1
EXHIBIT 10.16
$35,000,000
CREDIT AGREEMENT
DATED AS OF DECEMBER 15, 1995
BETWEEN
KOMAG, INCORPORATED
AND
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
SAN FRANCISCO AGENCY
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS. . . . . . . . . . . . 8
ARTICLE II THE REVOLVING LOANS . . . . . . . . . . . . . . . . . . . 9
SECTION 2.1. THE REVOLVING LOANS. . . . . . . . . . . . . . . . . 9
SECTION 2.2. REPAYMENT. . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3. INTEREST RATE AND PAYMENT DATES . . . . . . . . . . 13
SECTION 2.4. CONTINUATION AND CONVERSION OPTIONS . . . . . . . . 13
ARTICLE III GENERAL PROVISIONS CONCERNING THE
REVOLVING LOANS . . . . . . . . . . . . . . . . . . 14
SECTION 3.1. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . 14
SECTION 3.2. POST MATURITY INTEREST . . . . . . . . . . . . . . . 14
SECTION 3.3. COMPUTATION OF INTEREST . . . . . . . . . . . . . . 15
SECTION 3.4. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.5. PAYMENT ON NON-BUSINESS DAYS . . . . . . . . . . . . 15
SECTION 3.6. REDUCED RETURN . . . . . . . . . . . . . . . . . . . 15
SECTION 3.7. INDEMNITIES . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.8. FUNDING SOURCES . . . . . . . . . . . . . . . . . . 17
SECTION 3.9 INABILITY TO DETERMINE INTEREST RATE . . . . . . . . 17
SECTION 3.10. REQUIREMENTS OF LAW . . . . . . . . . . . . . . . . 18
SECTION 3.11. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . 20
SECTION 4.1. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOANS . . 20
SECTION 4.2. CONDITIONS PRECEDENT TO EACH BORROWING . . . . . . . 21
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 21
3
SECTION 5.1. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 21
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.1. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.2. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.1. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.1. AMENDMENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.2. NOTICES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.3. RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.4. NO WAIVER: REMEDIES . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.5. COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.6. PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.7. EFFECTIVENESS, BINDING EFFECT; GOVERNING LAW . . . . . . . . . . 38
SECTION 8.8. CONSENT TO JURISDICTION; VENUE. BANK FOR SERVICE OF PROCESS . . 39
SECTION 8.9. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.10. SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . 40
SECTION 8.11. EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . 40
SECTION 8.12. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.13. EFFECTIVENESS OF AGREEMENT . . . . . . . . . . . . . . . . . . . 40
EXHIBIT A: NOTICE OF BORROWING
EXHIBIT B: REVOLVING NOTE
SCHEDULE 1: EXISTING LIENS
SCHEDULE 2: SUBSIDIARIES
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CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of December 15, 1995, is entered into
between KOMAG, INCORPORATED, a Delaware corporation ("Borrower"), and THE
INDUSTRIAL BANK OF JAPAN, LIMITED, SAN FRANCISCO AGENCY ("Bank"). The parties
hereto hereby agree as follows:
I
DEFINITIONS
I.1 DEFINED TERMS. As used in this Agreement, the following terms have
the following meanings:
"Agreement": This Credit Agreement, as amended, supplemented or
modified from time to time.
"Bank": As set forth in the introductory paragraph of this Agreement.
"Borrower": As set forth in the introductory paragraph of this
Agreement.
"Business Day": A day other than a Saturday, Sunday or a day on which
commercial banks in 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.
"Commitment": The Commitment of Bank to make Revolving Loans to
Borrower pursuant to Article II up to, but not exceeding, at any time
outstanding the amount of $35,000,000.00.
"Confidentiality Letter": As set forth in Section 8.6(b).
"Consolidated Subsidiary" or "Consolidated Subsidiaries": Any
corporation or other Person more than 50% of the outstanding voting stock of
which shall at the time be owned by Borrower or another Consolidated Subsidiary,
excluding from this definition Asahi Komag Co., Ltd., a Japanese corporation.
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"Consolidated Tangible Net Worth": At any date of determination, the
excess of total assets over consolidated liabilities of Borrower and its
Consolidated Subsidiaries determined on a consolidated basis, excluding, however
from the determination of total assets (i) all intangible assets, including,
without limitation, goodwill (whether representing the excess cost over book
value of assets acquired or otherwise), patents, trademarks, trade names,
copyrights, franchises, and deferred charges (including, without limitation,
unamortized debt discount and expense, organization and research and product
development costs), (ii) treasury stock, (iii) cash set apart and held in a
sinking or other analogous fund established for the purpose of redemption or
other retirement of capital stock, and (iv) to the extent not already deducted
from total assets, reserves for depreciation, depletion, obsolescence, and/or
amortization of properties and all other reserves or appropriation of retained
earnings which, in accordance with GAAP, should be established in connection
with the business conducted by the relevant corporation.
"Convertible Debt": Debt subordinate by its terms to the Revolving
Loans converted at the option of Borrower to equity securities.
"Dastek(M)": Dastek(M) SDN BHD, a Malaysian corporation.
"Debt": As applied to any Person, (i) all indebtedness for borrowed
money, (ii) that portion of obligations with respect to Capital Leases which is
property classified as a liability on a balance sheet in conformity 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
which purchase price is (A) due more than six months from the date of incurrence
of the obligation in respect thereof or (B) evidenced by a note or similar
written instruments, and (v) 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
non-recourse to the credit of that Person.
"Dollars" and "$": Dollars in lawful currency of the United States of
America.
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"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 Borrower or any ERISA
Affiliate of Borrower.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate": As applied to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of Section
414(b) or (c) of the Internal Revenue Code, but excluding any Subsidiary or
other Person that is not a Consolidated Subsidiary.
"Eurodollar Business Day": A day which is a Business Day on which
dealings in Dollar deposits may be carried out in the interbank Eurodollar
market.
"Eurodollar Rate": For each Interest Period (i) the rate of interest
determined by Bank at which deposits for the relevant Interest Period would be
offered to Bank in the approximate amount of the relevant Eurodollar Rate Loan
for the Interest Period requested by Borrower in the interbank Eurodollar market
selected by Bank, upon request of Bank at 11:00 A.M. (San Francisco time) on the
day which is one Eurodollar Business Day 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, if any, (expressed as a decimal fraction) of reserve
requirements in effect on the day which is one Eurodollar Business Day prior to
the beginning of such Interest Period (including, without limitation, 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 Bank quotes
the rate to Borrower) for Eurocurrency funding of domestic assets (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board) 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%).
"Eurodollar Rate Loans": Revolving Loans hereunder at such time as
they accrue interest at a rate
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based upon the Eurodollar Rate.
"Event of Default": As defined in Article VII.
"FICAL": First Interstate Bank of California, a California banking
corporation.
"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, as may be in effect from time to time.
"Interest Payment Date": As to any Prime Rate Loan until payment in
full, the Maturity Date and the last day of each December, March, June, and
September commencing on the first of such days to occur after a Prime Rate Loan
is made. As to any Eurodollar Rate Loan with an Interest Period of three months
or less, the last day of such Interest Period and the Maturity Date, and as to
any Eurodollar Rate Loan with an Interest Period in excess of three months, (i)
the last day of each December, March, June and September 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 Eurodollar Rate Loan:
(i) initially, the period commencing on, as the case may be, the
Revolving Loan or conversion date with respect to such Eurodollar Rate Loan and
ending one, two, three, six, nine, or twelve months thereafter so long as the
Eurodollar Rate is quoted for such period in the applicable interbank Eurodollar
market, as selected by Borrower in the notice of Revolving Loan as provided in
Section 2.1(b) or the notice of conversion as provided in Section 2.4; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Rate Loan and
ending one, two, three, six, nine, or twelve months thereafter so long as the
Eurodollar Rate is quoted for such period in the applicable interbank Eurodollar
market, as selected by Borrower in the notice of continuation as provided in
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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 Eurodollar Rate Loan would
otherwise end on a day which is not a Eurodollar Business Day, that Interest
Period shall be extended to the next succeeding Eurodollar Business Day; and
(b) there shall be no more than six Interest Periods
outstanding at any time.
"Internal Revenue Code": The Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"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 Revolving Note, and other
documents executed in connection with this Agreement and/or the Revolving Loans
extended hereunder, including, without limitation all amendments, waivers, and
consents relating thereto.
"Material Adverse Effect": As defined in Section 5.1(f).
"Maturity Date": That date which is four years from the date of this
Agreement, unless an extension shall occur under Section 2.1, in which case
"Maturity Date" shall mean the amended Maturity Date resulting from such
extension.
"Multiemployer Plan": A "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of Borrower or any ERISA
Affiliate of Borrower.
"Pension Plan": Any employee plan which is subject to Section 412 of
the Internal Revenue Code and which is maintained for employees of Borrower or
any ERISA Affiliate of Borrower, other than a Multiemployer Plan.
