CREDIT AGREEMENT
This CREDIT AGREEMENT (as amended, supplemented or modified from time
to time, this "Agreement") is dated as of March 26, 1999 and is between
MICROSTRATEGY INCORPORATED and NATIONSBANK, N.A.
The parties hereto agree as follows:
ARTICLE I
GENERAL DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have
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the following meanings:
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled by
or is under common control with a Controlling Person, and if such Person is an
individual, any member of the immediate family (including parent, spouse,
children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used herein,
the term "control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Application" means any Application and Agreement for Standby Letter
of Credit executed and delivered by the Company to the Bank in accordance with
the terms and conditions of this Agreement, substantially in the form of Exhibit
B hereto and appropriately completed, including all extensions, supplements and
modifications thereto, and renewals thereof; and "Applications" means all of
said applications.
"Bank" means NationsBank, N.A., a national banking association, and
its successors and assigns.
"Borrower" means MicroStrategy Incorporated, a Delaware corporation,
and its successors.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Virginia are authorized by law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" has the meaning set forth in Section 2.1(a).
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements as of such date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
"Debt" means, collectively, and includes, with respect to any
specified Person (a) indebtedness or liability for borrowed money whether by
loan, the issuance and sale of debt securities or the sale of assets to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such assets from such Person, or for the deferred purchase price of
property or services; (b) obligations of a lessee under a capital lease; (c)
obligations to reimburse the issuer of letters of credit or acceptances; (d)
Debt of others guaranteed by such Person; (e) obligations under interest rate
swap, cap or collar agreements or other similar agreements or arrangements
designed to protect that Person against fluctuations in interest rates; (f)
obligations under any foreign exchange contract, currency swap agreements or
other similar agreements or arrangements designed to protect that Person against
fluctuations in currency values; (g) obligations secured by any Lien on property
owned by the specified Person, whether or not the obligations have been assumed,
provided that the amount of such Debt shall be limited to the lesser of (i) the
outstanding principal balance of
such Debt or (ii) the fair market value of the property of such Person securing
such Debt; and (h) the purchaser's obligations under seller-take-back
transactions.
"Default" means any condition or event which constitutes an Event of
Default or which, with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"$" means U.S. Dollars.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Effective Date" means the date on which this Agreement becomes
effective in accordance with Section 8.8.
"Event of Default" has the meaning set forth in Section 7.1.
"GAAP" means generally accepted accounting principles in the United
States.
"Investment" means any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (a) directly or indirectly purchases or
otherwise acquires any of the capital stock of a corporation, (b) directly or
indirectly purchases or otherwise acquires any ownership interest in any Person
that is not a corporation, (c) directly or indirectly purchases or otherwise
acquires any assets, obligations, or other securities of, or makes any capital
contribution to, or otherwise invests in or acquires any interest in, any
Person, (d) directly or indirectly makes or acquires any loan or advance, or an
interest in any loan or advance, to any Person, or (e) directly or indirectly
participates as a partner or joint venturer with any Person.
"Letter of Credit" means any Irrevocable Standby Letter of Credit
issued by the Bank for the account of the Borrower pursuant to the terms hereof
and of an Application, including all extensions, supplements and modifications
thereto, and renewals thereof; and "Letters of Credit" means all of said letters
of credit.
"Letter of Credit Loans" has the meaning set forth in Section 2.1(b).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a loan made by the Bank to the Borrower pursuant to this
Agreement and the Note or an Application, and "Loans" means all of such Loans.
"Note" has the meaning set forth in Section 2.3(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means the Liens referred to in clauses (i) through
(v) of Section 6.8.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of a member or members of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding May 31, 2001.
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"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Tax" means any fee (including license, filing and registration fee),
tax (including any income, gross receipts, franchise, sales, use or real,
personal, tangible or intangible property tax), interest equalization or stamp
tax, assessment, levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any governmental body, agency or official,
together with any penalty, fine or interest thereon.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
Section 1.2. Accounting Terms and Determinations. Unless otherwise
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specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP as
in effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Bank.
ARTICLE II
THE CREDIT
Section 2.1. Commitment to Make Loans.
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(a) Revolving Commitment. The Bank agrees, on the terms and
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conditions set forth in this Agreement, to make loans ("Loans") to the Borrower
from time to time during the Revolving Credit Period in an aggregate principal
amount not to exceed $25,000,000.00 at any one time outstanding (such amount, as
it may be reduced from time to time pursuant to Section 2.5, being herein
referred to as the "Commitment"). Subject to the foregoing, the Borrower may
borrow under this Section 2.1, prepay and reborrow.
(b) Letter of Credit Subfeature. As a subfeature under the
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Commitment, the Bank agrees, on the terms and conditions set forth in this
Agreement and in the applicable Applications, to make Loans to the Borrower by
issuing Letters of Credit for the account of the Borrower ("Letter of Credit
Loans"). At no time shall the aggregate of (i) the undrawn amount of all
outstanding Letters of Credit, plus (ii) all amounts paid by the Bank in
connection with drawings under Letters of Credit for which the Bank has not been
reimbursed (including by any Loan hereunder), exceed the lesser of $5,000,000.00
(or the equivalent in foreign currency, as determined by the Bank in its sole
discretion) and the unused Commitment (the "Letter of Credit Commitment"). Each
Letter of Credit shall be issued for a term not to exceed one (1) year, although
any Letter of Credit may be automatically renewed in accordance with the terms
and conditions of said Letter of Credit and the related Application. A Letter
of Credit may be denominated in U.S. Dollars, Canadian Dollars, Pounds Sterling,
Dutch Guilders, Spanish Pesetas, Austrian Schillings, Italian Lira, German
Deutschmarks, French Francs, or the European Union's single currency ("Euro").
Each draft paid by the Bank under a Letter of Credit shall, if such amount is
available under the Commitment, be deemed a Loan under the Revolving Commitment
and shall accrue interest at the rate then applicable under the Note. Subject
to the foregoing, the Borrower may borrow under this subparagraph (b), prepay
and reborrow.
Section 2.2. Method of Borrowing. The Borrower shall give the
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Bank notice not later than 11:00 a.m. (Eastern Time) on the date of each
proposed borrowing hereunder, specifying the date on which it proposes to borrow
(which shall be a Business Day), the amount of the Loan to be borrowed, (for a
Letter of Credit Loan) the denomination of the Letter of Credit, and (for other
than Letter of Credit Loans) the Borrower's deposit account at the Bank into
which such amount is to be deposited. The notices described in this Section 2.2
may be written, oral, or telephonic, and may be given to the Bank by anyone
reasonably believed by the Bank to have the authority to give such notice.
