AMENDED AND RESTATED
AGREEMENT
Dated as of October 30, 1998
between
DIGITAL MICROWAVE CORPORATION
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE II THE LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . .6
2.01 Existing Letters of Credit. . . . . . . . . . . . . . . . . . . . . .6
2.02 New Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .6
2.03 Issuance, Amendment and Renewal of Letters of Credit. . . . . . . . .6
2.04 Drawings Under the Letters of Credit. . . . . . . . . . . . . . . . .7
2.05 Role of the Bank. . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.06 Obligations Absolute. . . . . . . . . . . . . . . . . . . . . . . . .8
2.07 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . .9
2.08 Uniform Customs and Practice. . . . . . . . . . . . . . . . . . . . .9
2.09 Payments by the Company . . . . . . . . . . . . . . . . . . . . . . .9
2.10 European Economic and Monetary Union. . . . . . . . . . . . . . . . 10
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Effectiveness of Provisions . . . . . . . . . . . . . . . . 10
(c) Redenomination and Alternative Currencies . . . . . . . . . 10
(d) Letters of Credit . . . . . . . . . . . . . . . . . . . . . 11
(e) Banking Days. . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Payments to the Bank. . . . . . . . . . . . . . . . . . . . 11
(g) Deliberately left blank . . . . . . . . . . . . . . . . . . 11
(h) Payments by the Bank Generally. . . . . . . . . . . . . . . 11
(i) Basis of Accrual. . . . . . . . . . . . . . . . . . . . . . 12
(j) Rounding and Other Consequential Changes. . . . . . . . . . 12
(k) Increased Costs . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III TAXES AND YIELD PROTECTION. . . . . . . . . . . . . . . . . 12
3.01 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.02 Increased Costs and Reduction of Return . . . . . . . . . . . . . . 13
3.03 Certificates of the Bank. . . . . . . . . . . . . . . . . . . . . . 14
3.04 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . 14
4.01 Conditions to Effectiveness of this Agreement . . . . . . . . . . . 14
(a) Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Collateral Value. . . . . . . . . . . . . . . . . . . . . . 14
(d) Agreements with Third Persons . . . . . . . . . . . . . . . 14
(e) Evidence of Perfection. . . . . . . . . . . . . . . . . . . 14
i
SECTION PAGE
(f) Other Documents . . . . . . . . . . . . . . . . . . . . . . 14
4.02 Conditions to All Issuances of Letters of Credit. . . . . . . . . . 14
(a) Notice, Application . . . . . . . . . . . . . . . . . . . . 15
(b) Continuation of Representations and Warranties. . . . . . . 15
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . 15
(d) Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Collateral Value. . . . . . . . . . . . . . . . . . . . . . 15
(f) Agreements with Third Persons . . . . . . . . . . . . . . . 15
(g) Evidence of Perfection. . . . . . . . . . . . . . . . . . . 15
(h) Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(i) Other Documents, Etc. . . . . . . . . . . . . . . . . . . . 16
ARTICLE V REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 16
5.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . 15
5.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.03 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.04 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 16
5.05 Permits, Franchises . . . . . . . . . . . . . . . . . . . . . . . . 16
5.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.07 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 16
5.08 Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.09 Tax Returns.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Information Submitted . . . . . . . . . . . . . . . . . . . . . . . 17
5.11 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . 17
5.12 Chief Place of Business . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 Regulated Entities. . . . . . . . . . . . . . . . . . . . . . . . . 17
5.15 The Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 18
6.01 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . 18
6.02 Financial and Other Information . . . . . . . . . . . . . . . . . . 18
6.03 Books, Records, Audits and Inspections. . . . . . . . . . . . . . . 18
6.04 Use of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.05 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . 19
6.06 Change in Name, Structure or Location . . . . . . . . . . . . . . . 19
6.07 Existence and Properties. . . . . . . . . . . . . . . . . . . . . . 19
6.08 Financing Statements, Etc . . . . . . . . . . . . . . . . . . . . . 19
6.09 Collateral Value. . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.10 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.11 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.12 Delivery of Payments and Other Distributions. . . . . . . . . . . . 21
6.13 Delivery of Legal Opinion; Greyrock Financing; Etc. . . . . . . . . 22
ii
SECTION PAGE
ARTICLE VII NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 22
7.01 Business Activities . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Regulations T, U, and X . . . . . . . . . . . . . . . . . . . . . . 22
7.03 Transfer or Encumbrance . . . . . . . . . . . . . . . . . . . . . . 22
7.04 Impairment of Security Interest . . . . . . . . . . . . . . . . . . 23
7.05 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.06 Possession of Certificates, Etc. Evidencing Collateral. . . . . . . 23
ARTICLE VIII SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . 23
8.01 Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . 23
8.02 Deposit Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.03 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.04 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.05 Powers of the Bank. . . . . . . . . . . . . . . . . . . . . . . . . 25
8.06 The Bank Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . 26
8.07 Waivers by the Company. . . . . . . . . . . . . . . . . . . . . . . 27
8.08 No Responsibility for Certain Actions . . . . . . . . . . . . . . . 27
8.09 Custody of Collateral . . . . . . . . . . . . . . . . . . . . . . . 28
8.10 Conflict of Interest. . . . . . . . . . . . . . . . . . . . . . . . 28
8.11 Return of Collateral. . . . . . . . . . . . . . . . . . . . . . . . 28
8.12 Transfer of Collateral. . . . . . . . . . . . . . . . . . . . . . . 29
8.13 Continuing Agreement. . . . . . . . . . . . . . . . . . . . . . . . 29
8.14 Continuing Security Interests . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 29
9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Failure to Pay. . . . . . . . . . . . . . . . . . . . . . . 29
(b) Breach of Representation or Warranty. . . . . . . . . . . . 29
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . 29
(d) Other Defaults. . . . . . . . . . . . . . . . . . . . . . . 30
(e) Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Failure to Pay Debts; Voluntary Bankruptcy. . . . . . . . . 30
(g) Involuntary Bankruptcy. . . . . . . . . . . . . . . . . . . 30
(h) Default of Other Financial Obligations. . . . . . . . . . . 30
(i) Default of Other Bank Obligations . . . . . . . . . . . . . 31
(j) Material Adverse Effect . . . . . . . . . . . . . . . . . . 31
(k) Change of Control . . . . . . . . . . . . . . . . . . . . . 31
(l) Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 31
9.02 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.03 Application of Cash Collateral; Cash Proceeds . . . . . . . . . . . 33
9.04 Rights and Powers Are Cumulative. . . . . . . . . . . . . . . . . . 34
iii
SECTION PAGE
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 34
10.01 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 34
10.02 Consents and Waivers. . . . . . . . . . . . . . . . . . . . . . . . 34
10.03 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.04 Costs and Attorney Costs. . . . . . . . . . . . . . . . . . . . . . 34
10.05 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.06 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.07 General Indemnification . . . . . . . . . . . . . . . . . . . . . . 35
10.08 Arbitration; Reference Proceeding . . . . . . . . . . . . . . . . . 35
10.09 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.10 Headings; Interpretation. . . . . . . . . . . . . . . . . . . . . . 37
10.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.13 Effect of Amendment and Restatement . . . . . . . . . . . . . . . . 37
10.14 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . 37
Exhibit A: Summary of Outstanding Standby Letters of Credit
iv
AMENDED AND RESTATED
AGREEMENT
This Amended and Restated Agreement is entered into as of October 30,
1998, between Digital Microwave Corporation (the "COMPANY") and Bank of America
National Trust and Savings Association (the "BANK").
WHEREAS, the Company and the Bank entered into a Credit Agreement dated
as of June 30, 1997, amended by first, second, and third amendments dated June
1, 1998, July 22, 1998, and September 30, 1998 respectively (as so amended, the
"EXISTING AGREEMENT");
WHEREAS, under the Existing Agreement the Company is required to provide
cash collateral for the Existing Letters of Credit by October 30, 1998;
WHEREAS, the Company and the Bank have agreed to amend and restate the
representations, warranties, covenants, agreements and obligations of the
Company in this Amended and Restated Agreement in order to provide for (1) the
agreement of the Bank to accept cash and collateral other than cash, as
specified in this Agreement, (2) the grant of a security interest in all such
collateral to secure the Obligations of the Company, (3) the terms and
provisions applicable to all such collateral, and (4) clarification and
modification of certain other terms and provisions of the Existing Agreement;
WHEREAS, the Company and the Bank wish to set forth their agreement that
this Amendment and Restated Agreement completely amends, restates, and replaces
the Existing Agreement, all upon the terms and provisions and subject to the
conditions set forth in this Amended and Restated Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 CERTAIN DEFINED TERMS. The following terms have the following meanings:
"AFFILIATE" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"AGREEMENT" means this Amended and Restated Agreement.
"ATTORNEY COSTS" means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
1
"BANK-RELATED PERSONS" means the Bank together with its Affiliates and
the officers, directors, employees, counsel, agents and attorneys-in-fact of
such Persons and Affiliates.
"BANK'S PAYMENT OFFICE" means the address for payments set forth on the
signature pages to this Agreement or such other address as the Bank may from
time to time specify.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, ET SEQ.).
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in San Francisco, California are authorized or
required by law to close.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of the Bank or of any corporation controlling the Bank.
"CODE" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"COLLATERAL" has the meaning specified in Section 8.01 of this
Agreement.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"DOLLARS", "DOLLARS" and "$" each mean lawful money of the United
States.
"EFFECTIVE AMOUNT" means with respect to any outstanding L/C Obligations
on any date, the amount of such L/C Obligations on such date after giving effect
to any Issuance of Letters of Credit occurring on such date and any other
changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements of outstanding unpaid drawings under
any Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"EQUIVALENT AMOUNT" means (a) whenever this Agreement requires or
permits a determination on any date of the equivalent in dollars of an amount
expressed in a currency other than dollars, the equivalent amount in dollars of
any amount expressed in a currency other than dollars as determined by the Bank
on such date on the basis of the Spot Rate for the purchase of dollars with such
other currency on the relevant date; or (b) whenever this Agreement requires or
permits a determination on any date of the equivalent in a currency other than
dollars of an amount expressed in dollars, the equivalent amount in a currency
other than dollars of an amount expressed in dollars as determined by the Bank
on such date on the basis of the Spot Rate for the purchase of such other
currency with dollars on the relevant date. The relevant date shall be (a) the
Issuance Date if a Letter of Credit is to be Issued and (b) for all other
purposes, the date on which the required computation is made.