"Permitted Liens": A lien, security interest,
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encumbrance, or charge (a) for taxes, assessments, charges, or claims of
Borrower either not yet due or being contested in good faith by appropriate
proceedings, (b) arising out of judgments or awards against Borrower with
respect to which an appeal or other proceeding is being prosecuted in good faith
and with respect to which there shall have been secured a stay of execution
pending such appeal or proceedings or which is vacated or discharged within
thirty (30) days after the termination of such stay, (c) materialmen's,
mechanics', workers', repairmen's, employee's, or other like liens arising in
the ordinary course of business for amounts either not yet due or being
contested in good faith by appropriate proceedings, (d) granted by Borrower to
Bank pursuant to this Agreement, (e) liens, deposits, or pledges made to secure
statutory obligations, workers' compensation claims, surety or appeal bonds, or
bonds for the release of attachments or for stay of execution, or to secure the
performance of bids, lenders contracts (other than for the payment of borrowed
money), leases or for purposes of like general nature in the ordinary course of
Borrower's business, (f) purchase money security interests for property
acquired, conditional sale agreements, or other title retention agreements with
respect to property acquired, provided, however, that no such security interest
or agreement shall extend to any property other than such after-acquired
property and proceeds, (g) refunding, refinancing, or extension of the liens or
security interests permitted in the foregoing clause not exceeding the principal
amount of indebtedness so refunded, refinanced, or extended at the time of the
refunding, refinancing, or extension thereof, and applying only to the same
property theretofore subject to such lien or security interest, (h) liens
existing on the date hereof and identified in Schedule 1 attached hereto or
incurred with any refunding, refinancing, or extension of any such indebtedness
secured by such liens, provided that such refinancing, refunding or extension
shall not increase the amount, as of the date of such refinancing, refunding, or
extension, secured by any such lien or security interest, (i) other liens
securing indebtedness, the principal amount of which shall not exceed
$2,000,000; (j) liens in property of Asahi Komag Co., Ltd., a Japanese
corporation; and (k) liens taken by Borrower on its Subsidiaries.
"Person": An individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other entity of
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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.
"Prime Rate": On any day, the higher of (a) the rate of interest most
recently announced by The Industrial Bank of Japan, Limited at its New York
branch as its "Prime Rate" ("IBJ Prime Rate") for loans in Dollars in the United
States and (b) the Federal Funds Rate plus a margin of 0.50%. The IBJ Prime Rate
is one of The Industrial Bank of Japan, Limited's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto. The IBJ Prime Rate is evidenced by the recording
thereof after its announcement in such internal publication or publications as
The Industrial Bank of Japan, Limited may designate and may not be the lowest of
The Industrial Bank of Japan, Limited base rates. Any change in any of the
interest rates chargeable hereunder resulting from a change in IBJ Prime Rate
shall become effective as of 12:01 a.m. (San Francisco time): (a) on the
Domestic Business Day on which each change in the IBJ Prime Rate is announced by
The Industrial Bank of Japan, Limited, if such change is announced prior to
11:00 a.m. (San Francisco time) on such day, and (b) on the Domestic Business
Day following the Domestic Business Day on which each change in the IBJ Prime
Rate is announced if such change is announced at or after 11:00 a.m. (San
Francisco time) on such day.
"Prime Rate Loans": Revolving Loans hereunder at such time as they
accrue interest at a rate based upon the Prime Rate.
"Regulation 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 Loans": As defined in Section 2.1(a).
"Revolving Note": As defined in Section 2.1(f).
"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
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functions thereof.
"Subsidiary": A corporation or other Person of which at least fifty
percent (50%) of the outstanding voting stock or profit interests shall at the
time be owned by Borrower or another Subsidiary.
"Termination Event": (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for 30-day notice to the Pension Benefit
Guaranty Corporation under such regulations), or (ii) the withdrawal of Borrower
or any of its ERISA Affiliates from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(1)(2) or 4068(f) of
ERISA, or (iii) the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings to terminate a Pension Plan by the
Pension Benefit Guaranty Corporation (v) any other event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
by the Pension Benefit Guaranty Corporation of a trustee to administer, any
Pension Plan, or (vi) the imposition of a lien pursuant to Section 412(n) of the
Internal Revenue Code.
"Transfer": As defined in Section 6.2(i).
I.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the deemed meanings
when used in the Revolving Note or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Revolving Note, 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, and
all financial data required to be delivered hereunder shall be prepared in
accordance with GAAP, except that foreign currency translation adjustments need
not be included for purposes of determining Borrower's equity or net worth. If
any changes in GAAP from those used in the preparation of the financial
statements referred to in Section 5.1(e) ("GAAP Changes") hereafter occasioned
by the promulgation of rules, regulations, pronouncements, and opinions by or
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required by the Financial Accounting Standards Board of the American Institute
of Certified Public Accountants (or successors thereto or agencies with similar
functions) result in a change in the method of calculation of any of the
financial covenants, standards, or other terms or conditions found in this
Agreement, the parties hereto agree to enter into negotiations to amend such
provisions so as to reflect equitably such GAAP Changes with the desired result
that the criteria for evaluating the financial condition and performance of
Borrower and its Consolidated Subsidiaries shall be the same after such GAAP
Changes as if such GAAP Changes had not been made.
(c) For purposes of this Agreement and unless otherwise specified
herein:
(i) For purposes of computing periods of time: (A) the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding"; and (B) periods measured in days shall be measured in calendar
days.
(ii) References to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." References to any fiscal period are references to fiscal
periods of Borrower. References in this Agreement to any determination by Bank
include good faith estimates (in the case of quantitative determinations) by
Bank; any such determination made in good faith by Bank shall be presumptively
correct absent manifest error. The words "hereof," "herein," "hereby," and
"hereunder," and any other similar words, refer to this Agreement as a whole and
not to any particular provision of this Agreement, unless otherwise specified.
Article, section, subsection, clause, exhibit, and schedule references are to
this Agreement. Any reference to this Agreement or any other Loan Document
includes all permitted alterations, amendments, changes, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
(iii) All of the exhibits and schedules attached hereto are
incorporated herein by this reference.
(iv) Neither this Agreement nor any other Loan Document nor any
uncertainty or ambiguity herein or therein shall be construed or resolved using
any
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presumption against any party hereto or thereto, whether under any rule of
construction or otherwise. On the contrary, this Agreement and the other Loan
Documents have been reviewed by each of the parties and their counsel and, in
the case of any ambiguity or uncertainty, shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all parties hereto.
(v) All agreements and covenants hereunder and under the other
Loan Documents shall be given independent effect such that if a particular
action or condition is prohibited by the terms of any such agreement or
covenant, the fact that such action or condition would be permitted within the
limitations of another agreement or covenant shall not be construed as allowing
such action to be taken or condition to exist.
II
THE REVOLVING LOANS
II.1. THE REVOLVING LOANS.
(a) The Commitment. Bank agrees, on the terms and conditions
hereinafter set forth, to make loans ("Revolving Loans") to Borrower from time
to time during the period from the date hereof to and including the Maturity
Date in the aggregate principal amount not to exceed at any one time outstanding
the Commitment, as such amount may be reduced pursuant to Section 2.1(e). Each
Revolving Loan shall be in a minimum amount of $1,000,000 and in an integral
multiple of $100,000 above such amount for a Prime Rate Loan and in a minimum
amount of $1,000,000 and in an integral multiple of $500,000 above such amount
for a Eurodollar Rate Loan. Within the limits of each Commitment, Borrower may
borrow, repay pursuant to Section 2.2(b) and reborrow under this Section,
provided that at no time shall the aggregate principal amount of outstanding
Revolving Loans exceed the Commitment then in effect.
(b) Making the Revolving Loans. Borrower may borrow under the
Commitment on any Business Day if the Revolving Loan is to be a Prime Rate Loan
and on any Eurodollar Business Day if the Revolving Loan is to be a Eurodollar
Rate Loan, provided Borrower shall give Bank irrevocable notice in the form of
Exhibit A (which notice
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must be received by Bank prior to 9:00 A.M., San Francisco time) (i) three
Eurodollar Business Days prior to the requested borrowing date in the case of a
Eurodollar Rate Loan, and (ii) on the Business Day of the requested borrowing in
the case of a Prime Rate Loan, specifying (A) the amount of the proposed
Revolving Loan, (B) the requested date of the Revolving Loan, (C) whether the
Revolving Loan is to consist of a Prime Rate Loan or a Eurodollar Rate Loan, and
(D) if the Revolving Loan is to be a Eurodollar Rate Loan, the length of the
Interest Period therefor. Upon satisfaction of the applicable conditions set
forth in this Section and in Article IV, the proceeds of such Revolving Loan
will then be made available to Borrower by Bank by crediting the account of
Borrower on the books of Bank, or as otherwise directed by Borrower.
The notice of Revolving Loan may be given orally (including
telephonically) or in writing (including telex or facsimile transmission) and
any conflict regarding a notice or between an oral notice and a written notice
applicable to the same Revolving Loan shall be conclusively determined by Bank's
books and records. Bank shall not incur any liability to Borrower in acting upon
any notice of Revolving Loan which Bank believes in good faith to have been
given by a Person duly authorized to give such notice on behalf of Borrower.
(c) Arrangement Fee. Borrower agrees to pay to Bank, on the date of
Borrower's execution of this Agreement, the arrangement fee specified in the
letter from Bank to Borrower, dated October 26, 1995.
(d) Commitment Fee. Borrower agrees to pay to Bank a commitment fee
equal to 0.10% per annum of the maximum amount of the Commitment (whether or not
used), which shall be calculated on the basis of a 365-day year for the actual
days elapsed, payable quarterly in arrears on the last day of each December,
March, June, and September, commencing the first such date occurring after the
date of this Agreement, and on the Maturity Date.
(e) Reduction of the Commitment. Borrower shall have the right, upon
at least two (2) Business Days' notice to Bank, to terminate in whole or reduce
in part the unused portion of the Commitment, without premium or penalty,
provided that each partial reduction shall be in the aggregate amount of
$1,000,000 or an integral multiple of $1,000,000 thereof and that such reduction
shall not reduce the Commitment to an amount less than the amount
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outstanding hereunder on the effective date of the reduction. Such notice shall
be irrevocable and such reduction shall not be reinstated.
