Exhibit 10.31
--------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
P-COM, INC.,
AS THE BORROWER
UNION BANK OF CALIFORNIA, N.A.,
AS ADMINISTRATIVE AGENT
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
AS SYNDICATION AGENT
AND THE LENDERS PARTY HERETO
--------------------------------------------------------------------------------
* The Registrant agrees to furnish supplementally a copy of any omitted
Exhibits, Attachments, and Schedules to the Commission upon request.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.......................................... 1
1.1 Defined Terms................................ 1
1.2 Other Definitional Provisions................ 11
ARTICLE II
THE LOANS............................................ 11
2.1 The Revolving Loans.......................... 11
2.2 Repayment.................................... 14
2.3 Interest Rate and Payment Dates.............. 15
2.4 Continuation and Conversion Options.......... 15
2.5 Letters of Credit............................ 16
2.6 Security for Loans........................... 19
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS.............. 19
3.1 Use of Proceeds.............................. 19
3.2 Post Maturity Interest....................... 19
3.3 Computation of Interest and Fees............. 20
3.4 Payments..................................... 20
3.5 Payment on Non-Business Days................. 20
3.6 Reduced Return............................... 20
3.7 Indemnities.................................. 21
3.8 Funding Sources.............................. 23
3.9 Sharing of Payments, Etc..................... 23
3.10 Inability to Determine Interest Rate......... 23
3.11 Requirements of Law.......................... 24
3.12 Illegality................................... 25
ARTICLE IV
CONDITIONS OF LENDING................................ 25
4.1 Conditions Precedent to Initial Loans........ 25
4.2 Conditions Precedent to Each Borrowing....... 27
4.3 Conditions Precedent to Each Letter of Credit 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES....................... 29
5.1 Representations and Warranties............... 29
ARTICLE VI
COVENANTS............................................ 33
6.1 Affirmative Covenants........................ 33
6.2 Negative Covenants........................... 38
ARTICLE VII
EVENTS OF DEFAULT.................................... 44
7.1 Events of Default............................ 44
ARTICLE VIII
THE AGENT AND THE ISSUING BANK....................... 46
8.1 Authorization and Action........................ 46
8.2 Agent's Reliance, Etc........................... 47
8.3 Union Bank of California, N.A. and Affiliates... 47
8.4 Lender Credit Decision.......................... 48
8.5 Indemnification................................. 48
8.6 Successor Agent................................. 48
8.7 Syndication Agent............................... 49
ARTICLE IX
MISCELLANEOUS........................................ 49
9.1 Amendments, Etc................................. 49
9.2 Notices, Etc.................................... 50
9.3 Right of Setoff; Deposit Accounts............... 50
9.4 No Waiver; Remedies............................. 50
9.5 Costs and Expenses.............................. 50
9.6 Additional Lenders; Assignments; Participations. 51
9.7 Audits of Collateral; Fees...................... 52
9.8 Effectiveness; Binding Effect; Governing Law.... 53
9.9 Waiver of Jury Trial............................ 53
9.10 Consent to Jurisdiction; Venue;
Agent for Service of Process................... 54
9.11 Alternative Dispute Resolution.................. 54
9.12 Entire Agreement................................ 58
9.13 Separability of Provisions...................... 58
9.14 Obligations Several............................. 58
9.15 Survival of Certain Agreements.................. 58
9.16 Execution in Counterparts....................... 59
ii
CREDIT AGREEMENT
This Credit Agreement dated as of May 15, 1998 is entered into among P-Com,
Inc., a Delaware corporation (the "Borrower"), the financial institutions named
--------
on the signature pages hereof (each, a "Lender" and collectively the "Lenders"),
------ -------
Union Bank of California, N.A., as administrative agent for the Lenders (the
"Agent"), and Bank of America National Trust and Savings Association, as
------
syndication agent (the "Syndication Agent"). The parties hereto agree as
-----------------
follows:
RECITALS
WHEREAS, the Borrower desires that the Lenders extend certain credit
facilities to the Borrower for working capital, permitted acquisitions and other
corporate purposes;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, the Lenders, the Agent
and the Syndication Agent agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have
-------------
the following meanings:
"Acquisition": As defined in Section 6.2(i).
-----------
"Affiliate": As applied to any Person, any Person directly or
---------
indirectly controlling, controlled by or under common control with, that Person.
For the purposes of this definition, "control" (including with the correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise.
"Agent": As defined in the introductory paragraph of this Agreement.
-----
"Agreement": This Credit Agreement, as amended, supplemented or
---------
modified from time to time.
"Applicable Margin": As defined in Exhibit E hereto.
----------------- ---------
"Base Rate": The higher of (i) the rate of interest announced from
---------
time to time by Union Bank of California, N.A. as its Base Commercial Lending
Rate and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate on the day prior
to the date on which the Base Rate is
1
to be determined. The Base Rate is a reference rate; the Agent and the Lenders
may make loans at, above or below the Base Rate.
"Base Rate Loans": Loans hereunder at such time as they accrue
---------------
interest at a rate based upon the Base Rate.
"Borrower": As defined in the introductory paragraph of this
--------
Agreement.
"Borrowing": As defined in Section 2.1.
---------
"Business Day": A day other than a Saturday, Sunday or day on which
------------
commercial banks in San Francisco, California are authorized or required by law
to close.
"Capital Lease": As applied to any Person, any lease of any property
-------------
(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"Code": The California Uniform Commercial Code.
----
"Commitment": The obligation of each Lender to make Loans to the
----------
Borrower and to reimburse the Issuing Bank for the unreimbursed portion of
Letters of Credit, each pursuant to Article II in the amount or amounts referred
to therein. The term "Commitments" means all such obligations of the Lenders.
-----------
"Commitment Fee Rate": As defined in Exhibit E hereto.
------------------- ---------
"Consolidated Capital Expenditures": For any period, the dollar
---------------------------------
amount of gross expenditures (including obligations under Capital Leases)
incurred by the Borrower and its consolidated Subsidiaries during such period
for fixed assets, real property, plant and equipment, and renewals, improvements
and replacements thereto required to be included in "capital expenditures",
"additions to property, plant or equipment" or comparable items in the
consolidated statement of changes in financial position of the Borrower in
conformity with GAAP, excluding, however, expenditures of insurance proceeds
received as the result of damage or destruction of the property being replaced.
"Consolidated Current Liabilities": At any date of determination, the
--------------------------------
sum, determined on a consolidated basis, of all liabilities of Borrower and its
consolidated Subsidiaries which may properly be classified as current
liabilities in accordance with GAAP, including, without limitation, all
outstanding Loans and the Letter of Credit Usage under this Agreement.
"Consolidated Debt": At any date of determination, the sum,
-----------------
determined on a consolidated basis, of all Debt of the Borrower and its
consolidated Subsidiaries.
"Consolidated EBITDA": For any period, the net income of Borrower and
-------------------
its consolidated Subsidiaries for such period plus, to the extent deducted in
----
computing such
2
consolidated net income, without duplication, the sum of (a) income tax expense,
(b) interest expense, (c) depreciation and amortization expense, (d) any
extraordinary or non-recurring losses and (e) other noncash items reducing such
consolidated net income, minus, to the extent added in computing such
-----
consolidated net income, without duplication, the sum for such period of (i)
interest income, (ii) any extraordinary or non-recurring gains and (iii) other
noncash items increasing such consolidated net income, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Funded Debt": As of any date of determination, an
------------------------
amount equal to the sum of all Debt of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP pursuant to any
agreement or instrument to which the Borrower or any of its Subsidiaries is
party relating (without duplication) to the borrowing of money including,
without limitation, any and all subordinated Debt, all Debt and the Letter of
Credit Usage under this Agreement, purchase money Debt, all obligations in
respect of Synthetic Leases, or Debt in respect of Capitalized Leases.
"Consolidated Interest Expense": For any period, the sum, determined
-----------------------------
on a consolidated basis, of all interest expensed by the Borrower and its
consolidated Subsidiaries during such period (including that attributable to
Capital Leases in accordance with GAAP).
"Consolidated Net Income": For any period, the net income (or loss)
-----------------------
after income taxes for such period of the Borrower and its consolidated
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Operating Income": For any period, the operating income
-----------------------------
(or loss) for such period of the Borrower and its consolidated Subsidiaries on a
consolidated basis determined in accordance with GAAP.
"Consolidated Quick Assets": At any date of determination, the total
-------------------------
cash, marketable securities with maturities of less than one year, and net,
billed accounts receivable of the Borrower and its consolidated Subsidiaries on
a consolidated basis determined in accordance with GAAP.
"Consolidated Tangible Net Worth": At any date of determination, the
-------------------------------
sum of the capital stock and additional paid-in capital plus retained earnings
----
(or minus accumulated deficit) of the Borrower and its consolidated Subsidiaries
minus intangible assets, on a consolidated basis determined in accordance with
GAAP.
"Contingent Obligation": As applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Debt, lease, dividend or other obligation of another if the primary purpose
or intent thereof by the Person incurring the Contingent Obligation is to
provide assurance that such obligation of another will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such obligation will be protected (in whole or in part) against loss in
respect thereof, (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings, or (iii) with respect to
3
any Interest Rate Agreement or Currency Agreement. Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payment if
required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of that Person for the obligation of another
through any agreement (contingent or otherwise) (x) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(x) or (y) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Currency Agreement": As applied to any Person, any foreign exchange
------------------
contract, currency swap agreement, futures contract, option contract, synthetic
cap or other similar agreement or arrangement designed to protect that Person
against fluctuations in currency values.
"Debt": As applied to any Person, (i) all indebtedness for borrowed
----
money, including Subordinated Debt, (ii) that portion of obligations with
respect to Capital Leases which is properly classified as a liability on a
balance sheet in accordance with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services, (v) all obligations with respect to
Synthetic Leases, and (vi) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that person. Obligations not yet due and payable under Interest Rate
Agreements and Currency Agreements constitute Contingent Obligations and not
Debt.
"Dollars and $": Dollars in lawful currency of the United States of
-------------
America.
"Employee Benefit Plan": Any Pension Plan, any employee welfare
---------------------
benefit plan, or any other employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of the Borrower or any ERISA
Affiliate of the Borrower.
"Equity Issuance": As applied to any Person, the sale or issuance by
---------------
such Person of (i) any capital stock of such Person, (ii) any options, warrants
or other similar rights exercisable in respect of such capital stock, or (iii)
any other security or instrument representing an equity interest (or the right
to obtain an equity interest) in such Person.
"ERISA": The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time and any successor statute.
4
"Federal Funds Rate": On any day, a fluctuating interest rate per
------------------
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York, or
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it.
"Fee Letter": That certain letter agreement dated as of the date of
----------
this Agreement, between Borrower and Union Bank of California, N.A., as Agent
and Issuing Bank, regarding certain fees payable to the Agent and the Issuing
Bank.
"GAAP": Generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession.
"Guarantor": Each of (i) P-Com Network Services, Inc., a Delaware
---------
corporation, (ii) P-Com United Kingdom, Inc., a Delaware corporation, (iii) P-
Com Finance Corporation, a Delaware corporation, (iv) Control Resources
Corporation, a Delaware corporation, (v) Telematics, Inc., a Virginia
corporation, and (vi) any Material Subsidiary which has delivered a guaranty to
the Agent pursuant to Section 6.1(n).
"Guaranty": That certain Subsidiary Guaranty dated as of the date
--------
hereof, executed by each Material Subsidiary in favor of the Agent.
"Intellectual Property Security Agreement": That certain Intellectual
----------------------------------------
Property Security Agreement dated as of the date hereof by and between Borrower
and Agent.
"Interest Payment Date": As to any Base Rate Loan until payment in
---------------------
full, the last day of each March, June, September and December commencing on the
first of such days to occur after such Base Rate Loan is made. As to any LIBO
Rate Loan with an Interest Period of three months or less until payment in full,
the last day of such Interest Period and the Maturity Date, and as to any LIBO
Rate Loan with an Interest Period in excess of three months until payment in
full, (i) the same day of each three months following the beginning of such
Interest Period, (ii) the last day of such Interest Period and (iii) the
Maturity Date.
"Interest Period": With respect to any LIBO Rate Loan:
---------------
(i) initially, the period commencing on, as the case may
be, the Borrowing or conversion date with respect to such LIBO Rate Loan and
ending one, two, three, six, nine or twelve months thereafter as selected by the
Borrower in its notice of Borrowing as provided in Section 2.1(b) or its notice
of conversion as provided in Section 2.4; and
5
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such LIBO Rate Loan and ending
one, two, three, six, nine or twelve months thereafter as selected by the
Borrower in its notice of continuation as provided in Section 2.4; provided,
--------
that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(a) if any Interest Period for a LIBO Rate Loan would
otherwise end on a day which is not a LIBO Business Day, that Interest Period
shall be extended to the next succeeding LIBO Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately preceding
LIBO Business Day;
(b) the Borrower may not select an Interest Period with
respect to any portion of principal of a LIBO Rate Loan which extends beyond a
date on which the Borrower is required to make a scheduled payment of that
portion of principal;
(c) the Borrower may not select an Interest Period of nine
or twelve months without the prior consent of all Lenders, which consent may be
granted or withheld in the sole discretion of such Lenders;
(d) there shall be no more than ten Interest Periods with
respect to LIBO Rate Loans outstanding at any time.
"Interest Rate Agreement": As applied to any Person, an interest rate
-----------------------
swap, cap or collar agreement or similar arrangement designed to protect that
Person against fluctuations in interest rates.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Investment": As applied to any Person, (i) any direct or indirect
----------
purchase or other acquisition of, or of a beneficial interest in, capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of, another Person, or (ii) any direct or indirect loan, extension of
credit, advance (other than advances to employees for moving, entertainment and
travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution to any other Person, including all
indebtedness and accounts receivable from the other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustment for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Issuing Bank": Union Bank of California, N.A., as issuer of the
------------
Letters of Credit.
6
"Lender": As defined in the introductory paragraph of this Agreement.
------
"Letter of Credit" or "Letters of Credit": Any standby letter of
---------------- -----------------
credit or similar instrument issued or to be issued by the Issuing Bank for the
account of the Borrower pursuant to Section 2.5 for the purpose of supporting
the obligations of the Borrower permitted under this Agreement.
"Letter of Credit Usage": At any date of determination, the sum of
----------------------
(i) the maximum aggregate amount that is or at any time thereafter may become
available for drawing under all Letters of Credit then outstanding and (ii) the
aggregate amount of all drawings under Letters of Credit honored by the Issuing
Bank and not theretofore reimbursed by the Borrower.
"LIBO Business Day": A day which is a Business Day and a day on which
-----------------
dealings in Dollar deposits may be carried out in the London interbank market.
"LIBO Rate": For each Interest Period (i) the rate of interest
---------
determined by the Agent at which U.S. dollar deposits for the relevant Interest
Period and in the approximate amount of the relevant LIBO Rate Loan would be
offered by the Agent to prime banks in the London interbank market as of 11:00
A.M. (London time) on the day which is two (2) LIBO Business Days prior to the
first day of such Interest Period, divided by (ii) a number equal to 1.00 minus
the aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day which is two (2) LIBO
Business Days prior to the beginning of such Interest Period (including basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other governmental authority
having jurisdiction with respect thereto, as in effect at the time the Agent
quotes the rate to the Borrower) for Eurocurrency funding of domestic assets
(currently referred to as "Eurocurrency liabilities" in Regulation D of such
Board) having a term equal to the relevant Interest Period which are required to
be maintained by a member bank of such System (such rate to be adjusted to the
next higher 1/16 of 1%).
"LIBO Rate Loans": Loans hereunder at such time as they accrue
---------------
interest at a rate based upon the LIBO Rate.
"Lien": Any lien, mortgage, deed of trust, pledge, security interest,
----
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Loan Documents": This Agreement, the Notes, each letter of credit
--------------
application, the Security Agreement, the Fee Letter, Financing Statements (Forms
UCC-1), the Intellectual Property Security Agreement, the Guaranty, the
Subsidiary Pledge and Security Agreement, the Subsidiary Intellectual Property
Security Agreements and all other documents delivered by any Loan Party to the
Agent, the Issuing Bank or any Lender in connection with this Agreement and/or
the credit extended hereunder.
"Loan Party": The Borrower and each Guarantor.
----------
7
"Loans": Revolving Loans made to the Borrower pursuant to Section
-----
2.1.
"Majority Lenders": As of any date of determination, Lenders owed
----------------
66.667% of the then aggregate unpaid principal amount of the Notes, or, if no
principal amount of the Notes is outstanding, then Lenders having 66.667% of the
Commitments.
"Material Adverse Effect": A material adverse effect on (a) the
-----------------------
business, assets, operations, prospects or financial or other condition of the
Borrower, individually, or the Borrower and its Subsidiaries, taken as a whole;
(b) the ability of Borrower to pay or perform in accordance with the terms of
this Agreement or any Loan Document; or (c) the rights and remedies of Agent or
any Lender under this Agreement or any of the Loan Documents.
"Maturity Date": April 30, 2001.
-------------
"Material Subsidiary": Any Subsidiary having a net worth or annual
-------------------
revenues of at least Ten Million Dollars ($10,000,000).
"Net Proceeds": With respect to any Equity Issuance, the gross
------------
proceeds received by the issuer from the issuance less all legal and accounting
expenses, commissions and other fees and expenses incurred or to be incurred and
all federal, state, local and foreign taxes assessed in connection therewith.
"Note" and "Notes": The Revolving Notes.