"EXISTING LETTERS OF CREDIT" means the letters of credit described in
Exhibit A.
2
"EVENT OF DEFAULT" means any of the events or circumstances specified in
Section 9.01.
"FURTHER TAXES" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 3.01.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"GREYROCK FINANCING" means the $40,000,000 credit facilities extended by
Greyrock Capital, a division of NationsCredit Commercial Corporation, pursuant
to an agreement dated as of October 1, 1998 between the Company and Greyrock
Capital, a division of NationsCredit Commercial Corporation.
"INDEMNIFIED LIABILITIES" has the meaning specified in Section 10.07.
"INSOLVENCY PROCEEDING" means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or
(b) any general assignment for the benefit of creditors, composition,
marshalling of assets for creditors, or other, similar arrangement in respect of
its creditors generally or any substantial portion of its creditors; undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.
"ISSUANCE DATE" of a Letter of Credit means the date a Letter of Credit
is Issued.
"ISSUE" means, with respect to any Letter of Credit (including, for the
avoidance of doubt, any Existing Letters of Credit) to issue or to extend the
expiry of, or to renew or increase the amount of or otherwise amend the
provisions of, such Letter of Credit; and the terms "ISSUED," "ISSUING" and
"ISSUANCE" have corresponding meanings.
"L/C AMENDMENT APPLICATION" means an application form for amendment of
outstanding standby letters of credit as shall at any time be in use at the
Bank, as the Bank shall request.
"L/C APPLICATION" means an application form for issuance of standby
letters of credit in the form as shall at the relevant time be in use at the
Bank.
"L/C OBLIGATIONS" means at any time the sum of (a) the aggregate undrawn
amount of all Letters of Credit then outstanding, plus (b) the amount of all
unreimbursed drawings under all Letters of Credit.
"L/C-RELATED DOCUMENTS" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Bank's standard form documents for
issuance of letters of credit.
3
"LETTERS OF CREDIT" means the Existing Letters of Credit and any standby
letters of credit Issued by the Bank pursuant to this Agreement.
"LIEN" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the UCC or any comparable law) and any contingent or other
agreement to provide any of the foregoing, but not including the interest of a
lessor under an operating lease.
"LOAN DOCUMENTS" means this Agreement, the L/C-Related Documents, and
all other security agreements, deeds of trust, and other similar agreements
between the Company and the Bank now or hereafter delivered to the Bank pursuant
to this Agreement, and all financing statements (or comparable documents now or
hereafter filed in accordance with the UCC or comparable law) or notices against
the Company as debtor in favor of the Bank as secured party, or the Bank's
records reflecting, acknowledging, or identifying the Collateral, and any
amendments, supplements, modifications, renewals, replacements, consolidations,
substitutions, and extensions of any of the foregoing and all other documents
delivered to the Bank in connection herewith.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) of the Company or the Company and its Subsidiaries
taken as a whole (b) a material impairment of the ability of the Company to
perform under any Loan Document and to avoid any Event of Default; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against the Company of any Loan Document.
"OBLIGATIONS" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company to the
Bank or any Bank-Related Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"OTHER TAXES" means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"PLEDGED DEPOSITS" means:
4
(a) each deposit account opened by the Company with the Bank
that the Company and the Bank agree in writing is part of the Collateral subject
to this Agreement;
(b) each deposit account opened by the Bank for the account of
the Company to which the Bank credits proceeds of other Collateral;
(c) any renewals or rollovers of the deposit accounts described
in clauses (a), (b),and (c) of this definition; and
(d) proceeds of any of the foregoing.
A Pledged Deposit may be of any type of deposit account of the Company with the
Bank, including but not limited to a demand deposit, time deposit, or deposit
represented by a negotiable certificate of deposit issued by the Bank.
"REFERENCE RATE" means for any day, the rate of interest in effect for
such day as publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." It is a rate set by the Bank based upon
various factors including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the Reference Rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer, the president,
the chief financial officer, or the treasurer of the Company or any other
officer having substantially the same authority and responsibility.
"SPOT RATE" for a currency means the rate quoted by the Bank as the spot
rate for the purchase by the Bank of such currency with another currency through
in San Francisco, California, or such other of the Bank's offices as it may
designate from time to time, at approximately 8:00 a.m. (San Francisco,
California time) on the date two Business Days prior to the date as of which the
foreign exchange computation is made.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which more than 50% of the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
"TAXES" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of the Bank, taxes
imposed on or measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which the Bank is organized or maintains
a lending office.
"UCC" means the Uniform Commercial Code of California.
5
1.02 ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE LETTERS OF CREDITS
2.01 EXISTING LETTERS OF CREDIT. The Bank agrees to continue the Existing
Letters of Credit and to honor drafts drawn under the Existing Letters of
Credit. The Bank shall be under no obligation to amend any of the Existing
Letters of Credit.
2.02 NEW LETTERS OF CREDIT.
(a) The Bank is not committed to Issue any new Letters of Credit.
The Company may, from time to time, ask the Bank to Issue a Letter of Credit.
If the Bank agrees (in its sole discretion) to Issue a Letter of Credit
requested by the Company, such Issuance shall be subject to the terms and
conditions of this Agreement and such other terms and conditions as may be
agreed upon on such time between the Bank and the Company.
(b) The Letters of Credit Issued by the Bank and the Company's
reimbursement obligation relating to such Letters of Credit shall be evidenced
by one or more accounts or records maintained by the Bank in the ordinary course
of business. The accounts or records maintained by the Bank shall be rebuttable
presumptive evidence of the amount of the Letters of Credit Issued for the
account of the Company, the Company's corresponding reimbursement obligations,
and the interest and payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Company hereunder to pay any amount owing with respect to any Letter of Credit.
2.03 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT. If the Bank
decides (in its sole discretion) to Issue a Letter of Credit:
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Company received by the Bank at least three Business Days
(or such shorter time as the Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be in writing, which may be transmitted by
facsimile transmission, confirmed immediately in an original writing, in the
form of an L/C Application, and shall specify in form and detail satisfactory to
the Bank: (i) the proposed date of issuance of the Letter of Credit (which shall
be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the
expiry date of the Letter of Credit; (iv) the name and address of the
beneficiary thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text of any
certificate to be presented by the beneficiary in case of any drawing
thereunder; and (vii) such other matters as the Bank may require.
6
(b) Subject to the terms and conditions hereof and such other terms
and conditions as may be agreed on between the Bank and the Company, the Bank
shall, on the requested date, issue a Letter of Credit for the account of the
Company in accordance with the Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding, the
Bank may, upon the written request of the Company received by the Bank at least
three Business Days (or such shorter time as the Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of amendment, amend
any Letter of Credit. Each such request for amendment of a Letter of Credit
shall be made in writing, which may be by facsimile transmission, confirmed
immediately in an original writing, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to the Bank:
(i) the Letter of Credit to be amended; (ii) the proposed date of amendment of
the Letter of Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Bank may require. The
Bank shall be under no obligation to amend any Letter of Credit.
(d) The Bank may, at its election, deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than 13 months after its Issuance Date.
(e) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
2.04 DRAWINGS UNDER THE LETTERS OF CREDIT.
(a) In case of a drawing or payment by the Bank under a Letter of
Credit, the Bank will notify the Company. The Company will promptly reimburse
the Bank on demand and without demand on the date of such drawing or payment, in
the currency in which the Letter of Credit is payable, except that the Bank may,
at its option, require payments to be made in Dollars. The Equivalent Amount in
Dollars of each payment to be made by the Company to reimburse the Bank for a
payment made by the Bank for a Letter of Credit payable in a currency other than
dollars shall be determined by as of the date of payment by the Bank under such
Letter of Credit.
(b) Each such reimbursement obligation and other sums payable
hereunder (including but not limited to the obligation to furnish collateral) if
not paid when due shall bear interest, payable on demand from the date of such
drawing or payment or due date at an interest rate per annum equal to the
Reference Rate plus 2.00%.
(c) Interest based on the Reference Rate shall be computed on the
basis of a 365/366-day year and actual days elapsed. All other interest and
fees payable to the Bank under this Agreement shall be computed on the basis of
a 360 day year and actual days elapsed, which results in more interest or a
larger fee than if a 365-366 day year were used.
7
2.05 ROLE OF THE BANK.
(a) The Company agrees that, in paying any drawing under a Letter of
Credit, the Bank shall not have any responsibility to obtain any document (other
than any sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.
(b) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
PROVIDED, however, that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Bank-Related Person, nor any of the respective correspondents, participants or
assignees of the Bank, shall be liable or responsible for any of the matters
described in clauses (i) through (vii) of Section 2.06; PROVIDED, however,
anything in such clauses to the contrary notwithstanding, that the Company may
have a claim against the Bank, and the Bank may be liable to the Company, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Company which the Company proves were caused
by the Bank's willful misconduct or gross negligence or the Bank's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in
limitation of the foregoing: (i) the Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Bank shall
not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
2.06 OBLIGATIONS ABSOLUTE. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Bank for a drawing under
a Letter of Credit, and to repay any drawing under a Letter of Credit, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
8
(iv) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
(v) any payment by the Bank under any Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of any Letter of Credit; or any payment made by the Bank under any Letter
of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor.
2.07 LETTER OF CREDIT FEES.
The Company shall pay to the Bank, quarterly in arrears, a non-refundable Letter
of Credit fee on each Letter of Credit. This fee shall be the greater of
(a) 0.35% per annum on the undrawn amount of such Letter of Credit or (b) $400
per annum.
The Company shall also pay the standard fees and commissions charged to Bank
customers at the times and in the amounts the Bank advises the Company from time
to time as being applicable to the Company's standby letters of credit.
2.08 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
2.09 PAYMENTS BY THE COMPANY.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. All payments by the Company shall be made
to the Bank at the Bank's Payment Office or such branch of the Bank as the Bank
may select, and shall be made in dollars or in such currency as the Bank may
specify and in immediately available funds. Any payment received by the Bank
later than the time specified by the Bank shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
9
2.10 EUROPEAN ECONOMIC AND MONETARY UNION.
(a) DEFINITIONS.
In this Section and in each other provision of this Agreement to which
reference is made in this Section expressly or impliedly, the following terms
have the following meanings:
"COMMENCEMENT OF THE THIRD STAGE OF EMU" means the date of commencement
of the third stage of EMU (at the date of this Agreement expected to be January
1, 1999) or the date on which circumstances arise which (in the opinion of the
Bank) have substantially the same effect and result in substantially the same
consequences as commencement of the third stage of EMU as contemplated by the
Treaty on European Union.