(f) Revolving Note. The Revolving Loans made by Bank pursuant hereto
shall be evidenced by a promissory note of Borrower, substantially in the form
of Exhibit B, with appropriate insertions (the "Revolving Note"), payable to the
order of Bank and representing the obligation of Borrower to pay the aggregate
unpaid principal amount of the Revolving Loans made by Bank to Borrower, with
interest thereon as prescribed in Section 2.3. Bank is hereby authorized to
record in its books and records and on any exhibit annexed to Revolving Note,
the date and amount of each Revolving Loan made by Bank and the date and amount
of each payment of principal thereof, and in the case of Eurodollar 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 Bank to effect such
recordation shall not affect Borrower's obligations hereunder. Prior to the
transfer of the Revolving Note, Bank shall record such information on any
exhibit annexed to and forming a part of the Revolving Note.
(g) Non-Utilization Fee. Borrower agrees to pay to Bank a
non-utilization fee on the average daily unused portion of the Commitment from
the date of this Agreement until the Maturity Date, or any extensions thereof,
at the rate of 0.10% per annum, which shall be calculated on the basis of a
365-day year for the actual days elapsed, payable on the last day of each
December, March, June, and September (for the preceding quarter) commencing the
first such date occurring after the date of this Agreement and on the Maturity
Date.
(h) Extension of Maturity Date. Notwithstanding anything to the
contrary contained in this Agreement, the Maturity Date may be extended for
additional one year periods on each anniversary date of this Agreement. A
request for an extension of the Maturity Date may be made by Borrower not more
than 60 nor less than 30 days prior to each anniversary of the date of this
Agreement. Within 15 days of its receipt of a request by Borrower to extend the
Maturity Date, Bank shall notify Borrower whether it agrees to the requested
extension of the Maturity Date (which decision shall be in the absolute
discretion of Bank). The failure by Bank to respond to any extension request
within the applicable period, shall be deemed a
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rejection of such request. Each extension of the Maturity Date agreed to by Bank
shall be evidenced by an amendment to this Agreement. In connection with the
making of any request for an extension of the Maturity Date, Borrower shall
provide to Bank any documents, instruments, records, information, or access to
management personnel that Bank may reasonably request.
II.2. REPAYMENT.
(a) Mandatory Repayments. The aggregate principal amount of the
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Maturity Date. If at any time
the aggregate principal amount of outstanding Revolving Loans exceeds the
Commitment then in effect, Borrower shall immediately repay the Revolving Loans
in an amount equal to the excess.
(b) Optional Payment. Borrower may at its option repay the Revolving
Loans, without penalty except as set forth in Section 3.7(b), in whole or in
part, on any Business Day, prior to the Maturity Date, from time to time,
provided Bank shall have received from Borrower notice of any such payment at
least: (i) three Business Days prior to the date of the proposed payment if the
Revolving Loan being prepaid is a Eurodollar Rate Loan, and (ii) one Business
Day prior to the date of the proposed payment if the Revolving Loan being
prepaid is a Prime Rate Loan. For Prime Rate Loans, each day shall be defined as
and constitute an "Interest Period." Partial payments hereunder shall be in an
aggregate principal amount of not less than the lesser of (a) $1,000,000 and in
an integral multiple of $100,000 for a Revolving Loan consisting of a Prime Rate
Loan; (b) $1,000,000 and in an integral multiple of $500,000 for a Revolving
Loan consisting of a Eurodollar Rate Loan; and (c) the outstanding balance of
the Revolving Loan being paid.
(c) Allocation of Payments Following an Event of Default. Following
the occurrence of an Event of Default and acceleration of the Revolving Loans,
all amounts received by Bank on account of the Revolving Loans shall be applied
by Bank as follows:
(i) First, to the payment of expenses incurred by Bank in the
enforcement of its rights under the Loan Documents, including, without
limitation, all costs and expenses of collection, attorneys' fees and
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court costs; and
(ii) then, to the outstanding principal balance of all Revolving
Loans and interest accrued thereon.
II.3. INTEREST RATE AND PAYMENT DATES.
(a) Payment of Interest. Interest with respect to each Revolving Loan
shall be payable in arrears on each Interest Payment Date for such Revolving
Loan. In no event shall interest on a Revolving Loan exceed the maximum rate
permitted by applicable law.
(b) Prime Rate Loans. Revolving Loans which are Prime Rate Loans
shall bear interest on the unpaid principal amount thereof at a rate per annum
equal to the Prime Rate from the date hereof through the Maturity Date. Bank
shall promptly notify Borrower of the amount and the effective date of each
adjustment in the Prime Rate, provided that no failure or delay in giving any
such notice shall affect or delay the making of any such adjustments or the
obligation of Borrower to pay in a timely manner the interest due on such
Revolving Loans.
(c) Eurodollar Rate Loans. Revolving Loans which are Eurodollar 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 Eurodollar Rate
determined for such Interest Period plus 0.625 percentage points.
II.4. CONTINUATION AND CONVERSION OPTIONS. Borrower may elect from time
to time to convert outstanding Revolving Loans from Revolving Loans bearing
interest at a rate determined by reference to one basis to Revolving Loans
bearing interest at a rate determined by reference to an alternative basis if
Borrower gives Bank (i) at any time irrevocable notice of an election to convert
Eurodollar Rate Loans to Prime Rate Loans and (ii) at least three Eurodollar
Business Days' prior irrevocable notice of an election to convert Prime Rate
Loans to Eurodollar Rate Loans, provided that any conversion of Eurodollar Rate
Loans to Prime Rate Loans shall only be made on the last day of an Interest
Period with respect thereto, and provided further that no Prime Rate Loan may be
converted to a Eurodollar Rate Loan so long as an Event of Default or Potential
Event of Default has occurred and is continuing. Borrower may elect from time to
time to
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continue its outstanding Eurodollar Rate Loans upon the expiration of the
Interest Period(s) applicable thereto if Borrower gives to Bank irrevocable
notice of continuation of such a Eurodollar Rate at least one Eurodollar
Business Days' prior to the expiration thereof and so long as an Event of
Default or Potential Event of Default has not occurred and is not continuing.
Each notice electing to convert or continue a Revolving Loan shall specify: (i)
the proposed conversion/continuation date; (ii) the amount of the Revolving 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 Eurodollar 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 Bank 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 Bank with respect to outstanding Eurodollar Rate Loans, upon
expiration of the Interest Period(s) applicable thereto, such Eurodollar Rate
Loans shall convert to Prime Rate Loans. Subject to the limitations set forth in
this Section and in the definition of Interest Period, all or any part of
outstanding Revolving Loans may be converted or continued as provided herein,
provided that partial conversions or continuations shall be in an aggregate
principal amount of not less than (a) $1,000,000 and in an integral multiple of
$100,000 for a Revolving Loan consisting of a Prime Rate Loan; (b) $1,000,000
and in an integral multiple of $500,000 above such amount for a Eurodollar Rate
Loan; and (c) the outstanding balance of the Revolving Loan being converted or
continued.
III
GENERAL PROVISIONS CONCERNING THE REVOLVING LOANS
III.1. USE OF PROCEEDS. The proceeds of the Revolving Loans hereunder
shall be used by Borrower for general corporate purposes.
III.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 Revolving 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
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amount shall bear interest at a rate per annum which is equal to the greater of
(a) two percent (2%) above the rate which would otherwise be applicable pursuant
to Section 2.3 and (b) two percent (2%) above the Prime Rate, from the date of
such nonpayment until paid in full (after as well as before judgment), payable
on demand. In addition, such Revolving Loan, if a Eurodollar Rate Loan, shall be
converted to a Prime Rate Loan at the end of the then current Interest Period
therefor.
III.3. COMPUTATION OF INTEREST
(a) Calculations. Interest in respect of the Prime Rate Loans shall
be calculated on the basis of a 365-day year for the actual days elapsed. Any
change in the interest rate on a Prime Rate Loan resulting from a change in the
Prime Rate shall become effective as of the opening of business on the date on
which such change in the Prime Rate shall become effective. Interest with
respect of the Eurodollar Rate Loans shall be calculated on the basis of a
360-day year for the actual days elapsed.
(b) Determination by Bank. Each determination of an interest rate or
fee by Bank pursuant to any provisions of this Agreement shall be conclusive and
binding on Borrower in the absence of manifest error.
III.4. PAYMENTS. Borrower shall make each payment of principal, interest,
and fees referred to in Section 2.2 due from it hereunder and under the
Revolving Note, without setoff or counterclaim, not later than 12:00 P.M. (San
Francisco time) on the day when due in lawful money of the United States of
America to Bank, at the office of Bank designated from time to time in
immediately available funds.
III.5. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Revolving Note 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.
III.6. REDUCED RETURN. If Bank shall have determined that any new or
additional applicable law, regulation, rule, or regulatory requirement
(collectively in this Section 3.6 "Requirement") regarding capital
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adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation of administration thereof, or
compliance by Bank with any new or additional 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 Bank's capital as a consequence of the Commitment and
obligations hereunder to a level below that which would have been achieved but
for such Requirement, change, or compliance (taking into consideration Bank's
policies with respect to capital adequacy) by an amount deemed by Bank to be
material (which amount shall be determined by Bank's reasonable allocation of
the aggregate of such reductions resulting from such events), then from time to
time, within thirty (30) Business Days after written demand by Bank, Borrower
shall pay to Bank such additional amount or amounts as will compensate Bank for
such reduction. Notwithstanding the foregoing, no additional compensation will
be required from Borrower under this Section 3.6 if the reason for additional
compensation was based solely on Bank's failure to comply with any existing or
new law, treaty, rule, or regulation or requirement. In addition, Bank shall
promptly notify Borrower of any proposed request for compensation under this
Section 3.6 and shall provide Borrower with reasonable support therefor. Any
request by Bank for additional compensation shall be structured to allocate such
additional costs over the term of the credit affected thereby.