---- -----
"Permitted Liens": The following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or
claims (other than any such Lien imposed pursuant to Section 401(a)(29) or
412(n) of the Internal Revenue Code or by ERISA) to the extent not yet
delinquent or being contested in good faith and for which appropriate reserves
have been made in accordance with GAAP;
(ii) statutory Liens of landlords and statutory Liens of
carriers, warehousemen, mechanics and materialmen and other Liens imposed by law
incurred in the ordinary course of business securing obligations that are not
yet delinquent or are being contested in good faith and for which appropriate
reserves have been made in accordance with GAAP;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
8
(iv) easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material respect
with the use or value of such property;
(v) any attachment or judgment Lien not constituting an
Event of Default under Section 7.1(h); and
(vi) Liens not prior to the Lien of the Lenders which
constitute rights of set-off of a customary nature or bankers' Lien with respect
to amounts on deposit, arising by operation of law.
"Person": An individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Potential Event of Default": A condition or event which, after
--------------------------
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Receivables Facility": That certain Receivables Purchase Agreement
--------------------
dated as of March 26, 1998 by and between Borrower and Xxxxx Fargo HSBC Trade
Bank N.A., as the same may from time to time be modified, supplemented, amended,
restated, extended, renewed, or replaced in a manner no less favorable to
Lenders or with the prior written consent of all Lenders.
"Regulations G, T, U and X": Regulations G, T, U and X, respectively,
-------------------------
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"Revolving Commitment": The amount of Fifty Million Dollars
--------------------
($50,000,000) as such amount may be reduced pursuant to Section 2.1(e).
"Revolving Loans": As defined in Section 2.1(a).
---------------
"Revolving Note": As defined in Section 2.1(c).
--------------
"S.E.C.": The United States Securities and Exchange Commission and
------
any successor institution or body which performs the functions or substantially
all of the functions thereof.
"Security Agreement": The Security Agreement dated as of even date
------------------
herewith, between the Borrower and the Agent.
"Solvent": As to any Person at any time, that (a) the fair value of
-------
the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for
9
purposes of Section 101(32) of the United States Bankruptcy Code and, in the
alternative, for purposes of the California Uniform Fraudulent Transfer Act; (b)
the present fair saleable value of the property of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and mature; (c) such Person is able to pay its
debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in a business or a transaction for
which such Person's property would constitute unreasonably small capital.
"Subordinated Debt": Any Debt of the Borrower which is subordinated
-----------------
in right of payment to the obligations hereunder.
"Subsidiary": A corporation, partnership, association, joint venture
----------
or other business entity of which more than 50% of the total voting power of
shares of stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of Person or Persons
(whether directors, managers, trustees or other Persons performing similar
functions) having the power to direct or cause the direction of the management
and policies thereof are at the time owned, directly, or indirectly through one
or more intermediaries, or both, by the Borrower.
"Subsidiary Intellectual Property Security Agreements": Those certain
----------------------------------------------------
Intellectual Property Security Agreements, each dated as of the date hereof, by
and between the Agent and each of the Guarantors.
"Subsidiary Pledge and Security Agreement": That certain Subsidiary
----------------------------------------
Pledge and Security Agreement dated as of the date hereof, by and among each of
the Guarantors and the Agent.
"Synthetic Lease": As applied to any Person, obligations of such
---------------
Person, contingent or otherwise, under any lease of property or related
documents (including a separate purchase agreement) which provide that such
Person must purchase or cause another to purchase any interest in the leased
property and thereby guarantee a minimum residual value of the leased property
to the lessor.
1.2 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under GAAP. In
the event that GAAP changes during the
10
term of this Agreement such that the financial covenants contained in Sections
6.2(a) through (e) would then be calculated in a different manner or with
different components, (i) the Borrower and the Lenders agree to negotiate to
amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating the Borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP
and (ii) the Borrower shall be deemed to be in compliance with the financial
covenants contained in such Sections, pending reaching agreement on such
amendment, following any such change in GAAP if and to the extent that the
Borrower would have been in compliance therewith under GAAP as in effect
immediately prior to such change.
(c) The words "hereof", "herein" and "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 section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The terms defined in Section 1.1 include the plural as well as the
singular. Pronouns of either gender or neuter shall include, as appropriate,
the other pronoun forms. The terms "includes" and "including" shall not be
construed to imply any limitation.
ARTICLE II
THE LOANS
2.1 The Revolving Loans.
-------------------
(a) The Revolving Commitment. Each Lender agrees, severally and not
------------------------
jointly, on the terms and conditions hereinafter set forth, to make loans
("Revolving Loans") to the Borrower from time to time during the period from the
---------------
date hereof to and including the Maturity Date in an aggregate amount not to
exceed the amount set opposite such Lender's name on the signature pages hereof,
as such amount may be reduced pursuant to Section 2.1(e), provided, that no
Lender shall be obligated on any date to make a Loan which, when added to the
aggregate principal amount of outstanding Revolving Loans on such date plus the
Letter of Credit Usage, would exceed the Revolving Commitment then in effect.
Each borrowing under this Section (a "Borrowing") shall be in a minimum amount
---------
of $1,000,000. Each Borrowing shall be made on the same day by the
Lenders ratably according to their respective Commitments. Within the limits of
the Revolving Commitment and prior to the Maturity Date, the Borrower may
borrow, repay pursuant to Section 2.2(b) and reborrow under this Section,
provided, however, that at no time shall the aggregate principal
-------- -------
amount of outstanding Revolving Loans plus the Letter of Credit Usage then in
effect exceed the Revolving Commitment then in effect.
(b) Making the Revolving Loans.
--------------------------
(i) The Borrower may borrow under the Revolving Commitment on
any Business Day if the Borrowing is to consist of a Base Rate Loan and on any
LIBO
11
Business Day if the Borrowing is to consist of a LIBO Rate Loan, provided that
--------
the Borrower shall give the Agent irrevocable notice (which notice must be
received by the Agent prior to 10:00 A.M., San Francisco time) (i) three (3)
LIBO Business Days prior to the requested Borrowing date in the case of a LIBO
Rate Loan, and (ii) one (1) Business Day prior to the requested Borrowing date
in the case of a Base Rate Loan, specifying (A) the amount of the proposed
Borrowing, (B) the requested date of the Borrowing, (C) whether the Borrowing is
to consist of a LIBO Rate Loan or a Base Rate Loan, and (D) if the Loan is to be
a LIBO Rate Loan, the length of the Interest Period therefor. Promptly
following receipt of such notice, the Agent shall notify each Lender of the date
of the Loan, whether the Loan will be a Base Rate Loan or a LIBO Rate Loan, the
amount of that Lender's pro rata share of the Loan and, if the Loan is a LIBO
Rate Loan, of the applicable Interest Period. Not later than 2:00 P.M., San
Francisco time, on the date specified for any Loan, each Lender shall deposit
immediately available funds in the amount of its pro rata share of the Loan to
the account of the Agent set forth on the signature pages hereof. Upon
satisfaction of the applicable conditions set forth in Article IV, the Agent
will make available the proceeds of all such Loans to the Borrower by crediting
the account of the Borrower on the books of the Agent, or as otherwise directed
by the Borrower.
(ii) The notice of Borrowing may be given orally (including
telephonically) or in writing (including telex or facsimile transmission);
provided that any oral notice shall be confirmed in writing on the same Business
--------
Day and all written notices and confirmation shall be in the form of the Notice
of Revolving Loan attached hereto as Exhibit B. Any conflict regarding a notice
---------
or between an oral notice and a written notice applicable to the same Borrowing
shall be conclusively determined by the Agent's books and records absent
manifest error. The Agent's failure to receive any written notice of a
particular Borrowing made on oral notice shall not relieve the Borrower of its
obligations to repay the Borrowing made and to pay interest thereon. The Agent
shall not incur any liability to the Borrower in acting upon, and shall be
entitled to rely upon, any notice of Borrowing, or any notice of interest rate
conversion or extension or regarding any Letter of Credit, which the Agent
believes in good faith to have been given by a Person duly authorized to borrow
on behalf of the Borrower.
(iii) Unless the Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Borrowing, the
Agent may assume that such Lender has made such portion available to the Agent
on the date of such Borrowing in accordance with subsection (1) of this Section
2.1(b) and the Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (i) in the case of the Borrower, the interest
rate applicable at the time to such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Lender's pro
rata share of such Borrowing for purposes of this Agreement. The failure of any
Lender to make
12
available its pro rata share of any Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder, to make available its pro rata share of
such Borrowing on the date of such Borrowing, but no Lender shall be responsible
for the failure of any other Lender to make available its pro rata share of any
Borrowing on the date of any Borrowing.
(c) Revolving Notes. The Revolving Loans made by the Lenders
---------------
pursuant hereto shall be evidenced by promissory notes of the Borrower,
substantially in the form of Exhibits A-1 and A-2 hereto, with appropriate
--------------------
insertions (the "Revolving Notes"), payable to the order of each Lender and
---------------
representing the obligation of the Borrower to pay the aggregate unpaid
principal amount of all Revolving Loans made by that Lender, with interest
thereon as prescribed in Section 2.3. Each Lender is hereby authorized to record
in its books and records and on any schedule annexed to its Revolving Note, the
date and amount of each Revolving Loan made by that Lender, and the date and
amount of each payment of principal thereof, and in the case of LIBO Rate Loans,
the Interest Period and interest rate with respect thereto and any such
recordation shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded; provided that failure by any Lender to effect such
--------
recordation shall not affect the Borrower's obligations hereunder. Prior to the
transfer of a Revolving Note, the transferring Lender shall record such
information on any schedule annexed to and forming a part of such Revolving
Note.
(d) Commitment Fee. The Borrower agrees to pay to the Agent for the
--------------
ratable benefit of the Lenders a commitment fee on the average daily unused
portion of the Revolving Commitment, from the execution date of this Agreement
until the Maturity Date at the applicable Commitment Fee Rate per annum set
forth in Exhibit E hereto (the "Commitment Fee"), payable in arrears on the last
---------
day of each calendar quarter commencing on the first such date occurring after
the date of this Agreement, and on the Maturity Date. The Commitment Fee shall
be calculated on the basis of a 360-day year for the actual days elapsed, and
shall be non-refundable. For the purposes of calculating the Commitment Fee, the
Letter of Credit Usage shall be deemed a usage of the Revolving Commitment.
(e) Reduction of Revolving Commitment. The Revolving Commitment
---------------------------------
shall be permanently and automatically reduced (i) within one (1) Business Day
of the date on which Borrower or any Material Subsidiary receives any cash
proceeds from the incurrence, issuance or sale by Borrower or any Material
Subsidiary of any Debt (other than Debt permitted under Section 6.2), by an
amount equal to 100% of the cash proceeds received by Borrower or any Material
Subsidiary from such incurrence, issuance or sale, net of all taxes applicable
to and customary fees, commissions, costs and other expenses incurred in
connection with such issuance or sale; and (ii) within one (1) Business Day of
the date on which Borrower or any of its Subsidiaries receives any cash proceeds
from the sale, transfer or other disposition of any assets of Borrower or any
Subsidiaries (other than (x) inventory disposed of in the ordinary course of
business, or of worn-out or obsolete assets, (y) sales of receivables under the
Receivables Facility and (z) sales of equipment in connection with the lease
financing thereof within 60 days after the acquisition thereof), by an amount
equal to 100% of the cash proceeds received by Borrower or any Subsidiary from
such sale, transfer or disposition, net of selling expenses (including
Borrower's good faith estimate of income tax liabilities incurred in connection
with the receipt of such proceeds) ("Asset Sale Proceeds");
13
provided that if Borrower shall deliver a certificate of a responsible officer
--------
of Borrower to the Agent promptly following receipt of any such proceeds setting
forth the intention of Borrower or the applicable Subsidiary to use any portion
of such proceeds to purchase assets useful in the business of Borrower or the
applicable Subsidiary within 6 months of such receipt, such portion of such
proceeds shall not constitute Asset Sale Proceeds except to the extent not so
used within such 6-month period.
(f) Fees. From time to time, Borrower shall pay to the Agent non-
----
refundable fees as specified in the Fee Letter.
2.2 Repayment.
---------
(a) Mandatory Repayments. The aggregate principal amount of the
--------------------
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon and any other amounts due under this Agreement, shall be due and payable
in full on the Maturity Date. At any time the sum of the aggregate principal
amount of outstanding Revolving Loans plus the Letter of Credit Usage exceeds
the Revolving Commitment then in effect, the Borrower shall immediately repay
the Revolving Loans in an amount equal to the excess.
(b) Optional Prepayment. Subject to Section 3.7(b), the Borrower
-------------------
may at its option prepay the Loans, in whole or in part, at any time and from
time to time, provided that the Agent shall have received from the Borrower
--------
notice of any such prepayment at least one (1) Business Day prior to the date of
the proposed prepayment if such date is not the last day of the then current
Interest Period for each Loan being prepaid, in each case specifying the date
and the amount of prepayment. Partial prepayments hereunder shall be in an
aggregate principal amount of the lesser of (a) $1,000,000 and (b) the
outstanding balance of the Loan being prepaid .
2.3 Interest Rate and Payment Dates.
-------------------------------
(a) Payment of Interest. Interest with respect to each Loan shall
-------------------
be payable in arrears on each Interest Payment Date for such Loan, on the
Maturity Date and on the date of any prepayment.
(b) Base Rate Loans. Except as otherwise provided in Section 3.2,
---------------
Revolving Loans which are Base Rate Loans shall bear interest on the unpaid
principal amount thereof at a rate per annum equal to the Base Rate plus the
Applicable Margin.
(c) LIBO Rate Loans. Except as otherwise provided in Section 3.2,
---------------
Revolving Loans which are LIBO Rate Loans shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate per
annum equal to the LIBO Rate determined for such Interest Period in accordance
with the terms hereof plus the Applicable Margin.
2.4 Continuation and Conversion Options. The Borrower may elect from
-----------------------------------
time to time to convert its outstanding Loans from Loans bearing interest at a
rate determined by
14
reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis by giving the Agent irrevocable notice
prior to 10:00 A.M. San Francisco time (i) at least one (1) Business Day prior
to an election to convert Loans to Base Rate Loans and (ii) at least three
(3) LIBO Business Days' prior irrevocable notice of an election to convert Loans
to LIBO Rate Loans, provided that any conversion of Loans other than Base Rate
--------
Loans shall only be made on the last day of an Interest Period with respect
thereto, provided, further that no Loan may be converted to a Loan other than a
-------- -------
Base Rate Loan so long as an Event of Default or Potential Event of Default has
occurred and is continuing. The Borrower may elect from time to time to
continue its outstanding Loans other than Base Rate Loans upon the expiration of
the Interest Period(s) applicable thereto by giving to the Agent at least three
(3) LIBO Business Days' prior irrevocable notice of continuation of a LIBO Rate
Loan and the succeeding Interest Period(s) of such continued Loan or Loans will
commence on the last day of the Interest Period of the Loan to be continued,
provided that no Loan may be continued as a Loan other than a Base Rate Loan so
--------
long as an Event of Default or Potential Event of Default has occurred and is
continuing. Each notice electing to convert or continue a Loan shall be in the
form of Exhibit C hereto, and shall specify: (i) the proposed
---------
conversion/continuation date; (ii) the amount of the Loan to be
converted/continued; (iii) the nature of the proposed continuation/conversion;
and (iv) in the case of a conversion to, or continuation of, a Loan other than a
Base Rate Loan, the requested Interest Period, and shall certify that no Event
of Default or Potential Event of Default has occurred and is continuing. On the
date on which such conversion or continuation is being made each Lender shall
take such action as is necessary to effect such conversion or continuation. In
the event that no notice of continuation or conversion is received by the Agent
with respect to outstanding Loans other than Base Rate Loans, upon expiration of
the Interest Period(s) applicable thereto, such Loans shall continue with
Interest Periods having the same duration as the expiring Interest Periods.
Subject to the limitations set forth in this Section and in the definition of
Interest Period, all or any part of outstanding Loans may be converted or
continued as provided herein, provided that partial conversions or
--------
continuations with respect to Loans other than Base Rate Loans shall be in an
aggregate minimum amount of $1,000,000.
2.5 Letters of Credit
-----------------
(a) Letters of Credit. The Borrower may request from time to time
-----------------
during the period from the date hereof through the Maturity Date that the
Issuing Bank issue Letters of Credit for the account of the Borrower, provided
--------
that (i) Borrower shall not request that the Issuing Bank issue any Letter of
Credit, if after giving effect to such issuance, the sum of the aggregate
principal amount of outstanding Revolving Loans plus the Letter of Credit Usage
exceeds the Revolving Commitment then in effect, (ii) in no event shall the
Issuing Bank issue any Letter of Credit having an expiration date (x) later than
30 days prior to the Maturity Date or (y) more than one year from the date of
issuance or amendment, whichever is later, and (iii) Borrower shall not request
any Letter of Credit, if after giving effect to such issuance, the Letter of
Credit Usage exceeds Twenty Million Dollars ($20,000,000) or any regulatory,
legal or internal limit on the Issuing Bank's ability to issue the requested
Letter of Credit.
15
(b) Request for Issuance; Payments Under Letters of Credit.
------------------------------------------------------
Whenever the Borrower requests that the Issuing Bank issue a Letter of Credit,
it shall deliver to the Issuing Bank an executed application for such Letter of
Credit in the form customarily required by the Issuing Bank and the form of the
Letter of Credit requested, together with such other information or materials as
the Issuing Bank may request with respect to such Letter of Credit no later than
10:00 A.M., San Francisco time, at least three (3) Business Days in advance of
the proposed date of issuance. IN DETERMINING WHETHER TO PAY UNDER ANY LETTER OF
CREDIT, THE ISSUING BANK SHALL BE RESPONSIBLE ONLY TO DETERMINE THAT THE
DOCUMENTS AND CERTIFICATES REQUIRED TO BE DELIVERED UNDER THAT LETTER OF CREDIT
HAVE BEEN DELIVERED AND THAT THEY COMPLY ON THEIR FACE WITH THE REQUIREMENTS OF
THAT LETTER OF CREDIT.
