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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 9, 1998
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POWERWAVE TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-21507 11-2723423
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
2026 McGaw Avenue, Irvine, California 92614
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (949) 757-0530
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition Or Disposition Of Assets
On October 9, 1998, pursuant to the terms of an Amended and Restated Asset
Purchase Agreement dated October 9, 1998 (the "Asset Purchase Agreement"), and a
Purchase and Sale Agreement and Joint Escrow Instructions dated August 31, 1998,
Powerwave Technologies, Inc., a Delaware corporation (the "Company"), acquired
from Hewlett-Packard Company, a Delaware corporation ("HP"), substantially all
of the assets (the "Assets") related to HP's radio frequency power amplifier
business for use in wireless communications, including cellular, PCS and
wireless local loop (the "Business"). The purchase price paid for the Assets,
which include HP's manufacturing facility in Folsom, California, was
approximately $57,400,000, which amount was paid by the Company in cash. The
Company financed this acquisition utilizing (i) existing cash balances and (ii)
term loan borrowings of $25,000,000 under a Loan and Security Agreement entered
into on September 30, 1998, among the Company, Comerica Bank-California, as
Agent, and the lenders named therein (the "New Secured Credit Facility"). The
New Secured Credit Facility consists of a $25,000,000 term loan facility and a
$10,000,000 revolving line of credit facility.
Concurrently with the closing of the acquisition of the Assets, the Company
and HP entered into a License Agreement, a Product Supply Agreement, a
Transition Services Agreement and a Confidential Disclosure Agreement, all of
which were attached to the Asset Purchase Agreement which is filed as an exhibit
hereto. The Company does not believe that these documents contain information
which is material to an investment decision and, therefore, has not filed these
documents as exhibits to this Form 8-K. However, the Company will supplementally
furnish these documents, and the exhibits and schedules thereto, to the
Securities and Exchange Commission upon request.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(a) Financial Statements of Business Acquired. The financial statements of
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the Business required to be filed under this item are not available and,
accordingly, are not included herein. The Company plans to submit such
financial statements by amendment not later than 60 days after the date on which
this report on Form 8-K must be filed.
(b) Pro Forma Financial Information. The pro forma financial information
-------------------------------
required to be filed under this item is not available and, accordingly, is not
included herein. The Company plans to submit such pro forma financial
information by amendment not later than 60 days after the date on which this
report on Form 8-K must be filed.
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(c) Exhibits.
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Exhibit
Number
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2.1 Amended and Restated Asset Purchase Agreement with Hewlett-Packard
Company, dated as of October 9, 1998. /(1)//(2)/
2.2 Purchase and Sale Agreement and Joint Escrow Instructions with Hewlett-
Packard Company, dated as of August 31, 1998. /(1)/
10.23 Loan and Security Agreement, dated as of September 30, 1998, by and
among the Company, Comerica Bank-California, as Agent, and the lenders
party thereto. /(1)/
23.1 Consent of Deloitte & Touche LLP (to be filed by amendment).
99.1 Press Release dated October 9, 1998.
99.2 Financial Statements of the Business described in Item 7(a) above (to
be filed by amendment).
99.3 Pro Forma Financial Statements described in Item 7(b) above (to be
filed by amendment).
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/(1)/ Schedules and attachments are omitted. The Company shall furnish
supplementally to the Securities and Exchange Commission a copy of any
omitted schedule or attachment upon request.
/(2)/ Portions of this Exhibit are omitted and were filed separately with the
Secretary of the Commission pursuant to the Company's application
requesting confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POWERWAVE TECHNOLOGIES, INC.
Date: October 26, 1998 By: /s/ Kevin T. Michaels
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Kevin T. Michaels
Vice President, Finance and
Chief Financial Officer
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EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
2.1 Amended and Restated Asset Purchase Agreement
with Hewlett-Packard Company, dated as of 6
October 9, 1998. /(1)//(2)/
2.2 Purchase and Sale Agreement and Joint Escrow
Instructions with Hewlett-Packard Company, 58
dated as of August 31, 1998. /(1)/
10.23 Loan and Security Agreement, dated as of
September 30, 1998, by and among the Company, 77
Comerica Bank-California, as Agent, and the
lenders party thereto. /(1)/
23.1 Consent of Deloitte & Touche LLP (to be filed
by amendment). --
99.1 Press Release dated October 9, 1998. 132
99.2 Financial Statements of the Business described
in Item 7(a) above (to be filed by amendment). --
99.3 Pro Forma Financial Statements described in
Item 7(b) above (to be filed by amendment). --
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/(1)/ Schedules and attachments are omitted. The Company shall furnish
supplementally to the Securities and Exchange Commission a copy of any
omitted schedule or attachment upon request.
/(2)/ Portions of this Exhibit are omitted and were filed separately with the
Secretary of the Commission pursuant to the Company's application
requesting confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
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EXHIBIT 2.1
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Portions of this Exhibit are omitted and were filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended.