"EMU" means economic and monetary union as contemplated in the Treaty on
European Union.
"EMU LEGISLATION" means legislative measures of the European Council for
the introduction of, changeover to or operation of a single or unified European
currency (whether known as the euro or otherwise), being in part the
implementation of the third stage of EMU;
"EURO" means the single currency of participating member states of the
European Union;
"EURO UNIT" means the currency unit of the euro;
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro
unit) of a participating member state;
"PARTICIPATING MEMBER STATE" means each state so described in any EMU
legislation; and
"TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957,
as amended by the Single ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and the Maastricht Treaty (which was
signed at Maastricht on February 7, 1992, and came into force on November 1,
1993), as amended from time to time.
(b) EFFECTIVENESS OF PROVISIONS.
The provisions of subsections (c) through (j) of this Section shall be
effective at and from the commencement of the third stage of EMU; provided, that
if and to the extent that any such provision relates to any state (or the
currency of such state) that is not a participating member state on the
commencement of the third stage of EMU, such provision shall become effective in
relation to such state (and the currency of such state) at and from the date on
which such state becomes a participating member state.
(c) REDENOMINATION AND ALTERNATIVE CURRENCIES.
Each obligation under this Agreement of a party to this Agreement which
has been denominated in the national currency unit of a participating member
state shall be redenominated into the euro unit in accordance with EMU
legislation; provided, that if and to the extent that any EMU legislation
provides that following the commencement of the third stage of EMU an amount
denominated either in the euro or in the national currency unit of a
participating member
10
state and payable within that participating member state by crediting an account
of the creditor can be paid by the debtor either in the euro unit or in that
national currency unit, each party to this Agreement shall be entitled to pay or
repay any such amount either in euro unit or in such national currency unit.
(d) LETTERS OF CREDIT.
Any Letter of Credit denominated in the currency of a participating
member state shall be made in the euro unit.
(e) BANKING DAYS.
With respect to any amount denominated or to be denominated in the euro
or a national currency unit, any reference to a "Banking Day" shall be construed
as a reference to a day (other than a Saturday or Sunday) on which banks are
generally open for business in (i) London and New York City, and (ii) Frankfurt
am Main, Germany (or such principal financial center or centers in such
participating member state or states as the Bank may from time to time nominate
for this purpose).
(f) PAYMENTS TO THE BANK.
Each provision of this Agreement calling for payments in a specified
currency shall be construed so that, in relation to the payment of any amount of
euro units or national currency units, such amount shall be made available to
the Bank in immediately available, freely transferable, cleared funds to such
account with such bank in Frankfurt am Main, Germany (or such other principal
financial center in such participating member state as the Bank may from time to
time nominate for this purpose) as the Bank shall from time to time nominate for
this purpose.
(g) DELIBERATELY LEFT BLANK.
(h) PAYMENTS BY THE BANK GENERALLY.
With respect to the payment of any amount denominated in the euro or in
a national currency unit, the Bank shall not be liable to the Borrower in any
way whatsoever for any delay, or the consequences of any delay, in the crediting
to any account of any amount required by this Agreement to be paid by the Bank
if the Bank shall have taken all relevant steps to achieve, on the date required
by this Agreement, the payment of such amount in immediately available, freely
transferable, cleared funds (in the euro unit or, as the case may be, in a
national currency unit) to the account with the bank in the principal financial
center in the participating member state which the Borrower or, as the case may
be, the Bank shall have specified for such purpose. In this subsection, "all
relevant steps" means all such steps as may be prescribed from time to time by
the regulations or operating procedures of such clearing or settlement system as
the Bank may from time to time determine for the purpose of clearing or settling
payments of the euro.
11
(i) BASIS OF ACCRUAL.
If the basis of accrual of interest or fees expressed in this Agreement
with respect to the currency of any state that becomes a participating member
state shall be inconsistent with any convention or practice in the London
interbank market or, as the case may be, another applicable interbank market for
the basis of accrual of interest or fees in respect of the euro, such convention
or practice shall replace such expressed basis effective as of and from the date
on which such state becomes a participating member state; provided, that if any
reimbursement or other Obligation in the currency of such state is outstanding
immediately prior to such date, such replacement shall take effect, with respect
to such Obligation, at the end of the then applicable period.
(j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES.
Without prejudice and in addition to any method of conversion or
rounding prescribed by any EMU legislation and without prejudice to the
respective liabilities for Obligations of the Borrower to the Bank or the Bank
to the Borrower under or pursuant to this Agreement: (i) each reference in this
Agreement to a minimum amount (or an integral multiple thereof) in a national
currency unit to be paid to or by the Bank shall be replaced by a reference to
such reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Bank may from time to time specify; and
(ii) except as expressly provided in this Section, each provision of this
Agreement shall be subject to such reasonable changes of construction as the
Bank may from time to time specify to be necessary or appropriate to reflect the
introduction of or changeover to the euro in participating member states.
(k) INCREASED COSTS.
The Borrower shall from time to time, at the request of the Bank, pay to
the Bank the amount of any cost or increased cost incurred by, or of any
reduction in any amount payable to or in the effective return on its capital to,
or of interest or other return foregone by, such Bank or any holding company of
such Bank as a result of the introduction of, changeover to or operation of the
euro in any participating member state, other than any such cost or reduction or
amount foregone reflected in any interest rate hereunder.
ARTICLE III
TAXES AND YIELD PROTECTION
3.01 TAXES.
(a) Any and all payments by the Company to the Bank under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to the Bank, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), the Bank receives and retains an amount
12
equal to the sum it would have received and retained had no such
deductions or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Company shall also pay to the Bank, at the time
interest is paid, Further Taxes in the amount that the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless the Bank for
the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes in the
amount that the Bank specifies as necessary to preserve the after-tax yield the
Bank would have received if such Taxes, Other Taxes or Further Taxes had not
been imposed, and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment
under this indemnification shall be made within 30 days after the date the Bank
makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to the Bank the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Bank.
3.02 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If the Bank determines that, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation or
(ii) the compliance by the Bank with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank of agreeing to issue,
issuing or maintaining any Letter of Credit or of agreeing to make or making,
funding or maintaining any unpaid drawing under any Letter of Credit, then the
Company shall be liable for, and shall from time to time, upon demand pay to the
Bank, additional amounts as are sufficient to compensate the Bank for such
increased costs.
(b) If the Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or the Bank's Payment Office) or any corporation controlling the Bank
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration the Bank's or such
corporation's policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is increased as a
consequence of its commitment, Letters of Credit, or obligations under this
Agreement, then, upon demand of the Bank to the Company, the Company shall pay
to the Bank,
13
from time to time as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
3.03 CERTIFICATES OF THE BANK. If the Bank claims reimbursement or
compensation under this Article it shall deliver to the Company a certificate
setting forth in reasonable detail the amount payable to the Bank hereunder and
such certificate shall be conclusive and binding on the Company in the absence
of manifest error.
3.04 SURVIVAL. The agreements and obligations of the Company in this Article
shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall
take effect as of October 30, 1998, provided that the Bank shall have received,
on or before such date, all of the following, in form and substance satisfactory
to the Bank:
(a) AGREEMENT. This Agreement executed by each party thereto.
(b) COLLATERAL. All certificates and instruments representing the
Collateral as to which possession is a method of perfecting a Lien, stock
transfer powers (or other appropriate instruments of transfer) executed in blank
with signatures guaranteed as the Bank may specify.
(c) COLLATERAL VALUE. Evidence, satisfactory to the Bank, that the
market value of the Collateral in which the Bank has a first priority fully
perfected security interest (in both cases as determined by the Bank in its sole
discretion) is not less than the sum of (1) $100,000 PLUS (2) the aggregate
Dollar amount (including the Equivalent Amount in Dollars of the L/C Obligations
denominated in a currency other than Dollars) of the then Effective Amount of
all L/C Obligations.
(d) AGREEMENTS WITH THIRD PERSONS. Such agreements and other
documents and instruments executed by such Persons party to contracts relating
to any Collateral as to which the Bank shall be granted a security interest as
requested by the Bank.
(e) EVIDENCE OF PERFECTION. Evidence that all other actions
necessary or, in the opinion of the Bank, desirable to fully perfect and protect
the first priority security interest created by the Loan Documents, and to
enhance the Bank's ability to preserve and protect its interests in and access
to the Collateral, have been taken.
(f) OTHER DOCUMENTS. Such other approvals, opinions, documents or
materials as the Bank may request.
4.02 CONDITIONS TO ALL ISSUANCES OF LETTERS OF CREDIT. The obligation of the
Bank to Issue any Letter of Credit (including the initial Letter of Credit under
this Agreement) is subject to the satisfaction (in form and substance
satisfactory to the Bank) of the following conditions precedent on the relevant
Issuance Date:
14
(a) NOTICE, APPLICATION. The Bank shall have received an L/C
Application or L/C Amendment Application, as required under Section 2.03.
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in Article V shall be true and correct on and as
of such Issuance Date with the same effect as if made on and as of such Issuance
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).
(c) NO EXISTING DEFAULT. No Default or Event of Default shall exist
or shall result from such Issuance.
(d) COLLATERAL. All certificates and instruments representing the
Collateral as to which possession is a method of perfecting a Lien, stock
transfer powers (or other appropriate instruments of transfer) executed in blank
with signatures guaranteed as the Bank may specify.
(e) COLLATERAL VALUE. Evidence, satisfactory to the Bank, that the
market value of the Collateral in which the Bank has a first priority fully
perfected security interest (in both cases as determined by the Bank in its sole
discretion) is not less than the sum of (1) $100,000 PLUS (2) aggregate Dollar
amount (including the Equivalent Amount in Dollars of the L/C Obligations
denominated in a currency other than Dollars) of the then Effective Amount of
all L/C Obligations, after giving effect to the requested Issuance of a Letter
of Credit.
(f) AGREEMENTS WITH THIRD PERSONS. Such agreements and other
documents and instruments executed by such Persons party to contracts relating
to any Collateral as to which the Bank shall be granted a security interest as
requested by the Bank.
(g) EVIDENCE OF PERFECTION. Evidence that all other actions
necessary or, in the opinion of the Bank, desirable to fully perfect and protect
the first priority security interest created by the Loan Documents, and to
enhance the Bank's ability to preserve and protect its interests in and access
to the Collateral, have been taken.
