--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF JUNE 30, 1997
BETWEEN
DIGITAL MICROWAVE CORPORATION
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Section Page
ARTICLE I
Definitions and Financial Requirements . . . . . . . . . . . . 1
1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Financial Requirements . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
The Credit Facilities. . . . . . . . . . . . . . . . . . . . . 7
2.01 The Revolving Facility . . . . . . . . . . . . . . . . . . . . . . 7
2.02 Dollar Advances Under the Revolving Facility . . . . . . . . . . . 8
2.03 Conversion and Continuation Elections. . . . . . . . . . . . . . . 9
2.04 Commercial Letters of Credit under the Revolving Facility. . . . . 10
2.05 Standby Letters of Credit Under the Revolving Facility . . . . . . 11
2.06 Local Currency Advances. . . . . . . . . . . . . . . . . . . . . . 12
2.07 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 13
2.08 Mandatory Payment. . . . . . . . . . . . . . . . . . . . . . . . . 13
2.09 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 13
2.10 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Early Termination of Commitment. . . . . . . . . . . . . . . . . . 13
ARTICLE III
Extensions of Credit, Payments and Interest Calculations . . . 14
3.01 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 14
3.02 Disbursements and Payments . . . . . . . . . . . . . . . . . . . . 14
3.03 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 14
3.04 Evidence of Indebtedness . . . . . . . . . . . . . . . . . . . . . 14
3.05 Interest Calculation . . . . . . . . . . . . . . . . . . . . . . . 14
3.06 Late Payments; Compounding . . . . . . . . . . . . . . . . . . . . 14
3.07 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.08 Taxes and Other Charges. . . . . . . . . . . . . . . . . . . . . . 15
3.09 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . 18
3.13 Certificate of the Bank. . . . . . . . . . . . . . . . . . . . . . 18
3.14 Survival. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 18
ARTICLE IV
Conditions to Availability of Credit . . . . . . . . . . . . . 18
4.01 Conditions to First Extension of Credit. . . . . . . . . . . . . . 18
4.02 Conditions to Each Extension of Credit . . . . . . . . . . . . . . 19
i
Section Page
ARTICLE V
Representations and Warranties . . . . . . . . . . . . . . . . 19
5.01 Corporate Existence and Power. . . . . . . . . . . . . . . . . . . 19
5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.03 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.04 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 20
5.05 Permits, Franchises. . . . . . . . . . . . . . . . . . . . . . . . 20
5.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.07 No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 21
5.08 Other Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.09 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Information Submitted. . . . . . . . . . . . . . . . . . . . . . . 21
5.11 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 21
5.12 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 22
5.14 Swap Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI
Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . 22
6.01 Notices of Certain Events. . . . . . . . . . . . . . . . . . . . . 22
6.02 Financial and Other Information. . . . . . . . . . . . . . . . . . 23
6.03 Books, Records, Audits and Inspections . . . . . . . . . . . . . . 23
6.04 Use of Facility. . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.05 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.06 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 24
6.07 Change in Name, Structure or Location. . . . . . . . . . . . . . . 24
6.08 Existence and Properties . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII
Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 25
7.01 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 25
7.02 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.03 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 26
7.04 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 26
7.05 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 26
7.06 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.07 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.08 Liquidations and Mergers . . . . . . . . . . . . . . . . . . . . . 27
7.09 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.10 Business Activities. . . . . . . . . . . . . . . . . . . . . . . . 28
7.11 Regulations G, T, U, and X . . . . . . . . . . . . . . . . . . . . 28
7.12 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . 28
7.13 Quick Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.14 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . 28
7.15 Total Liabilities to Tangible Net Worth. . . . . . . . . . . . . . 28
7.16 Consecutive Quarterly Losses; Losses in One Quarter. . . . . . . . 28
ii
Section Page
ARTICLE VIII
Events of Default. . . . . . . . . . . . . . . . . . . . . . . 29
8.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Breach of Representation or Warranty . . . . . . . . . . . . . 29
(c) Specific Defaults. . . . . . . . . . . . . . . . . . . . . . . 29
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Failure to Pay Debts; Voluntary Bankruptcy . . . . . . . . . . 29
(g) Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . . . 30
(h) Default of Other Financial Obligations . . . . . . . . . . . . 30
(i) Default of Other Bank Obligations. . . . . . . . . . . . . . . 30
(j) Material Adverse Effect. . . . . . . . . . . . . . . . . . . . 30
(k) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) Change of Control. . . . . . . . . . . . . . . . . . . . . . . 31
8.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 32
9.01 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 32
9.02 Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . 32
9.03 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.04 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . 32
9.05 Integration; Amendment . . . . . . . . . . . . . . . . . . . . . . 33
9.06 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.07 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.08 General Indemnification. . . . . . . . . . . . . . . . . . . . . . 34
9.09 Arbitration; Reference Proceeding. . . . . . . . . . . . . . . . . 35
9.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.11 Headings; Interpretation . . . . . . . . . . . . . . . . . . . . . 36
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.14 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 37
Schedules
Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
Exhibits
Exhibit A Form of Compliance Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
iii
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "AGREEMENT") is entered into as of
June 30, 1997, between DIGITAL MICROWAVE 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:
"ACCEPTABLE SUBSIDIARY": a Subsidiary of the Borrower acceptable to the
Bank in its sole discretion that (a) is specified as a "Borrower" on a
continuing guaranty executed by the Borrower in form and substance satisfactory
to the Bank, and (b) has executed such credit and related documentation with and
in favor of the Bank as the Bank may request.
"ADVANCE": an advance hereunder.
"AFFILIATE": means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"AVAILABILITY PERIOD": the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) June 30, 1998 and (b)
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.
1
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive of
any central bank or other governmental authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"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.
"CONTINUING GUARANTY": a continuing guaranty in form and substance
satisfactory to the Bank which has been executed by the Borrower and which
guarantees the payment and performance of all obligations under the Credit
Documents of one or more Acceptable Subsidiaries.
"CREDIT DOCUMENTS": collectively, this Agreement and each other agreement,
documents and instrument, including any Continuing Guaranty, now or hereafter
delivered to the Bank (including any Offshore Credit Provider) in connection
with the credits established herein and the transactions contemplated hereby.
"CREDIT LIMIT": the amount $20,000,000.