HP Confidential
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
dated
October 9, 1998
by and between
HEWLETT-PACKARD COMPANY
and
POWERWAVE TECHNOLOGIES, INC.
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TABLE OF CONTENTS
ARTICLE 1 ASSETS AND LIABILITIES BEING PURCHASED AND ASSUMED 1
1.1 Purchased Assets 1
1.2 Excluded Assets 2
1.3 License Grant to Buyer 2
1.4 Product Supply Agreement 2
1.5 Real Property Purchase Agreement 3
1.6 Transition Services Agreement 3
ARTICLE 2 OBLIGATIONS BEING ASSUMED; LIABILITIES NOT BEING ASSUMED 3
2.1 Assumed Obligations 3
2.2 Liabilities Not Being Assumed 4
2.3 Taxes 4
ARTICLE 3 PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE 4
3.1 Purchase Price; Payment 4
3.2 Allocation of Purchase Price 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER 5
4.1 Authority and Binding Effect 5
4.2 Organization and Standing 6
4.3 Business Financial Information 6
4.4 Absence of Certain Changes 6
4.5 The Purchased Assets 7
4.6 Assigned Contracts; All Contracts 7
4.7 Intellectual Property 8
4.8 Conflicts 9
4.9 Customers and Suppliers 10
4.10 Product Warranties and Liabilities 10
4.11 Insurance 10
4.12 Compliance with Laws/Permits 10
4.13 Taxes and Tax Returns 11
4.14 Litigation and Proceedings 11
4.15 Operational Restrictions 12
4.16 No Broker 12
4.17 Representations and Warranties of Seller 12
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER 12
5.1 Authority and Binding Effect 12
5.2 Organization 12
5.3 No Conflicts 13
5.4 Broker 13
5.5 Financial Resources 13
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE CLOSING 13
6.1 Access 13
6.2 Conduct of Seller's Business 13
ARTICLE 7 OBLIGATIONS SURVIVING THE DATE OF THIS AGREEMENT AND
THE CLOSING DATE 15
7.1 Consents to Assignment; Termination of Encumbrances 15
7.2 Further Assurances 16
7.3 Expenses 16
7.4 Taxes 16
7.5 Non-Competition and Non-Solicitation 16
7.6 SEC Financial Statements 17
7.7 Delivery of Purchased Assets 17
7.8 Accounting System 18
7.9 Risk of Loss 18
7.10 Purchased Assets on Leased Property 18
7.11 FTO Transfer 18
7.12 [*] 18
7.13 Inventory and Purchase Price Adjustment 20
ARTICLE 8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES 20
ARTICLE 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER 20
9.1 Representations and Warranties 20
9.2 Absence of Material Litigation 20
9.3 Performance of Obligations 20
9.4 No Material Adverse Change 20
9.5 Certificates 20
9.6 Delivery of Additional Instruments 21
9.7 Real Property Purchase 21
9.8 Hart-Scott-Rodino 21
9.9 Approval of Board of Directors 21
9.10 Continuity of Business 21
9.11 Financing 21
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[*] Confidential Treatment Requested.
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ARTICLE 10 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 22
10.1 Representations and Warranties 22
10.2 Absence of Material Litigation 22
10.3 Performance of Obligations 22
10.4 Certificates 22
10.5 Delivery of Additional Instruments 22
10.6 Approval of Executive Committee of the Board of Directors 22
10.7 Hart-Scott-Rodino 22
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ARTICLE 11 THE CLOSING 23
11.1 Closing Deliveries of Seller 23
11.2 Closing Certificates of Buyer 23
ARTICLE 12 TERMINATION 23
12.1 Methods of Termination 23
12.2 Procedure upon Termination 23
ARTICLE 13 INDEMNIFICATION 24
13.1 Indemnification by Seller 24
13.2 Indemnification by Buyer 25
13.3 Notice of Claim 25
13.4 First Party Claims 26
13.5 Third Party Claims 26
13.6 Settlement of Third Party Claims 26
13.7 Cooperation 26
13.8 Monetary Limit on Indemnification 26
13.9 Exclusivity 27
13.10 Taxes and Insurance 27
13.11 No Consequential Damages 27
ARTICLE 14 CONFIDENTIALITY 27
14.1 Confidentiality 27
14.2 Public Announcements 27
ARTICLE 15 MISCELLANEOUS 27
15.1 Assignment 27
15.2 Severability 27
15.3 Governing Law 27
15.4 Entire Agreement; Amendment 27
15.5 Waiver 28
15.6 Interpretation; Headings 28
15.7 Counterparts 28
15.8 Dispute Resolution 28
15.9 Notices 28
15.10 Amendment and Restatement of Original Agreement 29
ARTICLE 16 DEFINITIONS 29
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SCHEDULES
1.1(a) Capital Equipment
1.1(b) Expensed Assets
1.1(c) Assigned Contracts
1.1(d) Technical Documentation
1.1(l) Licenses and Permits
1.2 Excluded Assets
2.1 Assumed Obligations
2.2(h) [*]
4 Seller's Disclosure Schedule
5 Buyer's Disclosure Schedule
7.11 FTO Transfer
7.13 Post-Closing Inventory
EXHIBITS
A License Agreement
B Product Supply Agreement
C Purchase and Sale Agreement and Joint Escrow Instructions
D Transition Services Agreement
E Allocation of Purchase Price
F SEC Financial Statements
G Form of Bill of Sale and Assumption Agreement
H-1 Form of Opinion of Seller's Counsel
H-2 Form of Opinion of Buyer's Counsel
I New Confidential Disclosure Agreement
__________
[*] Confidential Treatment Requested.