III.7. INDEMNITIES.
(a) General. Whether or not the transactions contemplated hereby
shall be consummated, Borrower agrees to indemnify, pay and hold Bank, and the
shareholders, officers, directors, employees, and agents of Bank, harmless from
and against any and all claims, liabilities, losses, damages, costs, and
expenses (whether or not any of the foregoing Persons is a party to any
litigation), including, without limitation, reasonable attorneys' fees and costs
(including, without limitation, the reasonable estimate of the allocated cost of
in-house legal counsel and staff) and costs of investigation, document
production, attendance at a deposition, or other discovery, with respect to or
arising out of any proposed acquisition by Borrower or any of its Consolidated
Subsidiaries of any Person or any securities (including a self-tender), this
Agreement or any use of proceeds
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hereunder, or any claim, demand, action or cause of action being asserted
against Borrower or any of its Consolidated Subsidiaries (collectively, the
"Indemnified Liabilities"), provided that Borrower shall have no obligation
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any such Persons. If any claim is made, or
any action, suit or proceeding is brought, against any Person indemnified
pursuant to this Section, the indemnified Person shall notify Borrower of such
claim or of the commencement of such action, suit or proceeding, and Borrower
will assume the defense of such action, suit or proceeding, employing counsel
selected by Borrower and reasonably satisfactory to the indemnified Person, and
pay the fees and expenses of such counsel. This covenant shall survive
termination of this Agreement and payment of the outstanding Revolving Note.
(b) Funding Losses. Borrower agrees to indemnify Bank and to hold
Bank harmless from any loss or expense including, but not limited to, any such
loss or expense arising from interest or fees payable by Bank to lenders of
funds obtained by Bank in order to maintain its Eurodollar Rate Loans hereunder,
which Bank may sustain or incur as a consequence of (i) default by Borrower in
payment of the principal amount of or interest on the Eurodollar Rate Loans of
Bank, (ii) default by Borrower in making a conversion or continuation after
Borrower has given a notice thereof, (iii) default by Borrower in making any
payment after Borrower has given a notice of payment or (iv) Borrower making any
payment of a Eurodollar Rate Loan on a day other than the last day of the
Interest Period for such Revolving Loan. For purposes of this Section and
Section 3.10, it shall be assumed that Bank had funded or would have funded one
hundred percent (100%) of each Eurodollar Rate Loan in the interbank Eurodollar
market for a corresponding amount and term. In the event of a payment set forth
in (iv) above, Borrower shall be credited with a reinvestment interest rate
equal to one sixteenth of one percent (.0625%) less than the rate of interest
generally available to Bank at the time of the payment for a period of time
approximately equal to the period remaining on the then applicable Interest
Period and for an amount approximately equal to the amount of the payment. The
determination of such amount by Bank shall be presumed correct in the absence of
manifest error. This covenant shall survive termination of this Agreement and
payment of the outstanding Revolving Note.
III.8. FUNDING SOURCES. Nothing in this Agreement
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shall be deemed to obligate Bank to obtain the funds for any Revolving Loan in
any particular place or manner or to constitute a representation by Bank that it
has obtained or will obtain the funds for any Revolving Loan in any particular
place or manner.
III.9. INABILITY TO DETERMINE INTEREST RATE. In the event that Bank shall
have determined (which determination shall be conclusive and binding upon
Borrower) that by reason of circumstances affecting the interbank Eurodollar
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.3 for any Interest Period with
respect to a Eurodollar Rate Loan that will result from a requested Eurodollar
Rate Loan or that such rate of interest does not adequately cover the cost of
funding such Revolving Loan, Bank shall forthwith give notice of such
determination to Borrower not later than 1:00 P.M., San Francisco time, on the
requested Borrowing date, the requested conversion date or the last day of an
Interest Period of a Revolving Loan which was to have been continued as a
Eurodollar Rate Loan. If such notice is given and has not been withdrawn (i) any
requested Eurodollar Rate Loan shall be made as a Prime Rate Loan, or, at
Borrower's option, such Revolving Loan shall not be made, (ii) any Revolving
Loan that was to have been converted to a Eurodollar Rate Loan, shall be
continued as, or converted into, a Prime Rate Loan and (iii) any outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then current
Interest Period with respect thereto, to a Prime Rate Loan. Until such notice
has been withdrawn by Bank, no further Eurodollar Rate Loans shall be made and
Borrower shall not have the right to convert a Revolving Loan to a Eurodollar
Rate Loan. Bank will review the circumstances affecting the interbank Eurodollar
market from time to time and Bank will withdraw such notice at such time as it
shall determine that the circumstances giving rise to said notice no longer
exist.
III.10. REQUIREMENTS OF LAW. In the event that any law, regulation, or
directive or any change therein or in the interpretation or application thereof
or compliance by 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:
(a) does or shall subject Bank to any new or additional tax of any
kind whatsoever with respect to this Agreement, the Revolving Note, or any
Revolving Loan made hereunder, or change the basis of taxation of payments to
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Bank of principal, commitment fee, non-utilization fee, interest, or any other
amount payable hereunder (except for changes in the rate of tax on the overall
net income of Bank);
(b) does or shall impose, modify, or hold applicable any reserve,
assessment rate, special deposit, compulsory loan, or other requirement
(collectively in this Section 3.10 "Requirements") against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
Bank which Requirements are not otherwise included in the determination of any
Eurodollar Rate at the last Borrowing conversion or continuation date of a
Revolving Loan;
(c) does or shall impose, modify or hold applicable any of the
Requirements against the Commitment; or
(d) does or shall impose on Bank any other new or additional
condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining the Commitment or the Eurodollar Rate Loans or
to reduce any amount receivable thereunder by an amount determined by Bank, in
its sole discretion, to be material (which increase or reduction shall be
determined by Bank's reasonable allocation of the aggregate of such cost
increases or reduced amounts receivable resulting from such events), then, in
any such case, Borrower shall pay to Bank, within thirty (30) Business Days of
its demand, any additional amounts necessary to compensate Bank for such
additional cost or reduced amount receivable as determined by Bank with respect
to this Agreement. If Bank becomes entitled to claim any additional amounts
pursuant to this subsection, it shall notify 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
Bank to Borrower shall be conclusive in the absence of manifest error.
Notwithstanding the foregoing, no additional compensation will be required from
Borrower under this Section 3.10 if the reason for said additional compensation
was based solely on Bank's failure to comply with any existing or new law,
treaty, rule, regulation, or requirement. In addition, Bank shall promptly
notify Borrower of any proposed request for compensation under this Section 3.10
and shall provide
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Borrower with reasonable support therefor. Any request by Bank for additional
compensation shall be structured to allocate such additional costs over the term
of the credit affected thereby.
III.11. 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 Bank to make or maintain Eurodollar Rate Loans as contemplated
by this Agreement, (a) the commitment of Bank hereunder to make Eurodollar Rate
Loans or convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
suspended and (b) Bank's Revolving Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the next
succeeding Interest Payment Date or within such earlier period as allowed by
law. Borrower hereby agrees to pay Bank, within thirty (30) Business Days of its
demand, any additional amounts necessary to compensate Bank for any costs
incurred by Bank in making any conversion in accordance with this Section,
including, but not limited to, any interest or fees payable by Bank to lenders
of funds obtained by it in order to make or maintain its Eurodollar Rate Loans
hereunder (Bank's notice of such costs, as certified to Borrower to be
conclusive absent manifest error). Notwithstanding the foregoing, no additional
compensation will be required from Borrower under this Section 3.11 if the
reason for said additional compensation was based solely on Bank's failure to
comply with any existing or new law, treaty, rule or regulation or requirement.
In addition Bank shall promptly notify Borrower of any proposed request for
compensation under this Section 3.11 and shall provide Borrower with reasonable
support therefor. Any request by Bank for additional compensation shall be
structured to allocate such additional costs over the term of the credit
affected thereby.
IV
CONDITIONS OF LENDING
IV.1. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOANS. The obligation
of Bank to make its initial Revolving Loan is subject to the conditions
precedent that:
(a) Bank shall have received on or before the date of this Agreement
the following, each dated such day
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(except for the documents referred to in clause (ii) and (iv)), in form and
substance satisfactory to Bank:
(i) The Revolving Note issued by Borrower to the order of Bank;
(ii) Borrower's certificate that the copies of the Certificate of
Incorporation or other organizational documents of Borrower certified by the
Secretary of State of its state of formation or incorporation, heretofore
provided to Bank are in full force and effect and have not been amended and/or
supplemented;
(iii) Borrower's certificate that the copies of the Bylaws, if
any, of Borrower, certified by the Secretary or an Assistant Secretary of
Borrower heretofore provided to Bank are in full force and effect and have not
been amended and/or supplemented;
(iv) Copies of resolutions of the Board of Directors or other
authorizing documents of Borrower, in form and substance satisfactory to Bank,
approving the Loan Documents and the Borrowings hereunder;
(v) Borrower's certificate that the copy of the incumbency
certificate executed by the Secretary or an Assistant Secretary of Borrower or
equivalent document, certifying the names and signatures of the officers of
Borrower or other Persons authorized to sign the Loan Documents and the other
documents to be delivered hereunder heretofore provided to Bank is in full force
and effect and has not been amended and/or supplemented; and
(vi) Executed copies of all Loan Documents;
(b) All corporate legal proceedings and instruments and documents in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in content, form and substance to Bank and its counsel,
and Bank and such counsel shall have received any and all further information
and documents which Bank or such counsel may reasonably have requested in
connection therewith, such documents where appropriate to be certified by proper
corporate or governmental authorities.
