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EXHIBIT 4.4
LOAN AND SECURITY AGREEMENT
BY AND AMONG
KOMAG, INCORPORATED,
AS BORROWER,
THE LENDERS NAMED HEREIN
AS THE LENDERS,
FOOTHILL CAPITAL CORPORATION,
AS ARRANGER AND ADMINISTRATIVE AGENT
AND
ABLECO FINANCE LLC,
AS COLLATERAL AGENT
dated as of June 30, 2002
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TABLE OF CONTENTS
Page(s)
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1. DEFINITIONS AND CONSTRUCTION.....................................................1
1.1 Definitions...............................................................1
1.2 Accounting Terms..........................................................24
1.3 Code......................................................................24
1.4 Construction..............................................................24
1.5 Schedules and Exhibits....................................................24
2. LOAN AND TERMS OF PAYMENT........................................................24
2.1 Revolving Advances........................................................24
2.2 [Intentionally omitted.]..................................................31
2.3 [Intentionally omitted.]..................................................31
2.4 Payments..................................................................31
2.5 Overadvances..............................................................33
2.6 Interest..................................................................33
2.7 [Intentionally omitted.]..................................................34
2.8 Crediting Payments; Application of Payments...............................34
2.9 Designated Account........................................................34
2.10 Maintenance of Loan Account; Statements of Obligations....................35
2.11 Fees......................................................................35
2.12 Registered Notes..........................................................36
2.13 Securitization............................................................36
3. CONDITIONS; TERM OF AGREEMENT....................................................40
3.1 Conditions Precedent to the Initial Advance...............................40
3.2 Conditions Precedent to all Advances......................................42
3.3 [Intentionally omitted.].....................................ERROR! BOOKMARK
3.4 Term......................................................................43
3.5 Effect of Termination.....................................................43
3.6 Early Termination by Borrower.............................................44
4. CREATION OF SECURITY INTEREST....................................................44
4.1 Grant of Security Interest................................................44
4.2 Negotiable Collateral.....................................................44
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral................................................................44
4.4 Delivery of Additional Documentation Required.............................44
4.5 Power of Attorney.........................................................45
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5. REPRESENTATIONS AND WARRANTIES...................................................45
5.1 Financial Condition.......................................................46
5.2 Ownership of Property; Liens..............................................46
5.3 Equipment.................................................................47
5.4 Location of Inventory and Equipment.......................................47
5.5 Inventory Records.........................................................47
5.6 Location of Chief Executive Office; FEIN..................................47
5.7 Due Organization and Qualification; Subsidiaries..........................47
5.8 Due Authorization; No Conflict............................................48
5.9 Investment Company Act....................................................48
5.10 Litigation................................................................49
5.11 No Material Adverse Change................................................49
5.12 Taxes.....................................................................49
5.13 Employee Benefits.........................................................49
5.14 Environmental Condition...................................................50
5.15 Brokerage Fees............................................................51
5.16 Permits and other Intellectual Property...................................51
5.17 [Intentionally omitted.]..................................................52
5.18 [Intentionally omitted.]..................................................52
5.19 Financial Status of Domestic Subsidiaries.................................52
6. AFFIRMATIVE COVENANTS............................................................52
6.1 Financial Statements; Certificates; Other Information.....................52
6.2 [Intentionally omitted.]..................................................54
6.3 Payment of Obligations....................................................54
6.4 [Intentionally omitted.]..................................................54
6.5 Conduct of Business and Maintenance of Existence..........................54
6.6 Inspection of Property; Books and Records; Discussions....................55
6.7 Title to Equipment........................................................55
6.8 Maintenance of Equipment..................................................55
6.9 Notices...................................................................55
6.10 Insurance.................................................................56
6.11 No Setoffs or Counterclaims...............................................57
6.12 Location of Inventory and Equipment.......................................57
6.13 Environmental Laws........................................................57
6.14 Intercompany Notes........................................................58
7. NEGATIVE COVENANTS...............................................................58
7.1 Indebtedness..............................................................59
7.2 Liens.....................................................................59
7.3 Restrictions on Fundamental Changes.......................................59
7.4 Disposal of Assets........................................................59
7.5 Change Name...............................................................60
7.6 Guarantee.................................................................60
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7.7 Nature of Business........................................................60
7.8 Foreign Exchange Contracts................................................60
7.9 Change of Control.........................................................60
7.10 Consignments..............................................................60
7.11 Distributions.............................................................60
7.12 Accounting Methods........................................................61
7.13 Investments...............................................................61
7.14 Transactions with Affiliates..............................................61
7.15 [Intentionally omitted.]..................................................62
7.16 Use of Proceeds...........................................................62
7.17 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees....................................................62
7.18 [Intentionally omitted.]..................................................62
7.19 Financial Covenants.......................................................62
7.20 Lien Priority; Payments...................................................65
7.21 Facilities Agreement......................................................65
7.22 Komag Bermuda.............................................................66
8. EVENTS OF DEFAULT................................................................66
9. THE LENDER GROUP'S RIGHTS AND REMEDIES...........................................69
9.1 Rights and Remedies.......................................................69
9.2 Remedies Cumulative.......................................................72
10. TAXES AND EXPENSES...............................................................72
11. WAIVERS; INDEMNIFICATION.........................................................72
11.1 Demand; Protest; etc. ....................................................72
11.2 The Lender Group's Liability for Collateral...............................72
11.3 Indemnification...........................................................73
12. NOTICES..........................................................................73
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................................74
14. DESTRUCTION OF BORROWER'S DOCUMENTS..............................................75
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.......................................75
15.1 Assignments and Participations............................................75
15.2 Successors................................................................79
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16. AMENDMENTS; WAIVERS..............................................................79
16.1 Amendments and Waivers....................................................79
16.2 No Waivers; Cumulative Remedies...........................................80
17. AGENT; THE LENDER GROUP..........................................................81
17.1 Appointment and Authorization of Agents...................................81
17.2 Delegation of Duties......................................................82
17.3 Liability of Agents.......................................................82
17.4 Reliance by Agents........................................................82
17.5 Notice of Default or Event of Default.....................................83
17.6 Credit Decision...........................................................83
17.7 Costs and Expenses; Indemnification.......................................84
17.8 Agents in Individual Capacity.............................................85
17.9 Successor Agents..........................................................85
17.10 Withholding Tax...........................................................86
17.11 Collateral Matters........................................................88
17.12 Restrictions on Actions by Lenders; Sharing of Payments...................89
17.13 Agency for Perfection.....................................................90
17.14 Payments by Administrative Agent to the Lenders...........................90
17.15 Concerning the Collateral and Related Loan Documents......................90
17.16 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information.....................91
17.17 Several Obligations; No Liability.........................................92
18. [Intentionally omitted.].........................................................92
19. GENERAL PROVISIONS...............................................................93
19.1 Effectiveness.............................................................93
19.2 Successors and Assigns....................................................93
19.3 Section Headings..........................................................93
19.4 Interpretation............................................................93
19.5 Severability of Provisions................................................93
19.6 Amendments in Writing.....................................................93
19.7 Counterparts; Telefacsimile Execution.....................................93
19.8 Revival and Reinstatement of Obligations..................................94
19.9 Integration...............................................................94
19.10 [Intentionally omitted.]..................................................94
19.11 Confidentiality...........................................................94
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SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule D-1 DDA of Borrower
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.3 Equipment
Schedule 5.7 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Pension Plans
Schedule 5.14 Environmental Condition
Schedule 5.16 Intellectual Property
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Schedule 7.6 Guarantees
Schedule 7.13 Investments
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit 3.1(d)(i) Form of Pledge Agreement
Exhibit 3.1(d)(iii) Form of Mortgages
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as
of June 30, 2002, among KOMAG, INCORPORATED, a Delaware corporation, as borrower
("Borrower"), with its chief executive office located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the lenders listed on the signature pages
hereof (such lenders, together with their respective successors and assigns, are
referred to hereinafter individually as a "Lender" and collectively as the
"Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as arranger
and administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent"), with a place of
business located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ABLECO FINANCE LLC, a Delaware limited liability company,
as collateral agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Collateral Agent"), with a place of business
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
WHEREAS, Borrower has requested that the Lenders extend credit to
Borrower in the form of a revolving credit facility in the aggregate principal
amount not exceeding $15,000,000 at any time outstanding; and
WHEREAS, the Lenders have agreed to make such revolving credit facility
available to Borrower subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Ableco" means Ableco Finance LLC, a Delaware limited liability company.
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account.
"Accounts" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof.
"Adjusted Current Assets" means, with respect to Borrower and its
Consolidated Subsidiaries as of any date of determination, the difference
between (i) the Current Assets of Borrower and its Consolidated Subsidiaries,
minus (ii) the Non-Cash Deferred Tax Assets of Borrower and its Consolidated
Subsidiaries.
"Adjusted Current Liabilities" means, with respect to Borrower and its
Consolidated Subsidiaries as of any date of determination, the result of (i) the
Current Liabilities of Borrower and its Consolidated Subsidiaries, minus (ii)
the sum of (a) Non-Cash Deferred Tax Liabilities of Borrower and its
Consolidated Subsidiaries, plus (b) the Current Maturities of Long Term Debt,
plus (iii) to the extent not included in clause (i) above, all liabilities of
Borrower and its Consolidated Subsidiaries under this Agreement that are
appropriately recorded as liabilities under GAAP.
"Adjusted Net Working Capital" means, with respect to Borrower and its
Consolidated Subsidiaries at any date of determination, the result of (i) the
Adjusted Current Assets of Borrower and its Consolidated Subsidiaries, minus
(ii) the Adjusted Current Liabilities of Borrower and its Consolidated
Subsidiaries (excluding liabilities accrued in respect of Borrower's stock-based
compensation program).
"Adjusted Tangible Net Worth" means the excess of (a) total assets of
the Company and its Consolidated Subsidiaries determined on a consolidated basis
over (b) the sum of (without duplication) (x) consolidated liabilities of the
Company and its Consolidated Subsidiaries determined on a consolidated basis
(excluding liabilities accrued in respect of Borrower's stock-based compensation
program), (y) all liabilities appropriately recorded under GAAP under this
Agreement, and (z) to the extent not already deducted from total assets,
reserves for depreciation, depletion, obsolescence, or amortization of
properties and all other reserves or appropriation of retained earnings which,
in accordance with GAAP, should be established in connection with the business
conducted by the relevant Person, excluding, however from the determination of
total assets (i) all intangible assets, including, without limitation, Goodwill,
(whether representing the excess cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises, and
deferred charges (including, without limitation, unamortized debt discount and
expense, organization and research and product development costs but excluding
deferred income taxes), (ii) treasury stock, and (iii) cash set apart and held
in a sinking or other analogous fund established for the purpose of redemption
or other retirement of capital stock..
"Administrative Agent" means Foothill, solely in its capacity as
administrative agent for the Lenders, and shall include any successor
administrative agent.
"Administrative Agent Advances" has the meaning set forth in Section
2.1(g).
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 20%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"Agent" means the Administrative Agent or the Collateral Agent, or
either or both, as the context requires.
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"Agent-Related Persons" means the Administrative Agent and any successor
agents thereto, the Collateral Agent and any successor agents thereto, together
with their respective Affiliates, and the officers, directors, employees,
counsel, agents, and attorneys-in-fact of such Persons and their Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Annualized" means in respect of any amount with respect to Borrower and
its Consolidated Subsidiaries: (a) for the fiscal quarter ending June 30, 2002,
such amount for such fiscal quarter multiplied by four, (b) for the fiscal
quarter ending September 29, 2002, such amount for such fiscal quarter and the
immediately preceding fiscal quarter multiplied by two, (c) for the fiscal
quarter ending December 29, 2002, such amount for such fiscal quarter and each
of the immediately preceding two fiscal quarters multiplied by four-thirds
(4/3), and (d) for each fiscal quarter ending on or after March 30, 2003, such
amount for such fiscal quarter and each of the three immediately preceding
fiscal quarters.
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" has the meaning set forth in Section 15.1
and shall be in the form of Exhibit A-1 attached hereto.
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means the amount that Borrower is entitled to borrow as
Advances under Section 2.1, such amount being the difference derived when (a)
the sum of the principal amount of Advances (including Administrative Agent
Advances and Swing Loans) then outstanding (including any amounts that the
Lender Group may have paid for the account of Borrower pursuant to any of the
Loan Documents and that have not been reimbursed by Borrower) is subtracted from
(b) the lesser of (i) the Maximum Revolving Amount or (ii) the Borrowing Base.
"Average Unused Portion of Maximum Revolving Amount" means, as of any
date of determination, the result of (a) the Maximum Revolving Amount, less
(b)(i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month plus (ii) the average Daily Balance of the Letter of
Credit Usage during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Sections 101 et seq.), as amended, and any successor statute.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Northern District of California.
"Books" means Borrower's and its Subsidiaries now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Borrower's or its Subsidiaries' Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
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"Borrower" has the meaning set forth in the preamble hereto.
"Borrowing" means a borrowing hereunder consisting of Advances made on
the same day by the Lenders to Borrower, or by the Swing Lender in the case of a
Swing Loan, or by Administrative Agent in the case of an Administrative Agent
Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
"Capital Expenditures" means, with respect to any Person, all
expenditures (including, among others, by the expenditure of cash or the
incurrence of Indebtedness) made in connection with the acquisition of any
assets which are required to be capitalized pursuant to GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness issued
directly by the United States of America or any agency thereof or guaranteed by
the United States of America or any agency thereof; (b) commercial paper,
maturing not more than nine months from the date of issue, which is issued by
(i) a corporation (other than an Affiliate of Borrower) organized under the laws
of any state of the United States of America or of the District of Columbia and
rated at least A-1 by S&P or P-1 by ▇▇▇▇▇'▇; or (ii) any Lender (or its holding
company; (c) any time deposit, certificate of deposit or bankers acceptance,
maturing not more than one year after such time, maintained with or issued by
either (i) a commercial banking institution (including U.S. branches of Foreign
Banks) that is a member of the Federal Reserve System and has a combined capital
and surplus of at least $100,000,000, (ii) any Lender, or (iii) with respect to
any Subsidiary of Borrower domiciled outside the United States of America, any
Foreign Bank located in the same jurisdiction as the domicile of such
Subsidiary, which Foreign Bank is an Eligible Institution or a Foreign Bank that
has, together with its parent financial institution, a combined capital and
surplus of at least $100,000,000; (d) short-term tax-exempt securities rated not
lower than MIG-1/1+ by either ▇▇▇▇▇'▇ or S&P with provisions for liquidity or
maturity accommodations of 183 days or less; (e) repurchase agreements which (i)
are entered into with any entity referred to in clause (b) or (c) above or any
other financial institution whose unsecured long-term debt (or the unsecured
long-term debt of whose holding company) is rated at least A- or better by S&P
or Baal or better by ▇▇▇▇▇'▇ and maturing not more than one year after such
time, (ii) are secured by a fully perfected security interest in securities of
the type referred to in clause (a) above, and (iii) have a market value at the
time of such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such counterparty entity with whom such repurchase
agreement has been entered into; or (f) any money market or similar fund the
assets of which are composed exclusively of any of the items specified in
clauses (a) through (d) above and as to which withdrawals are permitted at least
every 90 days.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
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"Chahaya" means Chahaya Optronics, Inc., a Delaware corporation.
"Chahaya Space Reserve" means, as of any date of determination, a
reserve relating to the Facilities Agreement in an amount equal to (a) $80,000,
times (b) the number of full or partial months remaining after such date up to
and including December 31, 2002.
"Change of Control" means each occurrence of any of the following:
(a) the acquisition, directly or indirectly, by any person or
group (within the meaning of Section 13(d)(3) of the Exchange Act) other than
the Permitted Holders of beneficial ownership of more than 35% of the aggregate
outstanding voting power of the Capital Stock of Borrower;
(b) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of Borrower was approved by a
vote of at least 51% of the directors of Borrower then still in office who were
either directors at the beginning of such period, or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Borrower then in office; and
(c) Borrower consolidates with or merges into another entity or
conveys, transfers or leases all or substantially all of its property and assets
to any Person.
"Chapter 11 Case" means Borrower's case under Chapter 11 of the
Bankruptcy Code in the Bankruptcy Court.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder, or the date on which Collateral Agent
sends Borrower a written notice that each of the conditions precedent set forth
in Section 3.1 either have been satisfied or have been waived.
"Closing Date Business Plan" means the set of Projections of Borrower
for the 3 year period following the Closing Date (on a year by year basis, and
for the 1 year period following the Closing Date, on a quarter by quarter
basis), in form and substance (including as to scope and underlying assumptions)
satisfactory to Administrative Agent.
"Code" means the New York Uniform Commercial Code.
"Collateral" means all of Borrower's now owned or hereafter acquired
right, title, and interest in and to each of the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
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(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) the Real Property Collateral,
(i) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of any member of the Lender Group,
and
(j) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
Notwithstanding anything to the contrary contained in this
definition, the term Collateral shall not include any rights or interest in any
contract, lease, permit, license, charter or license agreement covering real or
personal property of Borrower if under the terms of such contract, lease,
permit, license, charter or license agreement, or applicable law with respect
thereto, the grant of a security interest or lien therein to Collateral Agent is
prohibited as a matter of law or under the terms of such contract, lease,
permit, license, charter or license agreement and such prohibition has not been
or is not waived or the consent of the other party to such contract, lease,
permit, license, charter or license agreement has not been or is not otherwise
obtained; provided, that, the foregoing exclusion shall in no way be construed
(a) to apply if any such prohibition is unenforceable under Sections 9-406,
9-407, or 9-408 of the Code or other applicable law, or (b) so as to limit,
impair or otherwise affect Collateral Agent's unconditional continuing security
interests in and liens upon any rights or interests of Borrower in or to monies
due or to become due under any such contract, lease, permit, license, charter or
license agreement (including any Accounts), or (c) to limit, impair, or
otherwise affect Collateral Agent's continuing security interests in and liens
upon any rights or interests of Borrower in and to any proceeds from the sale,
license, lease, or other dispositions of any such contract, lease, permit,
license, charter or license agreement.
"Collateral Agent" means Ableco, solely in its capacity as collateral
agent for the Lenders, and shall include any successor collateral agent.
"Collateral Agent's Liens" has the meaning set forth in Section 4.1.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
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"Commitment" means, at any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "Commitment" on
Schedule C-1 attached hereto or on Annex I of the Assignment and Acceptance
pursuant to which such Lender assumed a portion of the aggregate Commitment in
accordance with the provisions of Section 15.1, as such Commitment may be
adjusted from time to time in accordance with the provisions of Section 15.1,
and "Commitments" means, collectively, the aggregate amount of the Commitments
of the Lenders.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 hereto and delivered by the chief accounting officer of Borrower
to Administrative Agent and the Collateral Agent.
"Confirmation Order" means an order confirming the Reorganization Plan
in form and substance acceptable to Administrative Agent.
"Consolidated EBITDAR" means, with respect to Borrower and its
Consolidated Subsidiaries for any period, the result of, without duplication,
(i) the Consolidated Net Income for such period, plus (ii) the Consolidated
Interest Expense for such period, whether paid or accrued, plus (iii) provision
for taxes based on income or profits for such period (to the extent such income
or profits were included in computing Consolidated Net Income for such period),
plus (iv) consolidated depreciation and amortization, plus (v) losses incurred
on the sale of assets not in the ordinary course of business, plus (vi)
Restructuring Charges, plus (vii) write-downs and charges required by
pronouncements issued by the Financial Accounting Standards Board that do not
and will not result in the expenditure of cash (e.g., SFAS 121), plus (viii)
non-cash stock-based compensation (to the extent such compensation was included
in computing Consolidated Net Income) less (ix) gains incurred on the sale of
assets not in the ordinary course of business. The foregoing notwithstanding,
items (i) through (viii) of a Consolidated Subsidiary of Borrower shall be added
to Consolidated Net Income to compute Consolidated EBITDAR only to the extent
(and in the same proportion) that the Net Income of such Consolidated Subsidiary
was included in calculating the Consolidated Net Income of Borrower.