v
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HP Confidential
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement") is
made October 9, 1998, by and between Hewlett-Packard Company, a Delaware
corporation ("Seller"), and Powerwave Technologies, Inc., a Delaware corporation
("Buyer").
RECITALS
WHEREAS, Seller is engaged in the business of designing, manufacturing and
servicing products and systems for measurement, computation and communications;
and
WHEREAS, Seller desires to sell certain assets, operations and business
related to its business of designing, manufacturing and marketing radio
frequency power amplifiers for use in the communications infrastructure market
which includes cellular, personal communications systems ("PCS"), specialty
mobile radio ("SMR") systems, fixed wireless access ("FWA") systems, radio in
the local loop ("RLL") systems and wireless in the local loop ("WLL") systems
(collectively, the "Business"); and
WHEREAS, subject to the terms and conditions of this Agreement, Buyer
desires to purchase and Seller desires to sell and transfer to Buyer the assets,
operations and business that constitute the Business as described herein; and
WHEREAS, Seller and Buyer entered into that certain Asset Purchase
Agreement, dated August 31, 1998 (the "Original Agreement") with respect to the
purchase, sale and transfer of the Business referred to above; and
WHEREAS, Seller and Buyer now desire to amend and restate the Original
Agreement as provided herein;
NOW, THEREFORE, in consideration of the terms, covenants, and conditions
hereinafter set forth, the parties hereto agree as follows:
Article 1 Assets and Liabilities Being Purchased and Assumed.
1.1 Purchased Assets. Subject to the terms and conditions of this
----------------
Agreement, Buyer hereby agrees to purchase from Seller, and Seller hereby agrees
to sell, convey,
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transfer and assign to Buyer, on the Closing Date, all of the assets, properties
and rights set forth or described in Sections 1.1(a)-(l) inclusive
(collectively, the "Purchased Assets"), which shall consist of the following:
(a) Seller's capital equipment that is listed on Schedule 1.1(a)
---------------
attached hereto (the "Capital Equipment");
(b) Seller's personal property and office equipment that are listed
on Schedule 1.1(b) attached hereto (the "Expensed Assets");
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(c) All of Seller's rights and benefits under the agreements,
contracts, licenses, instruments, commitments and understandings, written or
oral that are listed (or, in the case of oral agreements or understandings,
that are described) under the caption "Assigned Contracts" in Schedule 1.1(c)
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attached hereto;
(d) The technical and descriptive materials, drawings, schematics and
blueprints (other than those materials held as inventory) relating to the
Business as listed on Schedule 1.1(d) attached hereto (the "Technical
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Documentation");
(e) All rights of Seller in and to the customer and client lists,
vendor lists, catalogues, data relating to vendors, promotion lists and
marketing data and other compilations of names and requirements relating to the
Business;
(f) All rights of Seller in and to the computer programs, product
designs, manufacturing processes, Technical Documentation, trade secrets and
know how related to the Business, other than the Licensed Intellectual Property
Rights (the "Proprietary Materials");
(g) All of Seller's right, title and interest in and to the real
property located at 104 Woodmere Road, Folsom, California 95630, together with
all fixtures and other improvements located thereon or affixed thereto (the
"Folsom Real Property"), pursuant to the terms of the Real Property Purchase
Agreement;
(h) All raw material, work-in-process and finished goods inventories,
materials and supplies of Seller relating to the Business (the "Inventory");
(i) All available ordinary and customary accounting records in
support of the SEC Financial Statements, including order, shipment, material,
standard cost, warranty, department expense and general ledger records necessary
for Buyer to continue to operate the Business after the Closing;
(j) Any cause of action, claim, suit, proceeding, judgment or demand,
of any nature, of or held by Seller against any third parties arising out of the
Business;
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(k) All goodwill associated with the Business and the Purchased
Assets, including all of the Intangible Property Rights; and
(l) All rights in and to the governmental and private permits,
licenses, certificates of occupancy, franchises and authorizations listed on
Schedule 1.1(l) attached hereto, to the extent assignable, used in or relating
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to the Folsom Real Property, the Business or the Purchased Assets.
The Purchased Assets shall not include, and Seller shall retain, the
Excluded Assets.