(c) Issuance of Letters of Credit. Upon the satisfaction of all
------------------------------
relevant conditions set forth in Section 4.3, and provided that the issuance of
such Letter of Credit would not violate any internal policy of the Issuing Bank
at the time such issuance is requested, the Issuing Bank in respect of a
requested Letter of Credit shall issue a Letter of Credit by delivering the
Letter of Credit to the beneficiary, and shall promptly notify the Agent and
each Lender of the amount and terms thereof. If the Issuing Bank declines to
issue the requested Letter of Credit, it shall promptly so notify the Borrower
and the Borrower shall withdraw its application therefor.
(d) Participation by Lenders in Letters of Credit. Upon the
---------------------------------------------
issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably
purchased from the Issuing Bank, without recourse to or warranty from the
Issuing Bank, a pro rata undivided participation in the Letter of Credit, in an
amount equal to the face amount of the Letter of Credit multiplied by that
Lender's ratable share of the Revolving Commitment.
(e) Reimbursement of Amounts Drawn Under Letter of Credit. The
------------------------------------------------------
Issuing Bank shall notify the Borrower and the Agent of each request for a
drawing under a Letter of Credit, and the Borrower shall reimburse the Issuing
Bank for such amount in immediately available funds prior to 11:00 A.M., San
Francisco time, on the date of the drawing. In the event that the Borrower
shall fail to so reimburse the Issuing Bank, the Issuing Bank shall promptly
notify the Agent who shall promptly notify each Lender. Prior to 2:00 P.M., San
Francisco time, on the date of such notice, each Lender shall make a payment
under its participation in such Letter of Credit (which, except as provided in
Section 2.5(f)(ii), shall constitute a Revolving Loan to the Borrower) in an
amount equal to that Lender's ratable share of the unreimbursed amount of such
drawing, by depositing immediately available funds in such amount to the account
of the Agent set forth on the signature pages hereof. The Agent shall promptly
pay to the Issuing Bank the proceeds of such Revolving Loans, which shall be
used by the Issuing Bank to repay the unreimbursed amount. Such Revolving Loans
shall be evidenced by the Revolving Notes and shall initially be Base Rate
Loans. The obligation of each Lender to reimburse the Issuing Bank is absolute
and unconditional and shall not be affected by the occurrence of an Event of
Default or any other occurrence or event. Any such reimbursement shall not
relieve or otherwise impair the obligation of the Borrower to reimburse the
Issuing Bank for the amount of any payment made by the Issuing
16
Bank under any Letter of Credit as set forth herein. If any Lender fails to make
available to the Agent the amount of such Lender's participation in such Letter
of Credit as provided above, the Issuing Bank shall be entitled to recover such
amount on demand from such Lender together with interest thereon, for each day
from the date of notice to such Lender to the date such amount is paid to the
Issuing Bank at rate which is at all times equal to Federal Funds Rate.
(f) Compensation. The Borrower agrees to pay the following
-------------
amounts to the Agent with respect to Letters of Credit:
(i) with respect to each Letter of Credit, a Letter of Credit
fee for the period from and including the date of issuance of the Letter of
Credit to and including the date such Letter of Credit is drawn in full, expires
or is terminated for the ratable benefit of the Lenders at a rate per annum
equal to the Applicable Margin for LIBO Rate Loans multiplied by the stated
amount of the Letter of Credit, payable on the date of issuance of the Letter of
Credit for the period from the date of issuance to the last day of the next
occurring March, June, September and December, and thereafter payable quarterly
in arrears on the last day of each March, June, September and December;
(ii) with respect to drawings made under any Letter of
Credit, to the extent a Revolving Loan is not made to reimburse the Issuing Bank
for each such drawing, or the Issuing Bank is not otherwise reimbursed for any
reason, interest, for the ratable benefit of the Lenders, payable on demand, on
the amount paid by the Issuing Bank in respect of each such drawing from the
date of the drawing through the date such amount is reimbursed the Borrower at a
rate which is at all times equal to two percent (2%) per annum in excess of the
Base Rate in effect from time to time ;
(iii) with respect to the amendment or transfer of each
Letter of Credit and each drawing made thereunder, for the account of the
Issuing Bank, documentary and processing charges in accordance with the Issuing
Bank's standard schedule for such charges in effect at the time of amendment,
transfer or drawing, as the case may be;
(iv) with respect to each Letter of Credit, payable on the
date of issuance of such Letter of Credit, a non-refundable Letter of Credit fee
for the account of the Issuing Bank as specified in the Fee Letter.
(g) Obligations Absolute. The obligations of the Borrower to
---------------------
reimburse the Issuing Bank for drawings made under each Letter of Credit and the
obligation of the Lenders under Section 2.5(e) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against the beneficiary or any
transferee of the Letter of
17
Credit (or any persons or entities for whom any such transferee may be acting),
the Agent or any Lender or any other person or entity, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between the Borrower and the
beneficiary for which the Letter of Credit was procured);
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) payment against any draft, document or other demand for
payment that does not comply with the terms of the Letter of Credit, provided
that such payment does not constitute gross negligence or willful misconduct on
the part of the Issuing Bank; or
(v) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
(h) Payments Avoided. If any payment received on account of any
----------------
reimbursement obligation in respect of a Letter of Credit and distributed to a
Lender as a participant under this Section 2.5 is thereafter set aside, avoided
or recovered from the Issuing Bank in connection with any receivership,
liquidation, reorganization or bankruptcy proceeding relating to the Borrower,
each Lender that received a distribution in respect of such payment shall, upon
demand by the Agent, pay to the Issuing Bank the amount of such distribution
received by such Lender.
2.6 Security for Loans. As security for the payment and performance of
------------------
its obligations hereunder, the Borrower hereby grants to the Agent as collateral
agent for the Lenders a first priority security interest (subject to Permitted
Liens or other Liens permitted under this Agreement) in all of the Borrower's
right, title and interest in and to the collateral described in the security
agreement executed by the Borrower in favor of the Agent as collateral agent for
the Lenders.
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
3.1 Use of Proceeds. The proceeds of the Loans hereunder shall be used by
---------------
the Borrower for working capital and Acquisitions permitted under this
Agreement, and for general corporate purposes.
3.2 Post Maturity Interest. Notwithstanding anything to the contrary
----------------------
contained in Section 2.3, if all or a portion of the principal amount of any of
the Loans made hereunder or any interest accrued thereon shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), any such
overdue amount shall bear interest at a rate per annum
18
which is equal to the greater of (a) two percent (2%) above the highest rate
which would otherwise be applicable pursuant to Section 2.3 and (b) two percent
(2%) above the Base Rate, from the date of such nonpayment until paid in full
(after as well as before judgment), payable on demand. In addition, such Loan,
if a Loan other than a Base Rate Loan, shall be converted to a Base Rate Loan at
the end of the then current Interest Period therefor.
3.3 Computation of Interest and Fees.
--------------------------------
(a) Calculations. Interest in respect of Base Rate Loans when the
------------
Base Rate is determined by Union Bank of California N.A.'s "Base Commercial
Lending Rate" shall be calculated on the basis of a 365 day year for the actual
days elapsed, and otherwise shall be calculated on the basis of a 360 day year
for the actual days elapsed. Interest in respect of LIBO Rate Loans, and all
fees hereunder, shall be calculated on the basis of a 360 day year for the
actual days elapsed. Interest payable pursuant to Section 2.5 shall be
calculated on the basis of a 360 day year for the actual days elapsed. Any
change in the interest rate on a Base Rate Loan resulting from a change in the
Base Rate shall become effective as of the opening of business on the day on
which such change in the Base Rate shall become effective. In computing interest
on any Loan, the date of the making of the Loan shall be included and the date
of payment shall be excluded; provided that if a Loan is repaid on the same day
--------
on which it is made, one day's interest shall be paid on that Loan.
(b) Determination by Agent. Each determination of an interest
----------------------
rate or fee by the Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower in the absence of manifest error.
3.4 Payments. The Borrower shall make each payment of principal, interest
--------
and fees hereunder and under the Notes, without setoff or counterclaim, not
later than 10:00 A.M., San Francisco time, on the day when due in lawful money
of the United States of America to the Agent at the office of the Agent
designated from time to time in immediately available funds. The Borrower
hereby authorizes the Agent with notice to the Borrower (i) to charge its
accounts with the Agent in order to cause payment to be made to the Agent of all
principal, interest, fees and expenses due hereunder (subject to sufficient
funds being available in its accounts for that purpose), and (ii) to make
Revolving Loans in order to cause payment to be made to Agent of all interest,
fees and expenses due hereunder. The Agent shall promptly provide notice to the
Borrower of any charge or the making of any such Revolving Loan. The Agent
shall promptly pay to each Lender its pro rata share of each payment received by
the Agent.
3.5 Payment on Non-Business Days. Whenever any payment to be made
----------------------------
hereunder or under the Notes shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding Business Day, and
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
3.6 Reduced Return. If any Lender or the Issuing Bank shall reasonably
--------------
have determined that, after the date hereof, the adoption of any applicable law,
regulation, rule or regulatory requirement ("Requirement") regarding capital
-----------
adequacy, or any change therein, or
19
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender or the Issuing Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on any Lender's or the Issuing
Bank's capital as a consequence of its undrawn Commitments and obligations
hereunder, the Letters of Credit issued hereunder or its obligation to purchase
a participation in the Letters of Credit to a level below that which would have
been achieved but for such Requirement, change or compliance (taking into
consideration that Lender's or the Issuing Bank's, as the case may be, policies
with respect to capital adequacy) by an amount deemed by that Lender or the
Issuing Bank, as the case may be, to be material, then from time to time,
within five (5) Business Days after demand by such Lender or the Issuing Bank,
as the case may be, the Borrower shall pay to that Lender or the Issuing Bank,
as the case may be, such additional amount or amounts as will compensate that
Lender or the Issuing Bank, as the case may be, for such reduction.
3.7 Indemnities.
-----------
(a) General. Whether or not the transactions contemplated hereby
-------
shall be consummated, the Borrower agrees to indemnify, pay and hold the Agent,
the Issuing Bank and each Lender, and the shareholders, officers, directors,
employees and agents of the Agent, the Issuing Bank and each Lender (each, an
"Indemnified Person"), harmless from and against any and all claims,
-------------------
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees and costs (including the reasonable estimate of the allocated
cost of in-house legal counsel and staff) and including costs of investigation,
document production, attendance at a deposition, or other discovery, with
respect to or arising out of (i) any proposed acquisition by the Borrower or any
of its Subsidiaries of any Person or any securities (including a self-tender),
(ii) this Agreement or any other Loan Document or any use of proceeds hereunder,
(iii) the issuance of any Letter of Credit or the failure by the Issuing Bank to
honor a drawing under a Letter of Credit as a result of any act or omission of
any government or governmental authority, or (iv) any claim, demand, action or
cause of action arising from any of the foregoing being asserted against the
Agent, any Lender, the Borrower or any of its Subsidiaries, whether or not any
Indemnified Person is a party thereto, including, without limitation, any claim
under any environmental law, rule or regulation, or any dispute between or among
any parties to the Loan Documents (collectively, the "Indemnified Liabilities"),
-----------------------
except to the extent such Indemnified Liabilities result from the gross
negligence or willful misconduct of such Indemnified Person. If any claim is
made, or any action, suit or proceeding is brought, against any Indemnified
Person pursuant to this Section, the Indemnified Person shall notify the
Borrower of such claim or of the commencement of such action, suit or
proceeding, and the Borrower at its option may, or at the request of the
Indemnified Person will, control and direct the defense of such action, suit or
proceeding, employing counsel selected by the Borrower and reasonably
satisfactory to the Indemnified Person, and pay the reasonable fees and expenses
of such counsel; provided, however, that any Indemnified Person may at its own
-------- -------
expense retain separate counsel to participate in such defense. Notwithstanding
the foregoing, such Indemnified Person shall have the right to employ separate
counsel at the Borrower's expense and to control and direct its own defense
20
of such action, suit or proceeding if, in the reasonable opinion of counsel to
such Indemnified Person, (i) there are or may be legal defenses available to
such Indemnified Person or to other Indemnified Persons that are different from
or additional to those available to the Borrower that the Borrower cannot
assert, or (ii) a conflict or potential conflict exists between the Borrower and
such Indemnified Person that would make such separate representation advisable.
The Borrower agrees that it will not, without the prior written consent of the
Agent, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding with respect to which
the indemnification provided for in this Section is available (whether or not
any Indemnified Person is a party thereto) unless such settlement, compromise or
consent includes an unconditional release of the Agent and each other
Indemnified Person from all liability arising or that may arise out of such
claim, action, suit or proceeding. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 3.7 may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by any Indemnified Person. This covenant shall survive
termination of this Agreement and payment of the outstanding Notes.
(b) Funding Losses. The Borrower agrees to indemnify each Lender
--------------
and to hold each Lender harmless from any loss or expense including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to maintain its LIBO
Rate Loans hereunder, which such Lender may sustain or incur as a consequence of
(i) default by the Borrower in payment of the principal amount of or interest on
the LIBO Rate Loans of that Lender, (ii) default by the Borrower in making a
conversion or continuation after the Borrower has given a notice thereof, (iii)
default by the Borrower in making any payment after the Borrower has given a
notice of payment or (iv) the Borrower making any payment of a LIBO Rate Loan on
a day other than the last day of the Interest Period for such Loan. For purposes
of this Section and Section 3.12, it shall be assumed that the affected Lender
had funded or would have funded 100%, as the case may be, of a LIBO Rate Loan in
the London interbank market for a corresponding amount and term. The
determination of such amount by such Lender shall be presumed correct in the
absence of manifest error. This covenant shall survive termination of this
Agreement and payment of the outstanding Notes.
(c) Letters of Credit. As between the Borrower and the Issuing
------------------
Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit by, the respective beneficiaries of the Letters of Credit.
In furtherance and not in limitation of the foregoing, the Issuing Bank shall
not be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of the Letters of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission
21
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) for errors in interpretation of technical
terms; (vi) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the control of the
Issuing Bank, including any act or omission by any government or governmental
authority. None of theabove shall affect, impair, or prevent the vesting of any
of the Issuing Bank's rights or powers hereunder. In furtherance and extension
and not in limitation of the specific provisions set forth herein, any action
taken or omitted by the Issuing Bank, under or in connection with the Letters of
Credit or the related certificates, if taken or omitted in good faith, shall not
put the Issuing Bank under any resulting liability to the Borrower.
Notwithstanding the foregoing, Issuing Bank shall not be relieved of any
liability it may otherwise have as a result of its gross negligence or willful
misconduct.
3.8 Funding Sources. Nothing in this Agreement shall be deemed to
---------------
obligate any Lender to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by any Lender that it has obtained or
will obtain the funds for any Loan in any particular place or manner.
3.9 Sharing of Payments, Etc. If any Lender shall obtain any payment
-------------------------
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans owing to it in excess of its ratable share
of payments on account of the Loans obtained by all the Lenders, then such
Lender shall forthwith purchase from the other Lenders such participations in
the Loans owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
-------- --------
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 3.9 or
any other provision of this Agreement may, to the fullest extent permitted by
law, exercise all of its rights of payment (including the right to set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
3.10 Inability to Determine Interest Rate. In the event that the Agent
------------------------------------
or any Lender shall have determined (which determination shall be conclusive and
binding upon the Borrower) that by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for ascertaining
the LIBO Rate applicable pursuant to Section 2.3 for any Interest Period with
respect to a LIBO Rate Loan that will result from a requested LIBO Rate Loan or
that such rate of interest does not adequately cover the cost of funding such
Loan, the Agent or such Lender shall forthwith give notice of such determination
to the Borrower not later than 1:00 P.M., San Francisco time, on the requested
22
Borrowing date, the requested conversion date or the last day of an Interest
Period of a Loan which was to have been continued as a LIBO Rate Loan. If such
notice is given and has not been withdrawn (i) any requested LIBO Rate Loan
shall be made as a Base Rate Loan, or, at the Borrower's option, such Loan shall
not be made, (ii) any Loan that was to have been converted to a LIBO Rate Loan
shall be continued as, or converted into, a Base Rate Loan and (iii) any
outstanding LIBO Rate Loan shall be converted, on the last day of the then
current Interest Period with respect thereto, to a Base Rate Loan. Until such
notice has been withdrawn by the Agent, no further LIBO Rate Loans shall be made
and the Borrower shall not have the right to convert a Loan to a LIBO Rate Loan.
The Agent will review the circumstances affecting the London interbank market
from time to time and the Agent will withdraw such notice at such time as it
shall determine that the circumstances giving rise to said notice no longer
exist.