"Consolidated Interest Expense" means for any period the sum of:
(a) the aggregate of the cash interest expense with respect to
Indebtedness of Borrower and its Consolidated Subsidiaries (other than non-cash
interest) for such period, on a consolidated basis as determined in accordance
with GAAP (excluding the amortization of costs relating to original debt
issuances and the amortization of debt discount) plus
(b) without duplication, that portion of the Capital Leases of Borrower
and its Consolidated Subsidiaries representing the interest factor for such
period as determined in accordance with GAAP plus
(c) without duplication, dividends paid in respect of preferred stock of
Consolidated Subsidiaries of Borrower or Disqualified Stock of Borrower to
Persons other than Borrower or a Wholly Owned Subsidiary.
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"Consolidated Net Income" means, with respect to Borrower and its
Consolidated Subsidiaries for any period, the aggregate of the Net Income of
Borrower and its Consolidated Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, that (i) the Net Income
(but not loss) of any Person that is not a Consolidated Subsidiary that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to Borrower,
(ii) the Net Income of any Consolidated Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is prohibited at the date of determination
without any prior approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders except to the extent a
corresponding amount would not be prohibited at the date of determination to be
paid in any other manner to Borrower by such Consolidated Subsidiary without any
prior approval (that has not been obtained) pursuant to the terms of its charter
and all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Consolidated Subsidiary or its
stockholders, as certified by Borrower in an Officer's Certificate, provided,
however, that Net Income of any Consolidated Subsidiary excluded from
Consolidated Net Income pursuant to this clause (ii) as a result of any action
taken by the Malaysian government that began during the immediately prior fiscal
quarter which action is the subject of negotiations at the time of the
determination of Consolidated Net Income shall be included in Consolidated Net
Income for such period notwithstanding this clause (ii), (iii) the cumulative
effect of a change in accounting principles shall be excluded, (iv) all other
extraordinary gains and extraordinary losses determined in accordance with GAAP
shall be excluded and (v) the effect of discontinued operations, as determined
in accordance with GAAP, shall be excluded.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" of any Person
means any corporation or other Person which, for financial reporting purposes,
is required by GAAP to be consolidated into the financial statements of such
Person or another Consolidated Subsidiary of such Person.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Collateral Agent, executed and delivered by Borrower, Collateral
Agent, and the applicable securities intermediary with respect to a Securities
Account or bank with respect to a deposit account.
"Current Assets" means, with respect to any Person, all current
consolidated assets of such Person as of any date of determination calculated in
accordance with GAAP, but excluding debts due from Affiliates.
"Current Liabilities" means, with respect to any Person, all current
consolidated liabilities of such Person as of any date of determination
calculated in accordance with GAAP, but excluding Indebtedness owed to
Affiliates.
-8-
"Current Maturities of Long Term Debt" means the current maturities of
long term debt of Borrower and its Consolidated Subsidiaries, as determined in
accordance with GAAP, but excluding all or any portion of amounts owing under
this Agreement.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"Default" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any Advance that
it is required to make hereunder on any Funding Date and that has not cured such
failure by making such Advance within 1 Business Day after written demand upon
it by Administrative Agent to do so.
"Defaulting Lenders Rate" means the Reference Rate for the first 3 days
from and after the date the relevant payment is due and, thereafter, at the
interest rate then applicable to Advances.
"Designated Account" means that certain DDA of Borrower identified on
Schedule D-1 to the Disclosure Schedule.
"Designated Account Bank" means ▇▇▇▇▇ Fargo Bank, N.A., whose office is
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
whose ABA number is ▇▇▇▇▇▇▇▇▇, or such other bank of Borrower (located within
the United States) that has been designated as such, in writing, by Borrower to
Administrative Agent.
"Disclosure Schedule" has the meaning set forth in the preamble to
Section 5.
"Disqualified Stock" means any Stock, which, by its terms (or by the
terms of any security into which it is convertible or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part on, or prior to, or is exchangeable for debt
securities of Borrower or its Subsidiaries prior to, the final maturity date of
the Notes; provided that only the amount of such Capital Stock that is
redeemable prior to the maturity of the Notes shall be deemed to be Disqualified
Stock.
"Dollars or $" means United States dollars.
"Domestic Subsidiary" means a Subsidiary of Borrower that is not a
Foreign Subsidiary.
"Eligible Institutions" means those financial institutions identified as
"Anchor Banks" by Bank Negara Malaysia from time to time.
"Eligible Transferee" means: (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $500,000,000; (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country, and having total
assets in excess of $500,000,000; provided that such bank is acting
-9-
through a branch or agency located in the United States; (c) a finance company,
insurance company or other financial institution or fund that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of $250,000,000; (d)
any Affiliate (other than individuals) of a Lender that was party hereto as of
the Closing Date, or any fund, investment account or other account managed by a
Lender; and (e) any other Person approved by Agents and Borrower.
"Environmental Laws" means any and all applicable Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority regulating, or imposing
liability or standards of conduct concerning environmental protection matters
(including, without limitation, Hazardous Materials), including, without
limitation, the Clean Water Act, CERCLA, the Superfund Amendment and
Reauthorization Act of 1986, the Emergency Planning and Community Right to Know
Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, and the regulations adopted and publications
promulgated thereunder, all as amended to date.
"Equipment" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, including all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Reorganization" means with respect to a Multiemployer Plan, the
condition that such Plan is in reorganization as such term is used in Section
4241 of ERISA.
"Eugene Property" means the real property, buildings, improvements, and
other property located at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇.
"Event of Default" has the meaning set forth in Section 8.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute thereto.
"Facilities Agreement" means that certain Facilities Sharing and
Services Agreement entered into as of November 30, 2000, by and between Borrower
and Chahaya.
"Fair Market Value" means a determination by a qualified appraisal
company selected by the Collateral Agent of the most probable price which a
property should bring in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller, each acting prudently,
knowledgeably and assuming the price is not affected by undue stimulus;
provided, however, that implicit in this definition is the consummation of a
sale within twelve (12) months and the passing of title from seller to buyer
under conditions whereby: (a) buyer and seller are typically motivated, (b) both
parties are well informed or well advised, and each acting in what they consider
their own best interest, (c) a reasonable time is allowed for exposure in the
open market, (d) payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto, and (e) the price represents the
normal consideration for the property sold unaffected by special or creative
financing or sales concessions granted by anyone associated with the sale.
"Fee Letter" means that certain fee letter, of even date herewith,
between Borrower and Collateral Agent, in form and substance satisfactory to
Collateral Agent.
"Fee Split Letter" has the meaning set forth in Section 2.11.
"FEIN" means Federal Employer Identification Number.
"Foothill" means Foothill Capital Corporation, a California corporation.
"Foreign Bank" means a non-United States domiciled bank.
"Foreign Subsidiary" means a Subsidiary of Borrower that is organized
under the laws of a country other than the United States of America or any
state, province, territory, or possession thereof.
"Fremont Properties" means the real property, buildings, improvements,
and other property located at (a) ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ and (b) 1055 Page Road, each
in Fremont, California.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension
-11-
funds, route lists, rights to payment and other rights under any royalty or
licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
money, deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), and any and all supporting obligations in respect thereof, and any
other personal property other than goods, Accounts, Investment Property, and
Negotiable Collateral.
"Goodwill" means goodwill of Borrower and its Subsidiaries, as
determined in accordance with GAAP.
"Governing Documents" means, with respect to any Person, the certificate
or articles of incorporation, by-laws, or other organizational or governing
documents of such Person.
"Governmental Authority" means any nation or government, any state,
province, 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.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous or toxic substances, defined or regulated as such in or under any
Environmental Law, including, without limitation, asbestos, gasoline and any
other petroleum products (including crude oil or any fraction thereof).
"Indebtedness" means, with respect to any Person: (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or
other obligations of such Person in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations of such Person under capital leases, (d) all obligations or
liabilities of any other Person secured by a Lien on any property or asset of
such Person, irrespective of whether such obligation or liability is assumed,
(e) all obligations of such Person for the deferred purchase price of assets
(other than trade debt incurred in the ordinary course of such Person's business
and repayable in accordance with customary trade practices), and (f) any
obligation of such Person guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse to such Person)
any indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency" means with respect to a Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of such term as used in Section
4245 of ERISA.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or
-12-
insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Intellectual Property" has the meaning ascribed thereto in Section
5.16.
"Intercompany Advance" means a loan, advance or transfer of cash in the
ordinary course of business from Borrower to one of its Subsidiaries or from one
of Borrower's Subsidiaries to Borrower or a Subsidiary of Borrower; provided,
however, that payments of royalties to Borrower by Komag Bermuda, dividends or
other amounts payable by Borrower's Subsidiaries under the research and
development service agreement or other contractual obligations between or among
Borrower and its Subsidiaries shall not constitute Intercompany Advances.
"Intercompany Notes" means (a) the Komag Malaysia Intercompany Note, (b)
the Komag Bermuda Intercompany Note, and (c) one or more negotiable promissory
notes evidencing other Indebtedness owed to Borrower by any of its Subsidiaries
that arose as a result of the making of a loan or advance (i) by Borrower to
such Subsidiary which loan or advance was intended to remain, or has remained,
outstanding for more than 90 days from the date of its making, or (ii) is in the
amount of $5,000,000, or more.
"Intercreditor Agreement" means that certain Intercreditor Agreement,
dated as of even date herewith, by and among the Collateral Agent, the Senior
Notes Trustee, the Junior Notes Trustee, and Borrower.
"Inventory" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to inventory, including goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower as lessor, goods that are furnished by Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in Borrower's business.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Investment Property" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code and any supporting obligations in respect
thereof; provided, that in the case of the Stock of Foreign Subsidiaries of
Borrower, Investment Property shall be limited to only 65% of such shares of
Stock.
"Junior Notes" means the 12% Senior Secured Notes due 2007 issued by
Borrower in the aggregate principal amount of $7,000,000 pursuant to the Junior
Notes Indenture.
"Junior Notes Indenture" means the Indenture dated as of June 30, 2002
between Borrower and Bank One Trust Company, NA, as trustee.
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"Komag Bermuda" means Komag (Bermuda) Ltd., a limited liability company
organized under the laws of Bermuda.
"Komag Bermuda Intercompany Note" means a negotiable promissory note,
dated June 30, 2002, executed and delivered by Komag Bermuda to the order of
Borrower in the principal amount of $202,761,000.
"Komag Malaysia" means Komag USA (Malaysia) Sdn., an entity organized
under the laws of Malaysia.
"Komag Malaysia Intercompany Note" means a negotiable promissory note,
dated June 30, 2002, executed and delivered by Komag Malaysia to the order of
Borrower in the principal amount of $50,000.
"Issuing Lender" means Foothill or any other Lender that, at the request
of Borrower and with the consent of Administrative Agent agrees, in such
Lender's sole discretion, to become an Issuing Lender for the purpose of issuing
L/Cs or L/C Undertakings pursuant to Section 2.14.
"L/C" has the meaning set forth in Section 2.14(a).
"L/C Disbursement" means a payment made by the Issuing Lender pursuant
to a Letter of Credit.
"L/C Undertaking" has the meaning set forth in Section 2.14(a).
"Legal Requirements" means all applicable international, foreign,
federal, state, and local laws, judgments, decrees, orders, statutes,
ordinances, rules, regulations, or Permits.
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 15.1 hereof.
"Lender Group" means, individually and collectively, each of the
individual Lenders (including the Issuing Lender), Administrative Agent and
Collateral Agent.
"Lender Group Expenses" means all: costs or expenses (including taxes
and insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or incurred by any one or more members of the Lender
Group; reasonable fees or charges paid or incurred by any one or more members of
the Lender Group in connection with any one or more members of the Lender
Group's transactions with Borrower relating to the Loan Documents and the
transactions contemplated thereby, including reasonable fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, judgment, and UCC (or equivalent) searches
and including searches with the patent and trademark office or the copyright
office), filing, recording, publication, appraisal (including periodic
Collateral appraisals), real estate surveys, real estate title policies and
endorsements, and environmental audits; costs and expenses incurred by any one
or more members of the Lender
-14-
Group in the disbursement of funds to Borrower (by wire transfer or otherwise);
charges paid or incurred by any one or more members of the Lender Group
resulting from the dishonor of checks; reasonable costs and expenses paid or
incurred by any one or more members of the Lender Group to correct any default
or enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by any one or more members of the Lender Group in examining the Books;
reasonable costs and expenses of third party claims or any other suit paid or
incurred by any one or more members of the Lender Group in enforcing or
defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or any one or more members of the Lender Group's
relationship with Borrower (or any of Borrower's Subsidiaries party to one or
more Loan Documents); reasonable attorneys fees and expenses incurred by the
Agents in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including reasonable attorneys fees and expenses of the
Administrative Agent or Collateral Agent incurred in connection with any
"workout" or "restructuring" concerning Borrower), defending, or concerning the
Loan Documents (including amounts incurred in connection with the abandoned
debtor-in-possession financing transaction between the same parties),
irrespective of whether suit is brought. Certain of the Lender Group Expenses
are subject to the limits imposed by Section 2.11(c).
"Lender-Related Persons" means, with respect to any Lender, such Lender,
together with such Lender's Affiliates, and the officers, directors, employees,
counsel, agents, and attorneys-in-fact of such Lender and such Lender's
Affiliates.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
requires.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"Lien" means any interest in property securing an obligation owed to, or
a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a Mortgages, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Liquidity Balance" means, with respect to Borrower and its Domestic
Subsidiaries, the sum of (i) cash and Cash Equivalents held by Borrower and its
Domestic Subsidiaries which are consolidated for financial reporting purposes,
plus (ii) the Availability.
"Loan Account" has the meaning set forth in Section 2.10.
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"Loan Documents" means this Agreement, the Intercreditor Agreement, the
Pledge Agreement, the Mortgages, the Letters of Credit, any note or notes
executed by Borrower and payable to the Lender Group, and any other agreement
entered into, now or in the future, in connection with or relating to this
Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower and its Subsidiaries taken as a
whole, (b) the material impairment of Borrower's ability to perform its
obligations under the Loan Documents to which it is a party or of the Lender
Group to enforce the Obligations or realize upon the Collateral, (c) a material
adverse effect on the value of the Collateral or the amount that the Lender
Group would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of the Collateral, or (d) a
material impairment of the priority of the Collateral Agent's Liens with respect
to the Collateral.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolving Amount" means $15,000,000, as reduced from time to
time pursuant to the terms of this Agreement.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor
thereto.
"Mortgages" means, individually and collectively, one or more mortgages,
deeds of trust, or deeds to secure debt, executed and delivered by Borrower in
favor of the Collateral Agent, for the benefit of the Lender Group, that
encumbers the Real Property Collateral.
"Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral" means all of Borrower's now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP.
"Non-Cash Deferred Tax Assets" means, with respect to any Person, any
non-cash portion of deferred tax assets included in Current Assets.
"Non-Cash Deferred Tax Liability" means, with respect to any Person, any
non-cash portion of deferred tax liabilities included in Current Liabilities.
"Non-Material Subsidiaries" means Komag Materials Technology at such
time as it ceases to hold any material assets, Komag FSC (Barbados) Ltd., Komag
Technology Partners,
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Komag Asia Pacific, Inc., and Komag Distribution Company, and in each case for
so long as Borrower or any of its Subsidiaries shall not have, from the date of
this Agreement, contributed any amount to the capital of, loaned any money to,
transferred any assets to, or entered into any other transaction with, such
Subsidiary.
"Obligations" means all loans, Advances, debts, principal, interest,
premiums, liabilities (including all amounts charged to Borrower's Loan Account
pursuant hereto), contingent reimbursement obligations with respect to
outstanding Letters of Credit, obligations, fees, charges, costs, or Lender
Group Expenses, lease payments, guaranties, covenants, and duties owing by
Borrower to any Agent or the Lender Group of any kind and description whether
pursuant to or evidenced by the Loan Documents, irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and further including all
interest not paid when due and all Lender Group Expenses that Borrower is
required to pay or reimburse by the Loan Documents, by law, or otherwise.
"Originating Lender" has the meaning set forth in Section 15.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Owned Properties" means the ▇▇▇▇▇▇ Property and the Fremont Properties.
"Participant" has the meaning set forth in Section 15.1(e).
"Participant Register" has the meaning set forth in Section 15.1(i).
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Pension Plan" means a "pension plan," as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001 (a)(3) of ERISA), and to which
Borrower or any of its ERISA Affiliates, has or within the prior six years has
had any liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Permits" of a Person shall mean all rights, franchises, permits,
authorities, licenses, certificates of approval or authorizations, including
licenses and other authorizations issuable by a Governmental Authority, which
pursuant to applicable Legal Requirements are necessary to permit such Person
lawfully to conduct and operate its business as currently conducted and to own
and use its assets.
"Permitted Dispositions" means (a) sales or other dispositions in the
ordinary course of business of Equipment that is substantially worn, damaged, or
obsolete, (b) sales of Inventory to buyers in the ordinary course of business or
in a manner that constitutes a Permitted Intercompany Advance, (c) the use or
transfer of money or Cash Equivalents in a manner that is
-17-
not prohibited by the terms of this Agreement or the other Loan Documents, (d)
the licensing on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of business, (e) sales
of assets (other than Real Property) with a net book value of less than $100,000
in respect of any single sale or related series of sales, but in any event not
in excess of $1,500,000 in the aggregate in respect of all such sales during any
year, and (f) any immaterial condemnation or eminent domain proceeding affecting
any Real Property that does not prevent such Real Property from being utilized
by Borrower or any of its Subsidiaries substantially for the purposes for which
it was being utilized prior to such proceeding.
"Permitted Indebtedness" means Indebtedness of Borrower and its Foreign
Subsidiaries incurred in the ordinary course of business for necessary operating
expenses and consisting of reimbursement obligations in respect of letters of
credit, bank guarantees, or similar arrangements in an aggregate principal
amount outstanding at any one time not in excess of $5,000,000.
"Permitted Intercompany Advances" means an Intercompany Advance (a) in
the ordinary course of business from Borrower to one of the Domestic
Subsidiaries, from one of the Domestic Subsidiaries to Borrower or from one of
the Domestic Subsidiaries to another Domestic Subsidiary, (b) from Borrower to
one of the Foreign Subsidiaries, so long as (i) no Default or Event of Default
exists at the time of the making of such Intercompany Advance or would exist
after giving effect thereto, and (ii) if such Intercompany Advance is intended
to remain outstanding for more than 90 days from the date of its making or has
been outstanding for more than 90 days from its making or in an amount of
$5,000,000, or more, such Intercompany Advance is evidenced by an Intercompany
Note which has been pledged and delivered to Collateral Agent, and (c) from one
of the Foreign Subsidiaries to another of the Foreign Subsidiaries or to
Borrower.
"Permitted Liens" means:
(a) Liens granted to secure payment of capitalized lease
obligations, Mortgage financings and Purchase Money Indebtedness in a maximum
aggregate principal amount at any one time not to exceed $15,000,000 for all
such Indebtedness;
(b) Liens for taxes, assessments or other governmental charges or
levies, including liens pursuant to Section 107(l) of CERCLA or other similar
law, not at the time delinquent or thereafter payable without penalty or subject
to a Permitted Protest, provided that such Permitted Protest effectively
suspends enforcement of such Lien;
(c) Liens of carriers, warehousemen, mechanics, repairmen,
materialmen, contractors, laborers and landlords or other like Liens incurred in
the ordinary course of business for sums not overdue for a period of more than
30 days or subject to a Permitted Protest, provided that such Permitted Protest
effectively suspends enforcement of such Lien;
(d) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or
-18-
benefits, or to secure performance of tenders, bids, customs bonds, statutory or
regulatory obligations, insurance obligations, leases and contracts (other than
for borrowed money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(e) judgment Liens in respect of judgments that do not otherwise
constitute an Event of Default in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or the payment of
which is covered in full by a bond or (subject to a customary deductible) by
insurance maintained with responsible insurance companies;
(f) Liens with respect to minor imperfections of title and
easements, rights-of-way, restrictions, reservations, permits, servitudes and
other similar encumbrances on real property and fixtures (i) existing on the
date hereof and set forth in the title report obtained by Collateral Agent, or
(ii) which do not materially detract from the value or materially impair the use
by Borrower and its Subsidiaries in the ordinary course of their business of the
property subject thereto;
(g) Leases, subleases or licenses granted by Borrower and its
Subsidiaries to any other Person in the ordinary course of business;
(h) Liens of sellers of goods to Borrower and its Subsidiaries
arising under Article 2 of the Code or similar provisions of applicable law in
the ordinary course of business, covering only the goods sold and securing only
the unpaid purchase price for such goods and related expenses;
(i) Deposit arrangements with suppliers, equipment vendors and
the like made in the ordinary course of business;
(j) Liens on cash or Cash Equivalents granted by Borrower's
Foreign Subsidiaries to secure their obligations in respect of Permitted
Indebtedness;
(k) Liens in favor of the Senior Notes Trustee on property that
is also subject to Liens in favor of Collateral Agent, on behalf of the Lenders;
(l) Liens in favor of the Junior Notes Trustee on property that
is also subject to Liens in favor of Collateral Agent, on behalf of the Lenders;
and
(m) Liens set forth on Schedule P-1 to the Disclosure Schedule.