1.2 Excluded Assets. Seller shall retain all right, title and interest to
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and in and shall not sell, transfer, assign, convey or deliver to Buyer, and
Buyer shall not purchase from Seller, any Excluded Assets. "Excluded Assets"
shall mean all assets of Seller that are not Purchased Assets, including,
without limitation, the assets and information reflected on Schedule 1.2
------------
attached hereto.
1.3 License Grant to Buyer. On the Closing Date, Seller and Buyer shall
----------------------
enter into the License Agreement in substantially the form of Exhibit A attached
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hereto (the "License Agreement").
1.4 Product Supply Agreement. On the Closing Date, Seller and Buyer shall
------------------------
enter into the Product Supply Agreement in substantially the form of Exhibit B
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attached hereto (the "Product Supply Agreement").
1.5 Real Property Purchase Agreement. On August 31, 1998, Seller and
--------------------------------
Buyer entered into the Purchase and Sale Agreement and Joint Escrow Instructions
in the form of Exhibit C attached hereto (the "Real Property Purchase
----------
Agreement").
1.6 Transition Services Agreement. On the Closing Date, Seller and Buyer
-----------------------------
shall enter into the Transition Services Agreement in substantially the form of
Exhibit D attached hereto (the "Transition Services Agreement").
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Article 2. Obligations Being Assumed; Liabilities Not Being Assumed.
2.1 Assumed Obligations. Buyer hereby agrees to assume only: (a) those
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liabilities and obligations specifically set forth in Schedule 2.1 hereto; (b)
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those executory obligations arising after the Closing Date under the Assigned
Contracts; (c) as set forth in Schedule 7.11, the aggregate amount of FTO
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transferred by Seller employees to Buyer pursuant to Section 7.11; and (d)
subject to Section 2.2(h) below, any claims brought under any Warranties or any
other Claims relating to products sold by the Business that are outstanding as
of the Closing Date or that are brought after the Closing Date, including
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without limitation any Claims relating to [*] Section [*] below (collectively,
"[*]") that are outstanding as of the Closing Date or that are brought after the
Closing Date (the liabilities, obligations and claims referred to in clauses
2.1(a), (b), (c) and (d) are referred to herein collectively as the "Assumed
Obligations"). The Assumed Obligations shall not include any obligations or
liabilities arising out of any act or omission or default of Seller under any
Assigned Contract, regardless of when such liability or obligation is asserted.
2.2 Liabilities Not Being Assumed. Except for the Assumed Obligations,
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Seller agrees that Buyer shall not be obligated to assume or perform and is not
assuming or performing any liabilities or obligations of Seller, whether known
or unknown, fixed or contingent, certain or uncertain, and regardless of when
such liabilities or obligations may arise or may have arisen or when they are or
were asserted (the "Retained Liabilities"), and Seller shall remain responsible
for all Retained Liabilities, which shall include, without limitation, any and
all of the following obligations or liabilities of Seller:
(a) Any compensation or benefits payable to present or past employees
of Seller, including without limitation, any liabilities arising under any
employee pension or profit sharing plan or other employee benefit plan and any
of Seller's obligations for vacation, holiday or sick pay;
(b) All federal, state, local, foreign or other Taxes (i) that have
arisen prior to the Closing Date or may arise thereafter out of the Business,
and (ii) for which Seller is or, at any time hereafter, may become liable;
provided, however, that the Retained Liabilities shall not include any Taxes
arising out of the conduct by Buyer, after the Closing Date, of the Business.
(c) Any Encumbrances on any of the Purchased Assets and all
obligations and liabilities secured thereby that are not set forth on Schedule
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2.1 hereto;
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(d) All obligations of Seller, either for borrowed money or incurred
in connection with the purchase, lease or acquisition of any assets, that are
not set forth on Schedule 2.1 hereto;
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(e) Any accounts or notes payable of Seller;
(f) Any claims, demands, actions, suits or legal proceedings that
have been asserted or threatened prior to the Closing Date against Seller, the
Business or the Purchased Assets or which may be threatened hereafter against
the Purchased Assets, the Business or Buyer that arises in any way from or in
connection with (i) Seller's operation of the Business prior to the Closing
Date, or (ii) any other business or non-business activities of Seller conducted
prior hereto or hereafter, including, without limitation, those
__________
[*] Confidential Treatment Requested.
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legal actions or other proceedings set forth in Seller's Disclosure Schedule;
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(g) Any obligations under any employment, consulting or non-
competition agreement, whether written or oral, that is not listed on Schedule
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2.1 and any liabilities or obligations arising out of the termination by Seller
- ---
of any of its employees in anticipation or as a consequence of, or following,
consummation of the transactions contemplated hereby; and
(h) [*] described in Schedule 2.2(h) attached hereto (collectively,
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[*]).
2.3 Taxes.
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(a) Except as set forth in the Real Property Purchase Agreement,
Buyer shall pay all applicable Taxes and all recording and filing fees, whether
levied on Seller or Buyer, that are payable by reason of the sales, transfers,
leases, rentals, licenses, and assignments contemplated hereby, except for
Seller's income and capital gains taxes or franchise or other taxes based on
Seller's income.