3.11 Requirements of Law. In the event that any change after the date
-------------------
hereof in any law, regulation or directive or in the interpretation or
application thereof or compliance by any Lender or the Issuing Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority, agency or instrumentality not in effect on
the date hereof:
(a) does or shall subject any Lender or the Issuing Bank to any tax
of any kind whatsoever (other than any income or franchise tax) with respect to
this Agreement, any Note or any Loan made hereunder, or any Letter of Credit
issued hereunder, or change the basis of taxation of payments to any Lender or
the Issuing Bank of principal, fee, commission, interest or any other amount
payable hereunder (except for changes in the rate or amount of any income or
franchise tax imposed on such Lender or the Issuing Bank);
(b) does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, Letters of Credit issued by, or other credit extended by,
or any other acquisition of funds by, any office of any Lender or the Issuing
Bank;
(c) does or shall impose on any Lender or the Issuing Bank any
other condition;
and the result of any of the foregoing is to increase the cost to any Lender or
the Issuing Bank of maintaining its Revolving Commitment or the LIBO Rate Loans,
or of issuing, renewing or maintaining the Letters of Credit or purchasing a
participation therein, or to reduce any amount receivable thereunder (which
increase or reduction shall be determined by such Lender's or the Issuing
Bank's, as the case may be, reasonable allocation of the aggregate of such cost
increases or reduced amounts receivable resulting from such events), then, in
any such case, the Borrower shall pay to such Lender or the Issuing Bank, as the
case may be, within three (3) Business Days of its demand, any additional
amounts necessary to compensate such Lender or the Issuing Bank, as the case may
be, for such additional cost or reduced amount receivable as determined by such
Lender or the Issuing Bank, as the case may be, with respect to this Agreement;
provided that before making such demand, each
--------
23
Lender or Issuing Bank, as the case may be, agrees to use its reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different lending office if the making of such a designation would
avoid, or reduce the amount of, such additional cost or reduced amount, and
would not, in the reasonable judgment of such Lender or Issuing Bank, as the
case may be, be otherwise disadvantageous to such Lender or Issuing Bank. If any
Lender or the Issuing Bank becomes entitled to claim any additional amounts
pursuant to this Section, it shall notify the Borrower of the event by reason of
which it has become so entitled. A statement incorporating the calculation as to
any additional amounts payable pursuant to the foregoing sentence submitted by
the affected Lender or the Issuing Bank, as the case may be, to the Borrower
shall be conclusive in the absence of manifest error.
3.12 Illegality. Notwithstanding any other provisions herein, if any
----------
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful, impossible, or
impracticable for any Lender to make or maintain LIBO Rate Loans as contemplated
by this Agreement, (a) the commitment of such Lender hereunder to make LIBO Rate
Loans or convert Base Rate Loans to LIBO Rate Loans shall forthwith be canceled
and (b) such Lender's Loans then outstanding as LIBO Rate Loans, if any, shall
be converted automatically to Base Rate Loans on the next succeeding Interest
Payment Date or within such earlier period as allowed by law. The Borrower
hereby agrees to pay each Lender, within three (3) Business Days of its demand,
any additional amounts necessary to compensate such Lender for any costs
incurred by such Lender in making any conversion in accordance with this
Section, including, but not limited to, any interest or fees payable by such
Lender to lenders of funds obtained by it in order to make or maintain its LIBO
Rate Loans hereunder (such Lender's notice of such costs, as certified to the
Borrower and the Agent to be conclusive absent manifest error).
ARTICLE IV
CONDITIONS OF LENDING
4.1 Conditions Precedent to Initial Loans. The obligation of each
-------------------------------------
Lender to make its initial Loan is subject to the conditions precedent that:
(a) The Agent shall have received on or before the day of the
initial Borrowing the following, each dated on or about the date hereof (except
for the documents referred to in clauses (i) and (v)), in form and substance
satisfactory to the Agent and (except for the Notes) in sufficient copies for
each Lender:
(i) Copies of the Certificate of Incorporation, or other
organizational document of each Loan Party, certified as of a recent date by the
Secretary of State of its state of formation or incorporation;
(ii) Copies of the Bylaws, if any, of each Loan Party,
certified by the Secretary or an Assistant Secretary of such Loan Party;
24
(iii) Copies of resolutions of the Board of Directors or other
authorizing documents of each Loan Party, approving the Loan Documents and the
Borrowings and the reimbursement obligations under the Letters of Credit issued
hereunder;
(iv) An incumbency certificate or equivalent document
executed by the Secretary or an Assistant Secretary of each Loan Party
certifying the names and signatures of the officers of such Loan Party or other
Persons authorized to sign the Loan Documents and the other documents to be
delivered hereunder;
(v) a good standing certificate for each Loan Party, issued
as of a recent date by the Secretary of State of (A) the state in which such
Loan Party is incorporated or formed and (B) each state in which it owns
material assets and conducts material operations.
(vi) The Notes issued by the Borrower to the order of each
Lender;
(vii) This Agreement, including all exhibits and schedules
hereto, duly executed by the Borrower, the Agent, the Syndication Agent and the
Lenders;
(viii) A Notice of Revolving Loan, executed by the chief
financial officer of Borrower;
(ix) The Guaranty, duly executed by each Guarantor;
(x) The Security Agreement, duly executed by the Borrower,
and the Subsidiary Pledge and Security Agreement, duly executed by each
Guarantor together with (A) certificates representing the Pledged Shares
referred to in Schedule II to each of the Security Agreement and the Subsidiary
Pledge and Security Agreement, accompanied by undated stock powers executed in
blank, and (B) evidence satisfactory to the Agent that all other actions
necessary or advisable to perfect and protect the security interest created by
the Security Agreement and the Subsidiary Pledge and Security Agreement have
been taken, including delivery to the Agent of financing statements (Forms UCC-
1) duly executed by the Borrower and each Guarantor in form sufficient for
filing in all offices in which the Agent or Lenders may consider filing to be
appropriate in order to perfect the Lenders' security interest;
(xi) Certificates as to coverage under the insurance policies
required by the Security Agreement and the Subsidiary Pledge and Security
Agreement, each of which shall be endorsed or otherwise amended to include a
standard lender's loss payable endorsement and to name the Agent as additional
insured, in form and substance satisfactory to the Agent;
(xii) The Intellectual Property Security Agreement, duly
executed by the Borrower, and the Subsidiary Intellectual Property Security
Agreements, duly executed by each Guarantor, each in form sufficient for
recording in the United States Patent and Trademark Office and the United States
Copyright Office;
25
(xiii) The Fee Letter, duly executed by the Borrower, and such
other matters as the Agent acting on behalf of the Lenders may reasonably
request.
(b) The Borrower shall have paid to the Agent, for distribution (as
appropriate) to the Agent and/or the Lenders, the fees payable as required in
Section 2.1 and as specified in the Fee Letter.
(c) The Borrower shall have paid to Syndication Agent the fees
payable as specified in a separate letter between Borrower and Syndication
Agent.
(d) The Borrower shall have furnished to the Agent and each Lender
audited consolidated financial statements of Borrower for Borrower's fiscal year
ended December 31, 1997, prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm acceptable to the Agent;
(e) The Borrower shall have executed and delivered all financing
statements, notices, and other documents necessary or appropriate to perfect (to
the extent such perfection can be effected by such filings) the security
interest of Agent in the assets of Borrower in the U.S. covered by the Security
Agreement, and such financing statements, notices and other documents shall have
been filed or recorded with or delivered to the appropriate Person;
(f) The Borrower shall have delivered to Lenders one or more legal
opinions from its counsel, which opinions shall be acceptable to Lenders;
(g) All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to the Agent and
its counsel, and each Lender, and the Agent and the Agent's counsel shall have
received any and all further information and documents which the Agent or such
counsel may reasonably have requested in connection therewith, such documents
where appropriate to be certified by proper corporate or governmental
authorities.
4.2 Conditions Precedent to Each Borrowing. The obligation of each
--------------------------------------
Lender to make a Loan on the occasion of each Borrowing (including the initial
Borrowing) shall be subject to the further conditions precedent that on the date
of such Borrowing:
(a) the following statements shall be true and the Agent shall have
received the notice required by Section 2.1(b), which notice shall be deemed to
be a certification by the Borrower that:
(i) the representations and warranties contained in Section
5.1 and in the other Loan Documents are correct in all material respects on and
as of the date of such Borrowing as though made on and as of such date (except
to the extent they relate specifically
26
to any earlier date, in which case such representations and warranties shall
continue to have been correct in all material respects as of such date).
(ii) no event has occurred and is continuing, or would result
from such Borrowing, which constitutes an Event of Default or Potential Event of
Default, and
(iii) all Loan Documents are in full force and effect,
(iv) after giving effect to such requested Loan, the
aggregate outstanding principal amount of the Loans plus the Letter of Credit
Usage shall not exceed the Revolving Commitment then in effect, and
(b) each Lender shall have received such other approvals, opinions
or documents as any Lender or the Agent may reasonably request.
4.3 Conditions Precedent to Each Letter of Credit. The issuance of any
---------------------------------------------
Letter of Credit hereunder is subject to the prior or concurrent satisfaction of
all of the following conditions:
(a) On or before three (3) Business Days prior to the date of
issuance of the initial Letter of Credit, each of the conditions set forth in
Section 4.1 shall have been satisfied or waived and the initial Loan shall have
been made hereunder.
(b) On or before the date of issuance, the Issuing Bank shall have
received the executed application for such Letter of Credit in the form
customarily required by the Issuing Bank and all other information specified in
Section 2.5(b) and such other documents as the Issuing Bank may reasonably
require in connection with the issuance of such Letter of Credit.
(c) On the date of issuance, all conditions precedent described in
Section 4.2 shall be satisfied to the same extent as though the issuance of such
Letter of Credit were the making of a Loan and the date of issuance of such
Letter of Credit were the date of a Borrowing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties. The Borrower represents and
------------------------------
warrants as follows:
(a) Organization. Each Loan Party is duly organized, validly
------------
existing and in good standing under the laws of the state of its formation. Each
Loan Party is also duly authorized, qualified and licensed in all applicable
jurisdictions, and under all applicable laws, regulations, ordinances or orders
of public authorities, to carry on its business in the locations
27
and in the manner presently conducted, except where failure to be so qualified
would not reasonably be expected to have a Material Adverse Effect.
(b) Authorization, Execution and Delivery. The execution, delivery
-------------------------------------
and performance by each Loan Party of the Loan Documents to which it is a party,
and the making of Borrowings hereunder, are within such Loan Party's corporate
powers, have been duly authorized by all necessary corporate action, and do not
contravene (i) such Loan Party's charter, by-laws or other organizational
document or (ii) except to the extent not resulting in a Material Adverse
Effect, any law or regulation (including Regulations U and X) or any contractual
restriction binding on or affecting such Loan Party. Each of the Loan Documents
have been duly executed and delivered by each Loan Party which is a party
thereto.
(c) Governmental Consents. Except for the filings required to
---------------------
perfect the security interest of Agent in the collateral as specified in the
Security Agreement or Intellectual Property Security Agreement, no authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body (except routine reports required
pursuant to the Securities Exchange Act of 1934, as amended (if such act is
applicable to any Loan Party), which reports will be made in the ordinary course
of business) is required for the due execution, delivery and performance by each
Loan Party of the Loan Documents to which it is a party or by which it is bound.
(d) Executive Offices; FEIN. As of the date of this Agreement, the
-----------------------
current location of Borrower's chief executive office and principal place of
business, together with each location at which any Inventory is located, are set
forth on Schedule 5.1(d), and, except as set forth on Schedule 5.1(d), none of
--------------- ---------------
such locations have changed within the twelve (12) months preceding the
execution date of this Agreement. In addition, Schedule 5.1(d) lists the
---------------
federal employer identification number of Borrower.
(e) Validity. The Loan Documents are the binding obligations of
--------
the Borrower and each other Loan Party which is a party thereto enforceable in
accordance with their respective terms, except in each case as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.
(f) Financial Condition. The balance sheets of the Borrower and
-------------------
its consolidated Subsidiaries as at December 31, 1997 and the related statements
of income and retained earnings of the Borrower and its consolidated
Subsidiaries for the fiscal year then ended, copies of which have been furnished
to each Lender, fairly present the financial condition of the Borrower and its
consolidated Subsidiaries as at such dates and the results of the operations of
the Borrower and its consolidated Subsidiaries for the respective periods ended
on such dates, all in accordance with GAAP, consistently applied, and since
December 31, 1997 there has been no material adverse change in the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole.
28
(g) Litigation. Except as set forth on Schedule 5.1(g), there is
---------- ---------------
no pending or threatened action or proceeding affecting the Borrower or any of
its Subsidiaries before any court, governmental agency or arbitrator, which
would reasonably be expected to have a Material Adverse Effect.
(h) Employee Benefit Plans. Neither the Borrower nor any Material
----------------------
Subsidiary is party to any employee benefit plans subject to ERISA.
(i) Disclosure. No representation or warranty of the Borrower
----------
contained in this Agreement or any other document, certificate or written
statement furnished to the Agent or any Lender by or on behalf of the Borrower
for use in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact (known to the Borrower in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Borrower (other than matters of a
general economic nature) which materially adversely affects the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole, which has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Agent or any Lender for use in connection with the transactions
contemplated hereby.
(j) Margin Stock. The aggregate value of all margin stock (as
------------
defined in Regulation U) directly or indirectly owned by the Borrower and its
Material Subsidiaries is less than 25% of the aggregate value of the Borrower's
assets. No proceeds of any Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(k) Environmental Matters. Except as set forth in Schedule 5.1(k)
--------------------- ---------------
or where no Material Adverse Effect has occurred or would reasonably be expected
to occur as a result, none of Borrower's or any Material Subsidiary's properties
or assets has ever been used by Borrower or any Material Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets in the
U.S. has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property in the U.S.
owned by Borrower or any Material Subsidiary; and neither Borrower nor any
Material Subsidiary has received a summons, citation, notice, or directive from
the Environmental Protection Agency or any other federal, state or other U.S.
governmental agency concerning any action or omission by Borrower or any
Material Subsidiary resulting in the release or other disposition of hazardous
waste or hazardous substances into the environment.
(l) Employee Matters. There is no strike or work stoppage in
----------------
existence or threatened involving the Borrower or its Material Subsidiaries that
may materially adversely
29
affect the consolidated financial condition or operations of the Borrower or
that may have a material adverse effect on the Borrower's ability to perform its
obligations under the Loan Documents, having regard for its other financial
obligations.
(m) Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Schedule 5.1(m), Borrower has no
------------ ---------------
Subsidiaries, is not engaged in any joint venture or partnership with any other
Person, or is an Affiliate of any other Person. Schedule 5.1(m) sets forth all
---------------
of the Borrower's Material Subsidiaries as of the date of this Agreement. All
of the issued and outstanding capital stock of Borrower and each Subsidiary is
owned by each of the stockholders and in the amounts set forth on Schedule
--------
5.1(m). Except as set forth in Schedule 5.1(m), there are no outstanding rights
------ ---------------
to purchase, options, warrants or similar rights or agreements pursuant to which
Borrower may be required to issue, sell, repurchase or redeem any of its capital
stock or other equity securities or any capital stock or other equity securities
of its Subsidiaries.
(n) Government Regulation. Borrower is not an "investment
---------------------
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, and "investment company," as such terms are defined in the Investment
Company Act of 1940 as amended. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, or any other
federal or state statute that restricts or limits its ability to incur
indebtedness or to perform its obligations hereunder. The making of the
Revolving Loans by Lenders to Borrower, the issuance of Letters of Credit on
behalf of Borrower, the application of the proceeds of Collateral and repayment
of the Revolving Loans will not violate any provision of any such statute or any
rule, regulation or order issued by the S.E.C.
(o) Taxes. Except where the failure to do so would not reasonably
-----
be expected to have a Material Adverse Effect, all tax returns, reports and
statements, including information returns, required by any governmental
authority to be filed by Borrower have been filed with the appropriate
governmental authority and all claims asserted by any such authority have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof (or any such fine, penalty, interest,
late charge or loss has been paid), excluding any such claims being contested in
good faith and for appropriate reserves have been established on Borrower's
financial statements. Proper and accurate amounts have been withheld by
Borrower from its employees for all periods in full and complete compliance with
all applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective governmental authorities. Schedule 5.1(o)
---------------
sets forth as of the execution date of this Agreement those taxable years for
which Borrower's tax returns are currently being audited by the IRS or any other
applicable governmental authority and any assessments or threatened assessments
in connection with such audit, or otherwise currently outstanding.
(p) Brokers. No broker or finder acting on behalf of Borrower
-------
brought about the obtaining, making or closing of the Revolving Loans, and
Borrower has no obligation to any Person in respect of any finder's or brokerage
fees in connection therewith.
30
(q) Intellectual Property. As of the execution date of this
---------------------
Agreement, Borrower owns or has rights to use all intellectual property
(including all patents, trademarks, copyrights, licenses to use any of the
foregoing, trade secrets, and know-how) necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it
except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect, and each patent, trademark, copyright and license held
by Borrower and registered or covered by a registration application is listed,
together with application or registration numbers, as applicable, on Schedule
--------
5.1(q) hereto, and on Exhibits A, B, and C to the Intellectual Property Security
------
Agreement. Borrower has not received written notice from any Person expressly
asserting that the Borrower has conducted its business in infringement of or
interference with any intellectual property of any other Person.
(r) Insurance. Schedule 5.1(r) lists all insurance policies of any
--------- ---------------
nature maintained, as of the execution date of this Agreement, for current
occurrences by Borrower, as well as a summary of the terms of each such policy.
(s) Customer and Trade Relations. As of the execution date of this
----------------------------
Agreement, there exists no actual or, to the knowledge of Borrower, threatened
in writing termination or cancellation of, or any material adverse modification
or change in: (i) the business relationship of Borrower with any customer or
group of customers whose purchases during the preceding twelve (12) months
caused them to be ranked among the ten largest customers of Borrower; or (ii)
the business relationship of Borrower with any supplier material to its
operations.
(t) Solvency. Both before and after giving effect to (i) the
--------
Revolving Loans and Letters of Credit to be made or issued on the date of this
Agreement or such other date as Revolving Loans and Letters of Credit requested
hereunder are made or issued, (ii) the disbursement of the proceeds of such
Revolving Loans pursuant to the instructions of Borrower, and (c) the payment
and accrual of all transactions costs in connection with the foregoing, Borrower
is Solvent.