"Permitted Priority Liens" means the Liens described in paragraph (a) of
the definition of the term "Permitted Liens".
"Permitted Protest" means the right of Borrower to protest any Lien
(other than any such Lien that secures the Obligations), tax (other than payroll
taxes or taxes that are the subject of a United States federal tax lien), or
rental payment, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Collateral Agent, (b) any such protest is instituted and
diligently prosecuted by Borrower in good
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faith, and (c) Collateral Agent is satisfied that, while any such protest is
pending, there will be no impairment of the enforceability, validity, or
priority of any of the Collateral Agent's Liens in and to the Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means the Pledge Agreement, dated as of the Closing
Date, made by Borrower in favor of the Collateral Agent for the benefit of the
Lender Group, as amended, supplemented or otherwise modified from time to time.
"Projections" means Borrower's forecasted (a) balance sheets, (b) profit
and loss statements, and (c) cash flow statements, all presented on a quarterly
basis and prepared on a basis consistent with the Closing Date Business Plan,
together with appropriate supporting details and a statement of underlying
assumptions.
"Pro Rata Share" means,
(a) with respect to a Lender's obligation to make Advances
and a Lender's right to receive payments of interest, fees, and principal with
respect thereto, (x) prior to the Commitments being reduced to zero, the
percentage obtained by dividing (i) such Lender's Commitment, by (ii) the
aggregate amount of all Lenders' Commitments, and (y) from and after the time
the Commitments have been terminated or reduced to zero, the percentage obtained
by dividing (i) the aggregate unpaid principal amount of such Lender's Advances
by (ii) the aggregate unpaid principal amount of all of the Advances, and
(b) with respect to a Lender's obligation to participate
in Letters of Credit, to reimburse the Issuing Lender, and to receive payments
of fees with respect thereto, the percentage obtained by dividing (i) such
Lender's Commitment, by (ii) the aggregate Commitments of all Lenders.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including obligations under capital leases), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"Qualified Import Letter of Credit" means a Letter of Credit that (a) is
issued to facilitate the purchase of Inventory by Borrower or any of its
Subsidiaries that is not a Non-Material Subsidiary, (b) is in form and substance
acceptable to Administrative Agent, and (c) is issued to support an Underlying
Letter of Credit that only is drawable by the beneficiary thereof by the
presentation of, among other documents, either (i) a negotiable ▇▇▇▇ of lading
that is consigned to Administrative Agent (either directly or by means of
endorsements) and that was issued by the
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carrier respecting the subject Inventory, or (ii) a negotiable cargo receipt
that is consigned to Administrative Agent (either directly or by means of
endorsements) and that was issued by a consolidator respecting the subject
Inventory; provided, however, that, in the latter case, no ▇▇▇▇ of lading shall
have been issued by the carrier (other than a ▇▇▇▇ of lading consigned to the
consolidator or to Administrative Agent).
"Rating Agencies" has the meaning set forth in Section 2.13.
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by Borrower.
"Real Property Collateral" means all owned real property of Borrower and
the related improvements thereto identified on Schedule R-1 to the Disclosure
Schedule, including without limitation, the Fremont Properties, the ▇▇▇▇▇▇
Property, and any Real Property hereafter acquired by Borrower.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by The Chase Manhattan Bank or any successor thereto, as its
"base rate," irrespective of whether such announced rate is the best rate
available from such financial institution.
"Register" has the meaning set forth in Section 15.1(h).
"Registered Loan" has the meaning set forth in Section 2.12.
"Registered Note" has the meaning set forth in Section 2.12.
"Reorganization" means the adjustment of the claims against and
interests in Borrower effectuated pursuant to the Reorganization Plan.
"Reorganization Plan" means that certain Further Modified First Amended
Plan of Reorganization of Komag, Incorporated, f/a/k/a HMT Technology
Corporation, under Chapter 11 of the Bankruptcy Code, dated May 7, 2002.
"Reportable Event" means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
aggregate 66-2/3% or more of the Commitments, or, if the Commitments have been
terminated irrevocably, 66-2/3% of the Obligations then outstanding.
"Restructuring Charges" means all expenses incurred by Borrower and its
Consolidated Subsidiaries, as applicable, related to Borrower's Chapter 11 Case,
including expenses related to the implementation of the American Institute of
Certified Public Accountants' Statement of
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Position 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code", ("SOP 90-7"), and to the extent not classified as
"reorganization items" pursuant to SOP 90-7, expenses related to bankruptcy
claims, expenses related to the write-down of assets and any other expenses
incurred by Borrower and its Consolidated Subsidiaries, as applicable, in
connection with Borrower's Chapter 11 Case.
"Requirement of Law" means, as to any Person, the Governing Documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property, or to which such Person
or any of its property is subject.
"Retiree Health Plan" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Revenue" shall mean all revenues generated by Borrower and its
Consolidated Subsidiaries as determined in accordance with GAAP.
"Revolving Facility Usage" means, as of any date of determination, the
sum of (a) the then extant amount of outstanding Advances, plus (b) the then
extant amount of the Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of Credit, all
reimbursement obligations of Borrower to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrower,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto.
"SEC" means the United States Securities and Exchange Commission and any
successor Federal agency having similar powers.
"Securities Account" means a "securities account" as that term is
defined in the Code.
"Securitization" has the meaning set forth in Section 2.13.
"Securitization Parties" means any party providing credit support or
otherwise participating in a Securitization.
"Senior Notes" means the Senior Secured Notes due 2007 issued by
Borrower in the aggregate principal amount of $128,832,000 pursuant to the
Senior Notes Indenture.
"Senior Notes Indenture" means the Indenture dated as of June 30, 2002
between Borrower and The Bank of New York, as trustee.
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"Settlement" has the meaning set forth in Section 2.1(h)(i).
"Settlement Date" has the meaning set forth in Section 2.1(h)(i).
"Single Employer Plan" means any Plan which is not a Multiemployer Plan.
"Solvent" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"Stock" means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a corporation or
equivalent entity, whether voting or nonvoting, including common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act).
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"Swing Lender" means any Lender appointed by the Administrative Agent in
writing, and which appointment has been accepted by such Lender in writing, as
the "Swing Lender".
"Swing Loans" has the meaning set forth in Section 2.1(f).
"Total Cash Debt Service Coverage Ratio" means, with respect to Borrower
and its Consolidated Subsidiaries, for each fiscal quarter, the ratio of (a) the
greater of (i) Annualized Consolidated EBITDAR of Borrower and its Consolidated
Subsidiaries and (ii) Consolidated EBITDAR of the Company and its Consolidated
Subsidiaries for such fiscal quarter and each of the three immediately preceding
fiscal quarters, to (y) the sum of (without duplication) (i) Annualized
Consolidated Interest Expense of the Company and its Consolidated Subsidiaries
and (ii) scheduled cash payments with respect to the amortization of
Indebtedness paid during such fiscal quarter and each of the three immediately
preceding fiscal quarters.
"Underlying Issuer" means a third Person which is the beneficiary of an
L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrower and, in the case of a proposed
Qualified Import Letter of Credit, has agreed, in writing, to hold documents of
title as agent for an Agent.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 19.8.
"Welfare Plan" means a "welfare plan," as such term is defined in
Section 3(l) of ERISA, and to which Borrower has any liability.
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"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Stock of which (other than directors'
qualifying shares) is at the time owned by such Person and/or by one or more
Wholly Owned Subsidiaries of such Person.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules, if any, thereto.
Whenever the term "Borrower and its Subsidiaries" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower and its Subsidiaries on a consolidated basis unless the context clearly
requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or any other Loan Documents, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. An Event of Default shall
"continue" or be "continuing" until such Event of Default has been cured (if
capable of being cured) or waived in writing by the Collateral Agent. Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement or in the
Loan Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable. Any requirement of a writing contained herein or in the other Loan
Documents shall be satisfied by the transmission of a Record and any Record
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Advances. Subject to the terms and conditions of this
Agreement and during the term of this Agreement, each Lender severally agrees to
make advances ("Advances") to Borrower in an amount at any one time outstanding
not to exceed such Lender's Pro Rata Share of an amount equal to the lesser of
(i) the Maximum Revolving Amount less the Letter of Credit Usage or (ii) the
Borrowing Base less the Letter of Credit Usage. For purposes of this Agreement,
"Borrowing Base," as of any date of determination, shall mean an amount equal to
70% of the Fair Market Value of the Owned Properties less the Chahaya Space
Reserve.
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(b) Reserves. Anything to the contrary in Section 2.1(a)
above notwithstanding, Administrative Agent may create reserves against the
Borrowing Base without declaring an Event of Default (A) for any amount subject
to a Permitted Protest, or (B) as determined by Administrative Agent in its
reasonable credit judgment. Lenders shall have no obligation to make further
Advances hereunder to the extent such Advances would cause the outstanding
Revolving Facility Usage to exceed the Maximum Revolving Amount. Amounts
borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms
and conditions of this Agreement, reborrowed at any time during the term of this
Agreement.
(c) Procedure for Borrowing. Each Borrowing shall be made
upon Borrower's irrevocable request therefor delivered to Administrative Agent
(which notice must be received by Administrative Agent no later than 10:00 a.m.
(California time) on the Business Day immediately preceding the requested
Funding Date) specifying (i) the amount of the Borrowing; and (ii) the requested
Funding Date, which shall be a Business Day.
(d) Administrative Agent's Election. Promptly after
receipt of a request for a Borrowing pursuant to Section 2.1(c), Administrative
Agent shall elect, in its discretion, (i) to have the terms of Section 2.1(e)
apply to such requested Borrowing, or (ii) to request the Swing Lender to make a
Swing Loan pursuant to the terms of Section 2.1(f) in the amount of the
requested Borrowing; provided, however, that if such Swing Lender declines in
its sole discretion to make a Swing Loan pursuant to Section 2.1(f),
Administrative Agent shall elect to have the terms of Section 2.1(e) apply to
such requested Borrowing.
(e) Making of Advances.
(i) In the event that Administrative Agent shall
elect to have the terms of this Section 2.1(e) apply to a requested Borrowing as
described in Section 2.1(d), then promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(c), the Administrative Agent shall notify the
Lenders, not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto or such other time
that is agreed upon by Administrative Agent and the Lenders, by telecopy,
telephone, or other similar form of transmission, of the requested Borrowing.
Each Lender shall make the amount of such Lender's Pro Rata Share of the
requested Borrowing available to Administrative Agent in immediately available
funds, to such account of Administrative Agent as Administrative Agent may
designate, not later than 10:00 a.m. (California time) on the Funding Date
applicable thereto or such other time that is agreed upon by Administrative
Agent and the Lenders. After Administrative Agent's receipt of the proceeds of
such Advances, upon satisfaction of the applicable conditions precedent set
forth in Sections 3.1 and 3.2 hereof, Administrative Agent shall make the
proceeds of such Advances available to Borrower on the applicable Funding Date
by transferring same day funds equal to the proceeds of such Advances received
by Administrative Agent to Borrower's Designated Account; provided, however,
that, subject to the provisions of Section 2.1(k), Administrative Agent shall
not request any Lender to make, and no Lender shall have the obligation to make,
any Advance if Administrative Agent shall have received written notice from any
Lender, or otherwise has actual knowledge, that (1) one or more of the
applicable conditions precedent set forth in Sections 3.1 and 3.2 will not be
satisfied on the
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requested Funding Date for the applicable Borrowing unless such condition has
been cured (if capable of being cured) or waived in accordance with Section
16.1, or (2) the requested Borrowing would exceed the Availability of Borrower
on such Funding Date.
(ii) Unless Administrative Agent receives notice
from a Lender on or prior to the Closing Date or, with respect to any Borrowing
after the Closing Date, at least one (1) Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to Administrative Agent for the account of Borrower the amount of such
Lender's Pro Rata Share of the Borrowing, Administrative Agent may assume that
each Lender has made or will make such amount available to Administrative Agent
in immediately available funds on the Funding Date or such other time that is
agreed upon by Administrative Agent and the Lenders and Administrative Agent may
(but shall not be so required), in reliance upon such assumption, make available
to Borrower on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to Administrative Agent in
immediately available funds at the time required by this Section 2.1(e) and
Administrative Agent in such circumstances has made available to Borrower such
amount, then such Lender shall on the Business Day following such Funding Date
or on the Business Day following such other time that is agreed upon by
Administrative Agent and the Lenders make such amount available to
Administrative Agent, together with interest at the Defaulting Lenders Rate for
each day during such period. A notice by the Administrative Agent to any Lender
with respect to amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is paid to the Administrative Agent, such payment
to Administrative Agent shall constitute such Lender's Advance on the Funding
Date for all purposes of this Agreement. If such amount is not made available to
the Administrative Agent on the Business Day following the Funding Date or on
the Business Day following such other time that is agreed upon by the
Administrative Agent and the Lenders, Administrative Agent will notify Borrower
of such failure to fund and, upon demand by Administrative Agent, Borrower shall
pay such amount to Administrative Agent for Administrative Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate then applicable to
Advances. The failure of any Lender to make any Advance on any Funding Date or
such other time that is agreed upon by the Administrative Agent and the Lenders
shall not relieve any other Lender of any obligation hereunder to make an
Advance on such Funding Date or such other time that is agreed upon by
Administrative Agent and the Lenders, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on any Funding Date or such other time that is agreed upon by Administrative
Agent and the Lenders.
(iii) Administrative Agent shall not be obligated
to transfer to a Defaulting Lender any payments made by Borrower to
Administrative Agent for the Defaulting Lender's benefit; nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder. Amounts payable to
a Defaulting Lender shall instead be paid to or retained by Administrative
Agent. Administrative Agent may hold and, in its discretion, re-lend to Borrower
the amount of all such payments received or retained by it for the account of
such Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a
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"Lender" and such Lender's Commitment shall be deemed to be zero (-0-). This
section shall remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable or (y) the requisite non-Defaulting Lenders and
Administrative Agent shall have waived such Lender's default in writing. The
operation of this section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by Borrower
of its duties and obligations hereunder.
(f) Making of Swing Loans.
(i) In the event Administrative Agent shall elect, with
the consent of the Swing Lender as a Lender, to have the terms of this Section
2.1(f) apply to a requested Borrowing as described in Section 2.1(d), such Swing
Lender as a Lender shall make an Advance in the amount of such Borrowing (any
such Advance made solely by Swing Lender as a Lender pursuant to this Section
2.1(f) being referred to as a "Swing Loan" and such Advances being referred to
collectively as "Swing Loans") available to Borrower on the Funding Date
applicable thereto by transferring same day funds to Borrower's Designated
Account. Each Swing Loan is an Advance hereunder and shall be subject to all the
terms and conditions applicable to other Advances, except that all payments
thereon shall be payable to Swing Lender as a Lender solely for its own account
(and for the account of the holder of any participation interest with respect to
such Advance). Subject to the provisions of Section 2.1(k), Administrative Agent
shall not request Swing Lender as a Lender to make, and Swing Lender as a Lender
shall not make, any Swing Loan if Administrative Agent shall have received
written notice from any Lender, or otherwise has actual knowledge, that (i) one
or more of the applicable conditions precedent set forth in Sections 3.1 and 3.2
will not be satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived or cured (if capable of being cured), or
(ii) the requested Borrowing would exceed the Availability of Borrower on such
Funding Date. Swing Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set forth in Sections 3.1
and 3.2 have been satisfied on the Funding Date applicable thereto prior to
making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Collateral
and shall constitute Advances and Obligations hereunder, and shall bear interest
at the rate applicable from time to time to Advances pursuant to Section 2.6
hereof.
(g) Administrative Agent Advances.
(i) Subject to the limitations set forth in the proviso
contained in this Section 2.1(g), Administrative Agent hereby is authorized by
Borrower and the Lenders, from time to time in Administrative Agent's sole
discretion, (1) after the occurrence and during the continuance of a Default or
an Event of Default (but without constituting a waiver of such Default or Event
of Default), or (2) at any time that any of the other applicable conditions
precedent set forth in Sections 3.1 and 3.2 have not been satisfied, to make
Advances to Borrower on behalf of the Lenders that Administrative Agent, in its
reasonable business
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judgment, deems necessary or desirable (A) to preserve, protect or maximize the
amount of the Collateral, or any portion thereof, or (B) to pay any other amount
chargeable to Borrower pursuant to the terms of this Agreement, including Lender
Group Expenses and the costs, fees, and expenses described in Section 10 (any of
the Advances described in this Section 2.1(g) being hereinafter referred to as
"Administrative Agent Advances"); provided, that notwithstanding anything to the
contrary contained in this Section 2.1(g), the aggregate principal amount of
Administrative Agent Advances outstanding at any time, when taken together with
the aggregate principal amount of Overadvances made in accordance with Section
2.1(k) hereof outstanding at any time, shall not exceed $2,000,000.
(ii) Administrative Agent Advances shall be repayable by
Borrower on demand and secured by the Collateral, shall constitute Advances and
Obligations hereunder, and shall bear interest at the rate then applicable to
Advances pursuant to Section 2.6.
(h) Settlement. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to be equal at all times to such
Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Administrative Agent, Swing Lender, and the other Lenders agree
(which agreement shall not be for the benefit of or enforceable by Borrower)
that in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Advances, the Swing Loans, and
the Administrative Agent Advances shall take place on a periodic basis in
accordance with the following provisions:
(i) Administrative Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by Administrative Agent, (1) on behalf of Swing Lender, with
respect to each outstanding Swing Loan, (2) for itself, with respect to each
Administrative Agent Advance, and (3) with respect to Collections received, as
to each Lender, by notifying the Lenders by telecopy, telephone, or other
similar form of transmission, of such requested Settlement, no later than 2:00
p.m. (California time) five (5) Business Days immediately prior to the date of
such requested Settlement (the date of such requested Settlement being the
"Settlement Date"). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Administrative
Agent Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each Lender of
the principal, interest, fees, and other charges for such period. Subject to the
terms and conditions contained herein (including Section 2.1(e)(iii)): (y) if a
Lender's balance of the Advances, Swing Loans, and Administrative Agent Advances
exceeds such Lender's Pro Rata Share of the Advances, Swing Loans, and
Administrative Agent Advances as of the date which is five Business Days prior
to a Settlement Date, then Administrative Agent shall by no later than
12:00 p.m. (California time) on such Settlement Date transfer in immediately
available funds to the account of such Lender as such Lender may designate, an
amount such that each such Lender shall, upon receipt of such amount, have as of
the Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and
Administrative Agent Advances; and (z) if a Lender's balance of the Advances,
Swing Loans, and Administrative Agent Advances is less than such Lender's Pro
Rata Share of the Advances, Swing Loans, and Administrative Agent Advances as of
the date which is
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five Business Days prior to a Settlement Date, such Lender shall no later than
12:00 p.m. (California time) on such Settlement Date transfer in immediately
available funds to such account of Administrative Agent as Administrative Agent
may designate, an amount such that each such Lender shall, upon transfer of such
amount, have as of such Settlement Date, its Pro Rata Share of the Advances,
Swing Loans, and Administrative Agent Advances. Such amounts made available to
Administrative Agent under clause (z) of the immediately preceding sentence
shall be applied against the amounts of the applicable Swing Loan or
Administrative Agent Advance and shall, together with the portion of such Swing
Loan or Administrative Agent Advance representing Swing Lender's Pro Rata Share
thereof, constitute Advances of such Lenders. If any such amount is not made
available to Administrative Agent by any Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, Administrative
Agent shall be entitled to recover for its account such amount on demand from
such Lender together with interest thereon at the Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Administrative Agent Advances is less than, equal to,
or greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and
Administrative Agent Advances as of a Settlement Date, Administrative Agent
shall, as part of the relevant Settlement, apply to such balance the portion of
payments actually received in good funds by Administrative Agent or Swing Lender
with respect to principal, interest and fees payable by Borrower and allocable
to the Lenders hereunder, and proceeds of Collateral. To the extent that a net
amount is owed to any such Lender after such application, such net amount shall
be distributed by Administrative Agent or Swing Lender to that Lender as part of
such Settlement.