(b) Buyer shall be responsible for all Taxes attributable to, levied
upon or incurred in connection with the Purchased Assets pertaining to the
period (or that portion of the period) immediately beginning after the Closing
Date.
Article 3. Purchase Price and Allocation of Purchase Price.
3.1 Purchase Price.
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(a) The consideration for the sale to Buyer of the Purchased
Assets, the covenant not to compete set forth in Section 7.5 below, the license
granted to Buyer pursuant to the License Agreement and Seller's entering into
the other Principal Agreements shall be the sum of sixty million dollars
($60,000,000), subject to adjustment pursuant to Section 7.13 below (the
"Purchase Price").
(b) At the Closing, Buyer shall pay to Seller, by wire transfer of
immediately available funds to the following account of Seller: Bank of America
ABA #121000358 (domestic transfer to credit to the account of Hewlett-Packard
Company), account number 12336-51354, a cash payment equal to the sum of:
(i) sixty million dollars ($60,000,000),
less
__________
[*] Confidential Treatment Requested.
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(ii) (A) the amount set forth in Schedule 7.11 equal to the
-------------
aggregate amount of FTO transferred by Seller employees to Buyer pursuant to
Section 7.11;
(B) forty-two thousand two hundred sixty-seven dollars and
twenty-one cents ($42,267.21) equal to the amount of estimated real estate taxes
to be paid by Buyer for the period from July 1, 1998 to the Closing Date with
respect to the Folsom Real Property to be transferred by Seller to Buyer at the
Closing Date pursuant to the Real Property Purchase Agreement; and
(C) two million five hundred thousand dollars ($2,500,000)
(the "Prepayment").
3.2 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Purchased Assets, the covenant not to compete set forth in Section 7.5
below and the Principal Agreements, in the manner set forth in Exhibit E to be
---------
agreed by the parties and attached hereto within sixty (60) days after the
Closing (the "Purchase Price Allocation"). Each of the parties, when reporting
the transactions consummated hereunder in its own Tax Returns, shall allocate
the Purchase Price paid or received, as the case may be, in a manner that is
consistent with the Purchase Price Allocation set forth in Exhibit E hereto.
---------
Additionally, each of the parties will comply with, and furnish the information
required by, Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any regulations thereunder.
Article 4. Representations and Warranties of Seller.
Subject to the disclosures and exceptions set forth in the disclosure
schedule delivered by Seller to Buyer attached to the Original Agreement as
Schedule 4, Seller made the representations and warranties set forth hereinafter
- ----------
in this Section 4 to Buyer as of the date of the Original Agreement, except for
the representations and warranties set forth in Sections 4.1(b) with respect to
the Principal Agreements, 4.5(b), 4.6 and 4.10 and the delivery of certain
Schedules to the disclosure schedule to the Original Agreement (the "Original
Seller's Disclosure Schedule"), which were to be attached to the Original
Agreement after the date thereof. Subject to the disclosures and exceptions set
forth in the disclosure schedule delivered by Seller to Buyer attached hereto as
Schedule 4 ("Seller's Disclosure Schedule"), Seller hereby makes the
- ----------
representations and warranties set forth hereinafter in this Section 4 to Buyer
as of the date hereof.
4.1 Authority and Binding Effect.
----------------------------
(a) Seller has the full corporate power and authority to execute
and deliver this Agreement and the Principal Agreements. This Agreement and the
Principal Agreements and the consummation by Seller of its obligations contained
herein and
6
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therein have been duly authorized by all necessary corporate actions of Seller,
and such agreements have been duly executed and delivered by Seller.
(b) This Agreement is a valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms, and upon execution and
delivery each of the Principal Agreements will be a valid and binding agreement
of Seller, and will be enforceable against it in accordance with its terms, in
each case except as enforceability of the obligations of Seller hereunder and
thereunder may be limited by (i) bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally, and (ii) general principles
of equity relating to the availability of equitable remedies (whether such
agreements are sought to be enforced in a proceeding at law or a proceeding in
equity).
(c) Other than Seller's filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), it is not necessary for
Seller to take any action or to obtain any approval, consent or release by or
from any third person, governmental or other, to enable Seller to enter into or
perform its obligations under this Agreement or any of the Principal Agreements.
4.2 Organization and Standing.
-------------------------
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Seller is qualified
to do business in each jurisdiction where it conducts the Business, in which the
character of the properties owned by it in connection with the Business or the
nature of the Business makes such authorization necessary and where the failure
to be so qualified would have a Material Adverse Effect on Seller.
(b) Seller has the requisite corporate power and authority to conduct
the Business as now conducted and to own or lease (as the case may be) the
Purchased Assets, and to use such Purchased Assets in the conduct of the
Business.