ARTICLE VI
COVENANTS
6.1 Affirmative Covenants. So long as any Note shall remain unpaid,
---------------------
any Letter of Credit shall remain outstanding or unreimbursed or any Lender
shall have any Commitment hereunder, the Borrower will, unless the Majority
Lenders shall otherwise consent in writing:
(a) Financial Information. Furnish to each Lender and the Agent:
---------------------
(i) as soon as available, but in any event within one
hundred (100) days after the end of each fiscal year of the Borrower, a copy of
the consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of each fiscal year and the related
consolidated and consolidating statements of income and
31
retained earnings (or comparable statement) and changes in financial position
and cash flow for such year, setting forth in each case in comparative form the
figures as at the end of the previous year as to the balance sheet and the
figures for the previous corresponding period as to the other statements,
accompanied by an unqualified report and opinion thereon of independent
certified public accountants acceptable to the Agent, all such financial
statements to be complete and correct in all material respects and in accordance
with GAAP applied consistently throughout the fiscal year (except as approved by
such accountants and disclosed therein);
(ii) as soon as available, but in any event within fifty (50)
days after the end of each fiscal quarter of Borrower, a copy of the unaudited
consolidated and consolidating balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such period and the related unaudited
consolidated and consolidating statements of income and retained earnings (or
comparable statement) and changes in financial position and cash flow for such
period and year to date, setting forth in each case in comparative form the
figures as at the end of the previous fiscal year as to the balance sheet and
the figures for the previous corresponding period as to the other statements,
certified by a duly authorized officer of the Borrower as being fairly stated in
all material respects subject to year end and audit adjustments, all such
financial statements to be complete and correct in all material respects and in
accordance with GAAP subject to normal year end and audit adjustments and the
absence of footnotes, applied consistently throughout the period reflected
therein (except as approved by such accountants and disclosed therein);
(iii) together with each delivery of financial statements of
the Borrower and its Subsidiaries pursuant to subdivisions (i) and (ii) above,
(A) an officers' certificate stating that the signers have reviewed the terms of
the Loan Documents and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of the Borrower
and its Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or at the
end of such accounting period, and that the signers do not have knowledge of the
existence as at the date of the officers' certificate, of any condition or event
which constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking and proposes
to take with respect thereto; and (B) a Compliance Certificate in the form of
Exhibit D hereto demonstrating in reasonable detail compliance during and at
---------
the end of such accounting periods with the restrictions contained in Sections
6.2(a), (b), (c), (d), (e), and (h) as of the end of the fiscal period covered
thereby;
(iv) substantially concurrent with the sending or filing
thereof, copies of all reports which the Borrower sends to a majority of its
security holders, and copies of all reports and registration statements which
the Borrower or any of its Subsidiaries files with the S.E.C. or any national
securities exchange; and
32
(b) Notices and Information. Deliver to the Agent and each Lender:
-----------------------
(i) promptly upon any officer of the Borrower obtaining
knowledge (A) of any condition or event which constitutes an Event of Default or
Potential Event of Default, (B) that any Person has given any notice to the
Borrower or any Subsidiary of the Borrower or taken any other action with
respect to a claimed default or event or condition of the type referred to in
Section 7.1(f), (C) of the institution of any litigation involving an alleged
liability (including possible forfeiture of property) of the Borrower or any of
its Subsidiaries equal to or greater than $2,000,000 or any adverse
determination in any litigation involving a potential liability of the Borrower
or any of its Subsidiaries equal to or greater than $2,000,000, or (D) of a
material adverse change in the business, operations, properties, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, an officers' certificate specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed default,
Event of Default, Potential Event of Default, event or condition, and what
action the Borrower has taken, is taking and proposes to take with respect
thereto;
(ii) promptly, but in any event within five (5) Business Days
after receipt thereof, copies of all management letters, exception reports or
similar letters or reports received by Borrower from its independent certified
public accountants;
(iii) promptly, but in any event within thirty (30) days after
receipt thereof, a copy of any notice, summons, citation, directive, letter or
other form of communication from any governmental authority or court in any way
concerning any action or omission on the part of the Borrower or any of its
Material Subsidiaries in connection with any substance defined as toxic or
hazardous by any applicable federal, state or local law, rule, regulation, order
or directive or any waste or by product thereof, or concerning the filing of a
lien upon, against or in connection with the Borrower, its Material
Subsidiaries, or any of their leased or owned real or personal property, in
connection with a Hazardous Substance Superfund or a Post-Closure Liability Fund
as maintained pursuant to (S) 9507 of the Internal Revenue Code if such act or
omission may reasonably be expected to result in liability in an amount
exceeding $100,000 for all such acts or omissions or if any such Lien, together
with all other such Liens, is filed upon or against property the fair market
value of which exceeds $100,000 in the aggregate;
(iv) prompt notice of the occurrence of any event or
transaction described in Section 2.1(e);
(v) promptly, but in any event within ten (10) days after
request, such other information and data with respect to the Borrower or any of
its Subsidiaries as from time to time may be reasonably requested by the Agent
or any Lender.
(c) Corporate Existence, Etc. At all times preserve and keep in
------------------------
full force and effect its and its Material Subsidiaries' corporate existence and
rights and franchises material to its business and those of each of its Material
Subsidiaries; provided, however, that
-------- -------
33
the corporate existence of any such Subsidiary may be terminated if such
termination would not reasonably be expected to have a Material Adverse Effect.
(d) Books and Records. Borrower shall keep adequate books and
-----------------
records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the financial statements previously delivered to Lenders.
(e) Payment of Taxes and Claims. Except to the extent that a
---------------------------
Material Adverse Effect would not reasonably be expected to result, pay, and
cause each of its Subsidiaries to pay, all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and all claims (including claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a lien upon any of its properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if being contested
--------
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in accordance with GAAP shall have been made therefor.
(f) Maintenance of Properties; Insurance. Maintain or cause to be
------------------------------------
maintained in good repair, working order and condition all material properties
used or useful in the business of the Borrower and its Material Subsidiaries and
from time to time make or cause to be made all appropriate repairs, renewals and
replacements thereof except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect. The Borrower will maintain or cause
to be maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Material Subsidiaries against loss or damage of the kinds customarily insured
against by corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations. The
Borrower will comply with any other insurance requirement set forth in any other
Loan Document.
(g) Inspection. Permit any authorized representatives designated
----------
by the Agent or any Lender to visit and inspect any of the properties of the
Borrower or any of its Material Subsidiaries, including its and their financial
and accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested.
(h) Compliance with Laws, Etc. Exercise, and cause each of its
-------------------------
Material Subsidiaries to exercise, all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including all environmental laws, rules, regulations and
orders, noncompliance with which would reasonably be expected to have a Material
Adverse Effect.
34
(i) Registration of Intellectual Property Rights.
--------------------------------------------
(i) Borrower shall register or cause to be registered (to
the extent not already registered) on an expedited basis copyrights, and file
patent and trademark applications with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, with respect to the
intellectual property rights of Borrower which, either individually or together
with other intellectual property rights of Borrower and its Subsidiaries, exist
in products the sale or licensing of which Borrower reasonably expects will
generate accounts receivable equal to or greater than $5,000,000 in any fiscal
year (the "Material Products"), including without limitation patent and
copyright applications related to those intellectual property rights listed on
Exhibits A, B and C to the Intellectual Property Security Agreement delivered in
connection with this Agreement, within ninety (90) days of the date of this
Agreement, and shall promptly deliver copies of the registrations to Agent.
Borrower shall register or cause to be registered with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable,
trademarks, and copyright and patent applications covering intellectual property
rights in those additional Material Products developed or acquired by Borrower
from time to time, within ninety (90) days of the date on which such products
become Material Products, as defined above, including without limitation
revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C. Notwithstanding the foregoing, with respect to Patents (as
defined in the Intellectual Property Security Agreement), Borrower shall only be
required to register with the U.S. Patent and Trademark Office those Patents
which are material to the value of a Material Product. Borrower shall execute
and deliver such additional instruments and documents from time to time as the
Agent shall reasonably request to perfect the Agent's and the Lenders' security
interest in the Intellectual Property Collateral (as defined in the Intellectual
Property Security Agreement).
(ii) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, and Copyrights (as such
terms are defined in the Intellectual Property Security Agreement) except for
any such Trademarks, Patents or Copyrights that the Borrower has determined are
no longer materially important for the conduct of its or its Material
Subsidiaries' business, (ii) use commercially reasonable efforts to detect
infringements of the Trademarks, Patents, and Copyrights except for any such
Trademarks, Patents or Copyrights that the Borrower has determined are no longer
materially important for the conduct of its or its Material Subsidiaries'
business, and promptly advise the Agent in writing of material infringements
detected and (iii) not allow any Trademarks, Patents, or Copyrights except for
any such Trademarks, Patents or Copyrights that the Borrower has determined are
no longer materially important for the conduct of its or its Material
Subsidiaries' business, to be abandoned, forfeited or dedicated to the public
without the written consent of the Majority Lenders, which shall not be
unreasonably withheld.
(iii) the Agent shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under
this Section to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify the Agent for all
reasonable costs and expenses incurred in the exercise of its rights under this
Section.
35
(j) Principal Depository. Maintain its principal depository and
--------------------
operating accounts with the Agent.
(k) Intellectual Property. Borrower will conduct its business and
---------------------
affairs without infringement of or interference with any intellectual property
of any other Person except where the failure to do so would not have a Material
Adverse Effect.
(l) Environmental Matters. Borrower shall: (i) conduct its operations
---------------------
and keep and maintain its real property in compliance with all environmental
laws and environmental permits except where the failure to do so would not have
a Material Adverse Effect; (ii) except where the failure to do so would not have
a Material Adverse Effect, implement any and all investigation, remediation,
removal and response actions which are appropriate or necessary to comply with
environmental laws and environmental permits pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or release of any
hazardous material on, at, in, under, above, to, from or about any of its real
property; (iii) notify Agent promptly after Borrower becomes aware of any
violation of environmental laws or environmental permits or any release on, at,
in, under, above, to, from or about any real property which is reasonably likely
to result in a Material Adverse Effect; and (iv) promptly forward to Agent a
copy of any order, notice, request for information or any communication or
report received by Borrower in connection with any such violation or release or
any other matter relating to any environmental laws or environmental permits
that could reasonably be expected to result in a Material Adverse Effect.
(m) Landlords' Agreements, Mortgage Agreements and Bailee Letters.
-------------------------------------------------------------
Borrower shall use commercially reasonable efforts (not including the payment of
any fee or compensation to any party to such agreement or letter) to obtain a
landlord's agreement, mortgage agreement or bailee letter, as applicable, from
the lessor of each leased property or mortgagee of owned property or with
respect to any warehouse, processor or converter facility located in the U.S. or
other location where collateral securing obligations under Loan Documents is
located, which agreement or letter shall contain a waiver or subordination of
all Liens or claims that the landlord, mortgagee or bailee may assert against
the Inventory or collateral at that location, and shall otherwise be reasonably
satisfactory in form and substance to Agent. Borrower shall timely and fully
pay and perform its obligations under all leases and other agreements with
respect to each leased location or public warehouse where any collateral is or
may be located except where failure to do so would not reasonably be expected to
result in a Material Adverse Effect.
(n) Material Subsidiaries. In the event that any Subsidiary or other
---------------------
Person becomes a Material Subsidiary whose assets and business are located
primarily in the U.S., (i) Borrower shall deliver to Agent prompt notice
thereof, and (ii) at the request of Agent, Borrower shall promptly cause such
Material Subsidiary to deliver to Agent a guaranty of all of the indebtedness
and obligations hereunder, a security agreement with respect to all of its
assets, an intellectual property security agreement, and such financing
statements, resolutions, legal opinions or other such documents as Agent or any
Lender shall reasonably request in connection therewith, each in form and
substance satisfactory to Agent and the Lenders; provided that in the event that
any Subsidiary or other Person becomes a Material Subsidiary
36
whose assets and business are located primarily outside of the U.S., Borrower
shall (i) deliver to Agent prompt notice thereof, and (ii) at the request of
Agent, Borrower shall grant to Agent a security interest in all of the capital
stock (but not more than 65% of any class of equity securities of any such
Subsidiary) of such Material Subsidiary.
(o) Further Assurances. Borrower shall, at its expense and upon
------------------
request of Agent, duly execute and deliver, or cause to be duly executed and
delivered, to Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of Agent to
carry out more effectually the provisions and purposes of this Agreement or any
other Loan Document.
6.2 Negative Covenants. So long as any Note shall remain unpaid, any
------------------
Letter of Credit shall remain outstanding or unreimbursed or any Lender shall
have any Commitment hereunder, the Borrower will not, without the written
consent of the Majority Lenders:
(a) Quick Ratio. Permit the ratio of Consolidated Quick Assets to
-----------
Consolidated Current Liabilities as of the last day of each fiscal quarter of
Borrower to be less than 1.0 to 1.0.
(b) Leverage Ratio. As at the end of any fiscal quarter of the
--------------
Borrower, permit the ratio of Consolidated Funded Debt as at the end of such
fiscal quarter to Consolidated EBITDA for the four fiscal quarters ending on the
last day of such fiscal quarter, to be greater than 4.0 to 1.0. If Borrower
completes an Acquisition permitted under Section 6.1, and accounts for such
Acquisition using the pooling of interest accounting method, Borrower may
include any positive impact on Consolidated EBITDA, and exclude (up to a maximum
of $10,000,000) any negative impact on Consolidated EBITDA. In addition, for
purposes of this Section 6.2(b), Consolidated EBITDA shall exclude charges to
earnings directly related to any Acquisition permitted hereunder, but only to
the extent that any such charges are incurred during the fiscal quarter in which
the Acquisition closes.
(c) Consolidated Tangible Net Worth. Commencing with the fiscal
-------------------------------
quarter ended December 31, 1997, permit Consolidated Tangible Net Worth as of
the last day of any fiscal quarter of Borrower to be less than Ninety Two
Million Dollars ($92,000,000) plus (i) 75% of Consolidated Net Income (but not
----
loss) for each fiscal quarter of the Borrower commencing with the quarter ending
March 31, 1998, plus (ii) 100% of the Net Proceeds of any Equity Issuance by the
----
Borrower after December 31, 1997, minus (iii) 100% of any additions to goodwill
-----
and charges to earnings resulting directly from an Acquisition permitted
hereunder (but only to the extent such additions to goodwill or charges to
earnings are recognized during the fiscal quarter in which the Acquisition
closes). Notwithstanding the foregoing, Borrower shall not permit Consolidated
Tangible Net Worth as of the last day of any fiscal quarter of Borrower to be
less than Sixty Two Million Dollars ($62,000,000).
(d) Profitability. Permit (i) Consolidated Operating Income or
-------------
Consolidated Net Income to be less than Zero Dollars ($0) for any two
consecutive fiscal quarters of Borrower, or (ii) Consolidated Operating Income
or Consolidated Net Income for any fiscal quarter of Borrower to reflect a loss
greater than five percent (5%) of Consolidated Tangible
37
Net Worth as of the last day of the immediately preceding fiscal quarter, or
(iii) Consolidated Operating Income or Consolidated Net Income to be less than
Zero Dollars ($0) for any fiscal year of Borrower. For purposes of this Section
6.2(d), Consolidated Operating Income and Consolidated Net Income shall exclude
charges to earnings directly related to any Acquisition permitted hereunder, but
only to the extent that any such charges are incurred during the fiscal quarter
in which the Acquisition closes.
(e) Interest Coverage Ratio. As at the end of any fiscal quarter of
-----------------------
Borrower, permit the ratio of Consolidated EBITDA to Consolidated Interest
Expense for the four consecutive fiscal quarters ending on the last day of such
fiscal quarter to be less than 3.0 to 1.0.
(f) Liens, Etc. Create or suffer to exist, or permit any of its
----------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, other than:
(i) Liens in favor of the Agent for the benefit of the Lenders;
(ii) Liens existing on the date hereof and set forth in Schedule
--------
6.2(f);
------
(iii) Liens in favor of Xxxxx Fargo HSBC Trade Bank N.A., or any
successor or assign thereof, upon specific accounts receivable of Borrower
purchased under the Receivables Facility, provided that the obligations secured
--------
by such Liens shall not exceed $25,000,000 in the aggregate at any one time
outstanding; and provided, further, that Borrower shall not permit the
-------- -------
Receivables Facility to be modified, supplemented, amended, restated, extended,
renewed or replaced in a manner that is less favorable to Lenders without the
prior written consent of all Lenders;
(iv) Permitted Liens;
(v) purchase money Liens upon or in any property acquired or
held by the Borrower or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property, excluding
Capital Leases; and
(vi) all renewals, refundings, refinancings and extensions of any
such Liens described in clause (i) above; provided that the principal amount
--------
secured is not increased and that such Lien is not extended to other property.
(g) Debt. Create or suffer to exist, or permit any of its
----
Subsidiaries to create or suffer to exist, any Debt, other than:
(i) Debt existing on the date hereof and set forth on Schedule
--------
6.2(g);
------
38
(ii) Debt owed to the Lenders hereunder;
(iii) Debt relating to Liens permitted under Section 6.2(f)(v) and
Debt relating to Capital Leases; provided that the aggregate principal amount of
--------
such Debt of the Borrower and its consolidated Subsidiaries incurred pursuant to
this clause (iii) shall not exceed $10,000,000 at any time; and
(iv) Debt of a wholly-owned Subsidiary of the Borrower to another
wholly-owned Subsidiary of the Borrower or to the Borrower and Debt of the
Borrower to a wholly-owned Subsidiary of the Borrower;
(v) Contingent Obligations permitted under Section 6.2(l);
(vi) Debt not otherwise permitted by clauses (i) through (v)
above, not in excess of $10,000,000 in the aggregate at any one time
outstanding; and
(vii) all renewals, refundings, refinancings or extensions of any
such Debt described in clauses (i) and (iii) above, provided that the terms
--------
thereof are substantially similar to those set forth in the documents evidencing
such Debt as in effect on the date hereof in the case of Debt described in
clause (i), and provided further that no additional assets are pledged to secure
----------------
any renewals, refundings, refinancings or extensions of Debt described in clause
(iii).