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Not later than 2:00 p.m. (Eastern Time) on the date so specified, the Bank shall
(unless it determines that any applicable condition specified in this Agreement
has not been satisfied and has provided notice thereof to the Borrower) issue
the Letter of Credit or (for other than Letter of Credit Loans) deposit the
amount of the requested Loan, in immediately available funds in McLean,
Virginia, to the Borrower in said deposit account.
Section 2.3. Note.
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(a) The Loans, other than Letter of Credit Loans, shall be evidenced
by, and repayable with interest in accordance with, a single note substantially
in the form of Exhibit A hereto and appropriately completed (the "Note").
(b) The Bank shall record, and prior to any transfer of the Note shall
endorse on the schedule forming a part thereof appropriate notations to
evidence, the date and amount of each Loan and the date and amount of each
payment of principal made by the Borrower with respect thereto; provided,
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however, that any failure of the Bank to make such a notation or any error
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therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of the Note. The Borrower hereby
irrevocably authorizes the Bank so to endorse the Note and to attach to and make
part of the Note a continuation of any such schedule as and when required.
Section 2.4. Fees.
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(a) Unused Fee. During the Revolving Credit Period, the Borrower
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shall pay to the Bank an unused line fee at the rate of one-fifth of one percent
(0.20%) per annum on the unused portion of the Commitment. Such fee shall
accrue from and including the Effective Date to but excluding the last day of
the Revolving Credit Period and shall be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing June 30,
1999, and on the last day of the Revolving Credit Period.
(b) Commitment Fee. On the Effective Date, the Borrower shall pay to
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the Bank the remainder of the $25,000.00 commitment fee, in the amount of
$12,500.00.
(c) Letter of Credit Fees. During the Revolving Credit Period, the
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Borrower shall pay to the Bank a letter of credit fee at the rate of one percent
(1.0%) per annum of the average undrawn amount of Letters of Credit outstanding
during each consecutive three-month period commencing with the Effective Date.
The average undrawn amount of Letters of Credit for any three-month period shall
be determined by adding together the aggregate undrawn amount (in U.S. Dollar
equivalent) of each Letter of Credit outstanding on each day of said period and
dividing by the number of days in such period. Said fee shall accrue from and
including the Effective Date to but excluding the last day of the Revolving
Credit Period and shall be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing June 30, 1999, and on the
last day the last Letter of Credit is outstanding.
Section 2.5. Optional Termination or Permanent Reduction of the
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Commitment. The Borrower may, upon at least three Business Days' notice to the
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Bank, (i) terminate at any time, or (ii) permanently reduce, not more frequently
than once per year, by an aggregate amount of $1,000,000 or more, the unused
portion of the Commitment. If the Commitment is terminated in its entirety, any
accrued unused fee shall be payable on the effective date of such termination.
Section 2.6. Optional Prepayments. The Borrower may prepay the
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Loans in whole or in part at any time, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment.
ARTICLE III
CONDITIONS TO LOANS
The obligation of the Bank to make each Loan is subject to the
satisfaction of the following conditions:
Section 3.1. All Loans. In the case of each Loan:
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(i) receipt by the Bank of notice of borrowing as required by
Section 2.2;
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(ii) the fact that no Default has occurred and is continuing or
would result from such Loan; and
(iii) the fact that the representations and warranties of the
Borrower contained in this Agreement shall be true on and as of the date of
such Loan (other than those which relate to a specific date or which have
become untrue due to changes otherwise permitted hereunder).
Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date thereof that the facts hereinabove set forth in clauses
(ii) and (iii) of this Section are true as of such date.
Section 3.2. First Loan. In the case of the first Loan:
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(i) receipt by the Bank of a duly executed Note, dated on or
before the date of such Loan, complying with the provisions of Section 2.3;
(ii) all legal matters incident to this Agreement and the Note,
and the transactions contemplated hereby and thereby shall be reasonably
satisfactory to ▇▇▇▇ & Valentine, L.L.P., counsel for the Bank;
(iii) receipt by the Bank of (A) a copy of the Borrower's
certificate of incorporation, as amended, certified by the appropriate
office of the State of Delaware; (B) a certificate of such office, dated as
of a recent date, as to the good standing and charter documents of the
Borrower on file; and (C) a certificate of the Secretary or an Assistant
Secretary of the Borrower dated the date of such Loan and certifying (1)
that the certificate of incorporation of the Borrower has not been amended
since the date of the last amendment thereto indicated on the certificate
furnished pursuant to clause (B) above, (2) as to the absence of
dissolution or liquidation proceedings by or (to the Borrower's knowledge)
against the Borrower, (3) that attached thereto is a true and complete copy
of the by-laws of the Borrower as in effect on the date of such
certification, (4) that attached thereto is a true, correct and complete
copy of resolutions adopted by the board of directors of the Borrower
authorizing the execution, delivery and performance of this Agreement and
the Note and that said resolutions have not been amended and are in full
force and effect on the date of such certificate and (5) as to the
incumbency and specimen signatures of each officer of the Borrower
executing this Agreement and the Note, or any other document delivered in
connection herewith or therewith;
(iv) receipt by the Bank of an opinion of ▇▇▇▇ and ▇▇▇▇, LLP,
counsel for the Borrower, substantially in the form of Exhibit C hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Bank may reasonably request;
(v) receipt by the Bank of a certificate signed by the
President of the Borrower, to the effect set forth in clauses (ii) and
(iii) of Section 3.1; and
(vi) receipt by the Bank of all documents it may reasonably
request relating to the existence of the Borrower and its authority to
execute, deliver and perform this Agreement, the Note and the Applications
and the validity of this Agreement, the Note and the Applications and any
other matters relevant hereto or thereto, all in form and substance
reasonably satisfactory to the Bank.
Section 3.3. Letter of Credit Loans. In the case of each Letter of
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Credit Loan (and in addition to the requirements of Section 3.1):
(i) receipt by the Bank of a duly executed Application,
together with all agreements and documents required to be delivered to the
Bank as set forth therein.
All documents and opinions referred to in this Article shall be in form and
substance reasonably satisfactory to the Bank and its counsel.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.1. Corporate Existence and Power. The Borrower is a
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corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Borrower and each Subsidiary is duly
qualified as a foreign corporation, licensed and in good standing in each
jurisdiction in which the failure to so qualify or be licensed, as the case may
be, in the aggregate, could reasonably be expected to have a material adverse
effect on the business, financial position, results of operations or properties
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.2. Corporate and Governmental Authorization; Contravention.