(iii) Between Settlement Dates, Administrative Agent, to
the extent no Administrative Agent Advances or Swing Loans are outstanding, may
pay over to Swing Lender any payments received by Administrative Agent, that in
accordance with the terms of this Agreement would be applied to the reduction of
the Advances, for application to Swing Lender's Pro Rata Share of the Advances.
If, as of any Settlement Date, Collections received since the then immediately
preceding Settlement Date have been applied to Swing Lender's Pro Rata Share of
the Advances other than to Swing Loans or Administrative Agent Advances, as
provided for in the previous sentence, Swing Lender shall pay to Administrative
Agent for the accounts of the Lenders, and Administrative Agent shall pay to the
Lenders, to be applied to the outstanding Advances of such Lenders, an amount
such that each Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period between
Settlement Dates, Swing Lender with respect to Swing Loans, Administrative Agent
with respect to Administrative Agent Advances, and each Lender with respect to
the Advances other than Swing Loans and Administrative Agent Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Administrative
Agent, or the Lenders, as applicable.
(i) Notation. Administrative Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Swing Loans
owing to Swing Lender, and Administrative Agent Advances owing to Administrative
Agent, and the interests therein of each Lender, from time to time. In addition,
each Lender is authorized, at
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such Lender's option, to note the date and amount of each payment or prepayment
of principal of such Lender's Advances in its books and records, including
computer records, such books and records constituting rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(j) Lenders' Failure to Perform. All Advances (other than Swing
Loans and Administrative Agent Advances) shall be made by the Lenders
simultaneously (except as otherwise agreed upon by the Administrative Agent and
the Lenders) and in accordance with their Pro Rata Shares. It is understood that
(i) no Lender shall be responsible for any failure by any other Lender to
perform its obligation to make any Advances hereunder, nor shall any Commitment
of any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligation to make any Advances hereunder, and (ii) no
failure by any Lender to perform its obligation to make any Advances hereunder
shall excuse any other Lender from its obligation to make any Advances
hereunder.
(k) Optional Overadvances.
(i) Any contrary provision of this Agreement
notwithstanding, if the condition for borrowing under Section 3.2(d) cannot be
fulfilled, the Lenders nonetheless hereby authorize Administrative Agent or
Swing Lender, as applicable, and Administrative Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and intentionally continue
to make Advances (including Swing Loans) to Borrower such failure of condition
notwithstanding, so long as, at any time, (A) the outstanding Revolving Facility
Usage does not exceed the Borrowing Base by more than $1,000,000, (B) the
outstanding Revolving Facility Usage (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) does not
exceed the Maximum Revolving Amount, and (C) the aggregate principal amount of
Overadvances made pursuant to this Section 2.1(k) when taken together with the
aggregate principal amount of Administrative Agent Advances made pursuant to
Section 2.1(g) does not exceed $2,000,000 at any time. The foregoing provisions
are for the sole and exclusive benefit of Administrative Agent, Swing Lender and
the Lenders and are not intended to benefit Borrower in any way. The Advances
and Swing Loans, as applicable, that are made pursuant to this Section 2.1(k)
shall be subject to the same terms and conditions as any other Advance or Swing
Loan, as applicable, except that the rate of interest applicable thereto shall
be the rates set forth in Section 2.6(c) hereof without regard to the presence
or absence of a Default or Event of Default.
(ii) In the event Administrative Agent obtains actual
knowledge that Revolving Facility Usage exceeds the amount permitted by the
preceding paragraph, regardless of the amount of or reason for such excess,
Administrative Agent shall notify Lenders as soon as practicable (and prior to
making any (or any further) intentional Overadvances (except for and excluding
amounts charged to the Loan Account for interest, fees, or Lender Group
Expenses) unless Administrative Agent determines that prior notice would result
in imminent harm to the Collateral or its value), and the Lenders thereupon
shall, together with Administrative Agent, jointly determine the terms of
arrangements that shall be implemented with Borrower intended to reduce, within
a reasonable time, the outstanding
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principal amount of the Advances to Borrower to an amount permitted by the
preceding paragraph. In the event any Lender disagrees over the terms of
reduction and/or repayment of any Overadvance, the terms of reduction and/or
repayment thereof shall be implemented according to the determination of the
Required Lenders.
(iii) Each Lender shall be obligated to settle with
Administrative Agent as provided in Section 2.1(h) for the amount of such
Lender's Pro Rata Share of any unintentional Overadvances reported to such
Lender, any intentional Overadvances made as permitted under this Section
2.1(k), and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.
2.2 [INTENTIONALLY OMITTED.]
2.3 [INTENTIONALLY OMITTED.]
2.4 PAYMENTS.
(a) Payments by Borrower.
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim, except as otherwise
required by law. Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Administrative Agent for the account of the Lenders at
Administrative Agent's address set forth in Section 12, and shall be made in
immediately available funds, no later than 11:00 a.m. (California time) on the
date specified herein. Any payment received by Administrative Agent later than
11:00 a.m. (California time), at the option of Administrative Agent, shall be
deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.
(ii) 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.
(iii) Unless Administrative Agent receives notice from
Borrower prior to the date on which any payment is due to the Lenders that
Borrower will not make such payment in full as and when required, Administrative
Agent may assume that Borrower has made such payment in full to Administrative
Agent on such date in immediately available funds and Administrative Agent may
(but shall not be so required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent Borrower has not made such payment in full to
Administrative Agent, each Lender shall repay to Administrative Agent on demand
such amount distributed to such Lender, together with interest thereon at the
Reference Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(b) Apportionment, Application of Payments, and Reversal of
Payments.
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(i) Except as otherwise provided with respect to
Defaulting Lenders and except as otherwise provided in the Fee Split Letter,
aggregate principal and interest payments shall be apportioned ratably among the
Lenders (according to their Pro Rata Shares), and payments of fees (other than
fees designated for the Agents' sole and separate accounts) shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to Administrative Agent and all such payments (other than payments
constituting payment of specific fees), and all proceeds of Collateral received
by either of the Agents pursuant to this Agreement or any other Loan Document,
shall be applied:
first, to pay any fees or expense reimbursements then due to
Agents from Borrower on a ratable basis;
second, to pay any fees or expense reimbursements then due to the
Lenders from Borrower on a ratable basis;
third, ratably to pay interest due in respect of all Advances
(including Swing Loans and Administrative Agent Advances);
fourth, ratably to pay or prepay principal of Swing Loans and
Administrative Agent Advances;
fifth, ratably to pay principal of the Advances (other than Swing
Loans and Administrative Agent Advances);
sixth, to pay any fees due to Collateral Agent (for its sole and
separate account) under the Loan Documents;
seventh, if an Event of Default has occurred and is continuing
and if required by Required Lenders, to Administrative Agent, to be held
by Administrative Agent, for the ratable benefit of Issuing Lender and
those Lenders having a Commitment, as cash collateral in an amount up to
105% of the then extant Letter of Credit Usage until paid in full; and
eighth, ratably to pay any other Obligations due to Agents or any
Lender by Borrower.
Administrative Agent shall promptly distribute to each Lender, pursuant
to the applicable wire transfer instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided for in Section 2.1(h).
(ii) In the event of a direct conflict between the
priority provisions of this Section 2.4(b) and other provisions contained in any
other Loan Document, it is the intention of the parties hereto that both such
priority provisions in such documents shall be read together and construed, to
the fullest extent possible, to be in concert with each other. In the
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event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.4(b) shall control and
govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Lender Group pursuant to Section 2.1 is greater
than either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrower immediately shall pay to Administrative Agent, in cash,
the amount of such excess, which amount shall be used by Administrative Agent to
reduce the Obligations in accordance with the priority set forth in Section
2.4(b).
2.6 INTEREST RATES, LETTER OF CREDIT FEE, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) below, all
Obligations (except undrawn Letters of Credit) shall bear interest at a per
annum rate equal to 12%.
(b) Letter of Credit Fee. Borrower shall pay Administrative Agent
(for the ratable benefit of the Lenders with a Commitment, subject to any letter
agreement between Administrative Agent and individual Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.14(e)) which shall accrue at a rate equal to 4% per annum times the
Daily Balance of the undrawn amount of all outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the continuation
of an Event of Default,
(i) all Obligations (except for Obligations unrelated to
the payment of money and undrawn Letters of Credit) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 14%, and
(ii) the Letter of Credit fee provided for above shall be
increased to 6% per annum times the Daily Balance of the undrawn amount of all
outstanding Letters of Credit.
(d) [INTENTIONALLY OMITTED.]
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Administrative Agent to, and
Administrative Agent agrees that it will, without prior notice to Borrower,
charge such interest, all Lender Group Expenses (as and when incurred), the fees
and charges provided for in Section 2.11 (as and when accrued or incurred), and
all other payments due under any Loan Document to Borrower's Loan Account, which
amounts thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder.
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(f) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360-day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 [INTENTIONALLY OMITTED.]
2.8 CREDITING PAYMENTS; APPLICATION OF PAYMENTS. The receipt of any
payment by Administrative Agent immediately shall be applied provisionally to
the Obligations in accordance with Section 2.4(b), but shall not be considered a
payment on account unless such payment is a wire transfer of immediately
available federal funds and is made to the Administrative Agent's Account or
unless and until such payment is honored when presented for payment. Should any
payment not be honored when presented for payment, then Borrower shall be deemed
not to have made such payment, and interest shall be recalculated accordingly.
Anything to the contrary contained herein notwithstanding, any payment shall be
deemed received by Administrative Agent only if it is received into the
Administrative Agent's Account on a Business Day on or before 11:00 a.m.
California time. If any payment is received into the Administrative Agent's
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Administrative Agent as of the
opening of business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Administrative Agent, Swing Lender, and the
Lenders are authorized to make the Advances, and Issuing Lender is authorized to
issue the Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6(e). Borrower agrees to establish
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Advances requested by Borrower and made
by Administrative Agent, Swing Lender or the Lenders hereunder. Unless otherwise
agreed by Administrative Agent and Borrower, any Advance requested by Borrower
and made hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Administrative Agent shall maintain an account on its books in the name of
Borrower (the "Loan Account") on which Borrower will be charged with all
Advances made by Administrative Agent, Swing
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Lender, or the Lenders to Borrower or for Borrower's account, the Letters of
Credit issued by Issuing Lender for Borrower's account, including, accrued
interest, Lender Group Expenses, and any other payment Obligations of Borrower.
In accordance with Section 2.8, the Loan Account will be credited with all
payments received by Administrative Agent from Borrower or for Borrower's
account. Administrative Agent shall render statements regarding the Loan Account
to Borrower, including principal, interest, fees, and including an itemization
of all charges and expenses constituting Lender Group Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and the Lender Group unless,
within 45 days after receipt thereof by Borrower, Borrower shall deliver to
Administrative Agent written objection thereto describing the error or errors
contained in any such statements.
2.11 FEES. Borrower shall pay to Agents the following fees to be
distributed as set forth in a separate writing (the "Fee Split Letter") among
the Agents and the Lenders, which fees shall be non-refundable when paid:
(a) Unused Line Fee. On the first day of each month during the
term of this Agreement, Borrower shall pay to Collateral Agent an unused line
fee in an amount equal to 0.50% per annum times the Average Unused Portion of
the Maximum Revolving Amount.
(b) Fee Letter Fees. As and when due and payable under the terms
of the Fee Letter, Borrower shall pay to Collateral Agent the fees set forth in
the Fee Letter.
(c) Financial Examination, Documentation, and Appraisal Fees. For
the sole and separate account of the Agent performing the financial analysis,
examination, or appraisal (i) such Agent's customary fee of $850 per day per
examiner, plus such Agent's out-of-pocket expenses for each financial analysis
and examination of Borrower performed by personnel employed by such Agent; (ii)
such Agent's customary appraisal fee of $1,500 per day per appraiser, plus such
Agent's out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by such Agent; and (iii) the actual charges paid or incurred
by such Agent if it elects to employ the services of one or more third Persons
to perform such financial analyses and examinations of Borrower to conduct
environmental assessments, or to appraise the Collateral. The foregoing to the
contrary notwithstanding, unless an Event of Default has occurred and is
continuing, Agents shall not charge Borrower for the costs and expenses of more
than one environmental assessment, more than one appraisal of the Owned
Properties conducted each 6 months or more than three audits each calendar year.
2.12 REGISTERED NOTES. At the request of an Agent, Borrower agrees to
record each Advance on the Register referred to in Section 15.1(h). Each Advance
recorded on the Register (the "Registered Loan") may not be evidenced by
promissory notes other than Registered Notes (as defined below). Upon the
registration of any Advance, Borrower agrees, at the request of any Lender, to
execute and deliver to such Lender a promissory note, in conformity with the
terms of this Agreement, in registered form to evidence such Registered Loan, in
form and substance reasonably satisfactory to such Lender, and registered as
provided in Section 15.1(h) (a "Registered Note"), payable to the order of such
Lender and otherwise duly completed. Once
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recorded on the Register, the Advance or Advances may not be removed from the
Register so long as it or they remain outstanding, and a Registered Note may not
be exchanged for a promissory note that is not a Registered Note.
2.13 SECURITIZATION. Borrower hereby acknowledges that Lenders and any
of their Affiliates may sell or securitize the Advances (a "Securitization")
through the pledge of the Advances as collateral security for loans to such
Lenders or their Affiliates or through the sale of the Advances or the issuance
of direct or indirect interests in the Advances, which loans to such Lenders or
their Affiliates or direct or indirect interests will be rated by ▇▇▇▇▇'▇,
Standard & Poor's or one or more other rating agencies (the "Rating Agencies").
Borrower shall cooperate with such Lenders and their Affiliates in all
reasonable respects to effect the Securitization including, without limitation,
by (a) amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by such Lenders in connection with
the Securitization, provided that (i) any such amendment or additional
documentation does not impose any additional costs on Borrower and (ii) any such
amendment or additional documentation does not materially adversely affect the
rights, or materially increase the obligations, of Borrower under the Loan
Documents or change or affect in a manner adverse to Borrower the financial
terms of the Advances, and (b) providing such information as may be reasonably
requested by such Lenders in connection with the rating of the Advances or the
Securitization. Borrower shall not be liable for any costs or expenses incurred
by any Lender, or Agent or their Affiliates in effecting any Securitization.
2.14 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of
Borrower. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Lender) to the Issuing Lender and Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing
Lender, Borrower also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the requested
Letter of Credit:
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(i) the Letter of Credit Usage would exceed the Borrowing
Base less the then extant amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $3,000,000,
or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the then extant amount of outstanding Advances.
Borrower and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Administrative Agent an amount equal to such L/C
Disbursement not later than 11:00 a.m., California time, on the date that such
L/C Disbursement is made, if Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 9:00 a.m., California time, on such
date, or if received after 9:00 a.m., California time, reimbursement shall be
made on the following Business Day, and, in the absence of such reimbursement,
the L/C Disbursement immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.6. To the extent an L/C Disbursement is
deemed to be an Advance hereunder, Borrower's obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting Advance. Promptly
following receipt by Administrative Agent of any payment from Borrower pursuant
to this paragraph, Administrative Agent shall distribute such payment to the
Issuing Lender or, to the extent that Lenders have made payments pursuant to
Section 2.14(c) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.14(a), each Lender with a Commitment agrees to fund its
Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection
on the same terms and conditions as if Borrower had requested such Advance and
Administrative Agent shall promptly pay to Issuing Lender the amounts so
received by it from the Lenders. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders with Commitment,
the Issuing Lender shall be deemed to have granted to each Lender with a
Commitment, and each Lender with a Commitment shall be deemed to have purchased,
a participation in each Letter of Credit, in an amount equal to its Pro Rata
Share of the Risk Participation Liability of such Letter of Credit, and each
such Lender agrees to pay to Administrative Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender with a Commitment hereby absolutely and unconditionally
agrees to pay to Administrative Agent, for the account of the Issuing Lender,
such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not reimbursed by Borrower on the date due as
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provided in clause (a) of this Section, or of any reimbursement payment required
to be refunded to Borrower for any reason. Each Lender with a Commitment
acknowledges and agrees that its obligation to deliver to Administrative Agent,
for the account of the Issuing Lender, an amount equal to its respective Pro
Rata Share pursuant to this Section 2.14(b) shall be absolute and unconditional
and such remittance shall be made notwithstanding the occurrence or continuation
of an Event of Default or Default or the failure to satisfy any condition set
forth in Section 3 hereof. If any such Lender fails to make available to
Administrative Agent the amount of such Lender's Pro Rata Share of any payments
made by the Issuing Lender in respect of such Letter of Credit as provided in
this Section, Administrative Agent (for the account of the Issuing Lender) shall
be entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided, however, that Borrower shall not
be obligated hereunder to indemnify for any loss, cost, expense, or liability
that is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. Borrower agrees to be bound by
the Underlying Issuer's regulations and interpretations of any Underlying Letter
of Credit or by Issuing Lender's interpretations of any L/C issued by Issuing
Lender to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrower's instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that the L/C Undertakings may require
Issuing Lender to indemnify the Underlying Issuer for certain costs or
liabilities arising out of claims by Borrower against such Underlying Issuer.
Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group
harmless with respect to any loss, cost, expense (including reasonable attorneys
fees), or liability incurred by the Lender Group under any L/C Undertaking as a
result of the Lender Group's indemnification of any Underlying Issuer; provided,
however, that Borrower shall not be obligated hereunder to indemnify for any
loss, cost, expense, or liability that is caused by the gross negligence or
willful misconduct of the Issuing Lender, any other member of the Lender Group
or the Underlying Issuer.
(d) Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by
the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Administrative Agent for the account of the Issuing
Lender; it being acknowledged and agreed by Borrower that, as of the Closing
Date, the issuance charge imposed by the prospective
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Underlying Issuer is .825% per annum times the face amount of each Underlying
Letter of Credit, that such issuance charge may be changed from time to time,
and that the Underlying Issuer also imposes a schedule of charges for
amendments, extensions, drawings, and renewals.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer or
the Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or
the Lender Group any other condition regarding any Underlying Letter of Credit
or any Letter of Credit issued pursuant hereto,
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Administrative Agent may, at any time within
a reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrower, and Borrower shall pay on demand such amounts as
Administrative Agent may specify to be necessary to compensate the Lender Group
for such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at the rate
then applicable to Advances hereunder. The determination by Administrative Agent
of any amount due pursuant to this Section, as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.