(h) PAYMENTS. Evidence that all fees and other sums then due and
owing to the Bank has been received by the Bank in immediately available funds.
(i) OTHER DOCUMENTS, ETC. Such other approvals, opinions,
documents, or materials as the Bank may request.
Each L/C Application or L/C Amendment Application submitted by the Company
hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Issuance Date that
the conditions in this Section are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.01 CORPORATE EXISTENCE AND POWER. The Company and each of its
Subsidiaries: (a) is a corporation duly organized and existing under the laws
of the jurisdiction of its organization;
15
(b) has the power and authority and all governmental licenses, authorizations,
consents, and approvals to own its assets, carry on its business, and to
execute, deliver, and perform its obligations under, the Loan Documents to which
it is a party; and (c) is duly qualified and properly licensed and in good
standing under the laws of each jurisdiction where the failure to so qualify
would have a Material Adverse Effect.
5.02 AUTHORIZATION. The execution, delivery, and performance by the Company
of this Agreement and any other Loan Document to which it is a party, have been
duly authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any organizational or charter documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under any material agreement, contract, indenture,
document, or instrument to which the Company is a party or by which any property
is bound, or any order, injunction, writ, or decree of any governmental
authority to which the Company or any property is subject; or
(c) violate any material law, rule, regulation, or determination of
an arbitrator or of a court or other governmental authority, in each case
applicable to or binding upon the Company or any property.
5.03 ENFORCEABILITY. This Agreement is a legal, valid, and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
and the other Loan Documents and any other instrument or agreement required
under this Agreement, when executed and delivered, will be legal, valid,
binding, and enforceable in accordance with its terms against the Company;
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.04 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries is in
compliance with all foreign, federal, state and local laws, rules, regulations
and determinations of arbitrators, courts and other governmental authorities
materially affecting the business, operations or property of the Company and its
Subsidiaries.
5.05 PERMITS, FRANCHISES. The Company and its Subsidiaries possess all
material permits, memberships, franchises, contracts, and licenses required and
all trademark rights, trade name rights, patent rights, and fictitious name
rights necessary to enable the Company and its Subsidiaries to conduct the
businesses in which they are now engaged.
5.06 LITIGATION. There is no litigation, tax claim, proceeding, governmental
or administrative action, investigation, arbitration proceeding or dispute
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company or any of its Subsidiaries or any of their properties, the adverse
determination of which would result in a Material Adverse Effect.
5.07 NO EVENT OF DEFAULT. There exists no Default or Event of Default.
5.08 OTHER OBLIGATIONS. As of the date of this Agreement, the Company and
its Subsidiaries are not in default under any other material agreement involving
the borrowing of money, the extension of credit, or the lease of real or
personal property, to which the Company or any of its
16
Subsidiaries is a party as borrower, guarantor, installment purchaser, or
lessee, except as disclosed in writing to the Bank prior to the date of this
Agreement.
5.09 TAX RETURNS. The Company has no knowledge of any material pending
assessments or adjustments with respect to its or its Subsidiaries' income tax
liabilities for any year, except as disclosed in writing to the Bank prior to
the date of this Agreement.
5.10 INFORMATION SUBMITTED. All financial and other information that has
been submitted by the Company or any of its Subsidiaries to the Bank in
connection with this Agreement, including the Company's financial statement
delivered to the Bank most recently prior to the date of this Agreement: (a) in
the case of financial statements, is prepared in accordance with generally
accepted accounting principles consistently applied; and (b) is true and correct
in all material respects and is complete insofar as may be necessary to give the
Bank true and accurate knowledge of the subject matter thereof.
5.11 NO MATERIAL ADVERSE EFFECT. Since September 30, 1998, there has been no
Material Adverse Effect.
5.12 CHIEF PLACE OF BUSINESS. The Company's chief executive office and
principal place of business, and all books and records concerning the Collateral
are located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. The Company does not
do business under any other trade name, trade style, or fictitious business name
except as previously disclosed in writing to the Bank.
5.13 LOAN DOCUMENTS.
(a) The provisions of each of the Loan Documents are effective to
create in favor of the Bank, a legal, valid, enforceable and fully perfected
first priority security interest in all right, title and interest of the Company
in the Collateral covered by the Loan Document; and financing statements have
been filed in the offices in all of the jurisdictions and/or other filings or
agreements have been entered into with or notices given to all other Persons as
may be required to fully perfect a first priority security interest in favor of
the Bank in such Collateral;
(b) All representations and warranties of the Company in the Loan
Documents are true and correct.
(c) The Company has not acknowledged or given to any Person notice
of a Lien, security interest or pledge on any of the Collateral other than the
security interest in favor of the Bank hereunder.
5.14 REGULATED ENTITIES. None of Company, any Person controlling the
Company, or any subsidiary or Affiliate of the Company is subject to any federal
or state statute or regulation limiting its ability to incur indebtedness.
5.15 THE COLLATERAL. The Company owns the Collateral free and clear of any
and all Liens of any third parties other than the security interest of the Bank
and will keep the Collateral free of all Liens except the security interest of
the Bank.
17
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as credit is available under this Agreement and until full and final
payment of all of the Company's obligations under this Agreement and any other
Loan Document:
6.01 NOTICES OF CERTAIN EVENTS. The Company shall promptly give written
notice to the Bank of:
(a) all litigation, proceedings or actions affecting the Company or
its Subsidiaries where the amount claimed is $1,000,000 or more;
(b) any substantial dispute which may exist between the Company or
its Subsidiaries and any governmental regulatory body or law enforcement
authority;
(c) any Default or Event of Default;
(d) any of the representations and warranties in Article V which
ceases to be true and correct in all material respects; and
(e) any other matter which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
6.02 FINANCIAL AND OTHER INFORMATION. The Company shall deliver to the Bank
in form and detail satisfactory to the Bank, and in such number of copies as the
Bank may request:
(a) within 105 days after the end of each fiscal year, the Company's
consolidated financial statements for such year audited by a certified public
accountant together with an unqualified opinion of such certified public
accountant and including, at a minimum, the Company's balance sheet and
statements of income, retained earnings, and cash flow;
(b) within 60 days after the end of each fiscal quarter, the
Company's consolidated financial statements for such period prepared by the
Company and including, at a minimum, the Company's balance sheet and statements
of income, retained earnings, and cash flow;
(c) within 15 days after the date of filing with the Securities and
Exchange Commission, copies of any of the Company's Form 10-K Annual Reports,
Form 10-Q Quarterly Reports and Form 8-K Current Reports;
(d) within 15 days after the end of each month, the monthly
borrowing base certificate delivered by the Company pursuant to the Greyrock
Financing, the borrowing base certificate to be delivered in summary form;
(e) Promptly upon request, such other materials and information
relating to the Company or its Subsidiaries as the Bank may reasonably request.
6.03 BOOKS, RECORDS, AUDITS AND INSPECTIONS. The Company shall, and shall
cause its Subsidiaries to, maintain adequate books, accounts and records, and
prepare all financial statements required hereunder in accordance with generally
accepted accounting principles
18
consistently applied, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over the Company or its Subsidiaries, or the
Company's or its Subsidiaries' businesses, and permit employees or agents of the
Bank at any reasonable time to inspect the Company's and its Subsidiaries'
properties, and to examine or audit the Company's and its Subsidiaries' books,
accounts, and records and make copies and memoranda thereof.
6.04 USE OF FACILITY. The Company shall use the credit facility provided
herein solely for general corporate purposes not in contravention of any
Requirement of Law.
6.05 COMPLIANCE WITH LAWS. The Company shall at all times comply in all
material respects with, and cause its Subsidiaries to comply with, all laws,
statutes (including any fictitious name statute), rules, regulations, orders,
and directions of any governmental authority having jurisdiction over the
Company or any of its Subsidiaries or the business of the Company or any of its
Subsidiaries.
6.06 CHANGE IN NAME, STRUCTURE OR LOCATION. The Company shall notify the
Bank in writing prior to any change in (a) the Company's name (b) the Company's
business or legal structure, or (c) the Company's place of business or chief
executive office if the Company has more than one place of business.
6.07 EXISTENCE AND PROPERTIES. The Company shall, and shall cause each of
its Subsidiaries to, maintain and preserve its existence and all rights,
privileges, and franchises necessary to conduct its business, conduct its
business in an orderly, efficient, and customary manner, keep all its properties
in good working order and condition, and from time to time make all needed
repairs, renewals, or replacements thereto and thereof so that the efficiency of
such property shall be fully maintained and preserved. The Company may merge a
Subsidiary into another Subsidiary or a Subsidiary into the Company, provided
that the Company is the surviving corporation.
6.08 FINANCING STATEMENTS, ETC. The Company shall execute and deliver to the
Bank, at any time and from time to time, all financing statements, continuation
statements, termination statements, notices, and all other documents and
instruments which the Bank may request (including without limitation any custody
or other agreements with other Persons who might hold the Collateral or any part
of the Collateral), in form satisfactory to the Bank, and the Company hereby
agrees to, and authorizes the Bank to, take such other steps as shall be
requested by the Bank to perfect and continue perfected, maintain the priority
of or provide notice of the pledge of and security interest in the Collateral
and to accomplish the purposes of this Agreement. Without limiting the
generality of the foregoing, the Company acknowledges that the Bank will ▇▇▇▇
its records to reflect that the deposits that are subject to the security
interest of the Bank on or prior to the date such deposits are created.
6.09 COLLATERAL VALUE.
(a) (1) The Company shall at all times keep and maintain in the
possession of the Bank or the Bank's designee, Collateral in which the Bank has
a first priority fully perfected security interest with a market value (in both
cases as determined by the Bank in its sole discretion) of not less than the sum
of (y) $100,000 PLUS (z) the aggregate Dollar amount (including the Equivalent
Amount in Dollars of the L/C Obligations denominated in a currency other than
Dollars) of the Effective Amount of all L/C Obligations.
19
(2) The Bank shall, from time to time in its sole discretion,
determine the priority of its security interest and the market value of the
Collateral and the Company shall, within three Business Days after each demand
by the Bank, furnish the Bank with additional Collateral, of a type and in an
amount satisfactory to the Bank in its sole discretion, such that the market
value (as determined by the Bank in its sole discretion) of the Collateral in
which the Bank has a first priority fully perfected security interest (as
determined by the Bank in its sole discretion) is not less than the sum of (y)
$100,000 PLUS (z) the aggregate Dollar amount (including the Equivalent Amount
in Dollars of the L/C Obligations denominated in a currency other than Dollars)
of the Effective Amount of all L/C Obligations.
