of the Credit Agreement shall be amended by (i)
deleting the word "and" at the end of subsection (f) thereof; (ii) adding the
word "and" at the end of subsection (g) thereof); and (ii) adding a new
subsection (h) to follow subsection (g) thereof to read as follows:
"(h) additional unsecured indebtedness in an aggregate
outstanding principal amount not to exceed $500,000 at any time and,
to the extent such indebtedness is incurred by a Subsidiary, the
guarantee by the Borrower of such indebtedness."
(b) Subsection 7.04(f) of the Credit Agreement shall be amended and
restated in its entirety so as to read as follows:
"(f) employee relocation loans made in the ordinary course of
business in an aggregate outstanding principal amount not to exceed
$500,000 at any time."
3. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any governmental authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Borrower contained in
the Credit Agreement are true and correct as of the date hereof.
(d) The Borrower is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Bank or any
other Person.
4. Reservation of Rights. The Borrower acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to execute similar
amendments under the same or similar circumstances in the future.
5. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document may be delivered by any party thereto
either in the form of an executed original or an executed original sent by
facsimile transmission to be followed promptly by mailing of a hard copy
original, and that receipt by the Bank of a facsimile transmitted document
purportedly bearing the signature of the Borrower shall bind the Borrower with
the same force and effect as the delivery of a hard copy original. Any failure
by the Bank to receive the hard copy executed original of such document shall
not diminish the binding effect of receipt of the facsimile
2
transmitted executed original of such document which hard copy page was not
received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior drafts
and communications with respect thereto. This Amendment may not be amended
except in accordance with the provisions of Section 9.05 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Borrower covenants to pay to or reimburse the Bank, upon
demand, for all reasonable costs and expenses (including reasonable allocated
costs of in-house counsel) incurred in connection with the development,
preparation, negotiation, execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
MICROTEST, INC.
By: /s/ X. X. Xxxxxxx
-------------------------------------
Title: CFO
By:
-------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Title: Vice President
3