IV.2. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation of Bank to
make a Revolving Loan on the
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occasion of such Revolving Loan (including the initial Revolving Loan) shall be
subject to the further conditions precedent that on the date of such Revolving
Loan (a) the following statements shall be true and Bank shall have received the
notice required by Section 2.1(b), which notice shall be deemed to be a
certification by Borrower that:
(i) The representations and warranties contained in Section 5.1
are correct on and as of the date of such Revolving Loan as though made on and
as of such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date and except that Section 5.1(e) shall be deemed instead
to refer to the last day of the most recent fiscal year and fiscal quarter for
which financial statements have then been delivered),
(ii) No event has occurred and is continuing, or would result
from such Revolving Loan, which constitutes an Event of Default or Potential
Event of Default, and
(iii) All Loan Documents are in full force and effect,
and (b) Bank shall have received such other approvals, opinions, or documents as
Bank may reasonably request.
V
REPRESENTATIONS AND WARRANTIES
V.1. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to make the
Revolving Loans, Borrower represents and warrants as follows:
(a) Organization. Borrower is duly organized, validly existing, and
in good standing under the laws of the state of its formation. Borrower 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 and in the manner
presently conducted, to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect. All of the
Subsidiaries and Consolidated Subsidiaries of Borrower and the percentage of
Borrower's
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ownership interest therein as of the date of this Agreement are identified on
Schedule 2.
(b) Authorization. The execution, delivery, and performance by
Borrower of the Loan Documents, and the making of Borrowings hereunder, are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) Borrower's certificate of
incorporation, by-laws or other organizational documents or (ii) any law or
regulation (including Regulations G, T, U, and X) or any contractual restriction
binding on or affecting Borrower.
(c) Governmental Consents. 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 Borrower), which
reports will be made in the ordinary course of business) is required for the due
execution, delivery, and performance by Borrower of the Loan Documents.
(d) Validity. The Loan Documents are the binding obligations of
Borrower, 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.
(e) Financial Condition. The balance sheets of Borrower and its
Consolidated Subsidiaries as at the fiscal quarter ended July 2, 1995 and the
fiscal year ended January 1, 1995, and the related statements of income and
retained earnings of Borrower and its Consolidated Subsidiaries to that date and
the fiscal year then ended, copies of which have been furnished to Bank, fairly
present the financial condition of Borrower and its Consolidated Subsidiaries as
at such dates and the results of the operations of Borrower and its Consolidated
Subsidiaries for the respective periods ended on such dates, all in accordance
with GAAP, consistently applied. Since January 1, 1995, there has been no
material adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of Borrower and its Consolidated
Subsidiaries, taken as a whole.
(f) Litigation. Except as set forth in the
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financial statements delivered on or prior to the date hereof, to the best of
Borrower's knowledge there is no pending or threatened action or proceeding
affecting Borrower or any of its Consolidated Subsidiaries before any court,
governmental agency, or arbitrator, which may materially adversely affect the
consolidated financial condition or operations of Borrower or which may have a
material adverse effect on Borrower's ability to perform its obligations under
the Loan Documents, having regard for its other financial obligations (a
"Material Adverse Effect").
(g) Employee Benefit Plans. Borrower and each of its ERISA Affiliates
is in compliance in all material respects with any applicable provisions of
ERISA and the regulations and published interpretations thereunder wish respect
to all Employee Benefit Plans. No Termination Event has occurred or is
reasonably expected to occur with respect to any Pension Plan that would
reasonably be expected to have a Material Adverse Effect.
(h) Disclosure. No representation or warranty of Borrower contained
in this Agreement or any other document, certificate, or written statement
furnished to Bank or on behalf of 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 Borrower in the case
of any document not furnished by it) necessary in order to make the statements
contained herein or therein not misleading. To the best of Borrower's knowledge,
there is no fact known to Borrower (other than matters of a general economic
nature) which materially adversely affects the business, operations, property,
assets, or condition (financial or otherwise) of Borrower and its Consolidated
Subsidiaries, taken as a whole, which has not been disclosed herein or in such
other documents, certificates and statements furnished to Bank for use in
connection with the transactions contemplated hereby.
(i) Margin Stock. The aggregate value of all margin stock (as defined
in Regulation U) directly or indirectly owned by Borrower and its Consolidated
Subsidiaries is less than 25% of the aggregate value of Borrower's assets.
(j) Environmental Matters. Except as set forth in the financial
statements delivered on or prior to the date hereof and except for certain
claims associated with Great Western Chemical, neither Borrower nor any
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Consolidated Subsidiary, nor, to the best of their knowledge, any other person,
has treated, stored, processed, discharged, spilled, or otherwise disposed of
any substance defined as hazardous or toxic by any applicable federal, state, or
local law, rule, regulation, order, or directive, or any waste or by-product
thereof, at any real property or any other facility owned, leased, or used by
Borrower or any Consolidated Subsidiary, in violation of any applicable
statutes, regulations, ordinances, or directives of any governmental authority
or court, which violations may result in liability to Borrower or any
Consolidated Subsidiary in an amount for all such violations that could
reasonably be expected to have a Material Adverse Effect; and the unresolved
violations, if any, set forth in the financial statements delivered on or prior
to the date hereof will not result in liability to Borrower or any Consolidated
Subsidiary in an amount for all such unresolved violations that could reasonably
be expected to have a Material Adverse Effect. Except as set forth in the
financial statements delivered on or prior to the date hereof, no employee or
other person has ever made a claim or demand against Borrower or any
Consolidated Subsidiary based on alleged damage to health caused by any such
hazardous or toxic substance or by any waste or by-product thereof in an amount
that could reasonably be expected to have a Material Adverse Effect; and the
unsatisfied claims, if any, or demands against Borrower or any Consolidated
Subsidiary set forth in the financial statements delivered on or prior to the
date hereof will not result in uninsured liability to Borrower or any
Consolidated Subsidiary or any of their respective officers, employees,
representatives, agents, or shareholders in an amount that could reasonably be
expected to have a Material Adverse Effect for all such unsatisfied claims or
demands. Except as set forth in the financial statements delivered on or prior
to the date hereof neither Borrower nor any Consolidated Subsidiary has been
charged by any governmental authority with improperly using, handling, storing,
discharging, or disposing of any such hazardous or toxic substance or waste or
by-product thereof or with causing or permitting any pollution of any body of
water in an amount that could reasonably be expected to have a Material Adverse
Effect; and the outstanding charges, if any, set forth in the financial
statements delivered on or prior to the date hereof will not result in liability
to Borrower or any Consolidated Subsidiary or any or their respective officers,
employees, representatives, agents, or shareholders in an amount that could
reasonably be expected to have a Material Adverse Effect for all such
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outstanding charges.
(k) Employee Matters. There is no strike or work stoppage in
existence or, to the best of Borrower's knowledge, threatened involving Borrower
or its Consolidated Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
VI
COVENANTS
VI.1. AFFIRMATIVE COVENANTS. So long as the Revolving Note shall remain
unpaid or Bank shall have any Commitment hereunder, Borrower will, unless Bank
shall otherwise consent in writing:
(a) Financial Information. Furnish to Bank:
(i) as soon as available, but in any event within 120 days
after the end of each fiscal year of Borrower, a copy of Borrower's consolidated
balance sheet of itself and its Consolidated Subsidiaries as at the end of each
fiscal year and the related consolidated statements of income, stockholders'
equity, and statement of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, accompanied by an
unqualified report and opinion thereon of Ernst & Young or other independent
certified public accountants acceptable to Bank;
(ii) as soon as available, but in any event within 60 days
after the end of each of Borrower's fiscal quarters, Borrower's unaudited
consolidated balance sheet of itself and its Consolidated Subsidiaries as at the
end of such period and the related unaudited consolidated statements of income,
stockholders' equity, and statement of cash flows 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 Borrower as being fairly stated in all material respects
subject to year end adjustments;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail acceptable to Bank and in
accordance with GAAP
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applied consistently throughout the periods reflected therein (except as
approved by such accountants and disclosed therein);
(iii) together with each delivery of financial statements of
Borrower and its Consolidated Subsidiaries pursuant to subdivisions (i) and (ii)
above, (A) an officer's 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
Borrower and its Consolidated 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 existing 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 Borrower has taken, is taking and proposes to take with respect
thereto; and (B) a compliance certificate, in form and substance satisfactory to
Bank, setting forth in such detail as Bank may request the calculation of the
ratios and amounts necessary to determine Borrower's compliance with Sections
6.2(a), 6.2(b), 6.2(c), 6.2(e), and 6.2(j) hereof for the accounting period
covered by such financial statements, certified by Borrower's chief executive
officer or chief financial officer; and
(iv) as soon as available, copies of all reports which
Borrower sends to any of its security holders, and copies of all reports and
registration statements which Borrower or any Subsidiary files with the S.E.C.
or any national securities exchange, including, but not limited to: Form 8-K
Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report, Annual
Report to Shareholders, Proxy Statements, and Registration Statements.