"DEFAULT": any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or otherwise remedied during such
time) constitute an Event of Default.
"DOLLARS", "DOLLARS" and "$": each, lawful money of the United States.
"DOLLAR ADVANCES": specified in subsection 2.01(b).
"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.
"EQUIVALENT AMOUNT": (a) whenever this Agreement requires or permits a
determination on any date of the equivalent in dollars of an amount expressed in
a currency other than dollars, the
2
equivalent amount in dollars of any amount expressed in a currency other than
dollars as determined by the Bank on such date on the basis of the Spot Rate
for the purchase of dollars with such other currency on the relevant date; or
(b) whenever this Agreement requires or permits a determination on any date
of the equivalent in a currency other than dollars of an amount expressed in
dollars, the equivalent amount in a currency other than dollars of an amount
expressed in dollars as determined by the Bank on such date on the basis of
the Spot Rate for the purchase of such other currency with dollars on the
relevant date.
"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.
"FINAL MATURITY DATE": (a) in respect of any Advances, June 30, 1998; (b)
in respect of any commercial letters of credit, December 31, 1998; and (c) in
respect of any standby letters of credit, June 30, 1999.
"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.
3
"HAZARDOUS SUBSTANCE": any hazardous or toxic substance, material,
pollutant, waste or similar designation, defined, listed, classified, or
regulated as such in or under any 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.
"L/C OUTSTANDING AMOUNT": at any time, the undrawn amount at such time of
any letter of credit issued hereunder, plus the amount of all drafts or drawings
paid or accepted by the Bank which have not yet been reimbursed to the Bank,
plus any other obligation or liability of the Borrower or any Acceptable
Subsidiary to the Bank with respect to any letter of credit issued under this
Agreement.
"LOCAL CURRENCY": specified in subsection 2.01(b).
"LOCAL CURRENCY ADVANCE": specified in subsection 2.01(b).
"MATERIAL ADVERSE EFFECT": (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, or condition
(financial or otherwise) of the Borrower or the Borrower and its Subsidiaries
taken as a whole; (b) a material impairment of the ability of the Borrower or
any Acceptable Subsidiary to perform under any Credit Document; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability of any Credit Document.
"NOTICE OF BORROWING" means a notice in substantially the form of
EXHIBIT B.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in substantially the
form of EXHIBIT C.
"OFFSHORE CREDIT PROVIDER": a foreign office, foreign branch or foreign
affiliate of the Bank, acceptable to the Bank.
"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:
Offered Rate
Offshore Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
Where:
OFFERED RATE" means the rate of interest at which
deposits in the applicable currency 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
4
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 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 Final Maturity Date.
"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
5
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 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.
"SPOT RATE": for a currency, the rate quoted by the Bank as the spot
rate for the purchase by the Bank of such currency with another currency
through its Foreign Exchange Trading Center #5193, San Francisco, California,
or such other of the Bank's offices as it may designate from time to time, at
approximately 8:00 a.m. (San Francisco time) on the date two Business Days
prior to the date as of which the foreign exchange computation is made.
"SWAP CONTRACT": any agreement, whether or not in writing, relating to
any transaction that is a rate swap, basis swap,
6
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 charges, and other like intangibles and
monies due from Affiliates other than Subsidiaries of the Borrower, officers,
directors, or shareholders of the Borrower) less (a) reserves applicable
thereto, and (b) all liabilities (including accrued and deferred income taxes).
"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.
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 FACILITIES
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 (i) make Advances to the Borrower or an Acceptable
Subsidiary (iii) create and issue commercial and standby letters of credit
for the Borrower's or an Acceptable Subsidiary's account.
7
(b) Advances hereunder may be made in (i) dollars ("DOLLAR
ADVANCES"), or (ii) in a lawful currency other than dollars which is
available at a branch or affiliate of the Bank located in a country other
than the United States and is the legal tender of that country where the
branch or affiliate is located (a "LOCAL CURRENCY") ("LOCAL CURRENCY
ADVANCES").
(c) The aggregate dollar Equivalent Amount of (i) all Advances, and
(ii) the L/C Outstanding Amount of all letters of credit may not exceed at
any one time the Credit Limit.
(d) The aggregate dollar Equivalent Amount of the L/C Outstanding
Amounts in respect of both commercial and standby letters of credit may not
exceed at any time $5,000,000.
2.02 DOLLAR ADVANCES UNDER THE REVOLVING FACILITY. (a) Subject to the
other provisions of this Section, Dollar Advances under the Revolving
Facility shall bear interest at a rate per annum equal to the Reference Rate
(the Reference Rate is sometimes referred to herein as the "FLOATING RATE").
The Borrower or an Acceptable Subsidiary shall request Floating Rate Advances
(i) by giving irrevocable written notice in the form of a Notice of Borrowing
or (ii) by giving irrevocable oral notice by telephone in accordance with
Section 9.10 followed promptly by facsimile confirmation in the form of a
Notice of Borrowing; prior to 9:00 a.m. San Francisco time on the requested
date of the Advance. The Borrower shall pay or cause the applicable
Acceptable Subsidiary to pay interest quarterly, on the last day of each
calendar quarter until the Final Maturity Date, on which date all accrued and
unpaid interest shall be due and payable. The Borrower shall repay or cause
the applicable Acceptable Subsidiary to repay the principal amount of each
Reference Rate Advance on the Final Maturity date and on the date such
advance is converted into an Offshore Rate Advance under subsection (b) below.
(b) In lieu of the Floating Rate, the Borrower or the applicable
Acceptable Subsidiary may elect during the Availability Period to have all or
portions of Advances under the Revolving Facility bear interest at the
Offshore Rate plus 1.0% 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 $250,000 and multiples of $50,000 in excess thereof.
(ii) The Borrower shall pay or shall cause the applicable
Acceptable Subsidiary to 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 an Offshore Rate
Advance exceeds three months, interest shall also be payable on the date
which falls three months after the beginning of such
8
Interest Period and on each date which falls three months after any such
interest payment date. The Borrower shall repay or shall cause the
applicable Acceptable Subsidiary to repay the principal balance of each
Offshore Rate Advance on the last day of the Offshore Rate Interest
Period for such Advance, and (if sooner occurring) on the Final Maturity
Date.
(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.