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The execution, delivery and performance by the Borrower of this Agreement, the
Note and the Applications are within its corporate power, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute (with or without the giving of notice or lapse of time
or both) a default under, any provision of applicable law or of the articles of
incorporation or by-laws of the Borrower or of any material agreement, or any
judgment, injunction, order, decree or other instrument binding upon or
affecting the Borrower or result in the creation or imposition of any Lien on
any of its assets.
Section 4.3. Binding Effect. This Agreement constitutes a valid and
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binding agreement of the Borrower and the Note and each Application, when
executed and delivered in accordance with this Agreement, will constitute the
valid and binding obligation of the Borrower, in each case enforceable against
the Borrower in accordance with its terms, except as (i) the enforceability
hereof and thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 4.4. Financial Information.
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(a) The audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1997 for the fiscal year then
ended, reported on by Coopers & ▇▇▇▇▇▇▇, a copy of which has been delivered to
the Bank, fairly present, in conformity with GAAP, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such date and
their results of operations and changes in financial position for such fiscal
year. As of the date of such financial statements, the Borrower and its
Consolidated Subsidiaries did not have any material contingent obligation,
contingent liability or liability for Taxes, long-term lease or unusual forward
or long-term commitment, which is not reflected in any of such financial
statements or notes thereto.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1998 for the twelve months then
ended, a copy of which has been delivered to the Bank, fairly present, in
conformity with GAAP applied on a basis consistent with the financial statements
referred to in clause (a) of this Section, the consolidated financial position
of the Borrower and its Consolidated Subsidiaries as of such date and their
results of operations and changes in financial position for such twelve-month
period (subject to normal year-end adjustments).
(c) Since December 31, 1998, there has been no material adverse change
in the business, financial position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole.
Section 4.5. Litigation. To the knowledge of the Borrower, there is
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no action, suit or proceeding pending against, or threatened against or
affecting, the Borrower or any of its Consolidated Subsidiaries before any
court, governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could reasonably be expected to
materially adversely affect the business, financial position or results of
operations of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or which in any manner draws into question the validity of any material
provision of this Agreement, the Note, or any Application and there is no basis
known to the Borrower for any such action, suit or proceeding.
Section 4.6. Marketable Title. The Borrower has good and
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marketable title to all its properties and assets subject to no Lien, except
Permitted Liens.
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Section 4.7. Filings. All actions by or in respect of, and all
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filing with, any governmental body, agency or official required in connection
with the execution, delivery and performance by the Borrower of this Agreement,
the Note and the Applications, or necessary for the validity or enforceability
thereof against the Borrower or for the protection or perfection of the rights
and interests of the Bank thereunder, will, prior to the date of delivery
thereof, have been duly taken or made, as the case may be.
Section 4.8. Regulation U. The proceeds of the Loans will be used by
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the Borrower only for the purposes set forth in Section 6.11 hereof. None of the
Loan proceeds will be used, directly or indirectly, for the purpose of (i)
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
margin stock or for any other purchase which might constitute the Loans a
"purpose credit" within the meaning of Regulation U or Regulation X of the Board
of Governors of the Federal Reserve System; or (ii) acquiring any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
Section 4.9. Taxes. The Borrower and its Subsidiaries have filed all
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United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid (or made adequate provision
for the payment of) all Taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary, except where the payment
of such Tax is being disputed in good faith and adequate reserves have been
established in accordance with GAAP. The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of Taxes or other
governmental charges are, in the opinion of the Borrower, adequate.
Section 4.10. Subsidiaries. Each of the Borrower's corporate
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Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
Section 4.11. Real Estate. Neither the Borrower nor any Subsidiary
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of the Borrower owns any real property.
Section 4.12. Year 2000 Compliance. The Borrower (i) has begun
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analyzing the operations of the Borrower and its Subsidiaries that could be
adversely affected by the failure to become "Year 2000 Compliant" (as defined by
the British Standard Institute); and (ii) is in the process of developing a plan
for becoming Year 2000 Compliant in a timely manner. The Borrower reasonably
believes that it will become Year 2000 Compliant for its operations and those of
its Subsidiaries on a timely basis except to the extent that a failure to do so
could not reasonably be expected to have a material adverse effect upon the
financial condition of the Borrower.
Section 4.13. Disclosure. To the best of the Borrower's knowledge,
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none of this Agreement, any schedule or exhibit hereto or document, certificate,
report, or other written information furnished to the Bank by or at the
direction of the Borrower in connection herewith or with the consummation of the
transactions contemplated hereby contains any material misstatement of fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading at the time such were made. To the best of the
Borrower's knowledge, there is no fact materially adversely affecting the
assets, business, financial position or results of operations of the Borrower
which has not been set forth in a footnote included in the financial statements
referred to in Section 4.4(a) or in an exhibit or schedule thereto.
ARTICLE V
FINANCIAL COVENANTS
The Borrower agrees that so long as the Bank is committed to make
Loans hereunder, or honor any Letter of Credit, or any amount payable hereunder
or under the Note or any Application remains unpaid:
Section 5.1. Certain Definitions. As used in this Article V and
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elsewhere in this Agreement, the following terms have the following meanings:
"Capital Leases" means all leases that should be capitalized on the
balance sheet of the lessee prepared in accordance with GAAP.
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"Current Maturities of Long -Term Debt means, as of any date, the
aggregate amount of principal payments (including, without limitation, the
portion of any obligation under Capital Leases allocable to amortization in
accordance with GAAP) in respect of Long-Term Debt which are, in accordance with
GAAP, properly classified as of such date as current liabilities.
"Current Maturity Coverage Ratio" means, at any time, the ratio of
(a) Net Income, plus depreciation, plus Current Taxes, plus Interest Expense,
minus dividends and other distributions paid to shareholders, of the Borrower
and its Consolidated Subsidiaries, to (b) Current Maturities of Long-Term Debt
(excluding the Loans), plus Interest Expense, plus the current portion of
Capital Leases, of the Borrower and its Consolidated Subsidiaries.
"Current Taxes" means, for any period, Taxes paid in such period
(rather than merely accrued or deferred.)
"EBITDA" shall mean, for any period, the sum for the Borrower and its
Consolidated Subsidiaries (determined without duplication in accordance with
GAAP) of (a) Net Income for such period, plus (b) Taxes, Interest Expense,
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depreciation and amortization for such period
"Funded Debt" means at any date, with respect to any Person, all
interest-bearing Debt of such Person at such date.