(b) Notices and Information. Deliver to Bank:
(i) promptly upon any officer of Borrower obtaining
knowledge (a) of any condition or event which constitutes an Event of Default or
existing Potential Event of Default, (b) that any Person has given any notice to
Borrower or any Consolidated Subsidiary or taken any other action with respect
to a claimed default or event or condition of the type referred to in Section
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7.1(e), (c) of the institution of any litigation involving an alleged liability
(including possible forfeiture of property) of Borrower or any of its
Consolidated Subsidiaries equal to or greater than $5,000,000 or any adverse
determination in any litigation involving a potential liability of Borrower or
any of its Consolidated Subsidiaries equal to or greater than $5,000,000, or (d)
of a material adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of Borrower and its Consolidated
Subsidiaries, taken as a whole, an officer's 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 Borrower has taken, is taking, and proposes to take with respect
thereto;
(ii) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any (a) Termination Event, or (b) "prohibited
transaction," as such term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, in connection with any Employee Benefit Plan
(other than the Dastek, Inc. Savings and Deferred Profit-Sharing Plan which is
proposed to be terminated effective as of June 30, 1994) or any trust created
thereunder, a written notice specifying the nature thereof, what action Borrower
has taken, is taking, or proposes to take with respect thereto, and, when known,
any action taken or threatened by the Internal Revenue Service, the Department
of Labor, or the Pension Benefit Guaranty Corporation with respect thereto;
(iii) with reasonable promptness copies of (a) all notices
received by Borrower or any of its ERISA Affiliates of the Pension Benefit
Guaranty Corporation's intent to terminate any material Pension Plan or to have
a trustee appointed to administer any Pension Plan; (b) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed by
Borrower or any of its ERISA Affiliates with the Internal Revenue Service with
respect to each material Pension Plan; and (c) all notices received by Borrower
or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning the
material imposition or material amount of withdrawal liability pursuant to
Section 4202 of ERISA;
(iv) promptly, and in any event within thirty (30) days
after receipt thereof, a copy of any notice, summons, citation, directive,
letter, or other
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form of communication from any governmental authority or court
in any way concerning any material action or omission on the part of Borrower or
any of its Consolidated 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 material lien upon, against, or in connection with
Borrower, its Consolidated 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 ss. 9507 of the Internal
Revenue Code; and
(v) promptly, and in any event within ten (10) days after
request, such other information and data with respect to the business affairs
and financial condition of Borrower or any of its Consolidated Subsidiaries as
from time to time may be reasonably requested by Bank.
(c) Corporate Existence, Etc. At all times preserve and keep in full
force and effect Borrower's and its Consolidated Subsidiaries' corporate
existence and rights and franchises material to Borrower's business and those of
each of its Consolidated Subsidiaries; provided, however, that the corporate
existence of any such Consolidated Subsidiary may be terminated if such
termination is in the best interest of Borrower and is not materially
disadvantageous to the holder of the Revolving Note.
(d) Payment of Taxes and Claims. Pay, and cause each of its
Consolidated Subsidiaries (except Dastek(M)) 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, without
limitation, 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 conformity with GAAP shall have been
made therefor.
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(e) 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 Borrower and its Consolidated Subsidiaries
(except Dastek(M)) and from time to time will make or cause to be made all
appropriate repairs, renewals, and replacements thereof. 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 Consolidated Subsidiaries (except Dastek(M)) 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.
(f) Inspection. Permit any authorized representatives designated by
Bank to visit and inspect any of the properties of Borrower or any of its
Consolidated Subsidiaries (except Dastek(M)), 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 under Borrower's supervision and as often as may be
reasonably requested. Any such additional information together with other
nonpublic information received hereunder shall be held in confidence by Bank and
may not be used for any purpose other than to monitor the creditworthiness of
Borrower and its Consolidated Subsidiaries (except Dastek(M)) and shall not be
disclosed or disseminated to any other Person for any reason, and the
Confidentiality Letters shall apply thereto.
(g) Compliance with Laws, Etc. Exercise, and cause each of its
Consolidated 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, without limitation, all environmental laws,
rules, regulations, and orders, noncompliance with which would have a Material
Adverse Effect.
VI.2. NEGATIVE COVENANTS. So long as the Revolving Note shall remain
unpaid or Bank shall have any Commitment hereunder, Borrower will not, without
the written consent of Bank:
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(a) Profitability. Permit, on a consolidated after-tax basis, a loss
in more than two consecutive fiscal quarters.
(b) Leverage Ratio. Permit Borrower's ratio of consolidated total
liabilities (excluding Convertible Debt and minority interests in Subsidiaries)
to Consolidated Tangible Net Worth at the end of any fiscal quarter to exceed
.85 to 1.00.
(c) Consolidated Tangible Net Worth. Permit Borrower's Consolidated
Tangible Net Worth, on a quarterly consolidated basis, to be less than
$250,000,000, plus (i) 85% of Borrower's cumulative consolidated net income
(without deduction for any losses), adjusted on an annual basis beginning with
Borrower's fiscal year ending 1994 (said adjustment for fiscal 1994 shall
include Borrower's future net income after July 3, 1994), plus (ii) 100% of the
net proceeds of equity investments and issues received by Borrower or its
Consolidated Subsidiaries (other than equity investments by Borrower in its
Consolidated Subsidiaries or equity investments by Borrower's Consolidated
Subsidiaries in Borrower) adjusted on a quarterly basis. For purposes hereof,
the minimum Consolidated Tangible Net Worth requirement shall not be increased
by equity issued through the exercise of employee stock options and/or employee
stock purchase plans and the definition shall be exclusive of any effect of
minority interests.
(d) Liens, Etc. Create or suffer to exist, or permit any of its
Consolidated Subsidiaries (except Dastek(M)) to create or suffer to exist, any
Lien upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Consolidated Subsidiaries
(except Dastek(M)) to assign, any right to receive income, in each case to
secure any Debt of any Person other than (i) Liens in favor of Bank; (ii) Liens
reflected on the financial statements referred to in Section 5.1(e) and other
Liens existing on the date hereof heretofore disclosed to Bank; and (iii)
Permitted Liens.
(e) Dividends, Etc. Declare or pay any dividends, purchase or
otherwise acquire for value its capita] stock now or hereafter outstanding, or
make any distribution of assets to its stockholders as such, or permit any of
its Consolidated Subsidiaries (except Dastek(M)) to purchase or otherwise
acquire for value any
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stock of Borrower, except that Borrower and/or its Consolidated Subsidiaries
(except Dastek(M)) may (i) declare and deliver dividends and distributions
payable in its capital stock; (ii) in any fiscal year declare and pay cash
dividends to its stockholders and purchase or otherwise acquire shares of its
own outstanding capital stock for cash in an aggregate amount up to 15% of net
income after taxes of Borrower and its Consolidated Subsidiaries (except
Dastek(M)) for the immediately preceding fiscal year; and (iii) repurchase stock
of Borrower in an amount not to exceed $15,000,000 in any calendar year.
(f) Consolidation, Merger, or Acquisition. Regarding Borrower and its
Consolidated Subsidiaries (except Dastek(M)), liquidate or dissolve or enter
into any consolidation, merger, acquisition, material partnership, material
joint venture, syndication, or other combination without Bank's prior written
consent, which consent will not be unreasonably withheld, except that Borrower
may consolidate with, merge into or acquire any other corporation or entity,
except that any corporation or entity may consolidate with or merge into
Borrower, provided that Borrower shall be the surviving entity of such merger or
consolidation, and provided further, that immediately after the consummation or
such consolidation or merger there shall exist no condition or event which
constitutes an Event of Default or a Potential Event of Default. In addition
Borrower may purchase any, all or substantially all of the assets of any other
Person in connection with acquisitions reasonably related to Borrower's existing
lines of business, provided that immediately after the effectiveness of any such
acquisition, there shall have occurred and be continuing no Event of Default or
Potential Event of Default.
(g) Loans, Investments, and Secondary Liabilities. Make or permit to
remain outstanding, or permit any Consolidated Subsidiary (except Dastek(M)) to
make or permit to remain outstanding, any loan or advance to, or guaranty,
induce or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stock, or dividends of, or own, purchase, or
acquire any stock, obligations, or securities of or any other interest in, or
make any capital contribution to, any other Person, except Borrower and its
Consolidated Subsidiaries may:
(i) own, purchase, or acquire certificates of deposit, time
deposits and bankers'
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acceptances issued by Bank, commercial paper rated Moody's P-2 or better and/or
Standard & Poor's A-2 or better, obligations or instruments issued by or
guaranteed by an entity designated as Standard & Poor's A-2 or better, or
Moody's P-2 or better or the equivalent by a nationally recognized credit
agency, municipal bonds, and other governmental and corporate debt obligations
rated Standard & Poor's A or better and/or Moody's A2 or better, direct
obligations of the United States of America or its agencies, and obligations
guaranteed or insured by the United States of America, and any funds investing
in any of the foregoing;
(ii) acquire and own stock, obligations, or securities
received in connection with debts created in the ordinary course of business
owing to Borrower or a Subsidiary;
(iii) continue to own the existing capital stock of
Borrower's Subsidiaries;
(iv) endorse negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(v) make loans, advances to, or investments in a Subsidiary
or joint venture in connection with the normal operations of the business of
such Subsidiary or joint venture and allow Borrower's Subsidiaries or any joint
venture to which it is a party to make or permit to remain outstanding advances
from Borrower's Subsidiaries or such joint venture to Borrower;
(vi) make or permit to remain outstanding loans or advances
to Borrower's Subsidiaries or any joint venture to which it is a party or enter
into or permit to remain outstanding guarantees in connection with the
obligations of Borrower's Subsidiaries or such joint venture; and
(vii) make or permit to remain outstanding (a) loans and/or
advances to Borrowers' officers, stockholders and/or employees, which, in the
aggregate, would not exceed $3,000,000 during the term of this Agreement, (b)
loans to Borrower's vendors, in the ordinary course of Borrower's business,
which, in the aggregate, do not exceed $5,000,000, (c) progress payments to
Borrower's vendors made in the ordinary course of Borrower's business, (d) (i)
loans and/or advances for the purpose of purchasing Borrower's shares of stock
pursuant
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to its employee stock purchase or option plans, (ii) advances for
salary, travel, and other expenses, advances against commission and other
similar advances made to officers or employees in the ordinary course of
Borrower's business, and (iii) loans and/or advances to or for the benefit of
officers, directors, or employees in connection with litigation and other
proceedings involving such persons by virtue of their status as officers,
directors, or employees, respectively, and (e) investments under deferred
compensation plans for the benefit of the employees of Borrower and its
Subsidiaries.