(h) Dividends, Etc. Declare or pay any dividends, purchase or
--------------
otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such, or
permit any of its Subsidiaries to purchase or otherwise acquire for value any
stock of the Borrower, except that (i) the Borrower may declare and deliver
dividends and distributions payable in capital stock of the Borrower, and (ii)
provided no Event of Default exists, Borrower may repurchase stock from former
employees of Borrower in accordance with the terms of repurchase or similar
agreements between Borrower and such employees.
(i) Consolidation, Merger. Consolidate or merge with any other
---------------------
Person, liquidate, wind-up or dissolve itself or acquire by purchase or
otherwise all or substantially all of the business, property or fixed assets of,
or stock or other evidence of beneficial ownership of, any Person, or permit any
of its Subsidiaries to do any of the foregoing, except that:
(i) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower or any wholly-owned Subsidiary of the Borrower, or be
liquidated, wound up or dissolved, or all or any substantial part of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions, to the
Borrower or any wholly-owned Subsidiary of the Borrower; provided that, in the
--------
case of such a merger or consolidation, the Borrower or such wholly-owned
Subsidiary shall be the continuing or surviving corporation; and
39
(ii) Borrower may acquire the business, property, fixed assets or
stock of Persons in a substantially similar business or business utilizing the
products and services of the Borrower and its Subsidiaries (each, an
"Acquisition"), provided that (i) prior to and immediately following the
------------ --------
consummation of any such Acquisition there shall exist no condition or event
that constitutes an Event of Default or a Potential Event of Default, (ii) the
Borrower shall be the continuing or surviving corporation in any such
Acquisition, (iii) Borrower shall demonstrate compliance with the provisions of
Sections 6.2(a)-(e) prior to and immediately following the consummation of the
proposed Acquisition on a proforma basis, and (iv) the proposed Acquisition is
not opposed by the board of directors of the Person whose business, property,
fixed assets, or stock is sought to be acquired.
(j) Investments. Make or permit to remain outstanding, or permit any
-----------
Subsidiary to make or permit to remain outstanding, any Investment, except that
the Borrower and its Subsidiaries may:
(i) continue to own Investments existing on the date hereof and
set forth on Schedule 6.2(j);
---------------
(ii) own, purchase or acquire certificates of deposit issued by
any Lender, commercial paper rated Xxxxx'x P-I, municipal bonds rated Xxxxx'x XX
or better, direct obligations of the United States of America or its agencies,
and obligations guaranteed by the United States of America;
(iii) acquire and own stock, obligations or securities received
from customers in connection with debts created in the ordinary course of
business owing to the Borrower or a Subsidiary;
(iv) continue to own the existing capital stock of the Borrower's
Subsidiaries;
(v) make Investments constituting Acquisitions permitted by
Section 6.2(i);
(vi) make Investments in and to any Loan Party; and
(vii) make loans to any Subsidiary to finance the working capital
needs of the borrowing Subsidiary in the ordinary course of its business.
(k) Contingent Obligations. Create or become or remain liable, or
----------------------
permit any of its Subsidiaries to create or become or remain liable, with
respect to any Contingent Obligation, except that the Borrower and its
Subsidiaries may:
(i) remain liable with respect to Contingent Obligations
existing on the date hereof and set forth on Schedule 6.2(k);
---------------
40
(ii) endorse negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and
(iii) become or remain liable with respect to reimbursement
obligations under those Letters of Credit issued hereunder in accordance with
Section 2.5.
(l) Asset Sales. Convey, sell, lease, transfer or otherwise dispose
-----------
of, or permit any Subsidiary to convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, (i) all or any part
of its or its Subsidiary's business, property or fixed assets outside of the
ordinary course of business, whether now owned or hereafter acquired, or (ii)
any capital stock or debt of any of its Subsidiaries, except:
(i) the Borrower and its Subsidiaries may convey, sell, lease,
transfer of otherwise dispose of obsolete or worn out assets;
(ii) the Borrower may assign and sell accounts receivable to Xxxxx
Fargo HSBC Trade Bank N.A., or any successor or assign thereof, pursuant to the
Receivables Facility, provided that the total outstanding amount of all
--------
purchased receivables thereunder shall not exceed $25,000,000 at any time;
(iii) any Subsidiary of the Borrower may sell, lease or transfer
assets to the Borrower or to any wholly-owned Subsidiary of the Borrower;
(iv) the Borrower may sell, lease or transfer assets to any other
Loan Party; and
(v) the Borrower and its Subsidiaries may sell equipment in
connection with the lease financing thereof within 60 days after the acquisition
of such equipment.
(m) Transactions with Shareholders and Affiliates. Enter into, or
---------------------------------------------
permit any of its Subsidiaries to enter into, any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity securities of the
Borrower, or with any Affiliate of the Borrower or any such holder, on terms
that (when taken in the light of any related or series of transactions of which
such transaction is a part (if any)) are less favorable to the Borrower or any
such Subsidiary than those which might be obtained at the time from Persons who
are not such a holder or Affiliate, provided, however, that the foregoing shall
-------- -------
not limit the terms upon which the Borrower and its Subsidiaries may enter into
employment agreements with their respective officers.
(n) Agreements Restricting Payment of Dividends. Permit any of its
-------------------------------------------
Subsidiaries to enter into any agreement restricting the ability of such
Subsidiary to declare, order, pay or make or set apart any sum for any dividends
or other distributions on account of any shares of any class of its stock.
41
(o) Restrictive Agreements. Other than with respect to specific
----------------------
accounts receivable purchased under the Receivables Facility, agree with any
Person, or permit any of its Subsidiaries to agree with any Person, that the
Borrower or such Subsidiary will not create, incur or suffer to exist any Liens
on its properties.
(p) Payments on Subordinated Debt. Declare, order or pay, or permit
-----------------------------
any of its Subsidiaries to declare, order or pay, any amount of principal of,
premium, if any, or interest on, or redeem, purchase, retire or decease or make
any sinking fund or similar payment, or permit any of its Subsidiaries to do any
of the foregoing, with respect to any Subordinated Debt of the Borrower.
Notwithstanding the foregoing, provided that no Event of Default exists or would
result from such payment, Borrower may (i) make regularly scheduled payments of
interest that constitutes Subordinated Debt, and (ii) make regularly scheduled
payments of principal under that certain Promissory Note dated as of April 1,
1998 executed by Borrower in favor of Cylink Corporation in the original
principal amount of $14,500,000.
(q) Fiscal Year. Change its fiscal year-end from December 31.
-----------
(r) Capital Structure and Business. (i) Make any changes in any of
------------------------------
its business objectives, purposes or operations which would materially adversely
affect the repayment of the Revolving Loans or any of the other obligations,
(ii) make any change in its capital structure as described on Schedule 5.1(m),
---------------
except that Borrower may issue and sell shares of its capital stock and options
or warrants therefor or similar securities in connection with the Borrower's
benefit and incentive program for employees, (iii) amend its charter or bylaws
in a manner which would adversely affect Agent or Lenders or Borrower's duty or
ability to repay its obligations to Lenders, or (iv) engage in any business
other than the businesses currently engaged in by it.
(s) ERISA. Cause or permit to occur an event which could result in
-----
the imposition of a lien under Section 41.2 of the Internal Revenue Code or
Section 302 or 4068 of ERISA.
(t) Sale-Leasebacks. Other than as permitted under Section
---------------
6.2(l)(iv), engage in any sale-leaseback, synthetic lease or similar transaction
involving any of its assets.
(u) Cancellation of Indebtedness. Cancel any claim or debt owing to
----------------------------
it, except for reasonable consideration negotiated on an arm's-length basis and
in the ordinary course of its business consistent with past practices.
(v) Change of Corporate Name or Location. (i) Change its corporate
------------------------------------
name, or (ii) change its chief executive office, principal place of business,
corporate offices or warehouses or locations at which Collateral is held or
stored, or the location of its records concerning the collateral, in any case
without at least thirty (30) days prior written notice to Agent and after
reasonable action to continue the perfection of any security interests in favor
of Agent, on behalf of Lenders, in any collateral, has been completed or taken.
Without limiting the foregoing, Borrower shall not change its name, identity or
corporate structure in any manner which might make any financing or continuation
statement filed in connection
42
herewith seriously misleading within the meaning of Section 9-402(7) of the Code
or any other then applicable provision of the Code except upon prior written
notice to Agent and Lenders and after reasonable action to continue the
perfection of any security interests in favor of Agent, on behalf of Lenders, in
any collateral, has been completed or taken.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Events of Default. If any of the following events ("Events of
----------------- ---------
Default") shall occur and be continuing:
(a) The Borrower shall fail to pay (i) any installment of principal
when due hereunder, or (ii) any installment of interest hereunder or other
amount payable hereunder within three (3) Business Days of the date when due; or
(b) Any representation or warranty made by any Loan Party herein or in
any other Loan Document or by any Loan Party (or any of their respective
officers) in connection with this Agreement or any other Loan Document, shall
prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 3.1, 6.1(a), (b) or (c), 6.2(a), (b), (c),
(d), (e), (g), (h), (i), (j), (l), (p), (q), (r), (s), (t), (u), or (v) on its
part to be performed or observed; or
(d) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in this Agreement or any other Loan Document other than
those referred to in Sections 7.1(a), (b), and (c) above on its part to be
performed or observed and any such failure shall remain unremedied or uncured
for thirty (30) days after the Borrower knows of such failure or, in the event
such failure cannot by its nature be cured within such thirty (30) day period or
cannot after diligent attempts by Borrower be cured within such thirty (30) day
period, and the Borrower determines and so notifies the Agent within such thirty
(30) day period that such a remedy or cure is practicable within an additional
thirty (30) days, such failure shall remain unremedied or uncured for sixty (60)
days after the Borrower knows of such failure; or
(e) Any Loan Party shall default in the performance of or compliance
with any term contained in any Loan Document other than this Agreement and such
default shall not have been remedied or waived (A) within any applicable grace
period or (B) if not specified in the applicable Loan Document, within 30 days
after such Loan Party knows of such default or, in the event that such a remedy
or cure is not practicable within such 30 day period but the Borrower determines
and so notifies the Agent within such 30 day period that such a remedy or cure
is practicable within an additional 30 days, such default shall remain
unremedied or uncured for 60 days after the Borrower knows of such default; or
43
(f) Any Loan Party shall (A) fail to pay any principal of, or premium
or interest on, any Debt, the aggregate outstanding principal amount of which is
at least $2,000,000 (excluding Debt evidenced by the Notes), when due (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt, or (B) fail to
perform or observe any term, covenant or condition on its part to be performed
or observed under any agreement or instrument relating to any such Debt, when
required to be performed or observed, and such failure shall result in a right,
whether or not exercised, to accelerate the maturity of any such Debt; or
(g) (i) Any Loan Party shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or any Loan Party shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against any Loan Party any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against any Loan Party any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the
Borrower or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii) and (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) equal to or greater than $2,000,000 and all
such judgments or decrees shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or
(i) Collateral; Guarantees. (i) any material provision of any
----------------------
security agreement or guaranty given in connection herewith shall for any reason
cease to be valid and binding on or enforceable against the Loan Party party
thereto or any Loan Party shall so state in writing or bring an action to limit
its obligations or liabilities thereunder; (ii) any such guaranty shall for any
reason be partially (including with respect to future advances) or wholly
revoked; or (iii) any such security agreement shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security interest in the
collateral purported to be covered thereby or such security interest shall for
any reason cease to be a perfected and first priority (subject to Permitted
Liens and other Liens permitted hereunder) security interest;
44
THEN (i) upon the occurrence of any Event of Default described in clause
(g) above, the Commitments and any obligation of the Issuing Bank to issue any
Letter of Credit shall immediately terminate and all Loans hereunder together
with accrued interest thereon, an amount equal to the Letter of Credit Usage and
all other amounts owing under this Agreement, the Notes, the Letters of Credit
and the other Loan Documents shall automatically become due and payable; (ii)
upon the occurrence of any other Event of Default, the Agent shall at the
request, or may with the consent, of the Majority Lenders, by notice to the
Borrower, declare the Commitments and any obligation of the Issuing Bank to
issue any Letter of Credit to be terminated forthwith, whereupon the Commitments
and any obligation of the Issuing Bank to issue any Letter of Credit shall
immediately terminate, and/or, by notice to the Borrower, declare the Loans
hereunder, with accrued interest thereon, an amount equal to the Letter of
Credit Usage and all other amounts owing under this Agreement, the Notes, the
Letters of Credit and the other Loan Documents to be due and payable forthwith,
whereupon the same shall immediately become due and payable; and (iii) Agent may
exercise any and all rights and remedies provided to Agent or the Lenders under
the Loan Documents. Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived. So long as any Letter of Credit shall remain outstanding, any
amounts received by the Issuing Bank may be held as cash collateral for the
obligation of the Borrower to reimburse the Issuing Bank in event of any drawing
under any Letter of Credit. In the event any Letter of Credit in respect of
which the Borrower has deposited cash collateral with the Issuing Bank is
canceled or expires, the cash collateral shall be applied first to the
-----
reimbursement of the Issuing Bank for any drawings thereunder, and second
------
to the payment of any outstanding obligations of the Borrower hereunder or under
any other Loan Document.
ARTICLE VIII
THE AGENT AND THE ISSUING BANK
8.1 Authorization and Action.
------------------------
(a) Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement (including enforcement or collection of the Notes), the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders and all holders of
Notes; provided, however, that the Agent shall not be required to take any
-------- -------
action which exposes the Agent to personal liability or which is contrary to
this Agreement or applicable law. The Agent agrees to give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
45
(b) The Issuing Bank shall act on behalf of the Lenders with respect
to the Letters of Credit and the Documents associated therewith; provided that
--------
the Issuing Bank shall have all the benefits and immunities (i) provided to the
Agent in this Article VIII with respect to any acts taken or omissions suffered
by the Issuing Bank in connection with the Letters of Credit as fully as if the
term "Agent", as used in this Article VIII, included the Issuing Bank with
respect to such acts or omissions, and (ii) as otherwise provided in this
Agreement with respect to the Issuing Bank.
8.2 Agent's Reliance, Etc. Neither the Agent nor any of its directors,
---------------------
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement, except for
its or their own gross negligence or wilful misconduct. Without limitation of
the generality of the foregoing, the Agent: (i) may treat the payee of any Note
as the holder thereof until the Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form satisfactory to the Agent;
(ii) may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement; (iv) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on the part of the
Borrower or to inspect the property (including the books and records) of the
Borrower; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, cable or telex) believed by it to be genuine and signed or sent
by the proper party or parties.
8.3 Union Bank of California, N.A. and Affiliates. With respect to its
---------------------------------------------
Commitment, the Loans made by it, the Note issued to it and the Letters of
Credit issued by it, Union Bank of California, N.A. shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not the Agent and the Issuing Bank respectively; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include Union
------- -------
Bank of California, N.A. in its individual capacity. Union Bank of California,
N.A. and its respective affiliates may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower, any of its subsidiaries and any Person who may do business
with or own securities of the Borrower or any such subsidiary, all as if Union
Bank of California, N.A. were not the Agent and the Issuing Bank, respectively,
and without any duty to account therefor to the Lenders.
8.4 Lender Credit Decision. Each Lender and the Issuing Bank acknowledges
----------------------
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.1(c) and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender and the
Issuing Bank also acknowledges that it will,
46
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
8.5 Indemnification. The Lenders agree to indemnify the Agent, and the
---------------
Issuing Bank (to the extent not reimbursed by the Borrower), ratably according
to the respective principal amounts of the Notes then held by each of them (or
if no Notes are at the time outstanding or if any Notes are held by Persons
which are not Lenders, ratably according to the respective amounts of their
Commitments), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent or the Issuing Bank, as the case may be, in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent or the Issuing Bank, as the case may be, under this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
--------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's or the Issuing Bank's, as
the case may be, gross negligence or wilful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse the Agent and the Issuing Bank
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent or the Issuing Bank, as the case
may be, in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent or the
Issuing Bank, as the case may be, is not reimbursed for such expenses by the
Borrower.
8.6 Successor Agent. The Agent may resign at any time by giving written
---------------
notice thereof to the Lenders and the Borrower and may be removed at any time
with or without cause by the Majority Lenders. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation or the Majority Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations as Agent under this Agreement. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VIII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
8.7 Syndication Agent. The Lender identified on the facing page or
-----------------
signature pages of or elsewhere in this Agreement as a "syndication agent" shall
have no right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, the Lender so identified shall not have or
47
be deemed to have any fiduciary relationship with any Lender. Each Lender
acknowledges that it has not relied, and will not rely, on the Lender so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder or under any other Loan Document.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments, Etc. No amendment or waiver of any provision of the Loan
---------------
Documents nor consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however, that no amendment, waiver or consent shall, unless in writing and
-------
signed by all the Lenders, do any of the following: (a) waive any of the
conditions specified in Sections 4.1, 4.2 and 4.3, (b) increase the Commitments
of the Lenders or subject the Lenders to any additional obligations, (c) reduce
the principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action hereunder, (f) amend any of the
provisions in Sections 3.6 through 3.12, (g) alter or limit the obligation of
the Borrower to reimburse the Issuing Bank for amounts drawn under the Letters
of Credit, (h) alter or limit the obligations of the Lenders set forth in
Section 2.5(d), (i) amend this Section 9.1, (j) release any material portion of
any collateral covered by any security agreement given in connection herewith
(other than in accordance with the terms of any such security agreement), or (k)
release any Guarantor from its obligations or liabilities under any Loan
Document, or limit or reduce such obligations or liabilities in any material
respect; and provided, further, that no amendment, waiver or consent shall,
-------- -------
unless in writing and signed by the Agent in addition to the Lenders required
above to take such action, affect the rights or duties of the Agent under this
Agreement or any other Loan Document; and provided, further, that no amendment,
-------- -------
waiver or consent shall, unless in writing and signed by the Issuing Bank in
addition to the Lenders required above to take such action, alter or effect the
obligations of the Issuing Bank under Section 2.5 or effect the rights or duties
of the Issuing Bank under Article VIII; and provided, further, that no waiver or
-------- -------
consent shall unless in writing and signed by the affected Lender or the Issuing
Bank, as the case may be, waive the rights of that Lender or the Issuing Bank to
receive any payment or compensation under any of Sections 3.6 through 3.12.