"Funded Debt Ratio" means, at any time, the ratio of (a) Funded Debt
of the Borrower and its Consolidated Subsidiaries, to (b) EBITDA of the Borrower
and its Consolidated Subsidiaries.
"Interest Expense" means, for any period, all interest in respect of
Funded Debt (including the interest component of any payments in respect of
obligations of a lessee under Capital Leases) of the Borrower and its
Consolidated Subsidiaries (determined without duplication in accordance with
GAAP) accrued or capitalized during such period.
"Long-Term Debt" means as of any date, those Funded Debts scheduled to
mature more than one year from such date and which are classified properly as
long-term debt in accordance with GAAP.
"Net Income" means, for any Person for any period, the consolidated
net income (or deficit) of such Person and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from the calculation thereof any extraordinary, unusual or
non-recurring gains or losses during such period in accordance with GAAP.
Section 5.2. Current Maturity Coverage Ratio. For each 12-month
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period ending on the last day of each fiscal quarter of the Borrower, commencing
December 31, 1998, the Borrower shall maintain a Current Maturity Coverage Ratio
of not less than 1.25 to 1.0.
Section 5.3. Funded Debt Ratio. For each 12-month period ending on
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the last day of each fiscal quarter of the Borrower, commencing December 31,
1998, the Borrower shall maintain a Funded Debt Ratio of not greater than 3.5 to
1.0.
ARTICLE VI
OTHER COVENANTS
The Borrower agrees that so long as the Bank is committed to make
Loans hereunder, or honor any Letter of Credit, or any amount payable hereunder
or under the Note or any Application remains unpaid:
Section 6.1. Information. The Borrower will deliver or cause to be
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delivered to the Bank:
(i) as soon as available and in any event within 150 days
after the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and the related statements of income and cash flow for
such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and
accompanied by an opinion thereon by such independent public accountants as
are reasonably satisfactory to the Bank, which opinion shall state that
such consolidated financial statements present fairly the consolidated
-8-
financial position of the Borrower and its Consolidated
Subsidiaries as of the date of such financial statements and the
results of their operations for the period covered by such
financial statements in conformity with GAAP applied on a
consistent basis (except for changes in the application of which
such accountants concur) and shall not contain any "going
concern" or like qualification or exception;
(ii) as soon as available and in any event within 45
days after the end of each of the first three quarters of each
fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries and the related
consolidated statements of income and cash flow for such quarter
and for the portion of the Borrower's fiscal year ended at the
end of such quarter, setting forth in each case in comparative
form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all
certified (subject to normal year-end audit adjustments and
subject to footnotes) as complete and correct by the chief
financial officer or chief accounting officer of the Borrower;
(iii) simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above, a
certificate of the chief financial officer or chief accounting
officer of the Borrower, substantially in the form of Exhibit E
hereto and appropriately completed;
(iv) forthwith upon the occurrence of any Default, a
certificate of the chief financial officer or chief accounting
officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with
respect thereto;
(v) as soon as reasonably practicable after
obtaining knowledge of the commencement of, or of a material
threat of the commencement of, an action, suit or proceeding
against the Borrower or any of its Subsidiaries which could
reasonably be expected to materially adversely affect the
business, properties, financial position or results of operations
of the Borrower and its Consolidated Subsidiaries, considered as
a whole, or which in any manner questions the validity of any
material provision of this Agreement, the Note, any Application
or any of the other transactions contemplated hereby or thereby,
the nature of such pending or threatened action, suit or
proceeding and such additional information as may be reasonably
requested by the Bank;
(vi) as soon as reasonably practicable after
obtaining knowledge of, or of a material possibility of, any
actual or potential contingent liability of the Borrower or any
of its Subsidiaries which is in excess of the applicable
insurance coverage therefor by $500,000, the nature of such
contingent liability and such additional information as may be
reasonably requested by the Bank;
(vii) promptly upon transmission thereof, copies of
all press releases and other statements made available generally
by the Borrower or its Subsidiaries to the public concerning
material developments in the results of operations, financial
condition, business or prospects of the Borrower or its
Subsidiaries;
(viii) promptly upon receipt thereof, copies of each
report submitted to the Borrower or any of its Consolidated
Subsidiaries by independent public accountants in connection with
any annual, interim or special audit made by them of the books of
the Borrower or any of its Consolidated Subsidiaries including,
without limitation, each report submitted to the Borrower or any
of its Consolidated Subsidiaries concerning its accounting
practices and systems and any final comment letter submitted by
such accountants to management in connection with the annual
audit of the Borrower and its Consolidated Subsidiaries; and
(ix) as soon as available, and in any event within 30
days after the beginning of each fiscal year, a copy of the
Borrower's formally adopted annual budget or other form of
Borrower's consolidated financial projections for said fiscal
year; and
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(x) from time to time such additional information regarding
the financial position, results of operations or business of the Borrower
or any of its Subsidiaries as the Bank may reasonably request.
Section 6.2. Payment of Obligations. The Borrower will, and will
----------------------
cause each of its Subsidiaries to, pay and discharge, as the same shall become
due and payable, (i) all their respective obligations and liabilities, including
all claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like persons which, in any such case, if unpaid, might by
law give rise to a Lien upon any of their properties or assets, and (ii) all
lawful Taxes, assessments and charges or levies made upon their properties or
assets, by any governmental body, agency or official except where any of the
items in clause (i) or (ii) of this Section 6.2 may be diligently contested in
good faith by appropriate proceedings, and the Borrower or such Subsidiary shall
have set aside on its books, if required under GAAP, appropriate reserves for
the accrual of any such items.
Section 6.3. Maintenance of Property; Insurance. The Borrower
----------------------------------
will keep, and will cause each of its Subsidiaries to keep, all property useful
and necessary in their respective businesses in good working order and
condition, subject to ordinary wear and tear and obsolescence; will maintain
with financially sound and reputable insurance companies, insurance on all their
respective properties in at least such amounts and against at least such risks
(and with such risk retentions) as are usually insured against by companies
engaged in the same or a similar business; and will furnish to the Bank upon
request full information as to the insurance carried.
Section 6.4. Conduct of Business and Maintenance of Existence. The
------------------------------------------------
Borrower will continue, and will cause each of its Subsidiaries to continue, to
engage in business of the same general type as now conducted by the Borrower or
such Subsidiary, and will preserve, renew and keep in full force and effect, and
will cause each of its Subsidiaries to preserve, renew and keep in full force
and effect, their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business.