(h) Asset Sales. Convey, sell, lease, transfer, or dispose of
(individually, a "Transfer"), or permit any Consolidated Subsidiary (except
Dastek(M)) to Transfer, in one transaction or a series of transactions all or
any part of its or its Consolidated Subsidiary's (except Dastek(M)) business,
property or fixed assets outside the ordinary course of business, whether now
owned or hereafter acquired, except that Borrower and its Consolidated
Subsidiaries (except Dastek(M)) may make Transfers of business, property or
fixed assets in transactions outside the ordinary course of business for
consideration which in the aggregate does not exceed 20% of Consolidated
Tangible Net Worth in any fiscal year of Borrower without the prior written
consent of Bank, which consent shall not be unreasonably withheld.
VII
EVENTS OF DEFAULT
VII.1. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) Borrower shall fail to pay any installment of the principal of the
Revolving Note outstanding hereunder when due or any installment of interest on
the Revolving Note or other amount payable hereunder within 10 Business Days of
the date when due; or
(b) Any representation or warranty made by Borrower herein or by
Borrower (or any of its officers) in connection with the Loan Documents shall
prove to have been incorrect in any material respect when made; or
(c) Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement or in any and all documents executed in
conjunction with this
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Agreement, which failure continues uncured for more than 30 consecutive days.
Notwithstanding the foregoing, any failure of Borrower to perform or observe
Sections 6.1 (c) and (f) and/or 6.2 (a), (b), (c), (d), (f), and (h) shall
constitute an Event of Default without regard to any lapse of time or cure
period; or
(d) Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement other than those referred to in
Subsections 7.1(a), (b) and (c) above on its part to be performed or observed
and any such failure shall remain unremedied for 30 days after Borrower knows of
such failure; or
(e) Borrower or any of its Consolidated Subsidiaries (except
Dastek(M)) shall, after written demand, fail to pay any principal of or premium
or interest on, any Debt in which Borrower may be obligated as either a borrower
or guarantor, the aggregate outstanding amount of which is at least $1,000,000
(excluding Debt evidenced by the Revolving 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 is
specified in the agreement or instrument relating to such Debt; or
(f) (i) Borrower or any of its Consolidated Subsidiaries (except
Dastek(M)) 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
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 Borrower or any of
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its Consolidated Subsidiaries (except Dastek(M)) shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against
Borrower or any of its Consolidated Subsidiaries (except Dastek(M)) 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 30 days; or (iii) there shall be commenced against Borrower or any of its
Consolidated Subsidiaries (except Dastek(M)) 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 30 days from the entry
thereof; or (iv) Borrower or any of its Consolidated Subsidiaries (except
Dastek(M)) 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) Borrower or any of its Consolidated 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
(g) One judgment or decree shall be entered against Borrower or any of
its Consolidated Subsidiaries (except Dastek(M)) involving a liability (not paid
or 75% covered by insurance or the third party indemnity of a solvent
indemnitor) equal to or greater than $5,000,000 or one or more judgements or
decrees shall be entered against Borrower or any of its Consolidated
Subsidiaries (except Dastek(M)) involving in the aggregate a liability (not paid
or 75% covered by insurance or the third party indemnity of a solvent
indemnitor) equal to or greater than $10,000,000 and all such judgments or
decrees shall not have been vacated, discharged, or stayed or bonded pending
appeal within 30 days from the entry thereof; or
(h) (i) Borrower or any of its ERISA Affiliates fails to make full
payment when due of all material amounts which, under the provisions of any
Pension Plan or Section 412 of the Internal Revenue Cede, Borrower or any of its
ERISA Affiliates is required to pay as contributions thereto;
(i) any material accumulated funding deficiency occurs or
exists, whether or not waived, with respect to any Pension Plan;
(ii) the excess of the actuarial present value of all benefit
liabilities under all material Pension Plans over the fair market value of the
assets of such Pension Plans (excluding on such computation Pension Plans with
assets greater than benefit liabilities) allocable to such benefit liabilities
are greater than 5% of Consolidated Tangible Net Worth;
(iii) Borrower or any of its ERISA
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Affiliates enters into any transaction which has as its principal purpose the
evasion of liability under Subtitle D of Title IV of ERISA;
(iv) (A) Any material Pension Plan maintained by Borrower or any
of its ERISA Affiliates shall be terminated within the meaning of Title IV of
ERISA, or (B) a trustee shall be appointed by an appropriate United States
district court to administer any material Pension Plan, or (C) the Pension
Benefit Guaranty Corporation (or any successor thereto) shall institute
proceedings to terminate any material Pension Plan or to appoint a trustee to
administer any Pension Plan, or (D) Borrower or any of its ERISA Affiliates
shall withdraw (under Section 4063 of ERISA) from any material Pension Plan, if
as of the date of the event listed in subclauses (A)-(C) above or any subsequent
date, either Borrower or its ERISA Affiliates has any material liability (such
liability to include, without limitation, any material liability to the Pension
Benefit Guaranty Corporation, or any successor thereto, or to any other party
under Sections 4062, 4063, or 4064 of ERISA or any other provision of law)
resulting from or otherwise associated with the events listed in subclauses
(A)-(C) above;
(v) As used in this subsection 7.1(i)(vi) the term "accumulated
funding deficiency" has the meaning specified in Section 412 of the Internal
Revenue Codes and the terms "actuarial present value" and "benefit liabilities"
have the meanings specified in Section 4001 of ERISA; or
(i) There shall be instituted against Borrower, or any of its
Consolidated Subsidiaries (except Dastek(M)), any proceeding for which
forfeiture (not paid or 75% covered by insurance or the third party indemnity of
a solvent indemnitor) of any property equal to or greater than $5,000,000 is a
potential penalty and such proceeding shall not have been vacated or discharged
within 30 days of its institution;
THEN (i) upon the occurrence of any Event of Default described in clause (f)
above, the Commitment shall immediately terminate and all Revolving Loans
hereunder with accrued interest thereon, and all other amounts owing under this
Agreement, the Revolving Note, and the other Loan Documents shall automatically
become due and payable, and (ii) upon the occurrence and continuance of any
other Event of Default, Bank may by notice to Borrower, declare the Commitment
to be terminated forthwith, whereupon the
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Commitment shall immediately terminate; and by notice to Borrower, declare the
Revolving Loans hereunder, with accrued interest thereon, and all other amounts
owing under this Agreement, the Revolving Note, and the other Loan Documents to
be due and payable forthwith, whereupon the same shall immediately become due
and payable. Except as expressly provided above in this Section, presentment,
demand, protest, and all other notices of any kind are hereby expressly waived.
Notwithstanding any other provision of this Agreement, notices to Borrower
pursuant to this Section may be communicated orally (including by telephone with
a written notice to Borrower to be subsequently provided by Bank) or in writing
(including telex or facsimile transmission).
VIII
MISCELLANEOUS
VIII.1. AMENDMENTS, ETC. No amendment or waiver of any provision of the
Loan Documents nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Bank, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
VIII.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 Borrower, at
Borrower's address set forth on the signature page hereof; and if to Bank, 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 written notice to the
other parties. All such notices and communications shall be effective when
deposited in the mails, delivered to the telegraph company, sent by telex or
sent by facsimile respectively, except that notices and communications to Bank
pursuant to Article II shall not be effective until received by Bank.
VIII.3. RIGHT OF SETOFF. Upon and during the continuance of any Event of
Default, Bank and any participant with Bank in the Commitment pursuant to
Section 8.6 is hereby authorized by Borrower, at any time, and from time to
time, without prior notice, (a) to set off against, and to appropriate and apply
to the payment of, the obligations and liabilities of Borrower under the
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Loan Documents (whether matured or unmatured, fixed or contingent or liquidated
or unliquidated) any and all amounts owing by Bank or such participant to
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 Bank or such participant
in its sole discretion may elect. Bank agrees promptly to notify Borrower (and
to cause each such participant to notify Borrower) after any such set-off and
application is made. Upon and during the continuance of any Event of Default,
Bank and all such participants are authorized to debit any account maintained
with it by Borrower for any amount of principal, interest, or fees which are
then due and owing to Bank or such participants by Borrower.
VIII.4. NO WAIVER: REMEDIES. No failure on the part of Bank 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.
VIII.5. COSTS AND EXPENSES. Borrower agrees to pay, within 30 days of
demand therefor by Bank (but on demand if there shall then exist any Event of
Default), all costs and expenses (i) of Bank (including reasonable and
documented attorneys' fees and reasonable and documented costs of in-house
counsel and staff) in connection with the preparation, amendment, or
modification of the Loan Documents, and (ii) of Bank in connection with the
enforcement (including, without limitation, in appellate, bankruptcy,
insolvency, liquidation, reorganization, moratorium, or other similar
proceedings) or restructuring of the Loan Documents; provided that Borrower's
obligation to reimburse Bank for such attorneys' fees in connection with the
preparation of the Loan Documents shall be limited to $5,000; provided further
that the foregoing limitation shall not apply to any such costs and expenses
attributable (in the reasonable judgment of Bank) to (i) any material change
(other than at the request of Bank) in the terms and conditions set forth in the
Summary of Terms and Conditions (attached to a letter from Bank to
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., dated October 16, 1995), dated October 16, 1995, or (ii)
any failure by Borrower, or any representative acting on behalf of Borrower
reasonably to cooperate with the efficient closing of the transaction
contemplated by the Loan Documents.