(g) Borrower acknowledges and agrees that certain of the
Qualified Import Letters of Credit may provide for the presentation of time
drafts to the Underlying Issuer. If an Underlying Issuer accepts such a time
draft that is presented under an Underlying Letter of Credit, it is acknowledged
and agreed that (i) the Letter of Credit will require the Issuing Lender to
reimburse the Underlying Issuer for amounts paid on account of such time draft
on or after the maturity date thereof, (ii) the pricing provisions hereof
(including Sections 2.6(b) and 2.14(e)) shall continue to apply, until payment
of such time draft on or after the maturity date thereof, as if the Underlying
Letter of Credit were still outstanding, and (iii) on the date on which Issuing
Lender makes payment to the Underlying Issuer of the amounts paid on account of
such time draft, Borrower immediately shall reimburse such amount to Issuing
Lender and such amount shall constitute an L/C Disbursement hereunder.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The obligation of the
Lender Group (or any member thereof) to make the initial Advance is subject to
the fulfillment, to the
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satisfaction of the Collateral Agent and its counsel, of each of the following
conditions on or before the Closing Date, and upon such satisfaction, this
Agreement shall be deemed effective:
(a) the Closing Date shall occur on or before July 1, 2002;
(b) The Reorganization Plan shall be in form and substance
satisfactory to Agents;
(c) the Confirmation Order shall have been entered by the
Bankruptcy court, shall be in full force and effect, and shall be final and
non-appealable, and shall not be the subject of any appeal;
(d) Collateral Agent shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Pledge Agreement, duly executed by Borrower,
substantially in the form attached as Exhibit 3.1(d)(i) to this Agreement,
together with stock certificates and stock powers required by the terms of the
Pledge Agreement;
(ii) the Intercreditor Agreement, duly executed by the
Senior Notes Trustee, the Junior Notes Trustee, and Borrower;
(iii) the Mortgages substantially in the form attached as
Exhibit 3.1(d)(iii) to this Agreement; and
(iv) the Fee Letter.
(e) Collateral Agent shall have received a certificate from the
Secretary of Borrower (i) attesting to the resolutions of its Board of Directors
authorizing Borrower's execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same and (ii) certifying the names
and true signatures of the officers of Borrower authorized to sign each Loan
Document;
(f) Collateral Agent shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Borrower;
(g) Collateral Agent shall have received a certificate of status
with respect to Borrower dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;
(h) Collateral Agent shall have received certificates of status
with respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which Borrower's failure to be duly qualified or
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licensed would constitute a Material Adverse Change, which certificates shall
indicate that Borrower is in good standing in such jurisdictions;
(i) Collateral Agent shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.10, the form and substance of which shall be satisfactory to Collateral Agent
and its counsel and certified copies of the policies of insurance, together with
the endorsements thereto, as are required by Section 6.10, the form and
substance of which shall be satisfactory to Collateral Agent and its counsel;
(j) Collateral Agent shall have received a certificate from the
Secretary of Borrower certifying as to the satisfaction of the conditions set
forth in Section 3.2;
(k) the Liens in favor of Collateral Agent for the benefit of the
Lenders pursuant to this Agreement shall be legal, valid, continuing and
fully-perfected first priority Liens on the Collateral, subject only to
Permitted Priority Liens;
(l) Collateral Agent shall have received satisfactory evidence
that all tax returns required to be filed by Borrower have been timely filed and
all taxes upon Borrower or its properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(m) Borrower shall have a minimum of $14,000,000 of Availability
and unrestricted cash after the payment of all fees and expenses incurred in
connection with the transaction contemplated by this Agreement;
(n) Agents shall have received copies of Borrower's Closing Date
Business Plan;
(o) Agents shall have received (i) all financing statements
required by Agents, duly authorized by Borrower, and (ii) searches reflecting
the filing of all such financing statements;
(p) Collateral Agent shall have received possession of the Komag
Bermuda Intercompany Note, the Komag Malaysia Intercompany Note, and any and all
other Intercompany Notes extant as of the Closing Date;
(q) copies of the Senior Notes Indenture and all of the related
collateral and other documents as in effect on the Closing Date, certified as
true and correct copies thereof by an Authorized Officer of Borrower, each of
which shall be in form and substance satisfactory to the Agents, together with a
certificate of an Authorized Officer of Borrower stating that such agreements
remain in full force and effect;
(r) copies of the Junior Notes Indenture and all of the related
collateral and other documents as in effect on the Closing Date, certified as
true and correct copies thereof by an Authorized Officer of Borrower, each of
which shall be in form and substance satisfactory
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to the Agents, together with a certificate of an Authorized Officer of Borrower
stating that such agreements remain in full force and effect;
(s) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Collateral Agent
and its counsel; and
(t) Agents shall have received an opinion from Borrower's United
States and Bermuda counsel, in form and substance satisfactory to Agents.
(u) Borrower shall have paid all Lender Group Expenses incurred
in connection with the transactions evidenced by this Agreement, including the
fees of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for Agents.
Execution and delivery to the Collateral Agent by a Lender of a counterpart of
this Agreement shall be deemed confirmation by such Lender that (i) all
conditions precedent in this Section 3.1 have been fulfilled to the satisfaction
of such Lender and (ii) the decision of such Lender to execute and deliver to
the Collateral Agent an executed counterpart of this Agreement was made by such
Lender independently and without reliance on the Collateral Agent or any other
Lender as to the satisfaction of any condition precedent set forth in this
Section 3.1.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The following shall be
conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, any Agent, the Lender Group, or any of their Affiliates;
(d) Borrower shall have paid all fees, costs, expenses and taxes
then payable by Borrower to either Agent or any member of the Lender Group
pursuant to the Loan Documents including, without limitation, those due and
payable pursuant to Sections 2.11 and 11.3 hereof.
The foregoing conditions precedent are not conditions to each Lender
participating in or reimbursing Swing Lender or the Administrative Agent for
such Lenders' Pro Rata Share of any Swing Loan or Agent Advance as provided
herein.
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3.3 CONDITIONS SUBSEQUENT TO CLOSING DATE.
The obligation of the Lender Group (or any member thereof) to continue
to make Advances (or otherwise extend credit hereunder) is subject to the
fulfillment, on or before the date applicable thereto, of each of the conditions
subsequent set forth below (the failure by Borrower to so perform or cause to be
performed constituting an Event of Default):
(a) within 30 days after the Closing Date, deliver to Collateral
Agent a Control Agreement with respect to any Securities Account or bank account
maintained by Borrower.
3.4 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending three (3) years after the Closing Date (the
"Maturity Date"). The foregoing notwithstanding, the Lender Group shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrower with
respect to outstanding Letters of Credit) immediately shall become due and
payable without notice or demand (including (a) either (i) providing cash
collateral to be held by Administrative Agent for the benefit of those Lenders
with a Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to the
Issuing Lender). No termination of this Agreement, however, shall relieve or
discharge Borrower of its duties, Obligations, or covenants hereunder or under
the other Loan Documents, and Collateral Agent's continuing security interests
in the Collateral, for the benefit of the Lender Group, shall remain in effect
until all Obligations have been fully and finally discharged and the Lender
Group's obligation to provide additional credit hereunder have been terminated.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any time
upon 30 days prior written notice to the Agents, to terminate this Agreement
prior to the Maturity Date by paying to Administrative Agent (for the ratable
benefit of the Lender Group) in cash, the Obligations (including (a) either (i)
providing cash collateral to be held by Administrative Agent for the benefit of
those Lenders with a Commitment in an amount equal to 105% of the then extant
Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender) in full without premium or penalty .
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Collateral
Agent, for the benefit of the Lender Group, continuing Liens on all right,
title, and interest of Borrower in and to all currently existing and hereafter
acquired or arising Collateral (other than Real Property Collateral) in order to
secure prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrower of its covenants and duties under the Loan Documents
(the
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"Collateral Agent's Liens"). The Collateral Agent's Liens in and to the
Collateral (other than Real Property Collateral) shall attach to all Collateral
(other than Real Property Collateral) without further act on the part of the
Lender Group or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except as permitted by Section 7.4,
Borrower shall not have authority, express or implied, to dispose of any item or
portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower
promptly shall endorse and deliver physical possession of such Negotiable
Collateral to Collateral Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuance of an
Event of Default, Collateral Agent or Collateral Agent's designee may (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles,
or Negotiable Collateral have been assigned to Collateral Agent or that
Collateral Agent for the benefit of the Lender Group has a security interest
therein and (b) collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the
request of Collateral Agent, Borrower shall execute and deliver to Collateral
Agent all financing statements, collateral assignments, continuation financing
statements, fixture filings, security agreements, pledges, assignments,
Mortgages, leasehold Mortgages, deeds of trust, leasehold deeds of trust,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Collateral Agent reasonably may request, in form satisfactory to
Collateral Agent, to perfect and continue perfected the Collateral Agent's Liens
on the Collateral (whether now owned or hereafter arising or acquired), and in
order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes,
and appoints Collateral Agent (and any of Collateral Agent's officers,
employees, or agents designated by Collateral Agent) as Borrower's true and
lawful attorney, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in Section 4.4, sign the name
of Borrower on any of the documents described in Section 4.4, (b) at any time
that an Event of Default has occurred and is continuing, sign Borrower's name on
any invoice or ▇▇▇▇ of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse Borrower's name on any Collection item that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Collateral Agent, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and forward all other mail to Borrower, (f) at any time that
an Event of Default has occurred and is continuing, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
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decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Agent determines to be reasonable, and Collateral Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Collateral Agent as Borrower's
attorney, and each and every one of Collateral Agent's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and the Lender Group's obligations to
extend credit hereunder is terminated.
5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete in all material respects as of the
date hereof, and shall be true, correct, and complete in all material respects
as of the Closing Date, and at and as of the date of the making of each Advance,
as though made on and as of the date of the making of such Advance (except to
the extent that such representations and warranties relate solely to an earlier
date), subject to such exceptions as are specifically disclosed in the
disclosure letter supplied to the Administrative Agent (the "Disclosure
Schedule") as of the date hereof, and such representations and warranties shall
survive the execution and delivery of this Agreement:
5.1 FINANCIAL CONDITION. The consolidated balance sheets of Borrower and
its Subsidiaries as at December 30, 2001 and the related consolidated statements
of income and of cash flows for the fiscal year ended on such date, reported on
by Borrower's independent certified public accountants, copies of which have
heretofore been furnished to the Agents, present fairly the consolidated
financial condition of Borrower and its Subsidiaries as at such dates, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended. The unaudited consolidated balance sheet of Borrower
and its Subsidiaries as at March 31, 2002 and the related unaudited consolidated
statements of income and of cash flows for the periods ended on such date,
certified by the chief financial officer or controller of Borrower, copies of
which have heretofore been furnished to the Agents, present fairly and in all
material respects the consolidated financial condition of Borrower and its
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the periods then ended (subject to
footnote disclosures and normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or such officer, as the case
may be, and as disclosed therein).
5.2 OWNERSHIP OF PROPERTY; LIENS. Each of Borrower and its Subsidiaries
has good and valid title to all its assets and properties (other than Collateral
or goods sold on a consignment basis), except where the failure to have such
title could not reasonably be expected to result in a Material Adverse Change,
in each case free and clear of all Liens of any nature whatsoever except the
Liens permitted by Section 7.2. With respect to interests in Real Property,
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each of Borrower and its Subsidiaries has good and valid title to all Real
Property owned by it and the leasehold estates in all of the Real Property
leased by it, except where the failure to have such title could not reasonably
be expected to result in a Material Adverse Change, in each case free and clear
of all Liens, easements, covenants, rights-of-way and other similar restrictions
of any nature whatsoever, except (A) the Liens permitted by Section 7.2, (B)
easements, covenants, rights-of-way and other similar restrictions of record,
(C) any conditions that may be shown by a current, accurate survey or physical
inspection of any Real Property owned or leased by it made prior to the Closing
Date, (D) any immaterial condemnation or eminent domain proceeding affecting any
Real Property that does not prevent such Real Property from being utilized by
Borrower or any of its Subsidiaries substantially for the purposes for which it
was being utilized prior to such proceeding, and (E) (i) zoning, building and
other similar restrictions, (ii) Liens that have been placed by any developer,
landlord or other third party on property over which Borrower or any of its
Subsidiaries has easement rights or on any Real Property leased by Borrower or
any of its Subsidiaries and subordination or similar agreements relating
thereto, and (iii) unrecorded easements, covenants, rights-of-way or other
similar restrictions, none of which items set forth in clauses (i), (ii) and
(iii), individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate in the business of Borrower and
its Subsidiaries, taken as a whole, as currently conducted.
5.3 EQUIPMENT. Except as set forth in Schedule 5.3 to the Disclosure
Schedule, all of the Equipment is used or held for use in Borrower's business
and is fit for such purposes.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment are
not stored with a bailee, warehouseman, or similar party and are located only at
the locations identified on Schedule 6.12 to the Disclosure Schedule or
otherwise permitted by Section 6.12.
5.5 INVENTORY RECORDS. Borrower keeps correct and accurate records in
all material respects itemizing and describing the kind, type, quality, and
quantity of the Inventory, and Borrower's cost therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive office
of Borrower is located at the applicable address indicated in the preamble to
this Agreement. Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.7 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower and each of its Subsidiaries, (i) is duly organized
and existing and in good standing under the laws of the jurisdiction of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified reasonably could
be expected to constitute a Material Adverse Change, (ii) has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to use its
corporate name and to own, lease or otherwise hold its properties and assets and
to carry on its business as currently conducted other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change, and (iii) is in compliance with all applicable statutes, laws,
ordinances, rules,
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orders and regulations of any Governmental Authority or instrumentality,
domestic or foreign (including, without limitation, those related to asbestos,
petroleum and hazardous wastes and substances), except where noncompliance could
not reasonably be expected to result in a Material Adverse Change. Borrower has
not received any written communication from a Governmental Authority that
alleges that Borrower or any of its Subsidiaries is not in compliance, in all
material respects, with all material federal, state, local or foreign laws,
ordinances, rules and regulations, except where non-compliance could not
reasonably be expected to result in a Material Adverse Change.
(b) Set forth on Schedule 5.7 to the Disclosure Schedule is a
complete and accurate list of Borrower's direct and indirect Subsidiaries,
showing: (i) the jurisdiction of their incorporation; (ii) the number of shares
of each class of common and preferred Stock authorized for each of such
Subsidiaries; and (iii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by Borrower. All of the
outstanding capital Stock of each such Subsidiary has been validly issued and is
fully paid and non-assessable.
5.8 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation (including
Regulations T, U, and X of the Federal Reserve Board) applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation or material lease of
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of Borrower, other than
Liens arising hereunder, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) Other than the taking of any action expressly required under
this Agreement and the Loan Documents, the execution, delivery, and performance
by Borrower of this Agreement and the Loan Documents to which Borrower is a
party do not and will not require from Borrower any registration with, consent,
or approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is a
party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against it in accordance with their respective terms.
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(e) The Collateral Agent's Liens granted by Borrower to
Collateral Agent, for the benefit of the Lender Group, in and to its properties
and assets pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and, except to the extent junior to Permitted Priority
Liens, first priority Liens.
5.9 INVESTMENT COMPANY ACT. Neither Borrower nor any of its Subsidiaries
is an "investment company" or a company "controlled" by an "investment company"
(as each of the quoted terms is defined or used in the Investment Company Act of
1940, as amended).
5.10 LITIGATION. Except as set forth on Schedule 5.10 to the Disclosure
Schedule no litigation by, investigation known to Borrower by, or proceeding of,
any Governmental Authority is pending against Borrower with respect to the
validity, binding effect or enforceability of this Agreement, any other Loan
Document or the transactions contemplated hereby, and there are no lawsuits,
claims, proceedings or investigations are pending or, to the best knowledge of
Borrower, threatened against or affecting Borrower or any of its Subsidiaries or
any of its properties, assets, operations or businesses, except for (a) matters
disclosed on Schedule 5.10 to the Disclosure Schedule and (b) matters arising
after the Closing Date that, if decided adversely to Borrower, reasonably could
not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrower that have been delivered to the Lender Group have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended. Since the date of
the latest financial statements submitted to the Lender Group on or before the
Closing Date there has not been a Material Adverse Change with respect to
Borrower, except as may relate to the consummation of the Reorganization and the
implementation of the Reorganization Plan.
5.12 TAXES. Borrower and each of its Subsidiaries has filed or caused to
be filed all material tax returns which, to the knowledge of Borrower, are
required to be filed and, except for real estate taxes disclosed on Schedule
5.12 to the Disclosure Schedule and federal and state taxes for periods prior to
August 24, 2001 payable as provided in the Reorganization Plan, Borrower has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than (i) for which an extension for filing is available and Borrower and
each of its Subsidiaries has taken necessary steps to qualify for such
extension, (ii) where the failure to file would not result in a Material Adverse
Change, and (iii) any the amount or validity of which are subject to a Permitted
Protest, as the case may be); except for Permitted Liens and Liens arising from
the nonpayment of the real estate taxes disclosed on Schedule 5.12, no tax Lien
has been filed; and except for written claims made with respect to federal and
state taxes for periods prior to August 24, 2001, to the knowledge of Borrower,
no written claim is being asserted, with respect to any such tax, fee or other
charge.
5.13 EMPLOYEE BENEFITS. During the twelve-consecutive-month period prior
to the date of the execution and delivery of this Agreement, no steps have been
taken to terminate any
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Pension Plan, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA,
which, in either case, is reasonably expected to lead to a liability to such
Pension Plan in excess of $5,000,000. No condition exists or event or
transaction has occurred with respect to any Pension Plan which could reasonably
be expected to result in the incurrence by Borrower or any ERISA Affiliate of
any material liability, fine or penalty other than such condition, event or
transaction which would not reasonably be expected to result in a Material
Adverse Change. Except as disclosed in Schedule 5.13 to the Disclosure Schedule
or otherwise approved by the Collateral Agent, since the date of the last
financial statement Borrower has not increased any contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of Subtitle B of Title I
of ERISA, except as would not result in a Material Adverse Change.
5.14 ENVIRONMENTAL CONDITION. Except as set forth in Schedule 5.14 to
the Disclosure Schedule or as, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change:
(a) all facilities and property (including underlying
groundwater) owned or leased by Borrower or any of its Subsidiaries are in
material compliance with all Environmental Laws;
(b) within the past three years there have not been, and, to the
actual knowledge of Borrower, there are no pending or threatened (i) written
claims, complaints, notices or requests for information received by Borrower or
any of its Subsidiaries with respect to any alleged violation of any
Environmental Law, or (ii) written complaints, notices or inquiries to Borrower
or any of its Subsidiaries regarding potential liability under any Environmental
Law;
(c) to the actual knowledge of Borrower there have been no
releases (as such term is defined in CERCLA) of Hazardous Materials at, on or
under any property now or previously owned or leased by Borrower or any of its
Subsidiaries which could reasonably be expected to result in material liability
to Borrower or any of its Subsidiaries;
(d) Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters necessary for the conduct
of their businesses as currently being conducted;
(e) no property now owned or leased by Borrower or any of its
Subsidiaries is listed, or, to the actual knowledge of Borrower or any of its
Subsidiaries, is proposed for listing (with respect to owned property only) on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up;
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(f) to the actual knowledge of Borrower, there are no underground
storage tanks, active or abandoned, including petroleum storage tanks, on or
under any property now or previously owned or leased by Borrower or any of its
Subsidiaries;
(g) to the actual knowledge of Borrower, Borrower and its
Subsidiaries have not directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or to
the knowledge of Borrower or any of its Subsidiaries, proposed for listing on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list which could reasonably be expected to subject Borrower or its
Subsidiaries to material liability;
(h) to the actual knowledge of Borrower, there are no
polychlorinated biphenyls or friable asbestos present in a manner or condition
which could reasonably be expected to subject Borrower or its Subsidiaries to
material liability at any property now or previously owned or leased by Borrower
or any of its Subsidiaries; and
(i) to the actual knowledge of Borrower, no conditions exist at,
on or under any property now owned or leased by Borrower or any of its
Subsidiaries which could reasonably be expected to subject Borrower or its
Subsidiaries to material liability under any Environmental Law; and to the
actual knowledge of Borrower, no conditions existed at, on, or under any
property previously owned or leased by Borrower or any of its Subsidiaries at
the time it ceased to be owned or leased by Borrower or its Subsidiaries which
could reasonably have been expected to give rise to material liability.