9.2 Notices, Etc. Except as otherwise set forth in this Agreement, all
------------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex or facsimile communication) and mailed or
telegraphed or telexed or sent by facsimile or delivered, if to the Borrower, at
its address set forth on the signature page hereof; and if to any Lender, the
Issuing Bank or the Agent, at its address set forth on the signature page
hereof; or, as to each party, at such other address as shall be
designated by such party in a
48
written notice to the other parties. All such notices and communications shall
be effective three (3) Business Days after deposit in the U.S mail, postage
prepaid, when sent by telex or sent by facsimile, or when delivered,
respectively, except that notices and communications to the Agent pursuant to
Article II or VII shall not be effective until received by the Agent.
9.3 Right of Setoff; Deposit Accounts. Upon and after the occurrence of
---------------------------------
any Event of Default, each Lender is hereby authorized by the Borrower, at any
time and from time to time, without notice, for the ratable benefit of the
Lenders, (a) to set off against, and to appropriate and apply to the payment of,
the obligations and liabilities of the Borrower under the Loan Documents
(whether matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all amounts owing by such Lender to the Borrower (whether
payable in Dollars or any other currency, whether matured or unmatured, and, in
the case of deposits, whether general or special, time or demand and however
evidenced) and (b) pending any such action, to the extent necessary, to hold
such amounts as collateral to secure such obligations and liabilities and to
return as unpaid for insufficient funds any and all checks and other items drawn
against any deposits so held as such Lender in its sole discretion may elect;
provided that no such setoff, appropriation, or application shall be taken or
--------
made without the prior written consent of Agent or the Majority Lenders. The
Borrower hereby grants to each Lender a security interest in all deposits and
accounts maintained with that Lender. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
set-off) which such Lender may have.
9.4 No Waiver; Remedies. No failure on the part of the Agent or any
-------------------
Lender to exercise, and no delay in exercising, any right under any of the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
9.5 Costs and Expenses. The Borrower agrees to pay on demand all costs
------------------
and expenses of the Agent (including attorney's fees and the reasonable estimate
of the allocated cost of in-house counsel and staff) in connection with the
preparation, amendment, or modification of this Agreement or the other Loan
Documents, or incurred by the Agent or any Lender in connection with the
enforcement (including in appellate, bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar proceedings) or restructuring of the
Loan Documents.
9.6 Additional Lenders; Assignments; Participations.
-----------------------------------------------
(a) None of the Loan Documents nor any rights thereunder may be
assigned by Borrower without the prior written consent of all the Lenders, which
consent may be granted or withheld in the Lenders' sole discretion. Any Lender
may assign, from time to time, all or any portion of its pro rata share of the
Commitments and its Note to an Affiliate of that Lender or, subject at any time
prior to the occurrence of an Event of Default to the prior written approval of
the Borrower (which approval will not be unreasonably withheld or delayed), to
any other financial institution reasonably acceptable to the Agent; provided
--------
that
49
(i) the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment shall in no event be less than $5,000,000 or
the entire Commitment of such assigning Lender, whichever is less, (ii) the
parties to each such assignment shall execute and deliver to the Agent and
Borrower an assignment agreement reasonably satisfactory to Agent, and (iii) the
assignee (a) represents and warrants to the Lender, the Agent and the Borrower
that under applicable law and treaties no tax will be required to be withheld by
the Lender with respect to any payments to be made to the assignee hereunder,
(b) agrees to furnish (if it is organized under the laws of any jurisdiction
other than the United States or any State thereof) to the Agent and the Borrower
prior to the time that the Agent or Borrower is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein the assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payment hereunder) and agrees to provide new Forms 4224 or 1001 upon
expiration of any previously delivered form or comparable statement in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by the assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption. Upon such execution and delivery and payment of a fee in the amount
of $3,500 to Agent to cover administrative costs, from and after the effective
date of such assignment (i) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it,
have the rights and obligations of a Lender hereunder and (ii) the Lender
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it, relinquish its rights and be released from its
obligations under this Agreement (other than pursuant to Section 9.6(e)), and,
in the case of an assignment covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto, subject to its continuing obligations under
Section 9.6(e). The Commitments hereunder shall be modified to reflect the
Commitment of such assignee, and, if any such assignment occurs while any Notes
are outstanding, new Notes shall, upon the surrender of the assigning Lender's
Notes, be issued to such assignee and to the assigning Lender as necessary to
reflect the new Commitments of the assigning Lender and of its assignee.
(b) Each Lender may sell, negotiate or grant participations to other
financial institutions in all or part of the obligations of the Borrower
outstanding under the Loan Documents, without notice to or the approval of the
Agent or the Borrower; provided that any such sale, negotiation or participation
--------
shall be in compliance with any applicable federal and state securities laws and
the other requirements of this Section 9.6. No participant shall constitute a
"Lender" under any Loan Document, and the Borrower shall continue to deal solely
and directly with the Agent and the Lenders.
(c) Each Lender may disclose to any proposed assignee or participant
any information relating to the Borrower or any of its Subsidiaries; provided,
--------
that prior to such disclosure such proposed assignee or participant shall have
agreed in writing to keep any such information confidential substantially on the
terms of Section 9.6(e).
50
(d) The grant of a participation interest shall be on such terms as
the granting Lender determines are appropriate, provided only that (i) the
holder of such a participation interest shall not have any of the rights of a
Lender under this Agreement except, if the participation agreement so provides,
rights to demand the payment of costs of the type described in Article III, and
(ii) the consent of the holder of such a participation interest shall not be
required for amendments or waivers of provisions of the Loan Documents other
than those that (A) increase the amount of the Commitments, (B) extend the term
of the Commitments, (C) decrease the rate of interest or the amount of any fee
or any other amount payable to the Lenders under the Loan Documents, (D) reduce
the principal amount payable under the Loan Documents, or (E) extend the date
fixed for the payment of principal or interest or any other amount payable under
the Loan Documents.
(e) Each Lender understands that some of the information and documents
furnished to it pursuant to this Agreement may be confidential and each Lender
agrees that it will keep all non-public information, documents and agreements so
furnished to it confidential and will make no disclosure to other Persons of
such information or agreements until it shall have become public, except (i) to
the extent required in connection with matters involving operations under or
enforcement or amendment of the Loan Documents; (ii) to such Lender's examiners
and auditors or in accordance with such Lender's obligations under law or
regulations or pursuant to subpoenas or other process to make information
available to governmental agencies and examiners or to others; (iii) to any
corporate affiliate of any Lender so long as such parent agrees to accept such
information or agreement subject to the restrictions provided in this Section
9.6(e); (iv) to any participant bank or trust company of any Lender so long as
such participant shares the corporate parent with such Lender and agrees to keep
such information, documents or agreement confidential in accordance with the
restrictions provided in this Section 9.6(e); (v) to the Agent or to any other
Lender and their respective counsel and other professional advisors and to its
own counsel and professional advisors so long as such Persons are instructed to
keep such information confidential in accordance with the provisions of this
Section 9.6(e); (vi) to proposed assignees and participants in accordance with
Section 9.6(c); and (vii) with the prior written consent of the Borrower.
9.7 Audits of Collateral; Fees. The Agent, on behalf of the Lenders,
--------------------------
shall have the right from time to time to audit Borrower's accounts receivable,
inventory, or other collateral securing the indebtedness hereunder, provided
that such audits will be conducted no more than one (1) time in any fiscal year
unless an Event of Default has occurred and is continuing. Borrower agrees to
reimburse the Agent, on demand, for customary and reasonable fees and costs
incurred by the Agent for such audits, and for each appraisal of collateral and
financial analysis and examination of Borrower performed from time to time by
the Agent or their respective agents.
9.8 Effectiveness; Binding Effect; Governing Law. This Agreement shall
--------------------------------------------
become effective when it shall have been executed by the Borrower, the Agent and
each Lender and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent, each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent
51
of the Agent and all the Lenders. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW DOCTRINE. EACH LETTER OF CREDIT SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
AND RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO RULES OR LAWS ARE
DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDIT (1983
REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UCP")
AND, AS TO MATTERS NOT GOVERNED BY THE UCP, THE LAWS OF THE STATE OF CALIFORNIA.
9.9 Waiver of Jury Trial. THE BORROWER, THE AGENT, THE ISSUING BANK AND
--------------------
EACH LENDER HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims. The Agent, each
Lender, the Issuing Bank and the Borrower each acknowledge that this waiver is a
material inducement to enter into a business relationship, that each has already
relied on the waiver in entering into this Agreement, and that each will
continue to rely on the waiver in their related future dealings. The Agent,
each Lender, the Issuing Bank and the Borrower further warrant and represent
that each has reviewed this waiver with its legal counsel, and that each
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOAN. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
9.10 Consent to Jurisdiction; Venue; Agent for Service of Process. All
------------------------------------------------------------
judicial proceedings brought against the Borrower with respect to this Agreement
and the Loan Documents may be brought in any state or federal court of competent
jurisdiction in the City and County of San Francisco or Santa Xxxxx in the State
of California, and by execution and delivery of this Agreement, the Borrower
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The Borrower irrevocably waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the extent
----- --- ----------
any proceeding is brought in accordance with this Section. The Borrower
designates and appoints Borrower's Chief Financial Officer, from time to time,
P-Com, Inc., 0000 X. Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, and such
other Persons as may hereafter be selected by the Borrower
52
irrevocably agreeing in writing to so serve as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by the Borrower to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to the Borrower at its address provided in the applicable
signature page hereto, except that unless otherwise provided by applicable law,
any failure to mail such copy shall not affect the validity of service of
process. If any agent appointed by the Borrower refuses to accept service, the
Borrower hereby agrees that service upon it by mail shall constitute sufficient
notice. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of the Agent or any Lender to
bring proceedings against the Borrower in courts of any jurisdiction.
9.11 Alternative Dispute Resolution.
------------------------------
(1) Claims Subject to Arbitration or Judicial Reference.
---------------------------------------------------
(a) Any Claim other than a Claim that arises out of or relates to
any obligation under any Subject Document that is secured, in whole or in part,
by an interest in real property shall, at the written request of any Party, be
determined by Arbitration.
(b) Any Claim that arises out of or relates to any obligation
under any Subject Document that is secured, in whole or in part, by an interest
in real property shall be determined by Arbitration only with the consent of
both Parties. If both Parties do not consent to the determination of any such
Claim by Arbitration, then such Claim shall, at the written request of any
Party, be determined by Reference.
(c) The determination as to whether or not a Claim arises out of
or relates to any obligation under any Subject Document that is secured, in
whole or in part, by an interest in real property shall be made at the time the
arbitrator or referee is selected pursuant to subsection 2 of this Section 9.11.
(2) Selection of Arbitrator or Referee. Within 30 days after written
----------------------------------
demand, or within 30 days after commencement by any Party, of any lawsuit
subject to this Section 9.11, the Parties shall select a single neutral
arbitrator pursuant to the Commercial Arbitration Rules of the AAA or a single
neutral referee pursuant to the Judicial Reference Procedures of the AAA.
However, the arbitrator or referee selected must be a retired state or federal
court judge with at least five years of judicial experience in civil matters. In
the event that the selection pursuant to such Commercial Arbitration Rules or
Judicial Reference Procedures does not result in the appointment of a single
neutral arbitrator or a single neutral referee within 30 days, any such Party
may petition the court to appoint a single neutral arbitrator or single neutral
referee with the judicial experience described above. The Parties shall equally
bear the fees and expenses of the arbitrator or referee unless the arbitrator or
referee otherwise provides in the award or statement of decision.
(3) Conduct of Arbitration or Reference.
-----------------------------------
53
(a) Except as provided in this Section 9.11, the arbitrator shall
have the powers provided under Applicable State Law and the Commercial
Arbitration Rules of the AAA, and the referee shall have the powers provided
under Applicable State Law and the Judicial Reference Procedures of the AAA.
(b) The arbitrator or referee shall determine all challenges to
the legality or enforceability of this Section 9.11.
(c) The arbitrator or referee shall apply the rules of evidence
to the same extent as they would be applied in a court of law.
(d) A Party may not conduct discovery unless the arbitrator or
referee grants such Party leave to do so upon a showing of good cause. All
discovery shall be completed within 90 days after the appointment of the
arbitrator or referee, except upon a showing of good cause by any Party. The
arbitrator or referee shall limit discovery to non-privileged material that is
relevant to the issues to be determined by the arbitrator or referee.
(e) The arbitrator or referee shall determine the time of the
hearing and shall designate its location based upon the convenience of the
arbitrator or referee, the Parties and any witnesses. However, such hearing
shall be commenced within 30 days after completion of discovery, unless the
arbitrator or referee grants a continuance upon a showing of good cause by any
Party. At least 7 days before the date set for such hearing, the Parties shall
exchange copies of exhibits to be offered as evidence, and lists of the
witnesses who will testify, at such hearing. Once commenced, the hearing shall
proceed day to day until completed, unless the arbitrator or referee grants a
continuance upon a showing of good cause by any Party. Any Party may cause to be
prepared, at its expense, a written transcription or electronic recordation of
such hearing.
(f) Subject to the provisions of this Section 9.11, the
arbitrator may award, or the referee may report, a statement of decision
providing for any remedy or relief, including without limitation judicial
foreclosure, deficiency judgment and equitable relief, and give effect to all
legal and equitable defenses, including without limitation statutes of
limitation, the statute of frauds, waiver and estoppel .
(g) The award of the arbitrator or the statement of decision of
the referee shall be supported by written findings of fact and conclusions of
law delivered by the arbitrator or referee to the Parties concurrently with such
award or statement of decision.
(h) In the event that punitive damages are permitted under
Applicable State Law, the award of the arbitrator or the statement of decision
of the referee may provide for recovery of punitive damages provided that the
arbitrator or referee first makes written findings of fact that would satisfy
the requirements for recovery of punitive damages under Applicable State Law.
Any such punitive damages shall not exceed a sum equal to three times the amount
of actual damages as determined by the arbitrator or referee.
54
(i) The arbitrator shall have the power to award or the referee
shall have the power to report a statement of decision providing for reasonable
attorneys' fees (including a reasonable allocation for the costs of in-house
counsel) and costs to the prevailing party.
(j) In the event that Applicable State Law provides that
publications or communications made in a judicial proceeding are subject to a
litigation privilege, such litigation privilege shall apply to the same extent
to publications or communications made in the Arbitration or Reference.
(4) Provisional Remedies, Self-Help and Foreclosure. No provision of
-----------------------------------------------
this Section 9.11 shall limit the right of any Party (a) to exercise self-help
remedies including, without limitation, set-off, (b) to foreclose against or
sell any collateral, by power of sale or otherwise or (c) to obtain or oppose
provisional or ancillary remedies from a court of competent jurisdiction before,
after or during the pendency of the Arbitration or Reference. The exercise of,
or opposition to, any such remedy does not waive the right of any Party to
Arbitration or Reference pursuant to this Section 9.11.
(5) Final, Binding and Nonappealable Judgment. Any court of competent
-----------------------------------------
jurisdiction shall, upon the petition of any Party, confirm the award of the
arbitrator and enter judgment in conformity therewith. Any court of competent
jurisdiction shall, upon the filing of the statement of decision of the referee,
enter judgment thereon. Any such judgment shall be final, binding and
nonappealable.
(6) Miscellaneous. In the event that multiple claims are asserted,
-------------
some of which are found not subject to this Section 9.11, the Parties agree to
stay the proceedings of the claims not subject to this Section 9.11 until all
other claims are resolved in accordance with this Section 9.11. In the event
that claims are asserted against multiple parties, some of whom are not subject
to this Section 9.11, the Parties agree to sever the claims subject to this
Section 9.11 and resolve them in accordance with this Section 9.11. In the
event that any provision of this Section 9.11 is found to be illegal or
unenforceable, the remainder of this Section 9.11 shall remain in full force and
effect. In the event of any challenge to the legality or enforceability of this
Section 9.11, the prevailing Party shall be entitled to recover the costs and
expenses, including reasonable attorneys' fees, incurred by it in connection
therewith. Applicable State Law shall govern the interpretation of this Section
9.11. This Section 9.11 fully states all of the terms and conditions of the
Parties' agreement regarding the matters mentioned in, or incidental to, this
Section 9.11. This Section 9.11 supersedes all oral negotiations and prior
writings concerning the subject matter hereof.
(7) Defined Terms. As used in this Section 9.11, the following terms
-------------
shall have the respective meanings set forth below:
(a) "AAA" shall mean the American Arbitration Association.
---
(b) "Applicable State Law" shall mean the law of the state of
--------------------
California; provided, however, that if any Party seeks (i) to exercise self-help
remedies,
55
including without limitation set-off, (ii) to foreclose against or sell any
collateral, by power of sale or otherwise or (iii) to obtain or oppose
provisional or ancillary remedies from a court of competent jurisdiction before,
after or during the pendency of the Arbitration or Reference, the law of the
state where such collateral is located shall govern the exercise of or
opposition to such rights and remedies.