(3) If an item of Collateral does not exist as an instrument or in
certificated form in the physical possession of the Bank, possession as used in
this subsection (a) means that such item of Collateral has been designated as
Collateral in which the Bank has a first priority fully perfected security
interest, such designation appearing on the books and records of the Person
party to contracts relating to such Collateral.
(4) If a Letter of Credit expires by its terms and at such time no
Default or an Event of Default has occurred and is continuing, the Bank shall
return to the Company, within two Business Days after a demand by the Company,
an amount of Collateral such that the market value of the remaining Collateral
in which the Bank has a first priority fully perfected security interest (in
each case as determined by the Bank in its sole discretion) is greater than,
but is as close as is reasonably practicable to, the sum of (y) $100,000 PLUS
(z) the aggregate Dollar amount (including the Equivalent Amount in Dollars of
the L/C Obligations denominated in a currency other than Dollars) of the
Effective Amount of all L/C Obligations.
(b) The Company agrees that the Bank shall have no responsibility to
the Company with respect to any losses sustained on any item of, or investment
in, the Collateral or for any failure to realize any yields desired by the
Company.
6.10 COOPERATION. The Company shall perform, at the request of the Bank and
at the expense of the Company, such acts as may be reasonably necessary or
advisable to perfect any Lien provided for in this Agreement or in any other
Loan Document or otherwise to carry out the intent of this Agreement and the
other Loan Documents.
6.11 COLLATERAL. The Company:
(a) Shall keep the Collateral free of all Liens and claims of any
kind or nature except the security interest of the Bank and shall maintain such
security interest as a first priority fully perfected security interest. The
Company (1) shall not sell, assign, transfer, surrender, or otherwise dispose
of, or grant any option, warrant or other right or interest with respect to all
or any part of the Collateral, except as permitted by this Agreement or the
other Loan Documents; and (2) shall not cause or permit any instruments,
certificates or other documents or writings representing or evidencing any
Collateral to be, at any time, in the actual or constructive possession or
control of any Person other than the Bank (or a bailee selected by the Bank) who
is holding such Collateral for the benefit of the Bank;
(b) Shall pay, prior to delinquency, all taxes, charges, Liens, and
assessments against the Collateral; and upon any failure of Company to do so,
the Bank at its option may pay any of
20
them and shall be the sole judge of the legality or validity thereof and the
amount necessary to discharge the same. The Company agrees that it will
reimburse the Bank for all such amounts paid by the Bank, and such obligation to
reimburse shall be a part of the Obligations secured by this Agreement;
(c) Shall promptly notify the Bank, or shall cause the Bank to be
notified, in writing (1) prior to any change in the Company's name or any change
in its identity, or business structure, which might make any financing statement
filed hereunder incorrect or misleading, (2) of any event of which a Responsible
Officer becomes aware causing loss or depreciation in the value of the
Collateral in any material respect, and (3) of all notices and reports not
received from the Bank with respect to the Collateral, together with copies of
such notices and reports. The Company shall give the Bank at least 30 days
notice before changing its chief executive office;
(d) Shall promptly deliver to the Bank any Collateral now or
hereafter in the possession of the Company. Such Collateral shall be received
in trust by the Company for the benefit of the Bank and shall be segregated from
the other property of Company prior to its delivery to the Bank;
(e) Shall, from time to time, take any action (including but not
limited to appearing in and defending any action or proceeding which may affect
the Company's title to or the Bank's security interest in the Collateral) which
the Bank may from time to time reasonably determine to be necessary or desirable
in order (1) to create, preserve, protect, perfect, confirm or validate the
Collateral (or any portion thereof) or the security interest in the Collateral
(or any portion thereof), (the Company may, in lieu of the Bank's taking any
such action described in this clause, by agreement with the Bank furnish the
Bank with substitute collateral (A) which meets the requirements in this
Agreement relating to Collateral and (B) in which the Bank has a first priority
perfected security interest); (2) to enable the Bank to obtain the full benefits
of the Loan Documents or (3) to enable the Bank to exercise and enforce any of
its rights, powers, and remedies under the Loan Documents;
(f) Shall, at the request of the Bank, use reasonable efforts to
obtain the consent of any Person that is necessary or desirable to effect the
grant of security interests in any right, title, claims, and benefits now owned
or hereafter acquired by the Company in and to any item of Collateral.
6.12 DELIVERY OF PAYMENTS AND OTHER DISTRIBUTIONS. If the Company shall
become entitled to receive or shall receive in connection with the Collateral
any payment or other distribution, the Company shall accept such payment or
distribution as the agent for the Bank, shall hold the same in trust for the
benefit of the Bank, shall segregate the same from other property or funds of
the Company, and shall deliver all such payments and distributions in exact form
received, forthwith to or for the account of the Bank at the address and to the
Person or Persons to be designated by the Bank, with any necessary endorsements
and other instruments of transfer or assignment, all in form and substance
satisfactory to the Bank, as the Bank shall request, to be held by the Bank or
its designee, subject to the terms hereof, as part of the Collateral.
21
6.13 DELIVERY OF LEGAL OPINION; GREYROCK FINANCING; ETC. The Company shall
deliver to the Bank not later than November 30, 1998, each of the following in
form and substance satisfactory to the Bank:
(a) An opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, outside counsel to the
Company, covering matters set forth in Sections 5.01, 5.02, 5.03, 5.13(a), and
5.14, and such other legal matters relating hereto as the Bank may reasonably
request. The opinion may be qualified to the extent approved by the Bank.
(b) Evidence that the Greyrock Financing has been closed and that
all conditions precedent to the lender's commitment thereunder to extend credit
have been met.
(c) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as in effect
by the Secretary or an Assistant Secretary of the Company.
(d) A certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers of the Company
authorized to execute, deliver and perform, as applicable, this Agreement, and
all other Loan Documents to be delivered by it hereunder.
ARTICLE VII
NEGATIVE COVENANTS
So long as credit is available under this Agreement and until full and final
payment of all of the Company's obligations under this Agreement and any other
Loan Document:
7.01 BUSINESS ACTIVITIES. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, engage in any business activities or
operations substantially different from or unrelated to present business
activities and operations.
7.02 REGULATIONS T, U, AND X. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, use any portion of the proceeds of any Letter
of Credit or other extensions of credit under this Agreement, directly or
indirectly, (i) to purchase or carry margin stock (within the meanings of
Regulations T, U, and X of the Board of Governors of the Federal Reserve
System), (ii) to repay or otherwise refinance indebtedness of the Company or
others incurred to purchase or carry any such margin stock, (iii) to extend
credit for the purpose of purchasing or carrying any such margin stock, or (iv)
to acquire any security in any transaction that is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.
7.03 TRANSFER OR ENCUMBRANCE. The Company will not sell, assign (by
operation of law or otherwise), transfer, exchange, lend, lease or otherwise
dispose of any of the Collateral, except as otherwise expressly provided in this
Agreement, nor will the Company grant a security interest in or execute, file or
record any financing statement with respect to the Collateral or otherwise
identify the Collateral as being subject to a Lien other than that created
hereby, nor will the Company allow any such Lien, financing statement or other
identification to exist or deliver actual or constructive possession of the
Collateral to any other Person, other than the Bank or a bailee selected by the
Bank who is holding such Collateral for the benefit of the Bank.
22
7.04 IMPAIRMENT OF SECURITY INTEREST. The Company will not take or fail to
take any action which would in any manner impair the value or enforceability of
the Bank's security interest in any of the Collateral.
7.05 VOTING. The Company will not cast any vote, give or grant any consent,
waiver or ratification or take any action with respect to the Collateral which
would have the effect of impairing the position or interest of the Bank in
respect of the Collateral or would be inconsistent with or violate any
provisions of this Agreement or any other Loan Document.
7.06 POSSESSION OF CERTIFICATES, ETC. EVIDENCING COLLATERAL. The Company
will not cause or permit any document, instrument, or certificate constituting
or evidencing Collateral to at any time be in the actual or constructive
possession or control of any Person other than the Bank or a designee or bailee
selected by the Bank who is holding such Collateral for the benefit of the Bank.
ARTICLE VIII
SECURITY INTEREST
8.01 GRANT OF SECURITY INTEREST. As security for the payment in full in cash
when due, whether at stated maturity, by acceleration or otherwise, and
performance of the Obligations, the Company hereby irrevocably and
unconditionally grants a security interest in and assigns and transfers to the
Bank a security interest in all of the Company's right, title and interest in,
to and under the following, whether now existing or owned or hereafter acquired
or arising (collectively the "COLLATERAL"):
(a) All Horizon Service Shares of the Prime, Treasury, Treasury
Only, Government, Tax Exempt and California Tax Exempt money market funds and
any other mutual funds shares now or hereafter owned by the Company (the
"Shares"); which Shares are now or hereafter held in account number 781-992317
maintained with Bank of America National Trust and Savings Association and all
successor and replacement accounts (the "ACCOUNTS").
(b) All investment property, security entitlements, financial
assets, certificated securities, uncertificated securities, money, deposit
accounts, instruments, general intangibles, and all other investments or
property of any sort now or hereafter held, maintained or administered in the
Accounts.
(c) All Pledged Deposits.
(d) All rollovers, renewals or reinvestments of any of the foregoing
property.
(e) All stock or conversion rights, rights to subscribe, liquidation
dividends or preferences, stock dividends, dividends, rights to interest,
interest payments, dividends paid in stock, new securities or other property
which the Company is or may hereafter become entitled to receive on account of
any of the foregoing property.
(f) The proceeds, increase and products of any of the foregoing or
replacements thereof or substitutions therefor.
23
The Collateral includes all certificates and other instruments representing the
Collateral and any interest of the Company in the books of any financial
intermediary, clearing house, custodian, or broker pertaining to the Collateral.
8.02 DEPOSIT ACCOUNTS. Pledged Deposits shall be special purpose restricted
accounts opened by the Company with the Bank or opened by the Bank for the
account of Company pursuant to this Agreement, in which the Company has granted
the Bank a security interest for the purposes of securing the Obligations, and
in which the Bank has exclusive control and the sole right of withdrawal. Such
a deposit account may be a demand deposit or may accrue interest at a rate equal
to the rates payable from time to time with respect to similar accounts held by
the Bank. Such a deposit account may not accrue interest at a rate in violation
of applicable law. The Company agrees to pay the Bank such fees for services
rendered by the Bank in connection with such deposit accounts as may be
separately agreed upon between the Bank and the Company.