5.15 BROKERAGE FEES. No brokerage commission or finders fees has or
shall be incurred or payable by Borrower in connection with or as a result of
Borrower's obtaining financing from the Lender Group under this Agreement, and
Borrower has not utilized the services of any broker or finder in connection
with Borrower's obtaining financing from the Lender Group under this Agreement.
5.16 PERMITS AND OTHER INTELLECTUAL PROPERTY. To Borrower's knowledge,
Borrower and each of its Subsidiaries owns or possesses adequate licenses or
other rights to use all Permits, patents, patent applications, trademarks,
trademark applications, service marks, service ▇▇▇▇ applications, trade names,
copyrights, trade secrets and know-how (collectively, the "Intellectual
Property") that are necessary for the operation of its business as currently
conducted. Except as set forth in Schedule 5.16 to the Disclosure Schedule or
that, if decided adversely to Borrower, could not reasonably be expected to
result in a Material Adverse Change, no claim is pending or, to the knowledge of
Borrower, threatened to the effect that Borrower or its Subsidiaries infringes
upon, the asserted rights of any other Person under any Intellectual Property,
and to Borrower's knowledge there is no basis for any such claim (whether
pending or threatened). Except as set forth in Schedule 5.16 to the Disclosure
Schedule, no claim is pending or, to the knowledge of Borrower, threatened to
the effect that any such Intellectual Property owned or licensed by Borrower or
its Subsidiaries, or in which Borrower or its Subsidiaries otherwise has the
right to use is invalid or unenforceable by Borrower, and to Borrower's
knowledge, there is no basis for any such claim (whether or not pending or
threatened).
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5.17 [INTENTIONALLY OMITTED.]
5.18 [INTENTIONALLY OMITTED.]
5.19 FINANCIAL STATUS OF DOMESTIC SUBSIDIARIES. Borrower's Domestic
Subsidiaries known as Komag Asia Pacific, Inc., a Delaware corporation, and
Komag Distribution Company, a Delaware corporation, have no significant business
operations and have only de minimis assets and liabilities.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the termination of this Agreement and the full and
final payment of the Obligations, Borrower shall, and Borrower shall cause each
of its Subsidiaries to, do all of the following:
6.1 FINANCIAL STATEMENTS; CERTIFICATES; OTHER INFORMATION. Furnish to
the Agents (with copies to each Lender):
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each fiscal year
of Borrower,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and its Subsidiaries'
operations during such period,
(ii) a certificate signed by the chief financial officer,
controller, or treasurer of Borrower to the effect that:
(A) the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the lack
of footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects the financial condition
of Borrower and its Subsidiaries,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date), or, to the extent that any such
representation or warranty is not true in any material respect, a
description of the circumstances giving rise thereto; and in no
event shall the fact that any such representation or warranty
cannot be made in such certificate be the sole basis for a
Default or Event of Default,
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(C) there does not exist any condition or event
that constitutes a Default or Event of Default (or, to the extent
of any non-compliance, describing such non-compliance as to which
he or she may have knowledge and what action Borrower has taken,
is taking, or proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.19 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such period with
the applicable financial covenants contained in Section 7.19, and
(b) as soon as available, but in any event within 90 days after
the end of each fiscal year of Borrower,
(i) financial statements of Borrower and its Subsidiaries
for each such fiscal year, audited by independent certified public accountants
of recognized standing and certified, without any qualifications (except as may
be related to the Reorganization), by such accountants to have been prepared in
accordance with GAAP (such audited financial statements to include a balance
sheet, income statement, and statement of cash flow and, if prepared, such
accountants' final letter to management),
(ii) a certificate of such accountants addressed to Agents
and the Lenders stating that such accountants do not have knowledge of the
existence of any Default or Event of Default under Section 7.19,
(c) as soon as available, but in any event within 30 days prior
to the start of each of Borrower's fiscal years,
(i) copies of Borrower's Projections, in form and
substance (including as to scope and underlying assumptions) consistent with the
Closing Date Business Plan for the forthcoming 3 years, year by year, and for
the forthcoming fiscal year, quarter by quarter, certified by the chief
financial officer, controller, or treasurer of Borrower as being such officer's
good faith best estimate of the financial performance of Borrower during the
period covered thereby,
(d) promptly after filing by Borrower or any of its Subsidiaries,
(i) Form 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other publicly available filings made by Borrower
or any of its Subsidiaries with the SEC once they are final or effective,
(iii) copies of Borrower's federal income tax returns, and
any amendments thereto, filed with the Internal Revenue Service,
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(iv) any other information that is provided by Borrower or
any of its Subsidiaries, to their respective shareholders generally,
(e) if and when filed by Borrower and as requested by any Agent,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) Borrower conducts business or is required to pay any
such excise tax, (ii) where Borrower's failure to pay any such applicable excise
tax would result in a Lien on the properties or assets of Borrower, or (iii)
where Borrower's failure to pay any such applicable excise tax reasonably could
be expected to result in a Material Adverse Change, and
(f) [Intentionally omitted.]
(g) upon the request of any Agent, any other report reasonably
requested relating to the financial condition of Borrower.
In addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on both a consolidated and consolidating
basis and agrees that no Subsidiary of Borrower will have a fiscal year
different from that of Borrower. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by any Agent
pursuant to or in accordance with this Agreement, and agrees that any Agent,
upon reasonable notice to Borrower (in the absence of a continuing Event of
Default), may contact directly any such accounting firm or service bureau in
order to obtain such information.
6.2 [INTENTIONALLY OMITTED.]
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations and liabilities of whatever nature, except (a) when the amount or
validity thereof is subject to a Permitted Protest, (b) for delinquent
obligations which do not cause a Material Adverse Change and (c) for trade and
other accounts payable in the ordinary course of business which are not overdue
for a period of more than 120 days or, if overdue for more than 120 days, which
are subject to a Permitted Protest.
6.4 [INTENTIONALLY OMITTED.]
6.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to engage
in business of the same general type as now conducted by it, and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges, franchises, copyrights,
trademarks and trade names necessary or desirable in the normal conduct of its
business except for rights, privileges, franchises and Intellectual Property the
loss of which could not reasonably be expected to cause a Material Adverse
Change, and except as otherwise permitted hereunder; and comply with all
applicable Requirements of Law except to the extent that the failure to comply
therewith could not reasonably be expected to, in the aggregate, cause a
Material Adverse Change.
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6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of record and account in which full, true and correct entries are made of
all dealings and transactions in relation to its business and activities which
permit financial statements to be prepared in conformity with GAAP and all
Requirements of Law; and permit representatives of any Agent or any Lender, upon
reasonable notice (in the absence of a continuing Event of Default), to visit
and make a reasonable inspection of any of its properties, including the
Collateral, and reasonably examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be requested, upon
reasonable notice (in the absence of a continuing Event of Default), and to
discuss the business, operations, assets and financial and other condition of
Borrower and its Subsidiaries with officers thereof and, in the presence of a
representative of Borrower, with their independent certified public accountants.
Borrower agrees that its independent certified public accountants are
authorized, in the presence of a representative of Borrower, to communicate with
the Agents and the Lenders and to release to the Agents whatever financial
information concerning Borrower the Agents reasonably may request.
6.7 TITLE TO EQUIPMENT. Upon Collateral Agent's request after the
occurrence and during the continuance of an Event of Default, Borrower promptly
shall deliver to Collateral Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Except to the extent that the failure to
do so could not reasonably be expected to cause a Material Adverse Change,
maintain, preserve, protect and keep its properties (other than insignificant
properties) in good repair, working order and condition (ordinary wear and tear
excepted), and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times unless Borrower determines in good faith that the continued
maintenance of any item of property is no longer economically desirable.
6.9 NOTICES. Promptly give notice to the Agents and each Lender:
(a) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, of such event or condition
and a statement of the curative action that Borrower proposes to take with
respect thereto;
(b) of any (i) default or event of default under any instrument
or other agreement, guarantee or collateral document of Borrower or any of its
Subsidiaries which default or event of default has not been waived and could
reasonably be expected to result in a Material Adverse Change, or (ii)
litigation, investigation or proceeding which may exist at any time between
Borrower or any of its Subsidiaries and any Governmental Authority, or receipt
of any notice of any environmental claim or assessment against Borrower or any
of its Subsidiaries by any Governmental Authority, which in any such case could
reasonably be expected to result in a Material Adverse Change;
(c) of the commencement of any litigation or proceeding against
Borrower or any of its Subsidiaries (i) in which more than $500,000 of the
amount claimed is not
-54-
covered by insurance or (ii) in which injunctive or similar relief is sought
which if obtained could reasonably be expected to result in a Material Adverse
Change;
(d) of the following events, as soon as practicable after the
chief financial officer or the chief executive officer of Borrower or any of its
ERISA Affiliates becomes aware thereof: (i) formal steps in writing to terminate
any Pension Plan or (ii) the occurrence of any event with respect to a Pension
Plan which, in the case of (i) or (ii), could reasonably be expected to result
in a contribution to such Pension Plan by (or a liability to) Borrower or such
ERISA Affiliate in excess of $5,000,000, (iii) the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give rise to a
Lien under section 302(f) of ERISA in an amount in excess of $5,000,000, (iv)
the taking of any action with respect to a Pension Plan which could reasonably
be expected to result in the requirement that Borrower furnish a bond to the
PBGC or such Pension Plan in an amount in excess of $5,000,000 or (v) any
material increase in the contingent liability of Borrower with respect to any
post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(e) of a Material Adverse Change known to Borrower.
Each notice pursuant to this Section 6.9 shall be accompanied by
a statement of an officer of Borrower setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (d)) stating what
action Borrower proposes to take with respect thereto.
6.10 INSURANCE.
(a) Maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses and with such provisions and
endorsements as the Collateral Agent may reasonably request and will, upon
request of the Collateral Agent, furnish to Collateral Agent a certificate of an
authorized officer of Borrower setting forth the nature and extent of all
insurance maintained by Borrower and its Subsidiaries in accordance with this
Section 6.10.
(b) All hazard insurance and such other insurance respecting
Collateral shall specify, shall contain an endorsement satisfactory to
Collateral Agent, showing Collateral Agent as loss payee thereof to the extent
of the Obligations, and shall contain a waiver of warranties. Every policy of
insurance referred to in this Section 6.10(b) shall contain an agreement by the
insurer that it will not cancel such policy except after 30 days prior written
notice to Collateral Agent and that any loss payable thereunder shall be payable
notwithstanding any act or negligence of Borrower which might, absent such
agreement, result in a forfeiture of all or a part of such insurance payment.
Borrower shall deliver to Collateral Agent certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.
(c) Original policies or certificates or other evidence thereof
reasonably satisfactory to Collateral Agent evidencing hazard insurance and such
other insurance respecting Collateral shall be delivered to Collateral Agent no
later than the date on which the
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existing or preceding policies are scheduled to expire. If Borrower fails to
maintain or renew any such insurance policies, Collateral Agent may do so on
Borrower's behalf and all sums so expended by Collateral Agent shall be
considered Lender Group Expenses. Borrower shall give Collateral Agent prompt
notice of any loss covered by such insurance that exceeds $100,000, and
Collateral Agent shall have the right to adjust any loss respecting the Owned
Properties. Collateral Agent shall have the exclusive right to adjust all losses
payable with respect to the Owned Properties under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments made
in the absence of any willful misconduct or gross negligence. Any monies
received as payment for any loss with respect to the Owned Properties under any
insurance policy including the insurance policies mentioned above, shall be paid
over to Collateral Agent to be applied at the option of the Required Lenders
either to the prepayment of the Obligations without premium, in such order as
set forth in Section 2.4 or shall be disbursed to Borrower under staged payment
terms satisfactory to Agents for application to the cost of repairs,
replacements, or restorations. All repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, the Lender Group shall
have the right to apply all prepaid premiums to the payment of the Obligations
in such order as set forth in Section 2.4.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.12 to the Disclosure
Schedule; provided, however, that Borrower may amend Schedule 6.12 to the
Disclosure Schedule so long as such amendment occurs by written notice to
Collateral Agent not less than 30 days prior to the date on which the Inventory
or Equipment is moved to such new location.
6.13 ENVIRONMENTAL LAWS.
(a) Use and operate all of its facilities and properties in
material compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith, and
handle all Hazardous Materials in material compliance with all applicable
Environmental Laws, in each case except where the failure to comply with the
terms of this clause could not reasonably be expected to result in Material
Adverse Change;
(b) Promptly notify the Agents and provide copies of all written
claims, complaints, notices or inquiries relating to the condition of its
facilities and properties or compliance with Environmental Laws which would
have, or would reasonably be expected to result in, a Material Adverse Change,
and promptly cure and have dismissed with prejudice any material actions and
proceedings relating to compliance with Environmental Laws, except to the extent
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP have been set aside on its
books; and
-56-
(c) Provide such information and certifications which the Agents
may reasonably request from time to time to evidence compliance with this
Section 6.13.
6.14 Intercompany Notes.
(a) Borrower (i) shall cause each of its Subsidiaries to execute
a promissory note in favor of Borrower for any Intercompany Advance that is owed
to Borrower by any of its Subsidiaries that arose as a result of the making of a
loan or advance by Borrower to such Subsidiary which loan or advance was
intended to remain, or has remained, outstanding for more than 90 days from the
date of its making or which Intercompany Advance, when aggregated with all
Intercompany Advances due from the applicable Subsidiary to Borrower, equals or
exceeds $5,000,000, and (ii) shall deliver in pledge possession of any such
promissory notes to Collateral Agent.
(b) If an Intercompany Advance is evidenced by an Intercompany
Note, and if the applicable Subsidiary of Borrower that is the maker of such
Intercompany Note proposes to remit monies to Borrower, Borrower shall cause
such Subsidiary to distribute such monies to Borrower, directly or indirectly,
by means of a dividend and not as a repayment of the Indebtedness evidenced by
the applicable Intercompany Note; provided, however, that monies may be
distributed to Borrower as repayment of the Indebtedness (and not as a dividend)
evidenced by an Intercompany Note so long as, after giving effect thereto, the
aggregate amount of Indebtedness evidenced by the Komag Malaysia Intercompany
Note and the Komag Bermuda Intercompany Note is at least $100,000,000.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the termination of this Agreement and the full and
final payment of the Obligations, Borrower will not, and Borrower will not
permit any of its Subsidiaries to, do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit;
(b) Indebtedness set forth on Schedule 7.1 to the Disclosure
Schedule,
(c) Indebtedness evidenced by the Senior Notes;
(d) Indebtedness evidenced by the Junior Notes;
(e) Indebtedness owed by Borrower or any of its Subsidiaries
arising as a result of Permitted Intercompany Advances; and
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(f) Indebtedness consisting of capitalized lease obligations,
Mortgage financings and Purchase Money Indebtedness in a maximum aggregate
principal amount at any one time not to exceed $15,000,000 for all such
Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for:
(a) the Collateral Agent's Liens securing the Obligations; and
(b) Permitted Liens.
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger or
consolidation or amalgamation (other than in connection with the Reorganization
Plan, other than the merger of a Foreign Subsidiary with and into another
Foreign Subsidiary (so long as Collateral Agent retains or receives a pledge of
the Stock of the surviving entity equivalent to its security interest in the
Stock of the disappearing entity immediately prior to the consummation of the
transaction, and other than the merger of a Domestic Subsidiary with and into
Borrower or another Wholly-Owned Subsidiary of Borrower that is a Domestic
Subsidiary), or liquidate, wind up or dissolve itself (or suffer any liquidation
or dissolution) (other than in connection with the Reorganization Plan and
except that Borrower may liquidate any Non-Material Subsidiary.
7.4 DISPOSAL OF ASSETS. Convey, sell, lease (other than a sublease of
real property), assign, transfer or otherwise dispose of (including through a
transaction of merger or consolidation of any Subsidiary of Borrower) any of its
property, business or assets (including, without limitation, tax benefits,
receivables and leasehold interests), whether now owned or hereafter acquired,
except for Permitted Dispositions.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure
(within the meaning of the Code), or identity, or add any new fictitious name
without providing 30 days prior notice to the Administrative Agent.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person other than by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Collateral Agent except for guarantees set
forth on Schedule 7.6 to the Disclosure Schedule.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's business.
7.8 FOREIGN EXCHANGE CONTRACTS. Enter into any foreign exchange
contracts other than hedging transactions entered into in the ordinary course of
business.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control, except as provided under the Reorganization Plan.
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7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on ▇▇▇▇
and hold, sale or return, sale on approval, or other conditional terms of sale,
other than in the ordinary course of business consistent with past practices.
7.11 DISTRIBUTIONS. Declare any dividends on any shares of any class of
Stock, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, retirement or other
acquisition of any shares of any class of Stock, or any warrants or options to
purchase such Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Borrower or any of its Subsidiaries; except
that Subsidiaries of Borrower may pay dividends or make other distributions to
Borrower.
7.12 ACCOUNTING METHODS. Borrower waives the right to assert a
confidential relationship, if any, it may have with its auditors or service
bureau in connection with any information requested by Agents pursuant to or in
accordance with this Agreement, and agrees that Agents may contact directly any
such auditors or service bureau in order to obtain such information.
7.13 INVESTMENTS. Except for existing Investments set forth in Schedule
7.13 to the Disclosure Schedule, make any advance, loan, extension of credit or
capital contribution to, or purchase any stock, bonds, notes, debentures or
other securities of, or make any other investment in (including, without
limitation, any acquisition of all or any substantial portion of the assets, and
any acquisition of a business or a product line, of other companies, other than
the acquisition of Inventory in the ordinary course of business), any Person,
except:
(a) Borrower and its Subsidiaries may invest in, acquire and hold
Cash Equivalents; provided, however, that in no event shall such (i) deposits in
Foreign Banks be made other than by Borrower's Foreign Subsidiaries, (ii)
deposits in Foreign Banks be in amounts in excess of the amounts historically
maintained by such Foreign Subsidiaries in the ordinary course of their
business, and (iii) deposits in all such Foreign Banks in the aggregate exceed
the greater of $12 million or 20% of the Cash Equivalents of Borrower and its
Subsidiaries calculated on a consolidated basis;
(b) Borrower or any of its Subsidiaries may make travel and
entertainment advances and relocation, education and other loans to their
respective officers and employees (or guarantee such obligations) in the
ordinary course as currently conducted;
(c) Borrower or any of its Subsidiaries may make payroll advances
in the ordinary course of business; and
(d) Borrower and its Subsidiaries may make Permitted Intercompany
Advances.
7.14 TRANSACTIONS WITH AFFILIATES. After the date of this Agreement,
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate of Borrower (other than a Wholly-Owned Subsidiary
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of Borrower) except for transactions which are not prohibited under this
Agreement and which are in the ordinary course of Borrower's or a Subsidiary's
business and which are upon fair and reasonable terms no less favorable to
Borrower or such Subsidiary than it would obtain in a hypothetical comparable
arm's length transaction with a Person not an Affiliate of Borrower, provided,
however, that nothing in this Section 7.14 shall prohibit Borrower and its
Subsidiaries from engaging in the following transactions: (a) performance of
Borrower's or Subsidiary's obligations under any employment contract, collective
bargaining agreement, employee benefit plan, related trust agreement or any
other similar arrangement heretofore or hereafter entered into in the ordinary
course, (b) payment of compensation to employees, officers, directors or
consultants in the ordinary course of business, (c) maintenance of benefit
programs or arrangements for employees, officers or directors, including,
without limitation, vacation plans, health and life insurance plans, deferred
compensation plans, incentive plans, and retirement or savings plans and similar
plans, (d) entering into and performing license, research and development, tax
sharing or similar agreements in the ordinary course of business, and (e)
entering into such transactions as are expressly required by or referred to in
the Reorganization Plan.
7.15 [INTENTIONALLY OMITTED.]
7.16 USE OF PROCEEDS. Use the proceeds of the Advances made hereunder
for any purpose other than (a) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof, for Borrower's lawful and permitted
corporate purposes.
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Collateral
Agent. The Inventory and Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party without Collateral Agent's
prior written consent.
7.18 [INTENTIONALLY OMITTED.]