Section 6.5. Compliance with Laws. The Borrower will remain in
--------------------
material compliance, and will cause each of its Subsidiaries to remain in
material compliance, with all applicable laws, ordinances, rules, regulations,
and requirements of governmental authorities (including, without limitation,
ERISA and the rules and regulations thereunder) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
Section 6.6. Accounting; Inspection of Property, Books and Records.
-----------------------------------------------------
The Borrower will keep, and will cause each of its Subsidiaries to keep, proper
books of record and account in which full, true and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to their respective businesses and activities, will maintain, and will cause
each of its Subsidiaries to maintain, their respective fiscal reporting periods
on the present basis and will permit, and will cause each of its Subsidiaries to
permit, representatives of the Bank to visit and inspect any of their respective
properties during the Borrower's normal business hours, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their officers, employees and
independent public accountants, all at such reasonable times and as often as may
reasonably be desired. The Bank shall maintain the confidentiality of all
Confidential Information in accordance with its standard procedures adopted by
it in good faith to protect confidential information of third parties delivered
to it. As used herein, the term "Confidential Information" means information
delivered to the Bank by or on behalf of the Borrower or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
when received by the Bank as being confidential information of the Borrower or
such Subsidiary; provided, that such term does not include information (i) that
--------
was publicly known or otherwise known to the Bank prior to the time of such
disclosure, (ii) that subsequently becomes publicly known through no act or
omission of the Bank or any Person acting on the Bank's behalf, (iii) that
otherwise becomes known to the Bank other than through disclosure by the
Borrower or any Subsidiary, or (iv) that constitutes financial statements
delivered to the Bank that are otherwise publicly available; and provided
--- --------
further, that the Bank may disclose Confidential Information (v) if required for
-------
regulatory purposes, (w) pursuant to court order, (x) for any reason to its
attorneys, accountants and auditors, who shall treat said information as
confidential (y) to Participants and Assignees under Section 8.6 for the
purposes set forth in said Section, who shall agree to treat said information as
"Confidential Information" in accordance with this Section, or (z) as necessary
for the enforcement of its rights under this Agreement; and provided further,
--- -------- -------
that any of such information that is not clearly marked or labeled when received
by the Bank as being confidential information of the Borrower or such Subsidiary
shall nonetheless be treated by the
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Bank in accordance with it normal procedures for handling information given to
it by a borrower or prospective borrower.
Section 6.7. Debt. The Borrower and its Consolidated Subsidiaries
----
will not incur or at any time be liable with respect to any Debt in excess of
$750,000 in the aggregate at any time, except (i) Debt outstanding under this
Agreement, the Applications and the Note, and (ii) Debt secured by a Permitted
Lien.
Section 6.8. Restriction on Liens. The Borrower will not, and will
--------------------
not permit any of its Subsidiaries to at any time create, assume or suffer to
exist any Lien on any property or asset now owned or hereafter acquired by the
Borrower or any of its Subsidiaries or assign or subordinate any present or
future right to receive assets except:
(i) any Liens created by a Capital Lease or
operating lease, but only as to the leased property;
(ii) any purchase money security interest on any
capital asset of the Borrower or any of its Subsidiaries if such
purchase money security interest attaches to such capital asset
concurrently with the acquisition thereof and if the Debt secured
by such purchase money security interest does not exceed 100% of
the lesser of the cost or fair market value as of the time of
acquisition of the asset covered thereby to the Borrower or such
Subsidiary; provided, that no such purchase money security
--------
interest shall extend to or cover any property or asset of the
Borrower or such Subsidiary other than the related asset;
(iii) Liens securing Taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like persons; provided with respect to Taxes, assessments
--------
or governmental charges or levies or claims or demands secured by
such Liens, payment of which is not at the time required by
Section 6.2;
(iv) Liens not securing Debt which are incurred in
the ordinary course of business in connection with workmen's
compensation, unemployment insurance, social security and other
like laws; and
(v) any Lien arising pursuant to any order of
attachment, distraint or similar legal process arising in
connection with court proceedings so long as the execution or
other enforcement thereof is effectively stayed and the claims
secured thereby are being contested in good faith by appropriate
proceedings, or such claims are not in excess of available
insurance coverage by more than $500,000.
Section 6.9. Consolidations, Mergers and Sales of Assets. The
-------------------------------------------
Borrower will not (i) consolidate or merge with or into any other Person or (ii)
except for Investments, sell, lease or otherwise transfer all or any substantial
part of its assets to any Person other than a Wholly-Owned Consolidated
Subsidiary. The Borrower will not permit any of its Subsidiaries to consolidate
or merge with or into, or transfer all or any substantial part of its assets to,
any Person other than the Borrower or a Wholly-Owned Consolidated Subsidiary.
Section 6.10. Transactions with Other Persons. The Borrower will
-------------------------------
not, and will not permit any of its Subsidiaries to, enter into any agreement
with any Person whereby any of them shall agree to any restriction on the
Borrower's right to amend or waive any of the provisions of this Agreement.
Section 6.11. Use of Proceeds. The proceeds of the Loans will be
---------------
used by the Borrower to support the working capital needs of the Borrower and to
make Investments. None of the proceeds of the Loans will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of Regulation U.
Section 6.12. Independence of Covenants. All covenants contained
-------------------------
herein shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that such action
or condition would be permitted by an exception to, or otherwise be within the
limitations of another covenant shall not avoid the occurrence of a Default if
such action is taken or condition exists.
-11-
Section 6.13. Restrictions With Respect to Investments. Each
----------------------------------------
Investment with respect to which a Loan is made must comply with all of the
following conditions on or before the date of Investment:
(i) The entity in which the Investment is made shall
be in substantially the same or a related line of business as the
Borrower or any of its Subsidiaries.
(ii) No Default shall have occurred and be continuing.
Section 6.14. Change in Management. Without the prior written
--------------------
consent of the Bank, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall not for any reason cease to be the
President, Chief Executive Officer and majority shareholder of the Borrower.
Section 6.15. Year 2000 Compliance. The Borrower shall promptly
--------------------
notify the Bank in the event the Borrower determines that any computer
application which is material to the operations of the Borrower or its
Subsidiaries will not be fully Year 2000 Compliant (as defined in Section 4.12)
on a timely basis, except to the extent that such failure could not reasonably
be expected to have a material adverse effect upon the financial condition of
the Borrower and its Subsidiaries, taken as a whole.