The Borrower or an Acceptable Subsidiary shall request Offshore Rate
Advances by giving irrevocable written notice in the form of a Notice of
Borrowing prior to 9:00 a.m. San Francisco time three Business Days prior to
the requested date of the Advance.
2.03 CONVERSION AND CONTINUATION ELECTIONS. (a) The Borrower or an
Acceptable Subsidiary may, upon irrevocable written notice in the form of a
Notice of Conversion/Continuation.
(i) elect, as of any Business Day, in the case of
Floating Rate Advances, or as of the last day of the applicable Offshore
Rate Interest Period, in the case of any Offshore Rate Advance, to
convert any such Advances (or any part thereof in an amount not less
than $250,000, or that is in an integral multiple of $50,000 in excess
thereof) into Advances of the other type; or
(ii) elect, as of the last day of the applicable Offshore
Rate Interest Period, to continue any Offshore Rate Advance having
Interest Periods expiring on such day (or any part thereof in an amount
not less than $250,000 or that is in an integral multiple of $50,000 in
excess thereof);
PROVIDED, that if at any time the aggregate amount of Offshore Rate Advances
is reduced, by payment, prepayment, or conversion of part thereof to be less
than $250,000, such Offshore Rate Advances shall automatically convert into
Floating Rate Advances, and on and after such date the right of the Borrower
or an Acceptable Subsidiary to continue such Advances as, and convert such
Advances into, Offshore Rate Advances shall terminate.
(b) The Borrower or an Acceptable Subsidiary shall deliver a Notice
of Conversion/Continuation to be received by the Agent not later than 9:00
a.m. San Francisco time at least
9
(i) three Business Days in advance of the Conversion/Continuation Date, if
the Advances are to be converted into or continued as Offshore Rate Advances;
and (ii) on or before the Conversion/Continuation Date, if the Advances are
to be converted into Floating Rate Loans.
(c) If upon the expiration of any Offshore Rate Interest Period,
the Borrower or an Acceptable Subsidiary has failed to select timely a new
Offshore Rate Interest Period to be applicable to such Offshore Rate
Advances, or if any Default or Event of Default then exists, the Borrower or
an Acceptable Subsidiary shall be deemed to have elected to convert such
Offshore Rate Advances into Floating Rate Advances effective as of the
expiration date of such Offshore Rate Interest Period.
2.04 COMMERCIAL LETTERS OF CREDIT UNDER THE REVOLVING FACILITY. (a)
Each commercial letter of credit shall be issued pursuant to the terms and
conditions hereof and of a Bank standard form Application and Security
Agreement for Commercial Letter of Credit (or such other form as the Bank may
require) executed by the Borrower or an Acceptable Subsidiary.
(b) Each commercial letter of credit shall:
(i) expire on or before six months after the date such
letter of credit is issued, but in no event later than the Final
Maturity Date;
(ii) require drafts payable in dollars at sight;
(iii) be in favor of beneficiaries and for purposes not
prohibited by any law or regulation; and
(iv) be otherwise in form and substance satisfactory to
the Bank.
(c) The Borrower shall pay or cause the applicable Acceptable
Subsidiary to pay to the Bank an issuance fee of .125% of the face amount,
and a negotiation fee of .125% of the face amount, and such other standard
fees and commissions charged to Bank customers at the times and in the
amounts the Bank advises the Borrower from time to time as being applicable
to the Borrower's or the Acceptable Subsidiary's commercial letters of credit.
(d) In the event of any request for a drawing under a commercial
letter of credit, the Bank will notify the Borrower. The Borrower or the
applicable Acceptable Subsidiary may, subject to satisfaction of all
conditions to borrowing set forth in this Agreement, convert the amount of
each drawing into a Reference Rate Advance (which conversion shall be deemed
to be a new Advance). With respect to any unreimbursed drawing which is not
converted into a Reference Rate Advance in whole or in part, because of the
Borrower's failure to satisfy the conditions set
10
forth in Section 4.02 or for any other reason, the Borrower shall reimburse
or cause the applicable Acceptable Subsidiary to reimburse the Bank prior to
11:00 a.m. (San Francisco time), on each date that any amount is paid by the
Bank under any commercial letter of credit, in an amount equal to the amount
so paid by the Bank. Such reimbursement obligations in respect of drawings,
if not paid when due, shall bear interest, payable on demand, from the date
of such drawing or payment, at the Floating Rate plus 2.0%.
(e) At the expiration of the Availability Period, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary
to provide cash collateral in the amount of the L/C Outstanding Amount of any
commercial letters of credit outstanding under this Agreement. In addition
to any other rights or remedies which the Bank may have under this Agreement
or otherwise, upon the occurrence of an Event of Default, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary
to provide cash collateral in the amount of the L/C Outstanding Amount of any
commercial letters of credit outstanding under this Agreement.
2.05 STANDBY LETTERS OF CREDIT UNDER THE REVOLVING FACILITY. (a) Each
standby letter of credit shall be issued pursuant to the terms and conditions
hereof and of a Bank standard form Application and Agreement for Standby
Letter of Credit (or such other form as the Bank may require) executed by the
Borrower or an Acceptable Subsidiary.
(b) Each standby letter of credit shall: (i) expire on or before
one year after the date such letter of credit is issued, but in no event
later than the Final Maturity Date; (ii) be in favor of beneficiaries and for
purposes not prohibited by any law or regulation; and (iii) be otherwise in
form and substance satisfactory to the Bank.
(c) The Borrower shall pay or cause the applicable Acceptable
Subsidiary to pay to the Bank a non-refundable fee equal to 1.0% per annum of
the outstanding undrawn amount of each financial standby letter of credit and
.50% per annum of the outstanding undrawn amount of each performance standby
letter of credit payable quarterly in advance, and calculated on the basis of
the face amount outstanding on the day the fee is calculated. However, if an
Event of Default exists, at the option of the Bank, the amount of the fee
shall be increased to 2.0% per annum, commencing on the day the Bank provides
notice of the increase to the Borrower. The Borrower shall also pay or cause
the applicable Acceptable Subsidiary to pay the standard fees and commissions
charged to Bank customers at the times and in the amounts the Bank advises
the Borrower from time to time as being applicable to the Borrower's or the
Acceptable Subsidiary's standby letters of credit.