7.19 FINANCIAL COVENANTS.
(a) Minimum Adjusted Tangible Net Worth. Fail to maintain
Adjusted Tangible Net Worth on a quarterly basis of at least the amounts set
forth below at the end of the applicable quarter:
Quarters Ended: Minimum Adjusted Tangible Net Worth:
-------------- -----------------------------------
Q3 2002 88,462,000
Q4 2002 82,906,000
Q1 2003 80,386,000
Q2 2003 76,845,000
Q3 2003 72,951,000
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Q4 2003 70,775,000
Q1 2004 70,857,000
Q2 2004 69,739,000
Q3 2004 68,033,000
Q4 2004 68,562,000
Q1 2005 70,678,000
Q2 2005 71,564,000
Q3 2005 72,204,000
(b) Minimum Adjusted Net Working Capital. Fail to maintain
Adjusted Net Working Capital on a quarterly basis of at least the amounts set
forth below at the end of the applicable quarter:
Quarters Ended: Minimum Adjusted Net Working Capital:
-------------- ------------------------------------
Q3 2002 13,000,000
Q4 2002 18,000,000
Q1 2003 21,308,000
Q2 2003 18,693,000
Q3 2003 20,049,000
Q4 2003 21,812,000
Q1 2004 26,857,000
Q2 2004 24,962,000
Q3 2004 29,295,000
Q4 2004 34,468,000
Q1 2005 42,574,000
Q2 2005 48,744,000
Q3 2005 56,210,000
(c) Total Cash Debt Service Coverage Ratio. Fail to maintain a
Total Cash Debt Service Coverage Ratio on a quarterly basis of at least the
amounts set forth below at the end of the applicable quarter:
Quarters Ended: Cash Debt Service Ratio:
-------------- -----------------------
Q4 2002 2.00:1.0
Q1 2003 2.00:1.0
Q2 2003 2.00:1.0
Q3 2003 2.00:1.0
Q4 2003 2.00:1.0
Q1 2004 1.80:1.0
Q2 2004 1.60:1.0
Q3 2004 1.70:1.0
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Q4 2004 1.80:1.0
Q1 2005 1.90:1.0
Q2 2005 2.00:1.0
Q3 2005 2.00:1.0
(d) Capital Expenditures. Make Capital Expenditures in excess of
$30,000,000 in the aggregate in any fiscal year.
(e) Consolidated EBITDAR. (i) Fail to achieve Consolidated
EBITDAR for the first two full fiscal quarters following the confirmation of the
Plan of Reorganization of at least $15,000,000 at the end of such second fiscal
quarter.
(ii) Fail to achieve Consolidated EBITDAR for first three
full fiscal quarters following the confirmation of the Plan of Reorganization of
at least $24,000,000 at the end of the third such fiscal quarter.
(iii) Fail to achieve Consolidated EBITDAR for the most
recently ended four full fiscal quarters of at least the amount set forth below
at the end of the applicable quarter:
Quarters Ended: Consolidated EBITDAR:
-------------- ---------------------
Q4 2002 21,435,000
Q1 2003 26,841,000
Q2 2003 38,540,000
Q3 2003 40,146,000
Q4 2003 41,825,000
Q1 2004 43,852,000
Q2 2004 45,932,000
Q3 2004 48,107,000
Q4 2004 50,676,000
Q1 2005 52,776,000
Q2 2005 54,841,000
Q3 2005 56,889,000
(f) Minimum Revenue - One Quarter. Fail to achieve Revenue of
at least the amounts set forth below at the end of the applicable quarter:
Q3 2002 48,767,000
Q4 2002 55,082,000
Q1 2003 58,306,000
Q2 2003 57,813,000
Q3 2003 58,361,000
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Q4 2003 61,548,000
Q1 2004 65,176,000
Q2 2004 64,622,000
Q3 2004 65,240,000
Q4 2004 68,827,000
Q1 2005 71,601,000
Q2 2005 70,993,000
Q3 2005 71,672,000
(g) Minimum Revenue - Two Quarters. Fail to achieve Revenue of at
least the amounts set forth below for the most recently ended two full fiscal
quarters at the end of the applicable quarter:
Q3 2002 89,413,000
Q4 2002 114,488,000
Q1 2003 120,947,000
Q2 2003 123,860,000
Q3 2003 123,918,000
Q4 2003 127,902,000
Q1 2004 135,172,000
Q2 2004 138,451,000
Q3 2004 138,519,000
Q4 2004 143,004,000
Q1 2005 149,790,000
Q2 2005 152,100,000
Q3 2005 152,176,000
7.20 LIEN PRIORITY; PAYMENTS. Suffer to exist at any time any Lien on
any properties, assets or rights (including, without limitation, Accounts,
Inventory and all other Collateral) except for Liens permitted by Section 7.2.
7.21 FACILITIES AGREEMENT.
Amend, restate, modify, renew or extend the Facilities Agreement or
enter into any new agreement with Chahaya to provide Chahaya and its Affiliates
or any other Person with access to and the right to occupy and use Borrower's
Real Property for no consideration or in a transaction that is not an arm's
length transaction and not based upon ordinary business terms and conditions
representing the Fair Market Value of the services, access, occupancy or lease
that is the subject of such transaction.
7.22 KOMAG BERMUDA.
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Amend, restate, or modify the charter or other applicable organizational
documents of Komag Bermuda or permit the liabilities of Komag Bermuda at any
time outstanding to exceed $1,000,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due
and payable, any portion of the Obligations (whether of principal, interest,
fees and charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts constituting Obligations);
8.2 If Borrower fails to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Sections 6.1, 6.3, 6.5, 6.7 and
6.13 of this Agreement, or comparable provisions of the other Loan Documents,
within 10 days of the date when required, or if Borrower fails to perform, keep,
or observe any other term, provision, condition, covenant, or agreement
contained in this Agreement (except Sections 7.19 (f) and (g)), in any of the
other Loan Documents, or in any other present or future agreement between
Borrower and the Lender Group;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.6 If a notice of a Lien (other than with respect to a Permitted Lien),
levy, or assessment is filed of record with respect to any of Borrower's
properties or assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or governmental
agency, or if any taxes or debts owing at any time hereafter to any one or more
of such entities becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon any of
Borrower's properties or assets and the same is not paid on the payment date
thereof;
8.7 If one or more judgments or decrees shall be entered against (i)
Borrower involving in the aggregate liability (not paid or fully covered by
insurance) of $2,000,000 or more or (ii) any Subsidiary of Borrower involving in
the aggregate liability (not paid or fully covered by insurance) of $2,000,000
or more, and any such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days of the entry thereof;
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8.8 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn; or
8.9 If any Loan Document shall cease, for any reason, to be in full
force and effect or Borrower or any of its Subsidiaries shall so assert in
writing, or any Loan Document shall cease to be effective to grant a perfected
Lien on any material item of Collateral described therein with the priority
purported to be created thereby;
8.10 If any of the following events shall occur with respect to any
Plan:
(a) the institution of any steps by any of Borrower, any of their
ERISA Affiliates or any other Person to terminate a Plan if, as a result of such
termination, any of Borrower or any such ERISA Affiliate could be required to
make a contribution to such Plan, or could reasonably expect to incur a
liability or obligation to such Plan, in excess of $2,000,000; or
(b) a contribution failure occurs with respect to any Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA in an amount in
excess of $2,000,000;
8.11 If (a) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(b) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, (c) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (d) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, (e) other than as previously disclosed to the Lender
Group, Borrower or any Affiliate thereof shall, or in the reasonable opinion of
the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or ERISA Reorganization of, a Multiemployer
Plan; and in each case in clauses (a) through (e) above, such event or
condition, together with all other such similar events or conditions relating to
a Plan, if any, would be reasonably likely to subject Borrower or any of its
Subsidiaries to any tax, penalty or other liabilities in the aggregate material
in relation to the business, assets, condition (financial or otherwise) or
results of operations of Borrower and its Subsidiaries taken as a whole;
8.12 If an Insolvency Proceeding is commenced by Borrower or any of its
Subsidiaries;
8.13 If an Insolvency Proceeding is commenced against Borrower, or any
of its Subsidiaries (other than a Non-Material Subsidiary), and any of the
following events occur: (a) Borrower or the Subsidiary (other than a
Non-Material Subsidiary) consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted, (c) the petition commencing the Insolvency Proceeding
is not
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dismissed within 45 calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, the Agents (including any
successor agent) and each other member of the Lender Group shall be relieved of
their obligations to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
Borrower or any of its Subsidiaries (other than a Non-Material Subsidiary), or
(e) an order for relief shall have been entered therein;
8.14 At any time that there are outstanding Advances of at least
$250,000, Borrower fails to perform either of the covenants contained in Section
7.19 (f) or Section 7.19(g) and an Agent gives written notice to Borrower of its
election to declare an Event of Default based on such failure;
8.15 [INTENTIONALLY OMITTED.]
8.16 [INTENTIONALLY OMITTED.]
8.17 [INTENTIONALLY OMITTED.]
8.18 [INTENTIONALLY OMITTED.]
8.19 Borrower or any of its Subsidiaries fails to pay any principal of
or interest on any of its Indebtedness (excluding the Obligations) in excess of
$1,000,000, in the aggregate, or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such Indebtedness, or
any other default under any agreement or instrument relating to any such
Indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased
or an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case prior to the stated maturity thereof; or
8.20 If (a) Borrower shall attempt to invalidate, reduce or otherwise
impair the Liens or security interests of Collateral Agent and the Lenders'
claims or rights against Borrower, (b) any Lien or security interest created by
this Agreement shall, for any reason, cease to be valid or (c) any action is
commenced by Borrower or any other Person which contests the validity,
perfection or enforceability of any of the Liens and security interests of
Collateral Agent and the Lenders created by this Agreement.
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9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, and upon providing Borrower with four (4)
Business Days notice, the Required Lenders (at their election but without notice
of their election and without demand) may, except to the extent otherwise
expressly provided or required below or otherwise prohibited by applicable law,
authorize and instruct Collateral Agent to do any one or more of the following
on behalf of the Lender Group (and Collateral Agent, acting upon the
instructions of the Required Lenders, shall do the same on behalf of the Lender
Group), all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived, and an action therefor shall immediately accrue;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group, but without
affecting Collateral Agent's rights and security interests, for the benefit of
the Lender Group, in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Collateral Agent considers advisable,
and in such cases, Collateral Agent will credit Borrower's Loan Account with
only the net amounts received by Administrative Agent in payment of such
disputed Accounts after deducting all Lender Group Expenses incurred or expended
in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
the Lender Group, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of the Lender Group;
(f) Without further notice to or demand upon Borrower, make such
payments and do such acts as Collateral Agent considers necessary or reasonable
to protect its security interests in the Collateral. Borrower agrees to assemble
the Collateral if Collateral Agent so requires, and to make the Collateral
available to Collateral Agent as Collateral Agent may designate. Borrower
authorizes Collateral Agent to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or Lien
that in Collateral Agent's determination appears to conflict with the Collateral
Agent's Liens and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned or leased premises, Borrower hereby grants
Collateral Agent a license to enter into possession of such premises and
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to occupy the same, without charge, for up to 120 days in order to exercise any
of the Lender Group's rights or remedies provided herein, at law, in equity, or
otherwise;
(g) Without further notice to Borrower (such further notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by the Lender Group, or (ii) indebtedness at any time owing to or for the credit
or the account of Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits
of Borrower held by the Lender Group, to secure the full and final repayment of
all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Collateral Agent is hereby granted a license or other
right to use, without charge, for the benefit of Lender Group, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender Group's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Collateral
Agent determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Collateral Agent shall give notice of the disposition of the
Collateral as follows:
(1) Collateral Agent shall give Borrower a notice in
writing of the time and place of public sale, or, if the sale is a private sale
or some other disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least 10 days before
the date fixed for the sale, or at least 10 days before the date on or after
which the private sale or other disposition is to be made; no notice needs to be
given prior to the disposition of any portion of the Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Collateral Agent;
(l) The Lender Group may credit bid and purchase at any public
sale;
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(m) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents; and
(n) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Collateral Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Collateral
Agent determines in its reasonable judgment that such failure by Borrower could
result in a Material Adverse Change, in its discretion and without prior notice
to Borrower, Collateral Agent may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
Loan Account as Collateral Agent deems necessary to protect the Lender Group
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type described in Section 6.10, and take any action with respect
to such policies as Collateral Agent reasonably deems prudent. Any such amounts
paid by Lender Group shall constitute Lender Group Expenses. Any such payments
made by Lender Group shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Collateral Agent need not inquire as to, or
contest the validity of, any such expense, tax, or Lien and the receipt of the
usual official notice for the payment thereof shall be conclusive evidence that
the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. So long as the Lender
Group complies with its obligations, if any, under the Code, the Lender Group
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage
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thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower agrees to pay, indemnify, defend, and
hold each Agent-Related Person, each Lender-Related Person, each Lender, each
Participant, and each of their respective officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the indemnification set forth in this provision shall not apply
to claims, demands, suits, actions, investigations, proceedings and damages that
arose prior to August 24, 2001, which is the date Borrower filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code. Borrower shall not
have any obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to the relevant party at
its address set forth below:
IF TO BORROWER: KOMAG, INCORPORATED
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
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IF TO COLLATERAL AGENT
OR THE LENDER GROUP
IN CARE OF
COLLATERAL AGENT: ABLECO FINANCE LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇▇, PHLEGER & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ Hilson, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
IF TO ADMINISTRATIVE AGENT
OR THE LENDER GROUP
IN CARE OF
ADMINISTRATIVE AGENT: FOOTHILL CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ Hilson, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 12
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS AND
TO THE EXTENT EXPRESSLY PROVIDED TO THE
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CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND ADJUDICATED
ONLY IN THE STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER
GROUP'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER GROUP ELECTS TO
BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13.
BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
To the extent permitted under applicable law all documents, schedules,
invoices, agings, or other papers delivered to any one or more members of the
Lender Group may be destroyed or otherwise disposed of by such member of the
Lender Group 4 months after they are delivered to or received by such member of
the Lender Group, unless Borrower requests, in writing, the return of said
documents, schedules, or other papers and makes arrangements, at Borrower's
expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
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(a) Any Lender may, with the written consent of the Agents and
Borrower, assign and delegate to one or more assignees (provided that no written
consent of any such Agent or Borrower shall be required in connection with any
assignment and delegation by a Lender to an Eligible Transferee) (each an
"Assignee") all, or any ratable part of all, of the Obligations, the Commitments
and the other rights and obligations of such Lender hereunder and under the
other Loan Documents, in a minimum amount of $5,000,000 (except such minimum
amount shall not apply to any Affiliate of a Lender or to any fund or account
managed by a Lender); provided, however, that Borrower and the Agents may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to Borrower and the Agents by
such Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to Borrower and the Agents a fully executed Assignment and Acceptance
("Assignment and Acceptance") substantially in the form of Exhibit A-1; and
(iii) the assignor Lender or Assignee has paid to Collateral Agent for
Collateral Agent's sole and separate account a processing fee in the amount of
$5,000. Anything contained herein to the contrary notwithstanding, no consent of
any Agent shall be required (and payment of any fees shall not be required) if
such assignment is in connection with any merger, consolidation, sale, transfer,
or other disposition of all or any substantial portion of the business or loan
portfolio of such Lender or the assignee is an Affiliate (other than
individuals) of, or a fund, money market account, investment account or other
account managed by, a Lender.
(b) From and after the date that Collateral Agent notifies the
assignor Lender that it has received a fully executed Assignment and Acceptance
and payment (if applicable) of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation between
Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by
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Borrower of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon any Agent, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (5) such Assignee appoints and
authorizes Agents to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to Agents by the terms hereof,
together with such powers as are reasonably incidental thereto; and (6) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of the
Agents, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in the Obligations owing to such Lender, such Lender's Commitment, and the other
rights and interests of that Lender (the "Originating Lender") hereunder and
under the other Loan Documents (provided that no written consent of any Agent
shall be required in connection with any sale of such participating interests by
a Lender to an Eligible Transferee); provided, however, that (i) the Originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no
Originating Lender shall transfer or grant any participating interest under
which the Participant has the right to approve any amendment to, or any consent
or waiver with respect to, this Agreement or any other Loan Document, except to
the extent such amendment to, or consent or waiver with respect to this
Agreement or of any other Loan Document would (A) extend the final maturity date
of the Obligations hereunder in which such Participant is participating; (B)
reduce the interest rate applicable to the Obligations hereunder in which such
Participant is participating; (C) release all or a material portion of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating; (D) postpone the payment of, or reduce the amount
of, the interest or fees payable to such Participant; (E) change the amount or
due dates of scheduled principal repayments or prepayments or premiums in
respect of the Obligations hereunder in which such Participant is participating;
or (F) subordinate the Liens of Collateral Agent for the benefit of the Lender
Group to the Liens of any other creditor of Borrower; and (v) all amounts
payable by Borrower hereunder shall be determined as if such Originating Lender
had not sold such participation; except that, if amounts outstanding under this
Agreement are due
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and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; and (vi) such Participant shall have delivered to Borrower and the
Agents a confidentiality agreement evidencing the Participant's agreement to be
bound by the provisions of Section 17.16(d) hereof as if the Participant were a
party to this Agreement. The rights of any Participant only shall be derivative
through the Originating Lender with whom such Participant participates and no
Participant shall have any direct rights as to the other Lenders, Collateral
Agent, Administrative Agent, Borrower, the Collections, the Collateral, or
otherwise in respect of the Advances. No Participant shall have the right to
participate directly in the making of decisions by Lenders among themselves. The
provisions of this Section 15.1(e) are solely for the benefit of Lender Group,
and Borrower shall not have any rights as a third party beneficiary of any of
such provisions.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose to a third party all
documents and information which it now or hereafter may have relating to
Borrower or Borrower's business so long as the prospective assignee or
participant has agreed in writing to be bound by the provisions of Section 19.11
hereof as if it were a party hereto.
(g) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
(h) Borrower shall maintain, or cause to be maintained, a
register (the "Register") on which it enters the name of a Lender as the
registered owner of the Advance held by such Lender. A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register (and
each Registered Note shall expressly so provide). Any assignment or sale of all
or part of such Registered Loan (and the Registered Note, if any, evidencing the
same) may be effected only by registration of such assignment or sale on the
Register, together with the surrender of the Registered Note, if any, evidencing
the same duly endorsed by (or accompanied by a written instrument of assignment
or sale duly executed by) the holder of such Registered Note, whereupon, at the
request of the designated assignee(s) or transferee(s), one or more new
Registered Notes in the same aggregate principal amount shall be issued to the
designated assignee(s) or transferee(s). Prior to the registration of assignment
or sale of any Registered Loan (and the Registered Note, if any evidencing the
same), Borrower shall treat the Person in whose name such Loan (and the
Registered Note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
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(i) In the event that a Lender sells participations in the
Registered Loan, such Lender shall maintain a register on which it enters the
name of all participants in the Registered Loans held by it (the "Participant
Register"). A Registered Loan (and the Registered Note, if any, evidencing the
same) may be participated in whole or in part only by registration of such
participation on the Participant Register (and each Registered Note shall
expressly so provide). Any participation of such Registered Loan (and the
Registered Note, if any, evidencing the same) may be effected only by the
registration of such participation on the Participant Register.