ARTICLE VII
DEFAULTS
Section 7.1. Events of Default. If one or more of the following
-----------------
events ("Events of Default") shall have occurred:
(i) the Borrower shall fail to pay when due any
principal of or interest on any Loan, any fee or any other amount
payable hereunder or under the Note or any Application;
(ii) the Borrower shall fail to observe or perform
any covenant contained in Article V or in Section 6.7, 6.8, 6.9,
6.10, 6.11, 6.13, 6.14, or 6.15;
(iii) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement (other than
those covered by clauses (i) or (ii) above) for 30 days after the
earlier to occur of (A) the date written notice thereof is given
to the Borrower by the Bank, or (B) the date notice thereof
should have been given to the Bank pursuant to Section 6.1(iv);
(iv) any representation, warranty, certification or
statement made by the Borrower in this Agreement or any
Application or by the Borrower in any certificate, financial
statement or other document delivered pursuant hereto or thereto
shall prove to have been incorrect in any material respect when
made;
(v) the Borrower or any Subsidiary of the Borrower
shall fail to make any payment in respect of any Debt (other than
the Note) in excess of $500,000 when due or within any applicable
grace period;
(vi) any event or condition shall occur which results
in the acceleration of the maturity of any Debt in excess of
$500,000 of the Borrower or any Subsidiary of the Borrower or
enables (or, with the giving of notice or lapse of time or both,
would enable) the holder of such Debt in excess of $500,000 or
any Person acting on such holder's behalf to accelerate the
maturity thereof;
(vii) the Borrower or any Subsidiary of the Borrower
shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a
-12-
general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(viii) an involuntary case or other proceeding shall
be commenced against the Borrower or any Subsidiary of the
Borrower seeking liquidation, reorganization or other relief with
respect to it or its Debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Borrower or any
Subsidiary of the Borrower under the federal bankruptcy laws as
now or hereafter in effect;
(ix) any member of the Controlled Group shall fail
to pay when due an amount or amounts aggregating in excess of
$100,000 which it shall have become liable to pay to the PBGC,
any Plan or any Plan trustee under Title IV of ERISA or (S) 412
of the Code; or notice of intent to terminate a Plan or Plans
having aggregate Unfunded Vested Liabilities in excess of
$100,000 (collectively, a "Material Plan") shall be provided
under Title IV of ERISA by any member of the Controlled Group,
any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary
of any Material Plan against any member of the Controlled Group
to enforce Section 515 of ERISA and such proceeding shall not
have been dismissed within 30 days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be
terminated; or
(x) one or more judgments or orders for the payment
of money in excess of $500,000 over the limit of applicable
insurance coverage shall be rendered against the Borrower or any
Subsidiary of the Borrower and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days;
then, and in every such event, the Bank, at its option, may by notice to the
Borrower terminate the Commitment and it shall thereupon terminate, and may, at
its option, by notice to the Borrower declare the Note (together with accrued
interest thereon) to be, and the Note shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; provided that in the case of any
--------
of the Events of Default specified in paragraph (vii) or (viii) above with
respect to the Borrower, without any notice to the Borrower or any other act by
the Bank, the Commitment shall thereupon terminate and the Note (together with
accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower. Upon the occurrence and during the continuance
of any Event of Default, then, or at any time after the happening of the same,
the Bank may, at its option, demand that the Borrower, within ten (10) days of
such demand, arrange for the cancellation of each outstanding Letter of Credit
such that the Bank has no further liability under any Letter of Credit, or in
the event the Borrower fails to procure the cancellation of any Letter of Credit
within such ten (10) day period, demand that the Borrower pay to the Bank, as
cash collateral, the remaining amounts available to be drawn, if any, under all
Letters of Credit not so canceled and such amounts shall thereupon become
immediately due and payable. In the event the Borrower pays to the Bank or the
Bank collects from the Borrower sums representing the remaining amounts
available to be drawn under said outstanding Letters of Credit, the Bank shall
hold such sums in an interest-bearing account as security for the Borrower's
obligation to reimburse the Bank for amounts paid by the Bank under the Letters
of Credit or otherwise due hereunder. Upon the expiration of each of the
Letters of Credit and the Bank's reasonable determination that it has no further
liability thereunder, and provided the Borrower shall have no other unpaid debt
to the Bank under this Agreement, the Bank shall repay such sums to the Borrower
to the extent they exceed the remaining amounts actually paid by the Bank under
said Letter of Credit. The Bank's rights under this Section 7.1 are in addition
to other rights and remedies which the Bank may have.
-13-
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices. All notices, requests and other communications
-------
to a party hereunder shall be in writing and shall be given to such party at its
address set forth on the signature pages hereof or such other address as such
party may hereafter specify for the purpose by notice to the other. Each such
notice, request or other communication shall be effective when delivery to the
addressee, at the address specified in this Section is accepted or refused
provided that notices under Section 2.2 shall not be effective until received.
--------
Section 8.2. No Waivers. No failure or delay by the Bank in
----------
exercising any right, power or privilege hereunder or under the Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 8.3. Expenses.
--------
(a) The Borrower shall pay all out-of-pocket expenses of the Bank,
including: (i) $10,000 in fees, plus disbursements, of counsel for the Bank in
connection with the preparation of this Agreement and the other documents
contemplated hereby to be prepared by the Bank's counsel; (ii) reasonable fees
and disbursements of counsel for the Bank, in connection with the enforcement of
this Agreement, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder; and (iii) if an Event of Default occurs,
all reasonable out-of-pocket expenses incurred by the Bank, including reasonable
fees and disbursements of counsel, in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom. The Borrower
shall indemnify the Bank against any transfer Taxes, documentary Taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of this Agreement, any Application, or the Note.
(b) If the Bank shall determine that the adoption after the date
hereof of any law, rule, regulation or guidelines regarding capital adequacy, or
any change in any of the foregoing or in the interpretation or administration of
any of the foregoing by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the 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 the
Bank's capital or the capital of any Person controlling the Bank as a
consequence of the Bank's obligations hereunder to a level below that which the
Bank or such Person could have achieved but for such law, change or compliance
(taking into consideration the Bank's policies with respect to capital adequacy)
by an amount deemed by the Bank to be material, then from time to time within
ten days after written demand by the Bank, the Borrower shall pay to the Bank
such additional amount or amounts as will compensate the Bank for such reduction
with respect to the Obligations hereunder; provided, any such amounts shall not
--------
be for periods greater than 60 days prior to such demand by the Bank. A
certificate of the Bank claiming compensation under this Section 8.3(b) and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining any such amount,
the Bank may use any reasonable averaging and attribution methods.