11
(d) In the event of any request for a drawing under a standby
letter of credit, the Bank will notify the Borrower. The Borrower or the
applicable Acceptable Subsidiary may, subject to satisfaction of all
conditions to borrowing set forth in this Agreement, convert the amount of
each drawing into a Reference Rate Advance (which conversion shall be deemed
to be a new Advance). With respect to any unreimbursed drawing which is not
converted into a Reference Rate Advance in whole or in part, because of the
Borrower's failure to satisfy the conditions set forth in Section 4.02 or for
any other reason, the Borrower shall reimburse or cause the applicable
Acceptable Subsidiary to reimburse the Bank prior to 11:00 a.m. (San
Francisco time), on each date that any amount is paid by the Bank under any
standby letter of credit, in an amount equal to the amount so paid by the
Bank. Such reimbursement obligations in respect of drawings, if not paid
when due, shall bear interest, payable on demand, from the date of such
drawing or payment, at the Floating Rate plus 2.0%.
(e) At the expiration of the Availability Period, the Bank may
require the Borrower to provide or cause the applicable Acceptable Subsidiary
to provide cash collateral in the amount of the L/C Outstanding Amount of any
standby letters of credit outstanding under this Agreement. In addition to
any other rights or remedies which the Bank may have under this Agreement or
otherwise, upon the occurrence of an Event of Default, the Bank may require
the Borrower to provide or cause the applicable Acceptable Subsidiary to
provide cash collateral in the amount of the L/C Outstanding Amount of any
standby letters of credit outstanding under this Agreement.
2.06 LOCAL CURRENCY ADVANCES. (a) From time to time during the
Availability Period, the Borrower or an Acceptable Subsidiary may request by
giving written notice in the form of a Notice of Borrowing the Bank or any
Offshore Credit Provider may, in its sole discretion, make Local Currency
Advances to the Borrower or to an Acceptable Subsidiary.
(b) Neither the Bank nor any Offshore Credit Provider shall have
any obligation to make any Local Currency Advance unless the following
conditions are satisfied:
(i) the Bank and the Borrower or the relevant Acceptable
Subsidiary agree, at the time of Borrower's or such Acceptable Subsidiary's
request for a Local Currency Advance, on the currency, the amount, the date
of the Advance, the principal payment date(s), the interest rate and payment
date(s), the prepayment and overdue payment terms, and the reserve, tax and
other material provisions for such Advance; and
(ii) The Borrower or such Acceptable Subsidiary shall execute
such additional documentation as the Bank or such Offshore Credit Provider
may require relating to each Local Currency Advance.
12
2.07 INTENTIONALLY OMITTED.
2.08 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 or shall cause the applicable Acceptable
Subsidiary to pay to the Bank, upon demand, the amount of the excess
provided, that if the foregoing applies due to a change between Dollars and
Local Currencies, the Borrower shall be obligated to pay or cause the payment
of such amount only if the excess is greater than $100,000 or the Equivalent
Amount thereof. Payments under this Section may be applied to the
obligations of the Borrower or the Acceptable Subsidiaries to the Bank in the
order and manner as the Bank in its discretion may determine; PROVIDED,
however, that if no Default or Event of Default exists at the time of such
payments, Borrower may designate the obligations to which such payments shall
be applied. Payments may also be held as cash collateral to secure letters
of credit and may be used to prepay drafts accepted under letters of credit,
at the Bank's option.
2.09 INTENTIONALLY OMITTED.
2.10 COMMITMENT FEE. The Borrower shall pay to the Bank a commitment
fee at the rate of .20% per annum on the average daily unused portion of the
credit provided under this Agreement. For purposes of computing the unused
portion, the L/C Outstanding Amount shall be deemed to be usage. 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 September
30, 1997, and the last period which shall end on the Final Maturity Date in
respect of Advances. The commitment fee shall be payable in arrears on
September 30, 1997, on the last day of each successive quarter thereafter,
and on the Final Maturity Date in respect of Advances.
2.11 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 2.0% per annum higher than
the rate of interest otherwise provided under this Agreement.
2.12 EARLY TERMINATION OF COMMITMENT. The Borrower may at any time
terminate or permanently reduce by increments of $1,000,000 the Bank's
(including any Offshore Credit Provider'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
(including the L/C Outstanding Amount) or, in the case of a reduction of the
commitment, that amount which is in excess of the reduced commitment,
together with any sums due under Section 3.11. If the commitment is
terminated, payments shall be applied to letters of credit and drafts
accepted under letters of credit,
13
may, at the Bank's option, be used to prepay, or held as cash collateral to
secure, the Borrower's and Acceptable Subsidiaries' obligations to the Bank
or any Offshore Credit Provider with respect thereto. 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.
ARTICLE III
EXTENSIONS OF CREDIT, PAYMENTS AND INTEREST CALCULATIONS
3.01 INTENTIONALLY OMITTED.
3.02 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower or an Acceptable Subsidiary 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 INTENTIONALLY OMITTED.
3.04 EVIDENCE OF INDEBTEDNESS. Principal, interest, and all other sums
due to the Bank (or any Offshore Credit Provider) under this Agreement shall
be evidenced by entries in records maintained by the Bank (or such Offshore
Credit Provider), 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 or such Offshore Credit Provider.
The loan accounts or records maintained by the Bank or any Offshore Credit
Provider 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 or any Acceptable Subsidiary 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 and 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 or an
Acceptable Subsidiary 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 2.0% 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
14
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 or an Acceptable
Subsidiary 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 Interest Period shall end on the immediately
preceding Business Day. Any payments received by the Bank or an Offshore
Credit Provider 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 or any Offshore Credit Provider'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 or the applicable Acceptable Subsidiary'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 or shall cause the applicable Acceptable Subsidiary to pay all such taxes
and shall also pay or cause to be paid 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
15
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 or an Acceptable Subsidiary
pursuant to subsection (a) above. 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 (directly or through any Offshore Credit Provider) 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 (or any Offshore Credit
Provider) 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 (directly or through any
Offshore Credit Provider) 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 or any
applicable Offshore Credit Provider to maintain any Offshore Rate Advance or
Local Currency Advance hereunder, the Borrower shall or shall cause the
applicable Acceptable Subsidiary to prepay in full all Offshore Rate Advances
or Local Currency Advances, as the case may be then outstanding, together
with interest accrued thereon, either on the last day of the applicable
Offshore Rate Interest Period or the interest period applicable to the Local
Currency Advance if the Bank or such Offshore Credit Provider 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. (a) If the Bank determines that, due to either
(i) the introduction of or any change (other than any
16
change by way of imposition of or increase in reserve requirements included
in the calculation of the Offshore Rate) in or in the interpretation of any
law or regulation or (ii) the compliance by the Bank with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to the Bank
of agreeing to make or making, funding or maintaining any Offshore Rate
Advances, then the Borrower shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Agent), pay to the
Bank, additional amounts as are sufficient to compensate the Bank for such
increased costs.