(c) "Arbitration" shall mean an arbitration conducted pursuant
-----------
to this Section 9.11 in accordance with Applicable State Law, and under the
Commercial Arbitration Rules of the AAA, as in effect at the time the arbitrator
is selected pursuant to subsection 2 of this Section 9.11.
(d) "Claim" shall mean any claim, cause of action, action,
-----
dispute or controversy between or among the Parties, including any claim, cause
of action, action, dispute or controversy alleged in or subject to a lawsuit
between or among the Parties, which arises out of or relates to:
(i) any of the Subject Documents,
(ii) any negotiations, correspondence or communications
relating to any of the Subject Documents, whether or not incorporated into the
Subject Documents or any indebtedness evidenced thereby,
(iii) the administration or management of the Subject
Documents or any indebtedness evidenced thereby or
(iv) any alleged agreements, promises, representations or
transactions in connection therewith, including but not limited to any claim,
cause of action, action, dispute or controversy which arises out of or is based
upon an alleged tort or other breach of legal duty.
(e) "Parties" shall mean the Borrower, each Guarantor, the Agent,
-------
Issuing Bank and the Lenders party to this Agreement.
(f) "Reference" shall mean a judicial reference conducted
---------
pursuant to this Section 9.11 in accordance with Applicable State Law and under
the Judicial Reference Procedures of the AAA, as in effect at the time the
referee is selected pursuant to subsection 2 of this Section 9.11.
(g) "Subject Documents" shall mean the Loan Documents, any and all
-----------------
related documents, instruments and agreements, and any and all extensions,
renewals, amendments, substitutions and replacements of any of the foregoing;
and "Subject Document" shall mean any one of such Subject Documents.
(8) Waiver of Right to Trial By Jury. In connection with an
--------------------------------
Arbitration or Reference, or any other action or proceeding, the Parties hereby
expressly, intentionally and deliberately waive any right they may otherwise
have to trial by jury of any Claim.
56
9.12 Entire Agreement. This Agreement with Exhibits and Schedules and the
----------------
other Loan Documents embody the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof.
9.13 Separability of Provisions. In case any one or more of the provisions
--------------------------
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
9.14 Obligations Several. The obligation of each Lender hereunder is
-------------------
several, and no Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. Nothing contained in this Agreement and no action
taken by the Lenders pursuant hereto shall be deemed to constitute the Lenders
to be a partnership, an association, a joint venture or any other kind of
entity.
9.15 Survival of Certain Agreements. Notwithstanding anything in this
------------------------------
Agreement or implied by law to the contrary, the agreements of the Borrower set
forth in Sections 3.6, 3.7, 3.11 and 9.5 and the agreements of the Lenders set
forth in Sections 3.9, 8.2, 8.5 and 9.3, and the agreements set forth in Section
9.11 shall survive the payment of the Loans and the Notes and the termination of
this Agreement.
9.16 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement; signature
pages may be detached from counterpart documents and reassembled to form
duplicate executed originals.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
P-COM, INC., a
Delaware corporation
By: Xxxxxxx X. Sophie
---------------------------
Title: Chief Financial Officer
------------------------
Address:
0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Sophie
58
THE AGENT:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Vice President
Payment Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Person
Notice Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Person
with a copy to:
00 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx
59
COMMITMENT THE LENDERS:
$25,000,000 UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Vice President
Payment Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Person
Notice Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Person
with a copy to:
00 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx
$25,000,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: Xxxxxxx Xxxxxx
-------------------------------------
Title: Managing Director
----------------------------------
Notice and Payment Address:
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
60
EXHIBIT A-1
P-COM, INC.
REVOLVING PROMISSORY NOTE
San Francisco, California
$25,000,000 May 15, 1998
FOR VALUE RECEIVED, P-Com, Inc., a Delaware corporation (the "Borrower"),
--------
promises to pay to the order of Union Bank of California, N.A. (the "Lender")
------
the principal amount of Twenty-Five Million Dollars ($25,000,000) or, if less,
the aggregate amount of Revolving Loans (as defined in the Credit Agreement
referred to below) made by the Lender to the Borrower pursuant to the Credit
Agreement referred to below outstanding on the Maturity Date (as defined in the
Credit Agreement referred to below) on the Maturity Date.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from the date hereof until paid at the rates and at the times which shall
be determined in accordance with the provisions of the Credit Agreement.
Notwithstanding any other limitations contained in this Note, Lender does not
intend to charge and the Borrower shall not be required to pay any interest or
other fees or charges in excess of the maximum permitted by applicable law. Any
payments in excess of such maximum shall be refunded to the Borrower or credited
against principal.
All payments of principal and interest in respect of this Note shall be made
in lawful money of the United States of America in same day funds at the office
of the Agent described in the Credit Agreement. Until notified of the transfer
of this Note, the Borrower shall be entitled to deem the Lender or such person
who has been so identified by the transferor in writing to the Borrower as the
holder of this Note, as the owner and holder of this Note.
This Note is referred to in, and is entitled to the benefits of, the Credit
Agreement dated as of May 15, 1998 (the "Credit Agreement") among the Borrower,
----------------
the financial institutions named therein and Union Bank of California, N.A. as
Agent. The Credit Agreement, among other things, (i) provides for the making of
advances (the "Loans") by the Lender to the Borrower from time to time in an
-----
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or
the Credit Agreement shall alter or impair the obligation of the Borrower, which
is absolute and
1
unconditional, to pay the principal of and interest on this Note at the place,
at the respective times, and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Note. The
Borrower hereby consents to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waives diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
This Note shall be governed by, and construed in accordance with, the laws of
the state of California without giving effect to its choice of law doctrine.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the date and the place first
above written.
P-Com, Inc.
By
------------------------------
Title
---------------------------
2
EXHIBIT A-2
P-COM, INC.
REVOLVING PROMISSORY NOTE
San Francisco, California
$25,000,000 May 15, 1998
FOR VALUE RECEIVED, P-Com, Inc., a Delaware corporation (the "Borrower"),
--------
promises to pay to the order of Bank of America National Trust and Savings
Association (the "Lender") the principal amount of Twenty-Five Million Dollars
------
($25,000,000) or, if less, the aggregate amount of Revolving Loans (as defined
in the Credit Agreement referred to below) made by the Lender to the Borrower
pursuant to the Credit Agreement referred to below outstanding on the Maturity
Date (as defined in the Credit Agreement referred to below) on the Maturity
Date.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from the date hereof until paid at the rates and at the times which shall
be determined in accordance with the provisions of the Credit Agreement.
Notwithstanding any other limitations contained in this Note, Lender does not
intend to charge and the Borrower shall not be required to pay any interest or
other fees or charges in excess of the maximum permitted by applicable law. Any
payments in excess of such maximum shall be refunded to the Borrower or credited
against principal.
All payments of principal and interest in respect of this Note shall be made
in lawful money of the United States of America in same day funds at the office
of the Agent described in the Credit Agreement. Until notified of the transfer
of this Note, the Borrower shall be entitled to deem the Lender or such person
who has been so identified by the transferor in writing to the Borrower as the
holder of this Note, as the owner and holder of this Note.
This Note is referred to in, and is entitled to the benefits of, the Credit
Agreement dated as of May 15, 1998 (the "Credit Agreement") among the Borrower,
----------------
the financial institutions named therein and Union Bank of California, N.A. as
Agent. The Credit Agreement, among other things, (i) provides for the making of
advances (the "Loans") by the Lender to the Borrower from time to time in an
-----
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
1
No reference herein to the Credit Agreement and no provision of this Note or
the Credit Agreement shall alter or impair the obligation of the Borrower, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Note. The
Borrower hereby consents to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waives diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
This Note shall be governed by, and construed in accordance with, the laws of
the state of California without giving effect to its choice of law doctrine.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the date and the place first
above written.
P-Com, Inc.
By
-----------------------------
Title
-------------------------
2
EXHIBIT B
[FORM OF NOTICE OF REVOLVING LOAN]
NOTICE OF REVOLVING LOAN
Pursuant to that certain Credit Agreement, dated as of May 15, 1998 as
amended, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the
"Agreement"; the terms defined therein and not otherwise defined herein being
----------
used herein as therein defined), among P-Com, Inc., a Delaware corporation (the
"Borrower"), the financial institutions named on the signature pages thereof
--------
(each a "Lender" and collectively the "Lenders"), and Union Bank of California,
------ -------
N.A., as Agent for the Lenders (the "Agent"), this represents the Borrower's
-----
request to borrow on _____________, _____ from Lenders, in accordance with their
respective pro rata share of the Revolving Commitment, $______________ in
Revolving Loans as [Base Rate] [LIBO Rate] Loans. [The Interest Period for LIBO
Rate Loans shall be [one] [two] [three] [six] [nine] [twelve] months.]
The undersigned officers, to the best of their knowledge, and Borrower
certify that:
(i) The representations and warranties contained in the Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date hereof;
(ii) No event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an Event
of Default or a Potential Event of Default;
(iii) All Loan Documents are in full force and effect; and
(iv) There is no pending or threatened action or proceeding against or
affecting Borrower or any of its Subsidiaries before any court, governmental
agency or arbitrator, which could reasonably be expected to have a material
adverse effect on the business, operations, prospects, properties, assets or
condition (financial or otherwise) of Borrower, or on the ability of Borrower to
perform, or of any of the Lenders to enforce, the obligations of any of Borrower
under the Agreement or the other Loan Documents.
DATED: _____________________ P-Com, Inc.
By
-----------------------------
Title
-------------------------
B-1
EXHIBIT C
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Credit Agreement, dated as of May 15, 1998 as
amended, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, supplemented or otherwise modified, being the
"Agreement"; the terms defined therein and not otherwise defined herein being
----------
used herein as therein defined), among P-Com, Inc., a Delaware corporation (the
"Borrower"), the financial institutions named on the signature pages thereof
--------
(each a "Lender" and collectively the "Lenders"), and Union Bank of California,
------ -------
N.A., as Agent for the Lenders (the "Agent"), this represents Borrower's request
-----
to [Select A or B with appropriate insertions and deletions: [A: convert
$_________ in principal amount of presently outstanding Revolving Loans that are
[Base/LIBO] Rate Loans [having an Interest Period that expires on ____________,
199_] to [Base/LIBO] Rate Loans on ____________, 199_. [The initial Interest
Period for such LIBO Rate Loans is requested to be a [one] [two] [three] [six]
[nine] [twelve] month period.] [B: continue as LIBO Rate Loans $_________ in
principal amount of presently outstanding Revolving Loans having an Interest
Period that expires on ____________, 199_. The Interest Period for such LIBO
Rate Loans commencing on _______________, 199__ is requested to be a [one] [two]
[three] [six] [nine] [twelve] month period.]
[For Conversions to or Continuations of LIBO Rate Loans Only: The
undersigned officers, to the best of their knowledge, and Borrower certify that
no Event of Default or Potential Event of Default has occurred and is continuing
under the Agreement.]
DATED: P-Com, Inc.
By
-----------------------------
Title
-------------------------
C-1
EXHIBIT D
[FORM OF COMPLIANCE CERTIFICATE]
1. This Compliance Certificate ("Compliance Certificate") is executed and
delivered by P-Com, Inc., a Delaware corporation (the "Borrower") to Union Bank
of California, N.A. (the "Agent") pursuant to Section 6.1(a)(iii)(B) of the
Credit Agreement dated as of May 15, 1998 among the Borrower, the financial
institutions named therein and the Agent. Any terms used herein and not defined
herein shall have the meanings defined in the Credit Agreement. This Compliance
Certificate covers the Borrower's:
Fiscal quarter ended _________, 19__
Fiscal year ended _________, 19__
2. The following paragraphs set forth calculations in compliance with
obligations pursuant to Section 6.2(a), (b), (c), (d), (e), and (h) of the
Credit Agreement, as of the end of the fiscal period set forth in paragraph 1
hereof.
A. Quick Ratio (Sec. 6.2(a)):
--------------------------
(a) Consolidated Quick Assets $____________
(b) Consolidated Current
Liabilities $____________
Ratio (a) : (b) ____________
Minimum Permitted Ratio 1.00 to 1.00
B. Leverage Ratio (Sec 6.2(b)):
----------------------------
(a) Consolidated Funded Debt as at the
end of the most recent fiscal quarter $____________
(b) Consolidated EBITDA for the four
quarters ending on the last day
of the most recently ended
fiscal quarter $____________
Ratio (a) to (b) ____________
Maximum Permitted Ratio 4.0 to 1.0
D-1
C. Consolidated Tangible Net Worth (Sec. 6.2(c)):
----------------------------------------------
(a) $92,000,000
(b) plus 75% of Consolidated
Net Income (but not loss)
for each fiscal quarter
of the Borrower commencing
with the fiscal quarter
ending March 31, 1998 $____________
(c) plus 100% of Net Proceeds
of any Equity Issuance after
December 31, 1997 $____________
(d) minus 100% of additions to
goodwill and charges to earnings
resulting from permitted
Acquisitions $____________
Minimum Required Consolidated
Tangible Net Worth:
(a) + (b) + (c) - (d), but in no event
less than $62,000,000: $____________
Actual Consolidated Tangible
Net Worth: $____________
D. Profitability (Sec 6.2(d)):
---------------------------
1. (a) Consolidated Net Income during
the most recent fiscal quarter $____________
(b) Consolidated Net Income during
the fiscal quarter preceding
the most recent fiscal quarter $____________
(c) Consolidated Operating Income
during the most recent fiscal
quarter $____________
(d) Consolidated Operating Income
during the fiscal quarter
preceding the most recent
fiscal quarter $____________
Required: (a) or (b) greater than $0.
--------
(c) or (d) greater than $0.
D-2
2. (a) Consolidated Tangible Net Worth
as of the end of the fiscal
quarter immediately preceding
the current fiscal $____________
(b) Consolidated Net Income during
the most recent fiscal quarter
(same as 1(a) above) $____________
(c) Consolidated Operating Income
during the most recent fiscal
quarter $____________
(same as 1(c) above)
Required: (b) and (c): No loss
--------
greater than 5% of (a).
3. (a) Consolidated Net Income during
the most recent fiscal year $____________
(b) Consolidated Operating Income
during the most recent fiscal
year $____________
Required: (a) and (b): greater than $0
--------
E. Interest Coverage Ratio (Sec. 6.2(e)):
--------------------------------------
(a) Consolidated EBITDA $____________
(b) Consolidated Interest Expense $____________
Ratio (a) to (b) ____________
Minimum Permitted Ratio 3.0:1.0
F. Dividends (Sec. 6.2(h)):
------------------------
Dividends declared or paid in
current fiscal year $____________
Permitted: $0
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its Subsidiaries
during the fiscal period covered by this Compliance Certificate. The undersigned
does not (either as a result of such review or otherwise) have any knowledge of
the existence as of the date of this Compliance Certificate of
D-3
any condition or event that constitutes an Event of Default or a Potential Event
of Default, with the exception set forth below in response to which the Borrower
is taking or proposes to take the following actions (if none, so state):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4. This Compliance Certificate is executed on _______________, ____ by
the Chief Executive Officer or Chief Financial Officer of the Borrower. The
undersigned hereby certifies that each and every matter contained herein is
derived from the Borrower's books and records and is, to the best knowledge of
the undersigned, true and correct.
P-Com, Inc.
a Delaware corporation
By
-----------------------------
Title
-------------------------
D-4
EXHIBIT E
PRICING GRID
The "Applicable Margin" and the "Commitment Fee Rate" shall mean the
----------------- -------------------
variable number of percentage points determined in accordance with the grid set
forth below, based upon the Borrower's ratio of Consolidated Funded Debt as at
the end of each fiscal quarter to Consolidated EBITDA on a rolling four quarter
basis, as set forth in Section 6.2(b) (the "Leverage Ratio"), as determined by
the Agent with reference to the Borrower's most recently delivered financial
statements and Compliance Certificate; provided that from the execution date of
--------
this Agreement until five (5) Business Days after Agent's receipt of the
Borrower's financial statements and Compliance Certificate for the fiscal
quarter ended June 30, 1998, the Applicable Margin for LIBO Rate Loans, the
Applicable Margin for Base Rate Loans, and the Commitment Fee Rate shall be as
set forth in Level II, below. Thereafter, the effective date of any change in
the Applicable Margin and/or the Commitment Fee Rate shall be five (5) Business
Days following Agent's receipt of Borrower's financial statements and Compliance
Certificate; provided that if Borrower shall not have timely delivered its
--------
financial statements and Compliance Certificate in accordance with Section
6.1(a), then commencing five (5) Business Days following the date upon which
such financial statements should have been delivered and continuing until such
financial statements are actually delivered, it shall be assumed for purposes of
determining said rates that Borrower's Leverage Ratio is equal to or greater
than 3.00 to 1.00.
------------------------------------------------------------------------
Ratio of Consolidated
Funded Debt to Applicable Applicable
Consolidated Margin for Margin for
EBITDA on rolling Commitment LIBO Rate Base Rate
Level four quarter basis Fee Rate Loans Loans
------------------------------------------------------------------------
I. Equal to or greater 0.25 1.25 0.00
than 3.00:1.00
------------------------------------------------------------------------
II. Equal to or greater 0.20 1.125 0.00
than 2.50:1.00 but less
than 3.00:1.00
------------------------------------------------------------------------
III. Equal to or greater 0.20 1.00 0.00
than 2.00:1.00 but less
than 2.50:1.00
------------------------------------------------------------------------
IV. Less than 2.00:1.00 0.175 0.875 0.00
------------------------------------------------------------------------
E-1