Section 8.4. Right of Set-Off. Upon the occurrence and during the
----------------
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower against any and all of the
obligations now or hereafter existing under this Agreement, the Note or any
Application, irrespective of whether or not the Bank shall have made any demand
hereunder or under the Note and although such obligation may be unmatured. The
rights of the Bank under this Section 8.4 are in addition to other rights and
remedies (including, without limitation, other rights of set-offs) which the
Bank may have. The Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that any holder of a participation in any Note may
exercise rights of set-off or counterclaim or other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
Section 8.5. Amendments and Waivers. Any provision of this Agreement
----------------------
or of the Note or any Application may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Bank.
-14-
Section 8.6. Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of the Bank.
(b) The Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in the Commitment or
in any or all of the Loans or the Note. In the event of any such grant by the
Bank of a participating interest to a Participant, whether or not upon notice to
the Borrower, the Bank shall remain responsible for the performance of its
obligations hereunder, and the Bank shall continue to deal solely and directly
with the Borrower in connection with the Bank's rights and obligations under
this Agreement. Any agreement pursuant to which the Bank may grant such a
participating interest shall provide that the Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
--------
agreement may provide that the Bank will not agree to any modification,
amendment or waiver of this Agreement which would have the effect of (i)
increasing, decreasing or extending the Commitment or subjecting the Bank to any
additional obligation, (ii) reducing the principal of or rate of interest on any
Loan, (iii) postponing the date fixed for any payment of principal of or
interest on any Loan or fees hereunder or under the Note, or (iv) extending the
Revolving Credit Period, without the consent of the Participant. An assignment
or other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) The Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Note, and such Assignee
shall assume such rights and obligations, pursuant to an instrument executed by
such Assignee and the Bank, with (and subject to) the consent of the Borrower;
provided that if an Assignee is an affiliate of the Bank, no such consent shall
--------
be required. Upon execution and delivery of such an instrument (including the
consent of the Borrower) and payment by such Assignee to the Bank of an amount
equal to the purchase price agreed between the Bank and such Assignee, such
Assignee shall become a Bank party to this Agreement and shall have all the
rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank and the Borrower shall make
appropriate arrangements so that, if required, a new Note or Notes is issued to
the Assignee. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account deliver to the Borrower
certification as to exemption from deduction or withholding of any United States
federal income taxes.
(d) The Bank may at any time assign all or any portion of its rights
under this Agreement and the Note to a Federal Reserve Bank. No such assignment
shall release the Bank from its obligations hereunder.
(e) The Bank may furnish any information concerning the Borrower in
its possession from time to time to Assignees and Participants (including
prospective Assignees and Participants) and may furnish such information in
response to credit inquiries consistent with general banking practice, which
actual or prospective Participant or Assignee shall first have agreed to be
bound by the confidentiality provisions of Section 6.6 as if a party hereto.
Section 8.7. Virginia Law. This Agreement and the Notes shall be
------------
governed by and construed in accordance with the laws of the Commonwealth of
Virginia without reference to conflicts of laws principles.
Section 8.8. Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Bank shall have
received counterparts hereof signed by both parties.
Section 8.9. Enforcement of Arbitration; Submission to Jurisdiction.
------------------------------------------------------
Any legal action or proceeding to enforce an arbitration award pursuant to
Section 8.10 shall be brought in the courts of the Commonwealth of Virginia in
Fairfax County, Virginia or of the United States of America for the Eastern
District of Virginia and in no other courts, and by execution and delivery of
this Agreement the Borrower hereby accepts for itself and in respect of its
property, generally and
-15-
unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby
irrevocably and unconditionally waives any objection, including without
limitation, any objection to the laying of venue or based on the grounds of the
forum non conveniens which it now or hereafter may have to the bringing of any
----- --- ----------
action or proceeding in such respective jurisdictions.
Section 8.10. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
-----------
THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR
THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN FAIRFAX
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COUNTY, VIRGINIA, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR;
IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION,
THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT OR
(II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91
OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK
(A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B)
TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF
ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THIS
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION
FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER
OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
Section 8.11. Entire Agreement; Conflicts. This Agreement, the Note,
---------------------------
Applications and other loan documents set forth the entire agreement of the
parties with respect to the subject matter hereof and thereof and supersede all
previous understandings, written or oral, in respect thereof. Any conflict
between a term of this Agreement and a term of any Application shall be resolved
in favor of the term as set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
MICROSTRATEGY INCORPORATED [SEAL]
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
NATIONSBANK, N.A. [SEAL]
-16-
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Assistant Vice President
-17-
REVOLVING
COMMERCIAL NOTE
$25,000,000.00 March 26, 1999
FOR VALUE RECEIVED, the undersigned (the "Borrower") promises to pay
to the order of NATIONSBANK, N.A., a national banking association (the "Bank,"
which term shall include any holder of this Note) without offset, at the Bank's
office located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or
at such other address as the Bank shall designate), not later than May 31, 2001
(the "Date of Maturity"), the principal sum of Twenty-five Million and no/100
Dollars ($25,000,000.00) (hereinafter called "Principal Sum"), or so much of
that sum as the Bank may advance, and subject to the provisions of Section 2.5
of the Credit Agreement, together with interest on the principal balance
outstanding from time to time at the rate provided in this Note.
INTEREST RATE. This Note shall bear interest on the principal balance
outstanding from time to time, from the date of this Note until paid in full, at
a variable rate equal to the LIBOR Rate plus the Variance. The "LIBOR Rate"
means that variable rate of interest (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the three-month London interbank offered rate for deposits in U.S. Dollars at
approximately 11:00 a.m. (London time) on the second preceding business day, as
adjusted from time to time in the Bank's sole discretion for then-applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs. If, for any reason, such rate is not available, the term "LIBOR Rate"
shall mean the fluctuating rate of interest equal to the three-month rate of
interest (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Reuters Screen LIBO Page as the three-month London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) on the second
preceding business day as adjusted from time to time in the Bank's sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates. As used herein, "Variance" means that rate
per annum which varies in accordance with the Funded Debt Ratio, as determined
by the then most recent financial statements delivered to the Bank in accordance
with Section 6.1(i) or (ii) (each, a "Financial Statement") of the Credit
Agreement. If, in accordance with a Financial Statement of the Borrower
delivered to the Bank, (a) the Funded Debt Ratio for the reported fiscal quarter
was less than or equal to 1.0 to 1.0, then the Variance shall be 1.00%; (b) the
Funded Debt Ratio for the reported fiscal quarter was greater than 1.0 to 1.0
but less than or equal to 2.0 to 1.0, then the Variance shall be 1.25%; (c) the
Funded Debt Ratio for the reported fiscal quarter was greater than 2.0 to 1.0
but less than or equal to 3.0 to 1.0, then the Variance shall be 1.50%; and (d)
the Funded Debt Ratio for the reported fiscal quarter was greater than 3.0 to
1.0 but less than or equal to 3.5 to 1.0, then the Variance shall be 1.75%;
provided, that until delivery of the Financial Statement for the period ending
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March 31, 1999, the Variance shall be 1.0%.