(b) If the Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other governmental
authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Offshore Credit Provider) or any corporation
controlling the Bank with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by the
Bank or any corporation controlling the Bank and (taking into consideration
the Bank's or such corporation's policies with respect to capital adequacy
and the Bank's desired return on capital) determines that the amount of such
capital is increased as a consequence of its commitment, Advances, credits or
obligations under this Agreement, then, upon demand of the Bank to the
Borrower, the Borrower shall pay to the Bank, from time to time as specified
by the Bank, additional amounts sufficient to compensate the Bank for such
increase.
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 (or any Acceptable Subsidiary)
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 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.
17
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 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 and the Acceptable Subsidiaries hereunder.
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 to the Borrower or, as the case may be, to an Acceptable
Subsidiary:
(a) This Agreement, executed by the Borrower;
(b) Satisfactory evidence of due authorization of the execution,
delivery, and performance by the Borrower and, as required by the Bank, the
Acceptable Subsidiary 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 or the Acceptable Subsidiary (which counsel must be satisfactory to
the Bank) with respect to such legal matters relating hereto as the Bank may
reasonably request;
(d) Certificates of state officials showing that the Borrower and
the Acceptable Subsidiary is in good standing or qualified to conduct
business under the laws of the state of its
18
organization and, if requested by the Bank, in any other state in which the
Borrower and the Acceptable Subsidiary 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;
(g) In the case of the first extension of credit to the Acceptable
Subsidiary, a continuing guaranty in favor of the Bank, executed by the
Borrower, guaranteeing all debts and obligations (whether contingent or
otherwise) of that Acceptable Subsidiary arising under or in connection with
this Agreement;
(h) Such other approvals, opinions, documents or instruments as the
Bank may reasonably 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 in all material respects on and as of the date
of each extension of credit (except to the extent such representations and
warranties relate to an earlier date, in which case, they are true and
correct in all material respects on and as of that date);
(b) Immediately prior to and immediately after giving effect to
such extension of credit, no Default or Event of Default shall exist;
(c) Executed originals of all Credit Documents required under
Article II shall have been delivered to the Bank.
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
19
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 the failure to so qualify would have a Material Adverse Effect.
5.02 AUTHORIZATION. The execution, delivery, and performance by the
Borrower and each Acceptable Subsidiary of this Agreement and any other
Credit Document to which any of them is a party, 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 material
agreement, contract, indenture, document, or instrument to which the Borrower
or any Acceptable Subsidiary 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 Acceptable Subsidiary 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 Acceptable Subsidiary or
any 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 or the Acceptable Subsidiary, as applicable.
5.04 COMPLIANCE WITH LAWS. The Borrower and each of its Subsidiaries is
in compliance with all foreign, federal, state 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. There is no litigation, tax claim, proceeding,
governmental or administrative action,
20
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 material 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 in
connection with this Agreement, 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. Since March 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
21
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 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 and any Acceptable Subsidiaries'
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:
22
(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 which
ceases to be true and correct in all material respects; 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 90 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 officer or treasurer 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; and
(e) Promptly upon request, such other materials and information
relating to the Borrower or its Subsidiaries as the Bank may reasonably
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
23
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 and shall cause the
Acceptable Subsidiaries to 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 reasonably satisfactory to the Bank, 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 in
all material respects 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).
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 or the
name of any Acceptable Subsidiary, (b) the Borrower's or any Acceptable
Subsidiary's business or legal structure, or (c) the Borrower's or any
Acceptable Subsidiary'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 necessary to conduct its business, 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.
24
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 and any Acceptable Subsidiary'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 and
refinancings of such existing indebtedness, liabilities, and guarantees on
substantially similar terms as is promptly reported on an amended 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) indebtedness arising from purchase money financing of the type
described in subsection 7.02(f);
(g) Permitted Swap Obligations;
(h) indebtedness, liabilities and guarantees of all Persons
acquired by, consolidated with or merged into the Borrower or its
Subsidiaries as permitted by Section 7.08 of the Agreement; PROVIDED that
such obligations were not incurred in anticipation of the acquisition,
consolidation or merger and do not in aggregate amount exceed $10,000,000; and
(i) other unsecured indebtedness not to exceed $5,000,000.
25
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; (f) purchase
money security interests in personal or real property hereafter acquired when
the security interest does not extend beyond the property purchased and where
the debt secured does not exceed the value of the property acquired; (g)
liens consisting of pledges of cash collateral or government securities to
secure on a xxxx-to-market basis Permitted Swap Obligations only, provided
that (i) the counterparty to any Swap Contract relating to any such Permitted
Swap Obligation is under a similar requirement to deliver similar collateral
from time to time to the Borrower or the Subsidiary party thereto on a
xxxx-to-market basis; and (ii) the aggregate value of such collateral so
pledged by the Borrower and its Subsidiaries together in favor of any
counterparty does not at any time exceed $1,000,000; (h) liens, security
interests and encumbrances on the assets of any Person acquired by,
consolidated with or merged into the Borrower or its Subsidiaries as
permitted by Section 7.08 of this Agreement; PROVIDED that such liens,
security interests and encumbrances were not created in anticipation of the
acquisition, consolidation or merger and secure liabilities in an aggregate
amount not exceeding, at any one time, $5,000,000; and (i) additional
security interests or liens which secure liabilities in an aggregate
principal amount not exceeding, at any one time, $1,000,000.
7.03 INTENTIONALLY OMITTED.
7.04 INTENTIONALLY OMITTED.
7.05 INTENTIONALLY OMITTED.
7.06 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, redeem or otherwise acquire for value any of its
shares, or create any sinking fund in relation thereto, except, dividends
payable solely in its capital stock.