When used in this Agreement, the phrases "Material Adverse Effect on
Seller" and "Material Adverse Effect on the Business" shall both mean a
circumstance, state of facts, event, consequence or result that materially and
adversely affects, or could reasonably be expected to affect materially and
adversely the Purchased Assets or the Business, or the financial condition or
operating results of the Business or the ability of Seller to consummate the
transactions which it is required to consummate hereunder; and the phrase
"Material Adverse Effect on Buyer" shall mean a circumstance, state of facts,
event, consequence or result that materially and adversely affects, or could
reasonably be expected to affect materially and adversely the financial
condition or operating results of Buyer or the ability of Buyer to consummate
the transactions which it is required to consummate hereunder.
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4.3 Business Financial Information. The financial information schedules,
------------------------------
attached to Seller's Disclosure Schedule as Schedule 4.3 (the "Business
---------------------------- ------------
Financial Information") (a) have been compiled from and are in accordance with
Seller's books and records for the Business, and (b) fairly present in all
material respects the directly allocable assets, liabilities, revenues and
expenses of the Business as of the respective dates and for the periods then
ended in accordance with Seller's accounting and financial policies, which
comply with generally accepted accounting principles ("GAAP"). The Business
Financial Information also include certain internal management allocations,
which reflect management's judgment as to the proper apportionment of shared
Seller assets, liabilities and expenses to the Business; provided, however, such
allocations may not be representative of the assets, liabilities and expenses
necessary to operate the Business on a standalone basis.
4.4 Absence of Certain Changes. Since July 31, 1998, there has not been:
--------------------------
(a) Any default or breach, or anticipated default or breach under, or
any amendment, termination or revocation of or, to Seller's Knowledge, any
threatened termination or revocation of, any of the Assigned Contracts;
(b) Any actual or, to Seller's Knowledge, threatened amendment,
termination or revocation of any license, permit or franchise required for the
continued operation by Seller of any material portion of the Business;
(c) Any sale, transfer, or other disposition of, or the incurrence or
imposition of any Encumbrance of any kind on or affecting, any of the Purchased
Assets except (i) licenses, sales or utilization of inventory and obsolete
equipment in the ordinary course of the Business and consistent with past
practices of Seller, and (ii) Encumbrances for current taxes not yet due and
payable;
(d) Any damage, destruction or loss, whether or not covered by
insurance, of any of the Purchased Assets in an amount that exceeds two hundred
thousand dollars ($200,000) or which adversely affects Seller's or Buyer's
ability to continue to conduct the Business in any material respect as the
Business was conducted during the nine-month period ended July 31, 1998;
(e) The entry or violation of any judgment, order, writ or decree
that has had or could reasonably be expected to have a Material Adverse Effect
on Seller or on the Business; or
(f) The occurrence of any other event or circumstance which has had
or could reasonably be expected to have a Material Adverse Effect on Seller or
on the Business.
8
<PAGE>
4.5 The Purchased Assets.
--------------------
(a) Capital Equipment. The Capital Equipment are in good working
-----------------
order and condition, ordinary wear and tear excepted, have been properly
maintained, are suitable for the uses for which they are being utilized in the
Business, do not require more than regularly scheduled maintenance in the
ordinary course, consistent with Seller's established maintenance policies, to
keep them in good operating condition and comply with all requirements under
applicable laws, regulations and licenses which govern the use and operation
thereof.
(b) No Leases of Material Tangible Personal Property. Seller does
------------------------------------------------
not lease any material tangible personal property used in the conduct of the
Business.
(c) Inventories. Schedule 4.5(c) to Seller's Disclosure Schedule
----------- -----------------------------------------------
sets forth a list of Inventory relating to the Business as of July 31, 1998,
with a valuation based on Seller's standard practices. All Inventory is of a
quality and quantity usable in the ordinary course of the Business, except for
obsolete items, damaged items and materials at below standard quality, which, in
the aggregate are not material in amount and have been written off or written
down to net realizable value in the Financial Statements.
(d) Title to and Adequacy of Purchased Assets. Seller has, and on
-----------------------------------------
the Closing Date will convey and transfer to Buyer, good, complete and
marketable title to all of the Purchased Assets, free and clear of all
Encumbrances of any nature whatsoever other than the Permitted Encumbrances
described in Section 4.5(d) of Seller's Disclosure Schedule. All of the
----------------------------------------------
Purchased Assets are in the exclusive possession and control of Seller, and
Seller has the unencumbered right to use, and to sell to Buyer in accordance
with the terms and provisions of this Agreement, all of the Purchased Assets
without interference from and free of the rights and claims of others. The
Purchased Assets and the Proprietary Materials constitute all of the assets,
properties, rights, privileges and interests which Seller either owns or
controls, or uses or holds for use exclusively in connection with the Business
and which are necessary for Buyer to own and operate the Business substantially
in the same manner as it has been owned and operated by Seller during the nine-
month period ended July 31, 1998.