VIII.6. PARTICIPATIONS. (a) Bank may sell, negotiate, or grant
participations in all or part of the obligations of Borrower outstanding under
the Loan Documents, subject to the prior written approval of Borrower (which
approval shall not be unreasonably withheld); provided that any such sale,
negotiation or participation shall be in compliance with the applicable federal
and state securities laws. Notwithstanding the foregoing, Bank shall not sell,
negotiate, or grant participations unless it retains at least $20,000,000 of the
Commitment or another amount as agreed upon by Borrower and Bank. Bank shall not
transfer or grant any participating interest under which the participant shall
have rights: (i) greater than Bank under Sections 3.6, 3.7, or 3.10 of this
Agreement, or (ii) to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would:
(A) increase the amount or extend the Maturity Date of the
Commitment;
(B) reduce the principal of, or interest on, the Revolving Loans
or any fee or other amount payable to the participant hereunder;
(C) postpone any date fixed for any payment in respect of
principal of, or interest on, the Revolving Loans or any fee or other amount
payable to Bank hereunder; or
(D) amend the provisions of this sentence.
In the event that Borrower requests a modification to any of the provisions set
forth in clauses (A) through (D) above (a "Modification Request") and any
existing participant refuses to agree to such modifications (a "Nonaccepting
Participant"), Bank shall use good faith efforts to secure a participant willing
to accept such modifications as a replacement participant for the Nonaccepting
Participant (an "Accepting Participant") and, in the event that Bank shall be
unable to secure an Accepting Participant within 60 days from Bank's receipt
from Borrower of the related Modification Request, then
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Borrower shall, at its option, be entitled to purchase the Nonaccepting
Participant's participation interest. No participant shall constitute "Bank"
under any Loan Document, and Borrower shall continue to deal solely and directly
with Bank.
(b) Bank may disclose to any proposed participant which is a financial
institution any information relating to Borrower or any of its Consolidated
Subsidiaries; provided, that prior to such disclosure such participant and Bank
shall have executed Borrower's standard Confidential Disclosure Statement
("Confidentiality Letter").
VIII.7. EFFECTIVENESS, BINDING EFFECT; GOVERNING LAW. This Agreement is
being executed on the date hereof by Borrower, and Bank and is binding on and
effective against each such party as of the date hereof. This Agreement shall
become effective when it shall have been executed by Borrower and Bank and
thereafter shall be binding upon and inure to the benefit of Borrower, Bank and
their respective permitted successors and assigns, except that Borrower shall
not have the right to assign its rights hereunder or any interest herein without
the prior written consent of Bank. THIS AGREEMENT AND THE REVOLVING 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.
VIII.8. CONSENT TO JURISDICTION; VENUE. BANK FOR SERVICE OF PROCESS. All
judicial proceedings brought against Borrower with respect to this Agreement and
the Loan Documents may be brought in any state or federal court of competent
jurisdiction in the County of San Francisco in the State of California, and by
execution and delivery of this Agreement, 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. 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. Borrower designates and appoints Borrower's Chief
Financial Officer, from time to time, Komag Incorporated, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and such other Persons as may hereafter be
selected by Borrower irrevocably agreeing in writing to so serve (as its agent
to receive on its behalf
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service of all process in any such proceedings in any such court, such service
being hereby acknowledged by 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 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 Borrower refuses to accept service, 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 Bank, on behalf of Bank or Bank to bring
proceedings against Borrower in courts of any jurisdiction.
VIII.9. ENTIRE AGREEMENT. This Agreement with Exhibits 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.
VIII.10. 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.
VIII.11. 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.
VIII.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Borrower may not assign or transfer any of its rights or
obligations under this Agreement or any other Loan Document without the consent
of Bank.
VIII.13. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective
on the later to occur of (i) December 15, 1995 and (ii) such other date that
Borrower notifies Bank that any necessary approvals of any other lenders to
Borrower have been obtained and that this Agreement is effective, provided that
if this Agreement
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has not become effective on or before January 31, 1996 as hereinabove provided,
then this Agreement shall be null and void and Bank shall have no obligation to
Borrower on account of the Commitment or otherwise pursuant to this Agreement.
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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.
"BORROWER"
KOMAG, INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
Address for notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Treasurer
"BANK"
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, SAN FRANCISCO AGENCY
By:
-------------------------------------
Title:
----------------------------------
Address for notices:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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EXHIBIT A
NOTICE OF BORROWING
Date: ___________________, 19____
To: The Industrial Bank of Japan, Limited, San Francisco Agency, with
respect to the Credit Agreement, dated as of December 15, 1995 (as
extended, renewed, amended, or restated from time to time, the "Credit
Agreement"), between Komag, Incorporated and The Industrial Bank of
Japan, Limited, San Francisco Agency.
Ladies and Gentlemen:
The undersigned, Komag, Incorporated ("Borrower"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.1(b) of
the Credit Agreement, of the Revolving Loan specified below:
1. The Business Day of the proposed Revolving Loan
is ______________________, 19___.
2. The aggregate amount of the proposed Revolving Loan is
$__________________________.
3. The Revolving Loan is to be comprised of $____________ of
a [Prime Rate] [Eurodollar Rate] Loan.
[4. The duration of the Interest Period for the Eurodollar
Rate Loan shall be [one] [two] [three] [six] [nine] [twelve] months.]
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed Revolving
Loan, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the representations and warranties of Borrower
contained in Article V of the Credit Agreement are true and correct as though
made on and as of such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
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correct as of such date);
(b) no Event of Default or Potential Event of Default
has occurred and is continuing, or would result from such proposed Revolving
Loan; and
(c) The proposed Revolving Loan will not cause the
aggregate principal amount of all outstanding Revolving Loans to exceed the
Commitment.
KOMAG, INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
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EXHIBIT B
REVOLVING NOTE
$35,000,000 San Jose, California
December __, 1995
FOR VALUE RECEIVED, KOMAG, INCORPORATED (Borrower"), promises to pay to
the order of THE INDUSTRIAL BANK OF JAPAN, LIMITED, SAN FRANCISCO AGENCY
("Bank") the principal amount of THIRTY-FIVE MILLION DOLLARS ($35,000,000), or,
if less, the aggregate amount of Revolving Loans (as defined in the Credit
Agreement referred to below), made by Bank to Borrower pursuant to the Credit
Agreement referred to below, outstanding on the Maturity Date (as defined in the
Credit Agreement referred to below). All unpaid amounts of principal and
interest shall be due and payable in full on the Maturity Date as defined in the
Credit Agreement referred to below.
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 referred
to below.
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 Bank located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or at such other place as shall be designated in writing for such purpose
in accordance with the terms of the Credit Agreement referred to below. Until
notified of the transfer of this Note, Borrower shall be entitled to deem Bank
or such person who has been so identified by the transferor in writing to
Borrower as the holder of this Note, as the owner and holder of this Note. Each
of Bank and any subsequent holder of this Note agrees that before disposing of
this Note or any part hereof it will make a notation hereon of all principal
payments previously made hereunder and of the date to which interest hereon has
been paid on the schedule attached hereto, if any; provided, however, that the
failure to make notation of any payment made on this Note shall not limit or
otherwise affect the obligation of Borrower hereunder with respect to payments
of principal or interest on this Note.
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This Note is referred to in, and is entitled to the benefits of, the
Credit Agreement, dated as of December 15, 1995 (the "Credit Agreement"),
between Borrower and Bank. The Credit Agreement, among other things, (i)
provides for the making of advances (the "Loans") by Bank to 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 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 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.
Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Note.
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.
IN WITNESS WHEREOF, 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.
KOMAG, INCORPORATED
By:
-------------------------------------
Title:
----------------------------------
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SCHEDULE 1
EXISTING LIENS AND SECURITY INTERESTS
1. Purchase money security interests in equipment; and
2. UCC filings evidencing leased equipment.
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SCHEDULE 2
SUBSIDIARIES AND PERCENTAGE OF
CONSOLIDATED SUBSIDIARIES BORROWER'S OWNERSHIP
------------------------- --------------------
1. Komag Material Technology, Inc. 55%
2. Komag Technology Partners 50%
3. Asahi Komag Co., Ltd. 0%(1)
4. Komag Bermuda Ltd. 100%
5. Komag Overseas Ltd. 100%
6. Komag USA (Malaysia) Sdn 0%(2)
7. Dastek Holding Company 60%
8. Dastek(M) SDN BHD 0%(3)
9. Headway Technologies, Inc. 17%(4)
10. Asahi Komag (Thailand) Co., Ltd. 0%(5)
-------------------------
(1) Borrower owns 50% of Komag Technology Partners, which owns 98% of
Asahi Komag Co., Ltd.
(2) Komag Bermuda Ltd. (97%) and Komag Overseas Ltd. (3%) own 100% of
Komag USA (Malaysia) Sdn.
(3) Dastek Holding Company owns 100% of Dastek(M) SDN BHD.
(4) Borrower, through Asahi Komag Co, Ltd., owns an additional 9.5% of
Headway Technologies, Inc.
(5) Asahi Komag Co., Ltd. owns 100% of Asahi Komag (Thailand) Co., Ltd.