26
7.07 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) other
than in the ordinary course of business, 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 wholly-owned Subsidiaries or by any of
its wholly-owned Subsidiaries to another of its wholly-owned Subsidiaries;
(d) investments constituting Permitted Swap Obligations or payments or
advances under Swap Contracts relating to Permitted Swap Obligations.
7.08 LIQUIDATIONS AND MERGERS. The Borrower shall not, and shall not
suffer or permit any Subsidiary to, (i) liquidate or dissolve, (ii) enter
into any consolidation, merger, partnership, joint venture, or other
combination, or (iii) acquire or purchase control of, or the assets or
business of, any other Person, except that (a) any Subsidiary may merge with
the Borrower, provided that the Borrower shall be the continuing or surviving
corporation, or 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; (b)
any Subsidiary may sell all or substantially all of its assets (upon voluntary
liquidation or otherwise), to the Borrower or another wholly-owned
Subsidiary, and (c) notwithstanding clauses (ii) and (iii), the Borrower and
its Subsidiaries may enter into any consolidation, merger, partnership, joint
venture or other combination with, make loans or other extensions of credit
to or other investments in, or purchase or acquire control or any part of the
capital stock, assets or business of, any other Person if (w) such Persons
are engaged in business activities (including development activities) or
operations substantially similar to or related to present software and other
business activities and operations of the Borrower and its Subsidiaries, (x)
immediately prior to and after giving effect thereto, there exists no Default
or Event of Default, (y) in the case of a merger of the Borrower, the
Borrower is the surviving corporation, and (z) such transaction has been
undertaken in accordance with all applicable requirements of law.
7.09 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 reasonable 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 assets
27
except for full, fair and reasonable consideration; or (d) enter into any
sale and leaseback agreement covering any of its fixed or capital assets.
7.10 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.
7.11 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 Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
7.12 INTENTIONALLY OMITTED.
7.13 QUICK RATIO. The Borrower shall not permit as of the last day of
any fiscal quarter on a consolidated basis the sum of cash, short-term cash
investments, marketable securities not classified as long-term investments
and accounts receivable to be less than 1.35 times current liabilities (which
shall include the dollar Equivalent Amount of all outstanding Advances and
the L/C Outstanding Amount).
7.14 TANGIBLE NET WORTH. The Borrower shall not permit as of the last
day of any fiscal quarter on a consolidated basis its Tangible Net Worth to
be less than (i) 90% of its Tangible Net Worth as of December 31, 1996, PLUS
(ii) 100% of the net proceeds received from the issuance of equity after
December 31, 1996, LESS up to $20,000,000 in intangible assets acquired after
December 31, 1996 to the extent that such intangible assets are recognized as
a result of an acquisition of a company or line of business and the
intangible assets are recorded on the Borrower's books in the same quarter as
that in which the acquisition is consummated.
7.15 TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Borrower shall not
permit as of the last day of any fiscal quarter on a consolidated basis the
Borrower's total liabilities (which shall include the dollar Equivalent
Amount of all outstanding Advances and the L/C Outstanding Amount) to exceed
0.75 times its Tangible Net Worth.
7.16 CONSECUTIVE QUARTERLY LOSSES; LOSSES IN ONE QUARTER. The Borrower
on a consolidated basis shall not incur, (a) any quarterly net or operating
losses in any two consecutive fiscal
28
quarters or (b) any quarterly net or operating loss in excess of 5% of
consolidated Tangible Net Worth computed as of the last day of the
immediately preceding fiscal quarter.
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, or any
Acceptable Subsidiary fails to pay within one Business Day after the date
when due, any installment of principal, or either the Borrower or any
Acceptable Subsidiary fails to pay within three Business 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, 6.02 or 6.03 or
Article VII.
(d) OTHER DEFAULTS. The Borrower or any Acceptable Subsidiary
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 30 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. (i) One or more non-interlocutory judgments or
arbitration awards are entered against the Borrower or any of its
Subsidiaries and the same shall remain unsatisfied, unvacated and unstayed
for a period of 30 days after the entry thereof, or (ii) the Borrower or any
of its Subsidiaries enters into any settlement agreement with respect to any
litigation or arbitration, and the aggregate amount of such judgments,
arbitration awards and settlements which are not covered by third-party
insurance exceeds $2,000,000.
(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
29
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 appointed to take possession of
the properties of the Borrower or any Subsidiary and such petition or
appointment is not set aside or withdrawn within 60 days or continues in
effect for 60 days or more 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 $1,000,000
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 and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document 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 $1,000,000 (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 and such default continues after the applicable grace
or notice period.
(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
30
IV of ERISA to the Pension Plan or PBGC in an aggregate amount in excess of
$500,000; (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
$500,000; 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.
(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 40% 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 40% 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 or of any Acceptable Subsidiary
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, and the Bank may declare an amount equal to the
maximum aggregate amount that is or at any time thereafter may become
available for drawing under any then-outstanding letters of credit, (whether
or not any beneficiary shall have presented, or be entitled at such time to
present, the drafts or other documents required to draw under such letters of
credit) to be immediately due and payable;
(b) the obligation, if any, of the Bank (including through any
Offshore Credit Provider) to make further loans or
31
extensions of credit hereunder shall immediately cease and terminate, and
(c) the Bank and each Offshore Credit Provider 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 and each Offshore Credit Provider
may be exercised at any time by the Bank or such Offshore Credit Provider and
from time to time after the occurrence of an Event of Default. All rights,
powers, and remedies of the Bank and any Offshore Credit Provider 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.
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 or any Offshore Credit Provider, 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 reasonable 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
32
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 and the Acceptable Subsidiaries 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 CONFIDENTIALITY. The Bank agrees to take normal and reasonable
precautions and to exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Borrower and
provided to it by the Borrower or any of its Subsidiaries under this
Agreement or any other Credit Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Credit Documents or in connection
with other business now or hereafter existing or contemplated with the
Borrower or any Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a result of
disclosure by the Bank, or (ii) was or becomes available on a
non-confidential basis from a source other than the Borrower, provided that
such source is not bound by a confidentiality agreement with the Borrower
known to the Bank; PROVIDED, HOWEVER, that the Bank may disclose such
information (A) at the request or pursuant to any requirement of any
governmental authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Bank
may be party; (E) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Credit Document; (F) to
the Bank's independent auditors and other professional advisors; (G) to any
participant or assignee, actual or potential, provided that such person
agrees in writing to keep such information confidential to the same extent
required of the Bank hereunder; (H) as to the Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement
regarding confidentiality to which the Borrower or any Subsidiary is party or
is deemed party with the Bank or such Affiliate; and (I) to its Affiliates
which have a need to know such information in connection with the
33
evaluation or administration of this Agreement or any other Credit Document
and which shall keep such information confidential to the same extent
required of the Bank hereunder.