15.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties hereto; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without Lenders' prior written consent and any prohibited assignment
shall be absolutely void. No consent to assignment by the Lenders shall release
Borrower from its Obligations. A Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder pursuant to Section 15.1
hereof and, except as expressly required pursuant to Section 15.1 hereof, no
consent or approval by Borrower is required in connection with any such
assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Collateral Agent at the
written request of the Required Lenders) and Borrower and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Collateral Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Advance, or any fees or other amounts payable hereunder or under
any other Loan Document;
(d) change the percentage of the Commitments that is required for
the Lenders or any of them to take any action hereunder;
(e) increase the advance rates with respect to the Advances
(except for the restoration of an advance rate after the prior reduction
thereof) or change Section 2.1(a) or (b) or Section 2.4(b);
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(f) amend this Section or any provision of this Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section 17.11;
(h) change the definition of "Required Lenders" or "Pro Rata
Share" or "Owned Properties" or "Borrowing Base";
(i) release Borrower from any Obligation for the payment of
money; or
(j) amend any of the provisions of Article 17, Section 2.1(g) or
Section 2.1(k); or
(k) subordinate (i) the super priority claim status of the
Obligations (except as permitted in this Agreement and the Loan Documents) and
(ii) the Liens of Collateral Agent for the benefit of the Lender Group to the
Liens of any other creditor of Borrower.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agents or the Issuing Lender, as applicable, affect
the rights or duties of the Agents or the Issuing Lender, as applicable, under
this Agreement or any other Loan Document; and, provided further, however, that
no amendment, waiver or consent shall, unless in writing and signed by Foothill
in its individual capacity as a Lender (as contrasted with the rights or duties
of Foothill as a member of the Lender Group) affect the specific rights or
duties of Foothill under this Agreement or any other Loan Document. The
limitation contained in clause (e) above shall not be deemed to limit the
ability of Agent to make Advances or Administrative Agent Advances (or elect to
have Swing Lender make Swing Loans) in accordance with the provisions of
Sections 2.1(d), (e), (f), (g), (h), or (k). The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by any Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any other
Loan Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among Borrower and any Agent or any Lender, or delay
by any Agent or any Lender in exercising the same, will operate as a waiver
thereof. No waiver by any Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by any Agent
or the Lenders on any occasion shall affect or diminish each Agent's and each
Lender's rights thereafter to require strict performance by Borrower of any
provision of this Agreement. Each Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy which any Agent or any Lender may have.
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17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENTS. Each Lender hereby
designates and appoints Administrative Agent as its administrative agent under
this Agreement and the other Loan Documents and Collateral Agent as its
collateral agent under this Agreement and the other Loan Documents. Each Lender
hereby irrevocably authorizes each such Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Each such Agent agrees to act as
such on the express conditions contained in this Article 17. The provisions of
this Article 17 are solely for the benefit of the Administrative Agent, the
Collateral Agent and the Lenders, and Borrower shall not have rights as a third
party beneficiary of any of the provisions contained herein. Any provision to
the contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, each such Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall any Agent have or be deemed
to have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against any
Agent; it being expressly understood and agreed that the use of the word "Agent"
is for convenience only, that each such Agent is merely the representative of
the Lenders, and has only the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, each such Agent shall have and
may use its sole discretion with respect to exercising or refraining from
exercising any discretionary rights or taking or refraining from taking any
actions which such Agent is expressly entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents, including making the
determinations contemplated by Section 2.1(b). Without limiting the generality
of the foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Administrative Agent or the Collateral Agent, Lenders agree
that as long as this Agreement remains in effect each such Agent shall have the
right to exercise the following powers and to delegate the exercise of any such
powers to any sub-agent of such Agent as long as this Agreement remains in
effect: (a) the Administrative Agent shall have the right to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Advances, the other Obligations, the Collections and related
matters, and the Collateral Agent shall have the right to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Collateral and related matters; (b) the Collateral Agent shall
have the right to execute or file any and all financing or similar statements or
notices, amendments, renewals, supplements, documents, instruments, proofs of
claim for Lenders, notices and other written agreements with respect to the Loan
Documents; (c) the Administrative Agent shall have the right to make Advances
for itself or on behalf of Lenders as provided in the Loan Documents; (d) the
Administrative Agent shall have the right to exclusively receive, apply, and
distribute the Collections as provided in the Loan Documents; (e) the
Administrative Agent shall have the right to perform, exercise, and enforce any
and all other rights and remedies of the Lender Group with respect to Borrower,
the Advances, the other Obligations, the Collections, or otherwise related to
any of same as provided in the Loan Documents, and the Collateral Agent shall
have the right to perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrower, the Advances, the other
Obligations, the Collateral, or
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otherwise related to any of same as provided in the Loan Documents; and (f) each
such Agent shall have the right to incur and pay such Lender Group Expenses as
such Agent may deem necessary or appropriate for the performance and fulfillment
of its functions and powers pursuant to the Loan Documents.
17.2 DELEGATION OF DUTIES. Each Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made in compliance with this Section 17.2 and without
gross negligence or willful misconduct.
17.3 LIABILITY OF AGENTS. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by an
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of Borrower or any of
Borrower's Subsidiaries or Affiliates.
17.4 RELIANCE BY AGENTS. Each Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
such Agent. Each Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Lenders as it deems appropriate and
until such instructions are received, such Agent shall act, or refrain from
acting, as it deems advisable. If an Agent so requests, it shall first be
indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
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17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. No Agent shall be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Administrative Agent for the account of the
Lenders, except in the case of the Administrative Agent with respect to actual
knowledge of the existence of an Overadvance and except in the case of the
Collateral Agent with respect to Defaults and Events of Default of which
Collateral Agent has actual knowledge, unless Collateral Agent shall have
received written notice from a Lender or Borrower referring to this Agreement,
describing such Default or Event of Default, and stating that such notice is a
"notice of default." Collateral Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Collateral Agent
has actual knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and the Agents of
such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Section 17.4, Collateral Agent
shall take such action with respect to such Default or Event of Default as may
be requested by the Required Lenders in accordance with Section 9; provided,
however, that unless and until Collateral Agent has received any such request,
Collateral Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable:
(a) At all times, Collateral Agent may propose and, with the
consent of Required Lenders (which shall not be unreasonably withheld and which
shall be deemed to have been given by a Lender unless such Lender has notified
Collateral Agent to the contrary in writing within three (3) days of
notification of such proposed actions by Collateral Agent) exercise any remedies
on behalf of Lender Group; and
(b) At all times, once Collateral Agent and Required Lenders or
all Lenders, as the case may be, have approved the exercise of a particular
remedy or pursuit of a course of action, Collateral Agent may, but shall not be
obligated to, make all administrative decisions in connection therewith or take
all other actions reasonably incidental thereto (for example, if Required
Lenders approve the foreclosure of certain Collateral, Collateral Agent shall
not be required to seek consent for the administrative aspects of conducting
such sale or handling of such Collateral).
17.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by any Agent hereinafter taken, including any review of the affairs of
Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to each Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such
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documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by any Agent, no Agent
shall have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Each Agent may incur and pay
Lender Group Expenses to the extent such Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburse such Agent for
such expenses pursuant to the Loan Agreement or otherwise. Administrative Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections to reimburse the Agents for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event an Agent is
not reimbursed for such costs and expenses from Collections, each Lender hereby
agrees that it is and shall be obligated to pay to or reimburse such Agent for
the amount of such Lender's Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrower and without limiting the obligation of Borrower to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender shall reimburse each Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
attorney fees and expenses) incurred by such Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that such Agent is not reimbursed for such expenses by or on
behalf of Borrower. The undertaking in this Section 17.7 shall survive the
payment of all Obligations hereunder and the resignation or replacement of any
Agent.
17.8 AGENTS IN INDIVIDUAL CAPACITY. Each Agent and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking,
lending, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though such Person were not an Agent hereunder and without notice
to or
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consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, an Agent or its Affiliates may receive information regarding
Borrower or its Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrower or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Agent will use its reasonable best efforts to
obtain), such Agent shall be under no obligation to provide such information to
them. With respect to the Administrative Agent Advances, Foothill shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not an Agent, and the terms "Lender" and "Lenders"
include Foothill in its individual capacity. With respect to Swing Loans,
Administrative Agent, in its individual capacity, shall, if it is a Lender
hereunder, have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall, in such case, include Administrative Agent in its
individual capacity.
17.9 SUCCESSOR AGENTS.
(a) Administrative Agent may resign as Administrative Agent upon
45 days notice to the Lenders. If Administrative Agent resigns under this
Agreement, the Required Lenders shall appoint a successor Administrative Agent
for the Lenders reasonably satisfactory to Borrower. If no successor
Administrative Agent is appointed prior to the effective date of the resignation
of Administrative Agent, Administrative Agent shall appoint, after consulting
with the Lenders, a successor Administrative Agent. If Administrative Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Administrative Agent with a successor Administrative Agent
from among the Lenders reasonably satisfactory to Borrower. In any such event,
upon the acceptance of its appointment as successor Administrative Agent
hereunder, such successor Administrative Agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor Administrative Agent and the
retiring Administrative Agent's appointment, powers and duties as Administrative
Agent shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 17 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor Administrative Agent
has accepted appointment as Administrative Agent by the date which is 45 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of Administrative Agent
hereunder until such time, if any, as the Lenders appoint a successor
Administrative Agent as provided for above.
(b) Collateral Agent may resign as Collateral Agent upon 45 days
notice to the Lenders. If Collateral Agent resigns under this Agreement, the
Required Lenders shall appoint a successor Collateral Agent for the Lenders
reasonably satisfactory to Borrower. If no successor Collateral Agent is
appointed prior to the effective date of the resignation of
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Collateral Agent, Collateral Agent shall appoint, after consulting with the
Lenders, a successor Collateral Agent reasonably satisfactory to Borrower. If
Collateral Agent has materially breached or failed to perform any material
provision of this Agreement or of applicable law, the Required Lenders may agree
in writing to remove and replace Collateral Agent with a successor Collateral
Agent from among the Lenders. In any such event, upon the acceptance of its
appointment as successor Collateral Agent hereunder, such successor Collateral
Agent shall succeed to all the rights, powers and duties of the retiring
Collateral Agent and the term "Collateral Agent" shall mean such successor
Collateral Agent and the retiring Collateral Agent's appointment, powers and
duties as Collateral Agent shall be terminated. After any retiring Collateral
Agent's resignation hereunder as Collateral Agent, the provisions of this
Section 17 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Agreement. If no successor
Collateral Agent has accepted appointment as Collateral Agent by the date which
is 45 days following a retiring Collateral Agent's notice of resignation, the
retiring Collateral Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of Collateral Agent
hereunder until such time, if any, as the Lenders appoint a successor Collateral
Agent as provided for above.
17.10 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from withholding
tax pursuant to its portfolio interest exception, (a) a statement of the Lender,
signed under penalty of perjury, that it is not a (I) a "bank" as described in
Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the meaning of
Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign corporation
described in Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS
Form W-8BEN, before the first payment of any interest under this Agreement and
at any other time reasonably requested by Agent or Borrower;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Form W-8BEN before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form W-8ECI before the first payment of any
interest is due under this Agreement and at any other time reasonably requested
by Agent or Borrower;
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(iv) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower to such Lender, such Lender
agrees to notify Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrower hereunder or under any note
will be made without setoff, counterclaim, or other defense, except as required
by applicable law other than for Taxes (as defined below). All such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction (other
than the United States) or by any political subdivision or taxing authority
thereof or therein (other than of the United States) with respect to such
payments (but excluding, any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (i) measured by or based on
the net income or net profits of a Lender, or (ii) to the extent that such tax
results from a change in the circumstances of the Lender, including a change in
the residence, place of organization, or principal place of business of the
Lender, or a change in the branch or lending office of the Lender participating
in the transactions set forth herein or an
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assignment by the Lender) and all interest, penalties or similar liabilities
with respect thereto (all such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges being referred to collectively as "Taxes").
If any Taxes are so levied or imposed, Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any note, including any
amount paid pursuant to this Section 16.11(e) after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for
herein; provided, however, that Borrower shall not be required to increase any
such amounts payable to Agent or any Lender (i) that is not organized under the
laws of the United States, if such Person fails to comply with the other
requirements of this Section 16.11, or (ii) if the increase in such amount
payable results from Agent's or such Lender's own willful misconduct or gross
negligence. Borrower will furnish to Agent as promptly as possible after the
date the payment of any Taxes is due pursuant to applicable law certified copies
of tax receipts evidencing such payment by Borrower.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Collateral Agent, at
its option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
or on behalf of Borrower of all Obligations; and upon such termination Agent
shall deliver to Borrower, at Borrower's sole cost and expense, all documents
necessary to terminate the Loan Documents and release the Liens with respect to
the Collateral (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Borrower certifies to
Collateral Agent that the sale or disposition is permitted under Section 7 of
this Agreement or the other Loan Documents (and Collateral Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrower owned no interest at the time the Lien
was granted or at any time thereafter; or (iv) constituting property leased to
Borrower under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Collateral Agent will
not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or any substantial
portion of the Collateral, all of the Lenders, or (z) otherwise, the Required
Lenders. Upon request by Collateral Agent or Borrower at any time, the Lenders
will confirm in writing Collateral Agent's authority to release any such Liens
on particular types or items of Collateral pursuant to this Section 17.11;
provided, however, that (1) Collateral Agent shall not be required to execute
any document necessary to evidence such release on terms that, in Agent's
opinion, would expose Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrower in respect of) all
interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Collateral Agent shall not have any obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is owned by Borrower,
is cared for, protected, or insured or has been encumbered, or that the
Collateral Agent's Liens have been
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properly or sufficiently or lawfully created, perfected, protected, or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Collateral Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, subject to the terms and conditions contained herein,
Collateral Agent may act in any manner it may deem appropriate, absent
Collateral Agent's gross negligence or willful misconduct, in its sole
discretion given Collateral Agent's own interest in the Collateral in its
capacity as a Lender and that Collateral Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express consent of the Agents, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Collateral Agent, set off against the
Obligations, any amounts owing by such Lender to Borrower or any accounts of
Borrower now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Collateral Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral the purpose of
which is, or could be, to give such Lender any preference or priority against
the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times any Lender
shall receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from Administrative Agent pursuant
to the terms of this Agreement, or (ii) payments from Administrative Agent in
excess of such Lender's Pro Rata Share of all such distributions by
Administrative Agent, such Lender promptly shall (1) turn the same over to
Administrative Agent, in kind, and with such endorsements as may be required to
negotiate the same to Administrative Agent, or in same day funds, as applicable,
for the account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement and the Fee Split
Letter, as applicable, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
17.13 AGENCY FOR PERFECTION. Collateral Agent hereby appoints each other
Lender as its agent for the purpose of perfecting the Collateral Agent's Liens
in assets which, in accordance
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with Article 9 of the Code can be perfected only by possession. Should any
Lender obtain possession of any such Collateral, such Lender shall notify
Collateral Agent thereof, and, promptly upon Collateral Agent's request therefor
shall deliver such Collateral to Collateral Agent or in accordance with
Collateral Agent's instructions.
17.14 PAYMENTS BY ADMINISTRATIVE AGENT TO THE LENDERS. All payments to
be made by Administrative Agent to the Lenders shall be made by bank wire
transfer or internal transfer of immediately available funds to:
If to Foothill: The Chase Manhattan Bank
ABA # ▇▇▇-▇▇▇-▇▇▇
Credit: Foothill Capital Corporation
Account No. 323-266193
Re: Komag
If to Ableco: Chase Manhattan Bank of Texas, N.A.
ABA # ▇▇▇-▇▇▇-▇▇▇
AC: 00102619468
BNF: Wires-Clearing-Asset Backed Securities
OBI: Ref: ▇▇▇▇▇ ▇▇▇▇▇▇▇/Ableco
Finance/Acct. #2316401
Re: Komag
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Administrative Agent. Concurrently with each
such payment, Administrative Agent shall identify whether such payment (or any
portion thereof) represents principal, premium or interest on revolving advances
or otherwise.
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each member
of the Lender Group authorizes and directs Collateral Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit of the Lender Group. Each member of the Lender Group agrees that
any action taken by Collateral Agent, Required Lenders or all Lenders, as
applicable, in accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral and the exercise by Collateral Agent,
Required Lenders or all Lenders, as applicable, of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS
BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this Agreement, each
Lender:
(a) is deemed to have requested that Agents furnish such Lender,
promptly after it becomes available, a copy of each examination report or
reports (each a "Report" and collectively, "Reports") prepared by or at the
request of Agents, and Agents shall so furnish each Lender with such Reports;
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(b) expressly agrees and acknowledges that Agents (i) make no
representation or warranty as to the accuracy of any Report, or (ii) shall not
be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agents or other parties performing
any audit or examination will inspect only specific information regarding
Borrower and will rely significantly upon the Books, as well as on
representations of Borrower's personnel;
(d) agrees to keep all Reports and other non-public information
regarding Borrower and its Subsidiaries and their operations, assets, and
existing and contemplated business plans in a confidential manner; it being
understood and agreed by Borrower that in any event such Lender may make
disclosures (i) to counsel for and other advisors, accountants, and auditors to
such Lender, (ii) reasonably required by any bona fide potential or actual
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, provided that such
potential or actual Assignee, transferee or Participant agrees to comply with
this Section 17.16(d) as if it were a Lender hereunder, (iii) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (iv) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agents and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or conclusion the indemnifying Lender may reach or draw from any Report
in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrower; and (ii) to pay and protect, and indemnify, defend and hold
Agents and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses and other amounts
(including, attorney costs) incurred by Agents and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agents in writing that Agents provide to such Lender a copy of any report or
document provided by Borrower to Agents that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agents
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) to the extent that Agents are entitled, under any provision of the
Loan Documents, to request additional reports or information from Borrower, any
Lender
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may, from time to time, reasonably request Agents to exercise such right as
specified in such Lender's notice to Agents, whereupon Agents promptly shall
request of Borrower the additional reports or information specified by such
Lender, and, upon receipt thereof from Borrower, Agents promptly shall provide a
copy of same to such Lender; and (z) any time that Agents render to Borrower a
statement regarding the Loan Account, Agents shall send a copy of such statement
to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Administrative Agent or Collateral Agent in their capacity as such,
and not by or in favor of the Lenders, any and all obligations on the part of
the Lenders to make any Advances shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such Advances not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 17.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
18. [INTENTIONALLY OMITTED.]
19. GENERAL PROVISIONS.
19.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrower, each Agent and each of the Lenders.
19.2 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their successors and assigns to
the extent set forth in Section 16.
19.3 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
19.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
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19.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
19.6 AMENDMENTS IN WRITING. This Agreement can only be amended by a
writing signed in accordance with Section 16.
19.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The forgoing shall apply to each other Loan Document mutatis
mutandis.
19.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or the transfer by Borrower to the Lender
Group of any property of borrower should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
19.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
19.10 [Intentionally omitted.]
19.11 CONFIDENTIALITY. Each Agent and each Lender agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any non-public information supplied to it by
Borrower pursuant to this Agreement or the other Loan Documents which is
identified by Borrower as being confidential at the time the same is delivered
to such Person (and which at the time is not, and does not thereafter become,
publicly available or available to such Person from another source
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not known to be subject to a confidentiality obligation to such Person not to
disclose such information); provided, however, that nothing herein shall limit
the disclosure of any such information (i) to the extent required by statute,
rule, regulation or judicial process, (ii) to counsel for such Agent or such
Lender, (iii) to examiners, auditors, accountants or Securitization Parties
(provided, however, that Lender will obtain a nondisclosure agreement from the
Securitization Parties in connection with any such disclosure of information),
(iv) in connection with any litigation to which such Agent or such Lender is a
party or (v) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first agrees, in writing, to be bound by confidentiality provisions
similar in substance to this Section 19.11. Each Agent and each Lender agrees
that, upon receipt of a request or identification of the requirement for
disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to
keep Borrower informed of such request or identification; provided that Borrower
acknowledges that the applicable Agent or Lender may make disclosure as required
or requested by any Governmental Authority or representatives thereof and that
the applicable Agent or Lender may be subject to review by Securitization
Parties or other regulatory agencies and may be required to provide to, or
otherwise make available for review by, the representatives of such parties or
agencies any such non-public information.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date set forth above.
KOMAG, INCORPORATED,
a Delaware corporation
By______________________________________
Title:__________________________________
COLLATERAL AGENT AND LENDER:
ABLECO FINANCE LLC,
a Delaware limited liability company
By______________________________________
Title:__________________________________
ADMINISTRATIVE AGENT AND LENDER:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By______________________________________
Title:__________________________________
Schedule C-1
Commitments
Commitment Dollar Amount Percentage
---------- ------------- ----------
Foothill $ 5,000,000 33-1/3%
Ableco $10,000,000 66-2/3%
Exhibit A-1
Form of Assignment and Acceptance
Exhibit C-1
Form of Compliance Certificate