4.6 The Assigned Contracts and Other Agreements.
-------------------------------------------
(a) Schedule 1.1(c) contains an accurate and complete list of the
---------------
Assigned Contracts. Seller has furnished to Buyer accurate and complete copies
of all of the Assigned Contracts. Each of the Assigned Contracts is a valid and
binding obligation of Seller and the other parties thereto, enforceable in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and general
principles of equity relating to the availability of equitable remedies. There
have not been any defaults by Seller or, to Seller's Knowledge, defaults
9
<PAGE>
or any claims of default or claims of nonenforceability by the other party or
parties under or with respect to any of Assigned Contracts which, individually
or in the aggregate, would have a Material Adverse Effect on the Business, and
there are no facts or conditions to Seller's Knowledge that have occurred or
that are anticipated to occur which, with the passage of time or the giving of
notice, would constitute a default by Seller, or to Seller's Knowledge, by the
other party or parties under any of the Assigned Contracts or would cause a
creation or imposition of any Encumbrance upon any of the Purchased Assets or
otherwise would have a Material Adverse Effect on the Business.
(b) Schedule 4.6(b) to Seller's Disclosure Schedule contains a list
-----------------------------------------------
of all of the contracts, agreements, indentures, notes, leases and other
instruments or commitments, written or oral, which are related to any of the
Purchased Assets, the Assumed Obligations or the Business or the consummation of
the transactions contemplated by this Agreement.
As used in this Agreement, "Seller's Knowledge" shall mean only the
actual knowledge of the following employees of Seller or the knowledge such
employees would reasonably be expected to have: Dave Allen, Ross Woolley, Steve
Cooper, Caroline Husted, Don Whitelaw, Ed Rodgers, Ulrich Lippuner, Rich Silvers
and Melanie Daniels.
4.7 Intellectual Property.
---------------------
(a) Seller owns all right, title and interest in and to all patents,
patent applications, copyrights, trademarks, trademark applications and trade
secrets, know-how, intellectual property and rights thereto pertaining to the
Business, which consists of the Licensed Intellectual Property Rights and the
Proprietary Materials (collectively, the "Intellectual Property Rights") free
and clear of all Encumbrances (including without limitation any distribution
rights and royalty rights).
(b) Seller has the exclusive right to use, sell, license and dispose
of, and has the right to bring actions for infringement of, all Intellectual
Property Rights.
(c) All of Seller's copyright registrations related to any and all of
Seller's Intellectual Property Rights are valid and in full force and effect.
If the copyright has not been registered, then it is not part of the foregoing
representation. Seller has valid copyrights in all material copyrightable
material used in connection with the Business and included in the Purchased
Assets or the Licensed Intellectual Property Rights whether or not registered
with the U.S. Copyright Office. Consummation of the transactions contemplated
hereby will not alter or impair the validity of any such copyrights or copyright
registrations.
(d) No claims have been asserted against Seller by any person
challenging Seller's use or distribution (including manufacture, marketing
license or sale) of any Intellectual Property Rights or challenging or
questioning the validity or effectiveness of
10
<PAGE>
any license or agreement relating thereto. To Seller's Knowledge, there is no
valid basis for any claim of the type specified in this Section 4.7(d).
(e) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not (i) breach, violate or conflict with
any instrument, agreement or other right governing any of the Intellectual
Property Rights or portion thereof, (ii) cause the forfeiture or termination, or
give rise to a right of forfeiture or termination, of any Intellectual Property
Rights or portion thereof, (iii) in any way impair the right of Buyer to use
(including distribute, manufacture, marketing, license, sale or other
disposition) any Intellectual Property Rights or portion thereof, or (iv) to
Seller's Knowledge, give rise to any right to bring any action for infringement
of any Intellectual Property Rights or any portion thereof.
(f) To Seller's Knowledge, the operation by Seller of the Business
(including distribution, manufacture, marketing, license or sale) does not
violate, and has not violated, any right of any third party, including, without
limitation, infringement of or misappropriation of intellectual property.
(g) To Seller's Knowledge, no third party is violating, infringing,
or misappropriating any Intellectual Property Right.
(h) To Seller's Knowledge, no party to any contract, commitment or
restriction relating to any Intellectual Property Right intends to cancel,
withdraw, modify or amend such contract.
(i) (i) No third party has any right to manufacture, reproduce,
distribute, sell, sublicense, market or exploit any of the Intellectual Property
Rights or any adaptations, translations, or derivative works based on the
Intellectual Property Rights, or any portion thereof; (ii) Seller has no
agreements, contracts or commitments that provide for the manufacture,
reproduction, distribution, sale, sublicensing, marketing, development,
exploitation or supply by Seller of any Intellectual Property Right or any
adaptation, translation, or derivative work based on the Intellectual Property
Rights, or any portion thereof or otherwise material to the Business; (iii)
Seller has not granted to any third party any exclusive or non-exclusive rights
of any kind with respect to any of the Intellectual Property Rights; and (iv)
Seller has not granted any third party any right to market any product utilizing
any Intellectual Property Right under any "private label" arrangements pursuant
to which Seller is not identified as the source of such goods. Each document or
instrument identified pursuant to this Section 4.7(i) is listed in Schedule 4.7
------------
attached to Seller's Disclosure Schedule and true and correct copies of such
- ----------------------------------------
documents or instruments have been furnished to Buyer.