8.03 COLLATERAL.
(a) The Collateral shall be held in the name of the Bank or any
nominee designated by it, and except to the extent specifically provided herein
the Company shall have no right to the release or withdrawal thereof.
(b) The Bank is hereby authorized to sell all or any designated part
of the Collateral held by it under this Agreement:
(1) so long as no Event of Default exists, upon receipt by
the Bank of a request from the Company ordering such sale, or
(2) subject to the provisions of Section 9.02(e)(5), upon a
determination by the Bank, after the occurrence and during the
continuance of an Event of Default, that such sale is necessary
to reimburse the Bank for the nonpayment of any Obligation when
required to be paid under this Agreement or other Loan Document.
(c) Any request for sale of the Collateral or part thereof as
provided in subclause (1) of subsection (b) of this Section must be received
by the Bank no later than 10:00 a.m. (San Francisco, California time) one
Business Day (or such earlier time as the Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of the sale. The
Bank shall not have any responsibility or liability to the Company for any
penalties, breakage costs, or losses (whether resulting from a fluctuation in
interest rates, market values, or otherwise) in connection with any sales.
(d) Except to the extent the Company has designated the specific
items of Collateral which are the subject of any such sale (which the Company
may do so long as no Default or Event of Default exists), the Bank shall be
entitled in its sole discretion to designate the items of Collateral held by it
which is the subject of any such sale.
(e) The net proceeds of the sale of any part of the Collateral shall
be held in a Pledged Deposit pending reinvestment or, if in a Pledged Deposit
that is a time account for the
24
period of such time account, released under Section 8.04(a), or credited to the
payment of Obligations due and payable.
(f) Any notices from Company to the Bank relating to the Collateral
shall be in writing or by telephone (promptly confirmed in writing). The Bank
shall not incur any liability for acting in accordance with any telephonic
instructions reasonably believed by the Bank in good faith to have been given by
an individual authorized by the Company.
8.04 INTEREST.
(a) The Company shall be entitled to the release of the Bank's
security interest in the interest on and gains realized on sales of the
Collateral so long as (y) there exists no Default or Event of Default, and (z)
the collateral value requirements of Section 6.09 are met. Such release, if
any, shall take place after such interest or gain is realized by payment by the
Bank to the Company of such interest and gains.
(b) Upon the occurrence and during the continuance of a Default or
an Event of Default, all rights of the Company to receive interest and gains
realized which it would otherwise be authorized to receive and retain as
provided in subsection (a) of this Section shall immediately, automatically and
without notice cease, and all such interest and gains shall be held by the Bank
as Collateral. In such event, all interest and gains shall be deposited in a
Pledged Deposit on the payment date thereof.
8.05 POWERS OF THE BANK. At any time, without notice and at the expense of
the Company, the Bank (in its name or in the name of the Company) may, but shall
not be obligated to:
(a) collect by legal proceedings or otherwise, endorse, receive and
receipt for all interest, principal payments, and other sums now or hereafter
payable upon or on account of the Collateral;
(b) make any compromise or settlement it deems desirable or proper
with reference to the Collateral;
(c) insure, process, and preserve the Collateral;
(d) accept money or other property in exchange for the Collateral,
and take such action as it deems proper in connection therewith, and any money
or property received on account of or in exchange for the Collateral shall be
applied to the Obligations or held by the Bank thereafter as Collateral pursuant
to the provisions of this Agreement and the other Loan Documents;
(e) hold Collateral in its own name or in the name of its nominee or
cause Collateral to be transferred to its name or to the name of a depositary or
its nominee;
(f) obtain from any custodian or bailee holding the Collateral any
and all information with respect to the Collateral, without any further consent
of or notice to Company; and
25
(g) exercise as to the Collateral all the rights, powers and
remedies of an owner necessary to exercise its rights under this Section, but
prior to an Event of Default, the Bank shall not vote any securities
constituting Collateral except as instructed by the Company.
The Bank agrees that, if an Event of Default has not occurred and is
continuing, it shall (unless requested to do so by the Company or in connection
with delivery or payment of all or part of the Collateral to the Company) notify
the Company of its decision to transfer all or part of the Collateral out of any
of the accounts in which Collateral is held.
8.06 THE BANK APPOINTED ATTORNEY-IN-FACT. The Company hereby irrevocably
appoints the Bank and any of the Bank's officers, employees or agents designated
by the Bank as the Company's true and lawful attorney-in-fact with full
authority in the place and stead of the Company and in the name of the Company
or the Bank or otherwise, from time to time in the Bank's discretion to take any
action and to execute any instrument that the Bank may reasonably deem necessary
or advisable to exercise its rights under and in accordance with this Agreement
and the other Loan Documents, including without limitation:
(a) to make any deposit or withdrawal or order any transfer of funds
to or from any Pledged Deposit;
(b) to sign the name of the Company on any pledge instructions in
the case of Collateral held by a designee of the Bank, notices, UCC financing or
continuation statements which must be executed and sent or executed and filed to
perfect or continue perfected, maintain the priority of or provide notice of the
Bank's security interest in the Collateral or on UCC termination statements, and
file any such financing or continuation statements by electronic means with or
without a signature as authorized or required by applicable law or filing
procedures;
(c) to execute any and all notices, endorsements, assignments,
documents or other instruments of conveyance or transfer with respect to all or
any of the Collateral;
(d) to endorse any checks, drafts, money orders and other
instruments relating to all or any of the Collateral;
(e) to ▇▇▇ for, collect, receive and give acquittance for all moneys
due or to become due in connection with the Collateral; and
(f) to file any claims, take any action or institute, defend, settle
or adjust any actions, suits or proceedings with respect to the Collateral,
which the Bank may reasonably deem necessary or desirable to exercise its rights
under and in accordance with this Agreement or any other Loan Document,
including without limitation:
(1) to receive, endorse and collect all instruments made
payable to the Company representing any interest payment or
other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same;
(2) to perfect or continue perfected, maintain the priority
of or provide notice of the Bank's security interest in the
Collateral; or
26
(3) to maintain, protect, sell, assign, convey or otherwise
transfer title in or dispose of the Collateral.
The foregoing power of attorney is coupled with an interest and irrevocable so
long as any Obligation remains indefeasibly unpaid and not performed in full.
The Company hereby ratifies all that the Bank shall lawfully and in good faith
do or cause to be done by virtue of and in compliance with this Section.
The Bank agrees that, if an Event of Default has not occurred and is continuing,
it shall (unless any other provision of this Agreement does not require such
notice) notify the Company of its intention to exercise the power of attorney as
specified in clauses (b), (e), and (f) of this Section if such exercise is, in
the sole discretion of the Bank, appropriate.
8.07 WAIVERS BY THE COMPANY.
(a) The Bank shall be under no duty or obligation whatsoever:
(1) to make or give any presentment, demands for
performances, notices of nonperformance, protests, notices of
protest or notices of dishonor in connection with any
obligations or evidences of indebtedness held by the Bank as
Collateral, or in connection with any obligation or evidences of
indebtedness which constitute in whole or in part the
Obligations, or
(2) except as may be specifically provided in the agreement
with the Bank establishing the account number 781-992317 or in
the agreement establishing any other account with the Bank in
which the Collateral (or any part thereof) is held, to give the
Company notice of, or to exercise, any subscription rights or
privileges, any rights or privileges to exchange, convert or
redeem or any other rights or privileges relating to or
affecting any Collateral.
(b) The Company waives any right to require the Bank:
(1) to proceed against any Person;
(2) to proceed against or exhaust any Collateral; or
(3) to pursue any other remedy in the Bank's power.
(c) The Company waives any defense arising by reason of any
disability or other defense of the Company or any other Person, or by reason of
the cessation from any cause whatsoever of the liability of the Company or any
other Person. The Company waives any right to enforce any remedy which the Bank
now has or may hereafter have against any other Person and waives any benefit of
and any right to participate in any Collateral or security whatsoever now or
hereafter held by the Bank.
8.08 NO RESPONSIBILITY FOR CERTAIN ACTIONS.
(a) The powers conferred on the Bank by this and the other Loan
Documents are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise
27
any such powers. Except for the custody, safekeeping, and physical preservation
of any Collateral in its possession (if the Collateral is evidenced by
certificates or other physical writing) and the accounting for moneys actually
received by it hereunder, the Bank shall have no duty as to any Collateral, it
being understood that the Bank shall have no responsibility for:
(1) ascertaining or taking action with respect to calls,
conversions, exchanges, tenders or other matters relating to any
item of Collateral, whether or not the Bank has or is deemed to
have knowledge of such matters;
(2) taking any necessary steps to preserve rights against
any Persons with respect to any item of Collateral; or
(3) initiating any action to protect the Collateral against
the possibility of a decline in market value.
(b) The Bank shall have no duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession (if
the Collateral is evidenced by certificates or other physical writing) other
than as set forth in Section 9207 of the UCC.
8.09 CUSTODY OF COLLATERAL. The Bank may, in its discretion, hold some or
all of the Collateral in an account with a custody unit of the Bank. The
Company shall reimburse the Bank for the usual custody charges and expenses of
the Bank's custody unit. The Bank may, in its sole discretion, retain the
Collateral in physical form or with a depository. The Bank shall not be
required to segregate the Collateral from other securities owned by third
parties. The Company agrees to be bound by the rules, procedures, practices,
liens and assessments of each depository used by the Bank. The Bank shall not
be liable for any loss to the Collateral resulting from acts of God, war, civil
commotion, fire, earthquake, or other disaster beyond the reasonable control of
the Bank, or for any other loss or damage to the Collateral unless shown to have
arisen from the Bank's intentional misconduct or lack of reasonable care.