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 and any Acceptable Subsidiary
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 and any Acceptable Subsidiary 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; provided, however,
that any such prospective Participant or Participant shall agree to keep any
such information confidential.
9.08 GENERAL INDEMNIFICATION. The Borrower shall pay and indemnify the
Bank, the Offshore Credit Providers, the Bank's parent company, 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 and the Acceptable
Subsidiaries hereunder.
34
9.09 ARBITRATION; REFERENCE PROCEEDING. (a) Any controversy or claim
between or among the parties arising out of or relating to this Agreement or
any other Credit Document or other agreements or 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. 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
35
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 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
36
"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 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.
37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DIGITAL MICROWAVE CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------------
Typed Name: Xxxxxxx X. Xxxxxxx
--------------------------------
Title: Chairman of the Board, President
and Chief Executive Officer
-------------------------------------
By: /s/ XXXX X. XXXXXXX
----------------------------------------
Typed Name: Xxxx X. Xxxxxxx
--------------------------------
Title: Vice President, Chief Financial
Officer and Secretary
-------------------------------------
Address where notices to
Borrower are to be sent:
000 Xxxx Xxxxxxx Xxx
-------------------------------------------
Xxx Xxxx, XX 00000
-------------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ XXXXX X. XXXXXXX
----------------------------------------
Typed Name: Xxxxx X. Xxxxxxx
--------------------------------
Title: Vice President
-------------------------------------
Address where notices to
Bank are to be sent:
000 Xxxxxx Xxxxxx, 0xx Xxxxx
-------------------------------------------
Xxxx Xxxx, XX 00000
-------------------------------------------
38
Schedule 7.01
EXISTING INDEBTEDNESS
As of May 31, 1997
Amount Description
------ -----------
$2,016,443 Coast Business Credit $25,000,000 facility (terminated and
paid in full as of June 30, 1997)
1,226,518 Balance of lease obligations under capital equipment and
---------- auto leases
$3,242,961 Total Indebtedness as of May 31, 1997
----------
----------
39
Schedule 7.02
EXISTING LIENS
As of May 31, 1997
Amount Description
------ -----------
$2,016,443 Amount of outstanding indebtedness under Coast Business
Credit $25,000,000 facility terminated and paid in full as
of June 30, 1997, security interest filed on all receivables,
inventory and supplies related to sales of its goods and
services
1,226,518 Amount of outstanding liability under capital lease
---------- obligations for which liens are in effect on the leased
asset
$3,242,961 Total Amount of Liabilities Subject to Liens
----------
----------
40
Exhibit A
DIGITAL MICROWAVE CORPORATION
COMPLIANCE CERTIFICATE
Date: _____________, 199_
Pursuant to that Credit Agreement dated as of June 30, 1997 (as amended,
modified or supplemented from time to time, the "Credit Agreement";
capitalized terms not otherwise defined herein being used herein as defined
in the Credit Agreement) between Digital Microwave Corporation (the
"Borrower") and Bank of America National Trust and Savings Association (the
"Bank"), the undersigned responsible officer, certifies that he/she is the
__________________ of the Borrower, and that, as such, he/she is authorized
to execute and deliver this Certificate, and that:
[Use this paragraph if this Certificate is delivered in connection with the
financial statements required by subsection 6.02(a) of the Credit Agreement.]
1. Attached as Schedule 1 hereto is a true and correct copy of the
Borrower's audited consolidated balance sheet as at the end of the fiscal
year ended ______________, 199_ and the related consolidated statements of
income, retained earnings and cash flow for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal year,
and accompanied by the unqualified opinion of _____________________
[nationally-recognized independent public accounting firm].
or
[Use this paragraph if this Certificate is delivered in connection with the
financial statements required by subsection 6.02(b) of the Credit Agreement.]
1. Attached as Schedule 1 hereto is a true and correct copy of the
unaudited consolidated balance sheet of the Borrower for the fiscal quarter
ended _________________, 199_ and the related consolidated statements of
income, retained earnings and cash flow for the period commencing on the
first day and ending on the last day of such quarter and for the portion of
the fiscal year ending on the last day of such quarter.
2. The attached financial statements are complete and correct and fairly
present, in accordance with GAAP, the financial position and results of
operations of the Borrower and the Borrower's consolidated Subsidiaries.
3. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the
A-1
transactions and conditions of the Borrower during the accounting period
covered by the attached financial statements.
4. To the best of the undersigned's knowledge, the Borrower, during such
period, has observed, performed or satisfied all of its covenants and other
agreements, and satisfied every condition in the Credit Agreement to be
observed, performed or satisfied by the Borrower, and the undersigned has no
knowledge of any Default or Event of Default (both as defined in the Credit
Agreement).
5. The following financial covenant analyses and information set forth
on Schedule 2 attached hereto are true and accurate on and as of the date of
this Certificate. All amounts and ratios in Schedule 2 refer to the
financial statements attached as Schedule 1 hereto and are determined in
accordance with the specifications set forth in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
______________________, 199_.
DIGITAL MICROWAVE CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
A-2
Date: ______________, 199__
For the fiscal quarter/year
ended ______________, 199__
SCHEDULE 2
to the Compliance Certificate
($ in 000's)(1)
ACTUAL REQUIRED/PERMITTED
------ ------------------
1. SECTION 7.13 QUICK RATIO.
The ratio of:
A. the sum of:
(i) cash
PLUS -------
-
(ii) short-term cash investments
PLUS -------
-
(iii) marketable securities not
classified as long-term
investments
PLUS -------
-
(iv) current accounts receivable
-------
-
(i)+(ii)+(iii)+(iv) = -------
-
B. Current Liabilities(2)
-------
-
A
---
B =
-------- Not less than 1.35 to 1.00.
--------
-----------
(1) Determined on a consolidated basis, in accordance with GAAP.