The interest rate on this Note will change in accordance with changes in the
LIBOR Rate and the Funded Debt Ratio. The interest rate in any fiscal quarter of
the Borrower (an "Interest Period") will be the LIBOR Rate in effect on the last
day of the fiscal quarter immediately preceding said Interest Period, plus the
Variance as determined by the Financial Statement delivered to the Bank covering
such preceding fiscal quarter. Any change in the interest rate will become
effective on the first day of the Interest Period and remain fixed for said
Interest Period. Interest on this Note shall be calculated on the basis of a
360-day year, for the actual number of days elapsed.
Upon the maturity of this Note (whether scheduled, by acceleration, or
otherwise) this Note shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 4.0% plus the otherwise applicable
interest rate.
PAYMENT OF INTEREST. Interest accrued shall be payable beginning April
26, 1999, and on the same day of each consecutive month thereafter until this
Note is paid in full.
PREPAYMENT. The Borrower may pay the whole or any part of the
outstanding indebtedness evidenced by this Note at any time without penalty by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment.
ADVANCES. If no Default (as defined in the Credit Agreement) has
occurred and is continuing, and subject to the other requirements of the Credit
Agreement, the Borrower may borrow at any time and from time to time from the
date hereof to the Date of Maturity, such amounts as the Borrower may request,
provided the unpaid principal balance at any given time does not exceed the
Page 1 of 3
Principal Sum. Subject to the foregoing, the Borrower may borrow under this
Note, prepay and reborrow. Advances may be made by credit to the Borrower's
deposit account with the Bank, and if so, the Borrower shall be liable to the
Bank for such advance without regard to the proper authorization for the
advance.
ACCELERATION. At the option of the Bank, upon the occurrence of an
Event of Default as defined in the Credit Agreement, the full amount remaining
unpaid on this Note shall become immediately due and payable without
presentment, demand or notice of any kind; no additional advances shall be made
to the Borrower under this Note; and the Bank may exercise any or all remedies
available to it under applicable law and the Credit Agreement.
ACCOUNT RECORD. The Bank shall maintain records of the dates and
amounts of advances of principal and payments of principal and interest, the
date to which interest has been paid, accrued interest, the unpaid principal
balance, and any other account information. Such records shall be maintained
unilaterally by the Bank without notice to the Borrower and shall be presumed to
be correct, provided, however, any failure of the Bank to maintain such records
or any error therein or in any notice hereunder shall not in any manner affect
the obligation of the Borrower to pay this Note in accordance with the terms
hereof.
IMMEDIATELY AVAILABLE FUNDS. The principal of and interest on this
Note shall be payable in immediately available funds in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment. The making of any payment in other than immediately available
funds which the Bank, at its option, elects to accept shall be subject to
collection, and interest shall continue to accrue until the funds by which
payment is made are available to the Bank for its use.
APPLICATION OF PAYMENTS. Payments will be applied to interest, late
charges and other charges due at the time such payments are received, and
principal, in that order. All payments shall be applied to satisfaction of
scheduled payments in the order in which they become due.
WAIVER. The Borrower and any indorser of this Note, to the extent
permitted by law and except as otherwise provided herein, in the Credit
Agreement or in any Loan Document, (i) waive presentment, demand, protest and
notice of dishonor and protest, (ii) waive the benefit of their homestead
exemptions as to this debt, (iii) waive any right which they may have to require
the Bank to proceed against any other Person or any collateral given to secure
the payment of this Note, and (iv) agree that, without notice to the Borrower or
any indorser and without affecting the liability of the Borrower or any
indorser, the Bank, at any time or times, may grant extensions of the time for
any payment due on this Note or any other indulgence or forbearance, release any
Person from the obligation to make payments on this Note, permit the renewal of
this Note, or permit the substitution, exchange or release of any security for
this Note.
LATE CHARGE; ATTORNEYS' FEES. If the Borrower fails to pay any amount
due under this Note within 10 days of the date due, the Borrower shall pay to
the Bank on demand a late charge equal to five percent (5%) of the amount due.
The Borrower shall pay to the Bank on demand all costs incurred by the Bank, and
reasonable attorneys' fees, in the collection or enforcement of this Note upon
the occurrence of an Event of Default, whether or not suit is brought.
SET-OFF. The Bank will have the right, in addition to all other
remedies permitted by law (including, without limitation, other rights of set-
off), during the continuance of an Event of Default and after 2 days' written
notice to the Borrower, to set off the amount now or hereafter due under this
Note or due under any other obligation of the Borrower to the Bank against any
and all accounts, credits, money, securities, or other property now or hereafter
on deposit with, held by, or in the possession of the Bank to the credit or for
the account of the Borrower, without notice to or consent by the Borrower. In
addition to the right of set-off, to secure the payment of this Note the
Borrower assigns and grants to the Bank a security interest in all accounts,
credits, money, securities, or other property now or hereafter on deposit with,
held by, or in the possession of the Bank to the credit or for the account of
the Borrower.
DEFINITIONS. Terms used herein and defined in that certain Credit
Agreement dated as of March 26, 1999 between the Borrower and the Bank (as said
agreement may from time to time be amended, extended, supplemented and replaced,
the "Credit Agreement") shall have their respective meanings herein as therein
defined.
Page 2 of 3
ADDITIONAL TERMS.
ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
------------
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
NOTE, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
INSTRUMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN FAIRFAX
-------------
COUNTY, VIRGINIA, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR;
IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION,
THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS NOTE; OR (II)
BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK
MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT. NEITHER THIS
EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION
FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER
OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
The proceeds of this Note shall be used to acquire or carry on a
business, professional, investment, or commercial enterprise or activity.
This Note is the "Note" referred to in the Credit Agreement. Reference
is made to the Credit Agreement for other provisions applicable to this Note.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia without reference to conflicts of laws
principles.
WITNESS the following signature and seal:
MICROSTRATEGY INCORPORATED [SEAL]
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive
Officer
Page 3 of 3