8.10 CONFLICT OF INTEREST. In some cases, some or all of the Collateral may
be held by the Bank pursuant to another agreement, other than this Agreement,
between the Bank and the Company (the "ACCOUNT AGREEMENT"). The Company
acknowledges that a conflict may arise between the Bank's obligations under the
Account Agreement, including any obligations to direct the Company's investments
or to provide investment advice, and the Bank's rights under this Agreement. In
such event, the Company expressly agrees that the Bank's rights under this
Agreement shall take precedence over the Bank's obligations under the Account
Agreement insofar as they relate to the Collateral. The Company agrees that all
provisions of the Account Agreement that directly or indirectly prohibit any
extension of credit or the grant of a security interest in the Collateral are
hereby amended to the extent necessary to permit this Agreement to be fully
effective according to its terms. In the event of any conflict or inconsistency
between the terms and provisions of this Agreement and the terms and provisions
of the Account Agreement insofar as they relate to the Collateral, the terms and
provisions of this Agreement shall control.
8.11 RETURN OF COLLATERAL. The Bank may at any time deliver all or part of
the Collateral to the Company and the receipt of the Company shall be a complete
and full acquittance for the
28
Collateral so delivered, and the Bank shall thereafter be discharged from any
liability or responsibility therefor.
8.12 TRANSFER OF COLLATERAL. Upon the transfer of all or any part of the
Obligations, the Bank may transfer all or any part of the Collateral and shall
be fully discharged thereafter from all liability and responsibility with
respect to such Collateral so transferred, and the transferee shall be vested
with all the rights and powers of the Bank hereunder with respect to such
Collateral so transferred; but with respect to any Collateral not so transferred
the Bank shall retain all rights and powers hereby given.
8.13 CONTINUING AGREEMENT. This is a continuing security agreement and all
the rights, powers and remedies hereunder shall apply to all past, present and
future Obligations of Company to the Bank, including that arising under
successive transactions which shall either continue the Obligations, increase or
decrease it, or from time to time create new Obligations after all or any prior
Obligations has been satisfied, and notwithstanding the incapacity, cessation of
business, dissolution or Insolvency Proceeding of the Company or any other event
or proceeding affecting the Company.
8.14 CONTINUING SECURITY INTERESTS. The security interests created by this
Agreement and the other Loan Documents are continuing security interests and:
(a) shall remain in full force and effect until payment in full of
all the Obligations;
(b) shall be binding upon the Company, its successors and assigns;
(c) may be exercised by the Bank irrespective of the fact that the
Obligations or any part thereof or any Loan Document may have become barred by
any statute of limitations or that the personal liability of the Company may
have ceased; and
(d) shall inure, together with the rights and remedies of the Bank,
to the benefit of the Bank, its successors, transferees, and assigns.
ARTICLE IX
EVENTS OF DEFAULT
9.01 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT" under this Agreement:
(a) FAILURE TO PAY. The Company fails to pay when due any amount
of principal, or the Company fails to pay within three Business Days after
the date when due any interest, fee or any other sum due under this Agreement
or any other Loan Document in accordance with the terms hereof or thereof.
(b) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty herein or in any other Loan Document proves to have been false or
misleading in any material respect when made.
(c) SPECIFIC DEFAULTS. The Company fails to perform or observe any
term, covenant or agreement contained in Sections 6.08 and 6.09 and Article VII.
29
(d) OTHER DEFAULTS. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any Loan Document, and
such default shall continue unremedied for a period of 30 days after the earlier
of (i) the date upon which the chief executive or chief financial officer of the
Company knew or should have known of such failure and the term or covenant
involved is a material term or covenant or (ii) the date upon which written
notice thereof is given to the Company by the Bank, whether or not the term or
covenant involved is a material term or covenant.
(e) JUDGMENTS. (i) One or more non-interlocutory judgments or
arbitration awards are entered against the Company or any of its Subsidiaries
and the same shall remain unsatisfied, unvacated and unstayed for a period of 30
days after the entry thereof, or (ii) the Company or any of its Subsidiaries
enters into any settlement agreement with respect to any litigation or
arbitration, and the aggregate amount of such judgments, arbitration awards and
settlements which are not covered by third-party insurance exceeds $2,000,000.
(f) FAILURE TO PAY DEBTS; VOLUNTARY BANKRUPTCY. The Company or any
of its Subsidiaries (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing.
(g) INVOLUNTARY BANKRUPTCY. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business.
(h) DEFAULT OF OTHER FINANCIAL OBLIGATIONS. Any default occurs
under any other agreement or agreements involving the borrowing of money or the
extension of credit having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of (a) $1,000,000 or more
for any one such agreement, or (b) a total amount of $5,000,000 for all such
agreements (regardless of the amount involved in any one such agreement), to
which the Company or any Subsidiary may be a party as borrower, guarantor, or
installment purchaser, if such default consists of the failure to pay any
obligation or obligations when due and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document or
documents or if such default gives to the holder of the obligation or
obligations concerned the right to accelerate the obligation or obligations.
30
(i) DEFAULT OF OTHER BANK OBLIGATIONS. Any default occurs under any
other material obligation of the Company or any Subsidiary to the Bank or to any
Affiliate of the Bank and such default continues after the applicable grace or
notice period.
(j) MATERIAL ADVERSE EFFECT. There occurs a Material Adverse
Effect.
(k) CHANGE OF CONTROL. (i) any Person or two or more Persons acting
in concert shall acquire beneficial ownership, directly or indirectly, of
securities of the Company (or other securities convertible into such securities)
representing 40% or more of the combined voting power of all securities of the
Company entitled to vote in the election of directors; or (ii) during any period
of up to 12 consecutive months, commencing after the date of this Agreement,
individuals who at the beginning of such 12-month period were directors of the
Company shall cease for any reason to constitute a majority of the Board of
Directors of the Company unless the persons replacing such individuals were
nominated by the Board of Directors of the Company; or (iii) any Person or two
or more Persons acting in concert acquiring by contract or otherwise, or
entering into a contract or arrangement which upon consummation will result in
its or their acquisition of, or control over, securities of the Company (or
other securities convertible into such securities) representing 40% or more of
the combined voting power of all securities of the Company entitled to vote in
the election of directors.
(l) COLLATERAL.
(1) Any voluntary or involuntary Lien of any kind or
character attaches to the Collateral or any part of the Collateral other
than the security interest granted to the Bank under this Agreement and
the other Loan Documents and such Lien remains undischarged or is not
released within 10 days after its attachment.
(2) The Company fails to deliver additional Collateral when
required to pursuant to Section 6.09.
(3) Any deterioration or impairment of the Collateral or any
part thereof or any decline or depreciation in the value or market price
thereof (whether actual or reasonably anticipated), which causes the
Collateral in the good faith judgment of the Bank to become
unsatisfactory as to character or value.
(4) (A) Any provision of any Loan Document shall for any
reason cease to be valid and binding on or enforceable against the
Company or the Company shall so state in writing or bring an action to
limit its obligations or liabilities thereunder; or
(B) Any Loan Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security interest
in the Collateral purported to be covered thereby or such security
interest shall for any reason cease to be a first priority fully
perfected security interest.
9.02 REMEDIES. If any Event of Default occurs,
(a) Any indebtedness of the Company under any of the Loan Documents,
any term thereof to the contrary notwithstanding, shall at the Bank's option
(but automatically upon the occurrence of an Event of Default described in
subsection 9.01(f)(iii) or subsection 9.01(g))
31
and without notice become immediately due and payable without presentment,
demand, protest, or notice of dishonor, or any other notice, all of which are
hereby expressly waived by the Company to the full extent permitted by law, and
the Bank may declare an amount equal to the maximum aggregate amount that is or
at any time thereafter may become available for drawing under any
then-outstanding Letters of Credit, (whether or not any beneficiary shall have
presented, or be entitled at such time to present, the drafts or other documents
required to draw under such letters of credit) to be immediately due and
payable.
(b) The obligation, if any, of the Bank to Issue Letters of Credit
or to make further extensions of credit hereunder shall immediately cease and
terminate.
(c) The Bank shall have all rights, powers, and remedies available
under each of the Loan Documents, or accorded by law, including the right to
resort to any or all security for any credit accommodation described herein, and
to exercise any or all of the rights of a beneficiary or secured party pursuant
to applicable law.
(d) The Bank may exercise in respect of the Collateral, in addition
to other rights and remedies provided for in this Agreement or other Loan
Documents, (1) all the rights and remedies of a secured party under the UCC and
any other applicable law or regulation (including without limitation 31 C.F.R.
Sections 306.115 through 306.122) and/or (2) all the rights, powers, and
remedies of an owner with respect to the Collateral.
(e) The Bank may enforce the security interest in the Collateral
pursuant to the UCC and any other applicable law including but not limited to
the sale of all or any part of the Collateral at public or private sale, without
demand, advertisement, or notice, in such manner and order as the Bank may elect
(including the right to vote any securities constituting Collateral).
(1) The Bank may purchase the Collateral for its own account
at any such sale.
(2) The Company acknowledges and agrees that any sale or
disposition of the Collateral may result in the liquidation of items
constituting all or a portion of the Collateral, whether or not such
items have matured and notwithstanding the fact that such liquidation
may give rise to penalties or other breakage costs as a result of an
early withdrawal of funds or the like.
(3) The Company acknowledges that sale of all or part of the
Collateral may result in a loss to the Company and that, in such event,
the Bank shall have no liability or responsibility to the Company for
such loss.
(4) Without limiting the generality of the foregoing, the
Company also agrees that any of the Collateral may be sold for cash or
other value in any number of lots at the same or different times, at any
exchange, brokers' board or elsewhere, by public or private sale, and at
such times and on such terms as the Bank shall determine; PROVIDED,
HOWEVER, that the Company shall be credited with the net proceeds of
sale only when such proceeds are finally collected by the Bank.
32
(5) The Company hereby agrees that the sending of notice by
ordinary mail, postage prepaid, to the address of the Company set forth
in this Agreement, of the place and time of any public sale or of the
time after which any private sale or other intended disposition is to be
made, shall be deemed reasonable notice thereof if such notice is sent
10 days prior to the date of such sale or other disposition or the date
on or after which such sale or other disposition may occur, PROVIDED
that the Bank may provide the Company shorter notice or no notice, to
the extent permitted by the UCC or other applicable law.
(6) The Company recognizes that the Bank may be unable to
make a public sale of any or all of the Collateral, by reason of
prohibitions contained in applicable securities laws or otherwise, and
expressly agrees that a private sale to a restricted group of purchasers
for investment and not with a view to any distribution thereof shall be
considered a commercially reasonable sale.
(7) At any sale or sales of the Collateral, the Bank or any
Person acting on behalf of the Bank or its assigns may bid for and
purchase the whole or any part of the Collateral so sold and upon
compliance with the terms of such sale may hold and dispose of such
Collateral without further accountability to the Company, except for the
proceeds of such sale or sales.