(2) Including, without duplication, the dollar Equivalent Amount of all
outstanding Advances and the L/C Outstanding Amount.
A-3
ACTUAL REQUIRED/PERMITTED
------ ------------------
2. SECTION 7.14 MINIMUM TANGIBLE
NET WORTH.
Tangible Net Worth: Not to be less than the sum of:
(i) Total assets A. 90% of consolidated Tangible
------ Net Worth as of
12/31/96
LESS -----------
PLUS
(ii) goodwill, patents, trademarks,
trade names, organization B. 100% of the net proceeds
expense, treasury stock, received from the issuance
unamortized debt discount and of equity after 12/31/96
expense, deferred charges and
other like intangibles and -----------
monies due from Affiliates other
than Subsidiaries of the Borrower, LESS
officers, directors, or
shareholders ------ C. up to $20,000,000 in
intangible assets acquired
LESS after 12/31/96
----------
(iii) reserves applicable thereto ------
LESS
(iv) all liabilities (including
accrued and deferred income
taxes) -------
(i)-(ii)-(iii)-(iv) = ------- A + B - C = -----------
------- -----------
A-4
ACTUAL REQUIRED/PERMITTED
------ ------------------
3. SECTION 7.15 TOTAL LIABILITIES
TO TANGIBLE NET WORTH.
The ratio of:
A. Total Liabilities(3)
------
B. Tangible Net Worth (from 2.
above) ------
A
---
B Not greater than 0.75 to 1.00.
------
------
4. SECTION 7.16(a)
LOSSES IN TWO CONSECUTIVE
QUARTERS.
A. (i) Operating loss for fiscal
quarter just ended ------- Not to exceed 0 if (ii) shows
------- a loss.
(ii) Operating loss for the
fiscal quarter immediately
preceding the fiscal quarter
just ended --------
--------
B. (i) Net loss for fiscal quarter
just ended -------- Not to exceed 0 if (ii) shows
------- a loss.
(ii) Net loss for the fiscal
quarter immediately preceding
the fiscal quarter just ended -------
-------
5. SECTION 7.16(b) LOSSES IN ONE QUARTER.
Operating loss for fiscal quarter
just ended ------- Not to exceed 5% of Tangible
------- Net Worth as of immediately
preceding fiscal quarter:
Tangible Net Worth
from last quarter's
Compliance Certif-
icate Item No. 2
----------
x 5%
=
----------
----------
Net loss for fiscal quarter
just ended ------- Not to exceed 5% of Tangible
------- Net Worth as of immediately
preceding fiscal quarter
as computed above:
----------
----------
----------
(3) Including, without duplication, the dollar Equivalent Amount of all
outstanding Advances and the L/C Outstanding Amount.
A-5
EXHIBIT B
NOTICE OF BORROWING
Date: _________________, 199_
To: Bank of America National Trust and Savings Association, (the "BANK")
Re: Credit Agreement dated as of June 30, 1997 (as extended, renewed, amended
or restated from time to time, the "CREDIT AGREEMENT") between Digital
Microwave Corporation and Bank of America National Trust and Savings
Association
Ladies and Gentlemen:
The undersigned, ___________________________ (the "BORROWER"), refers to
the Credit Agreement and hereby gives you notice irrevocably, pursuant to
Section [2.02/2.06] of the Credit Agreement, of the specified Advance requested
below. The terms defined in the Credit Agreement which are used herein have
the meanings therein defined.
1. The Business Day of the proposed Advance is __________________,
19___.
2. The aggregate amount of the proposed Advance is
[$_____________________.] [or specify the amount and currency of any
Local Currency Advances].
3. A Dollar Advance is to be a [Reference Rate] [Offshore Rate]
Advance.
4. The duration of the Interest Period for the [Offshore Rate
Advance or Local Currency Advance] shall be [_____ days] [_______ months].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Advance,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Borrower contained
in Article V of the Credit Agreement are true and correct in all material
respects as though made on and as of such date (except to the extent
such representations and warranties relate to an earlier date, in which
case they are true and correct in all material respects as of such date);
(b) no Default or Event of Default has occurred and is continuing,
or would result from such proposed Advance; and
B-1
(c) The proposed Advance will not cause the aggregate principal
amount of all outstanding Advances PLUS the aggregate amount of all L/C
Outstanding Amounts to exceed the Credit Limit.
Digital Microwave Corporation
By:
-----------------------------------
Title:
--------------------------------
[By:
----------------------------------
Title: ]
--------------------------------
B-2
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date: _________________, 199_
To: Bank of America National Trust and Savings Association, (the "BANK")
Re: Credit Agreement dated as of June 30, 1997 (as extended, renewed, amended
or restated from time to time, the "CREDIT AGREEMENT") between Digital
Microwave Corporation and Bank of America National Trust and Savings
Association
Ladies and Gentlemen:
The undersigned, ___________________________ (the "BORROWER"), refers to
the Credit Agreement and hereby gives you notice irrevocably, pursuant to
Section 2.03 of the Credit Agreement, of the [conversion] [continuation] of
the Advances specified herein. The terms defined in the Credit Agreement
which are used herein have the meanings therein defined.
1. The conversion/continuation Date is _____________,
19____.
2. The aggregate amount of the Advances to be [converted]
[continued] is $_____________.
3. The Advances are to be [converted into] [continued as]
[Reference Rate] [Offshore Rate] Advances.
4. [If applicable:] The duration of the Offshore Rate Interest
Period for the Advances included in the [conversion] [continuation]
shall be [_____ days] [_____ months].
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the proposed conversion/continuation
Date, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the representations and warranties of the Borrower contained
in Article V of the Credit Agreement are true and correct in all material
respects as though made on and as of such date (except to the extent
such representations and warranties relate to an earlier date, in which
case they are true and correct in all material respects as of such date);
C-1
(b) no Default or Event of Default has occurred and is continuing,
or would result from such proposed [conversion] [continuation][; and
(c) the proposed [conversion][continuation] will not cause the
aggregate principal amount of all outstanding Advances PLUS the aggregate
amount of all L/C Outstanding Amounts to exceed the Credit Limit.
Digital Microwave Corporation
By:
-----------------------------------
Title:
--------------------------------
[By:
----------------------------------
Title: ]
--------------------------------
C-2