(8) The Company acknowledges and agrees that it shall be
liable for any deficiency should the net proceeds from the sale of the
Collateral be insufficient to pay the full amount of the Obligations.
(9) The Company waives any claims against the Bank arising
solely by reason of the fact that the price at which any Collateral may
have been sold at a private sale was less than the price which might
have been obtained at a public sale.
(10) The Bank may enforce the security interest of the Bank
in any Pledged Deposit by applying all or part of such deposit account
to the Obligations.
9.03 APPLICATION OF CASH COLLATERAL; CASH PROCEEDS. Any cash held by the
Bank as Collateral and all cash proceeds received by the Bank in respect of any
sale of, collection from, or other realization upon all or any part of the
remainder of the Collateral shall be applied by the Bank as follows:
FIRST, to the payment of the costs and expenses of such sale, including
all expenses (including, without limitation, Attorney Costs),
liabilities and advances made or incurred by the Bank in connection
therewith;
NEXT, to the Bank in respect of all costs, expenses and fees (including,
without limitation, Attorney Costs) due the Bank under this Agreement or
any of the other Loan Documents;
NEXT, to the Bank to be applied to prepayment of the Obligations or to
be held as cash collateral for the Obligations until the Obligations
have been paid in full; and
FINALLY, after payment in full in cash of all of the Obligations, to the
Person or Persons entitled thereto.
33
9.04 RIGHTS AND POWERS ARE CUMULATIVE. All rights, powers, and remedies of
the Bank may be exercised at any time by the Bank and from time to time after
the occurrence of an Event of Default. All rights, powers, and remedies of the
Bank in connection with each of the Loan Documents are cumulative and not
exclusive and shall be in addition to any other rights, powers, or remedies
provided by law or equity.
ARTICLE X
MISCELLANEOUS
10.01 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Company shall not assign this Agreement or any other
Loan Document or any of the rights, duties or obligations of the Company
hereunder without the prior written consent of the Bank.
10.02 CONSENTS AND WAIVERS. No failure to exercise and no delay in
exercising, on the part of the Bank any right, remedy, power, or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power,
or privilege. No consent or waiver under this Agreement shall be effective
unless in writing. No waiver of any breach or default shall be deemed a waiver
of any breach or default thereafter occurring.
10.03 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California.
10.04 COSTS AND ATTORNEY COSTS. The Company shall, whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the Bank
on demand for all reasonable costs and expenses incurred by the Bank in
connection with the development, preparation, delivery, administration, and
execution of, and any amendment, supplement, waiver or modification to, this
Agreement and any other Loan Document and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs and
disbursements, incurred by the Bank with respect thereto; and in connection with
the enforcement, attempted enforcement or preservation of any rights or remedies
hereunder or under any Loan Document, including any "workout" or restructuring
under this Agreement, including Attorney Costs. The agreements and obligations
of the Company under this Section shall survive the expiration or termination of
the commitment to extend credit hereunder and the payment of all other
obligations of the Company.
10.05 AMENDMENT. This Agreement may be amended or modified only in writing,
signed by the Company and the Bank.
10.06 CONFIDENTIALITY. The Bank agrees to take normal and reasonable
precautions and to exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Company and
provided to it by the Company or any of its Subsidiaries under this Agreement or
any other Loan Document, and neither it nor any of its Affiliates shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information
34
(i) was or becomes generally available to the public other than as a result of
disclosure by the Bank, or (ii) was or becomes available on a non-confidential
basis from a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company known to the Bank;
PROVIDED, HOWEVER, that the Bank may disclose such information (A) at the
request or pursuant to any requirement of any governmental authority to which
the Bank is subject or in connection with an examination of the Bank by any such
authority; (B) pursuant to subpoena or other court process; (C) when required to
do so in accordance with the provisions of any applicable requirement of law;
(D) to the extent reasonably required in connection with any litigation or
proceeding to which the Bank may be party; (E) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other Loan
Document; (F) to the Bank's independent auditors and other professional
advisors; (G) to any participant or assignee, actual or potential, provided that
such person agrees in writing to keep such information confidential to the same
extent required of the Bank hereunder; (H) as to the Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is deemed
party with the Bank or such Affiliate; and (I) to its Affiliates which have a
need to know such information in connection with the evaluation or
administration of this Agreement or any other Loan Document and which shall keep
such information confidential to the same extent required of the Bank hereunder.
10.07 GENERAL INDEMNIFICATION. The Company shall pay and indemnify each
Bank-Related Person harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses, or disbursements (including Attorney Costs) of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance, and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation, or proceeding related to this Agreement, any
violation of any environmental law by the Company or its Subsidiaries, any use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence (whether actual or alleged) of a hazardous
substance on, under or about the property or operations of or property leased to
the Company or any of its Subsidiaries, any transportation from or other
off-site management of any hazardous substance generated or used by the Company
or any of its Subsidiaries, or the loans and other extensions of credit
hereunder or the use of the proceeds thereof, whether or not any Bank-Related
Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED, that the Company shall have no obligation hereunder to
any Bank-Related Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Bank-Related Person. The
agreements and obligations of the Company under this Section shall survive the
expiration or termination of the commitment to extend credit hereunder and the
payment of all other obligations of the Company hereunder.
10.08 ARBITRATION; REFERENCE PROCEEDING.
(a) Any controversy or claim between or among the parties arising
out of or relating to this Agreement or any other Loan Document or other
agreements or instruments relating hereto or delivered in connection herewith
and any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial
35
Rules of the American Arbitration Association ("AAA"). The arbitration shall be
conducted within the following California county or counties: San Francisco.
The arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) Notwithstanding the provisions of subsection (a) of this
Section, no controversy or claim shall be submitted to arbitration without the
consent of all parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to the Bank which
is secured by real property collateral located in California. If all parties do
not consent to submission of such a controversy or claim to arbitration, the
controversy or claim shall be determined as provided in subsection (c) of this
Section.
(c) A controversy or claim which is not submitted to arbitration as
provided and limited in subsections (a) and (b) of this Section shall, at the
request of any party, be determined by a reference in accordance with California
Code of Civil Procedure Sections 638 ET SEQ. If such an election is made, the
parties shall designate to the court a referee or referees selected under the
auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee
if there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(d) No provision of this paragraph shall limit the right of any
party to this Agreement to exercise self-help remedies such as setoff, to
foreclose against or sell any real or personal property collateral or security,
or to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party
to resort to arbitration or reference. At the Bank's option, foreclosure under
a deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
10.09 NOTICES.
(a) All notices, requests and other communications provided for
hereunder shall be in writing and mailed or delivered to a party at its address
specified on the signature pages hereof, or to such other address as shall be
designated by such party in a written notice to the other parties.
(b) All such notices and communications shall, when transmitted by
overnight delivery, be effective when delivered for overnight delivery, or if
personally delivered, upon such personal delivery, except that notices pursuant
to Article II and Sections 8.03(b), or 8.03(c), or 8.03(f) shall not be
effective until actually received by the Bank at the address specified for
notices in the signature pages to this Agreement.
36
(c) The Company acknowledges and agrees that any agreement of the
Bank to receive notices by telephone or facsimile transmission is solely for the
convenience and at the request of the Company. Telephone requests may be made
by any individual identified in writing to the Bank on a form acceptable to the
Bank as being authorized to make such requests. The Bank shall be entitled to
rely upon any written (including by facsimile transmission) or telephone request
from persons it reasonably believes to be authorized by the Company to make such
requests without making independent inquiry. The Company assumes the full risk
of, and the Bank shall not be responsible for, any delays or errors in
transmission, and the obligation of the Company to repay the extensions of
credit hereunder shall not be affected in any way or to any extent by any
failure by the Bank to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Bank of a confirmation which is at
variance with the terms understood by the Bank to be contained in the telephonic
or facsimile notice.
10.10 HEADINGS; INTERPRETATION. Article, section, and section headings are
for reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement. The meaning of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. The words
"hereof", "herein", "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; and Article, subsection, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The term
"including" is not limiting and means "including without limitation." In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including."
10.11 SEVERABILITY. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
10.12 COUNTERPARTS. This Agreement may be executed in as many counterparts as
may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
10.13 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement is intended to
completely amend and restate the Existing Agreement, without novation. The
Company hereby acknowledges and agrees that the Company's obligations to
reimburse the Bank with respect to drawings under the Existing Letters of Credit
is not subject to any defense, counterclaim, set-off, right of recoupment,
abatement, or other claim and the Existing Letters of Credit shall continue and
constitute Letters of Credit under and subject to the terms and provisions of
this Agreement.
10.14 WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE
37
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY BANK-RELATED
PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY AND THE BANK EACH AGREE THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
The rest of the page is deliberately left blank.
38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DIGITAL MICROWAVE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President, Chief Financial
Officer and Secretary
Address where notices to
Company are to be sent:
Digital Microwave Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Treasurer
Phone: 408/▇▇▇-▇▇▇▇
Facsimile: 408/944-1880
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Director
Address where notices to Bank are to be sent:
CD-HI Tech - NT&SA #3697
Bank of America National Trust and Savings Association
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Phone: 415/▇▇▇-▇▇▇▇
Facsimile: 415/622-2514
Bank's Payment Office
-------------------------------------------
Signature Page
for
Amended and Restated Agreement
October 30, 1998
between
Digital Microwave Corporation
and
Bank of America National Trust and Savings Association
Exhibit A
DIGITAL MICROWAVE CORPORATION
SUMMARY OF OUTSTANDING STANDBY LETTERS OF CREDIT
AS OF 10/30/98
STANDBY
L/C CURRENCY EXPIRY
NUMBER BENEFICIARY COUNTRY AMOUNT DATE
--------------------------------------------------------------------------------
3009119 CYPRUS POPULAR BANK CYPRUS EUROPEAN 4/6/99
CURRENCY UNIT
33,260
3010390 ROMGAZ, R.A. ROMANIA U.S. DOLLARS 11/15/98
1,100,000
3010636 BANCA ROMANA DE ROMANIA U.S. DOLLARS 1/30/99
COMERT EXTERIOR 500,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ POPULAR BANK CYPRUS EUROPEAN 9/21/99
CURRENCY UNIT
34,000
▇▇▇▇▇▇▇ BANK OF AMERICA, New INDIA U.S. DOLLARS
Delhi 12,970 10/19/99