(j) Seller has not knowingly altered its data, or any Intellectual
Property Rights, in a manner that may damage data, whether stored in electronic,
optical or
11
<PAGE>
magnetic or other form.
(k) Except as set forth herein, Seller makes no representation or
warranty as to the validity or utility of any patents licensed to Buyer under
the License Agreement.
(l) Except as set forth herein, Seller makes no representation or
warranty as to the accuracy or usefulness of the HP Confidential Information (as
defined in the License Agreement) or to the quality of goods to be produced by
Buyer through its operation of the Business after the Closing.
(m) At the Closing Date, Seller hereby gives the representations and
warranties contained in the last sentence of Section 4.7(d) and in Section
4.7(f) after due inquiry. For the purpose of this Section 4.7(m), "due inquiry"
shall mean that Seller, at its expense (i) has conducted an on-line search
within U.S. and foreign patent databases using applicable keyword search
strategies, and (ii) has engaged an independent search firm to conduct an
infringement/freedom to operate search.
4.8 Conflicts. Neither the execution and delivery of nor the consummation
---------
of the transactions contemplated by, this Agreement or the Principal Agreements
will or could result in any of the following:
(a) A default or an event that, with notice or lapse of time, or
both, would be a default, breach or violation of the Certificate of
Incorporation, bylaws or other governing instruments of Seller, or any Assigned
Contract;
(b) The right to terminate any Assigned Contract, or the acceleration
of the maturity of any indebtedness or other obligation of Seller relating to
the Business;
(c) The creation or imposition of any Encumbrance on any of the
Purchased Assets;
(d) The violation or breach of any writ, injunction or decree that
would become or is now applicable to or binding on any of the Purchased Assets
or the Business;
(e) A loss or adverse modification of any license, franchise, permit
or other authorization or right (contractual or other) to operate the Business
or to own any of the Purchased Assets, granted to or otherwise held by Seller or
used in the Business, which would have a Material Adverse Effect on the
Business; or
(f) The right to cease or terminate any other business relationship
or arrangement between Seller and any third party that would have a Material
Adverse Effect on the Business.
4.9 Customers and Suppliers. Schedule 4.9 to Seller's Disclosure Schedule
----------------------- --------------------------------------------
12
<PAGE>
contains correct and current lists of (a) Seller's ten (10) largest customers,
in terms of the revenues generated from the conduct of the Business, in the
twelve-month period ended October 31, 1997, and the nine-month period ended
July 31, 1998, showing the approximate aggregate dollar amount of revenues from
each such customer during such periods and the nature of the products licensed
or sold; and (b) the ten (10) largest suppliers of Seller in terms of purchases
made by Seller in connection with the Business during the nine-month period
ended July 31, 1998, showing the approximate aggregate dollar amounts of
purchases by Seller from each such supplier during such periods. To Seller's
Knowledge, none of the customers or suppliers listed in Schedule 4.9 to
---------------
Seller's Disclosure Schedule intends to cease, and there is no event or
- ----------------------------
circumstance that has occurred during the past twelve (12) months which might
reasonably be expected to cause or lead any such customer or supplier to cease
doing business with Seller, or alter materially the amount of the business that
any of them is presently doing with Seller.
4.10 Product Warranties and Liabilities. Schedule 4.10 to Seller's
---------------------------------- -------------------------
Disclosure Schedule sets forth the current Warranties given or made by Seller
- -------------------
relating to the Business. "Warranties" shall mean all obligations to service,
repair, replace, credit or refund based upon or arising out of express and
implied warranties made by Seller in connection with the Business. Schedule
--------
4.10 to Seller's Disclosure Schedule reflects in all material respects all
- ------------------------------------
Warranties as of the date it is delivered. Seller has not extended or granted
any return rights or given or made any Warranties with respect to the Business
which are currently in effect except for those set forth in Schedule 4.10 to
----------------
Seller's Disclosure Schedule. To Seller's Knowledge, no products relating to the
- ----------------------------
Business which have been shipped by Seller in a condition that such products
might reasonably be expected to be returned by the customers, or there is no
intention on the part of any customer to return any of Seller's products, except
returns made in the ordinary course of the Business and consistent with the
Warranties and which, in any event, are not, and are not expected to become,
material in amount. To Seller's Knowledge, there is no fact or the occurrence
of any event which might reasonably form the basis of any present or future
claim against Seller, whether or not fully covered by insurance, for liability
on account of negligence or product liability or on account of any Warranties
which would have, individually or in the aggregate, a Material Adverse Effect on
the Business, and adequate reserves will have been set aside in the SEC
Financial Statements for claims relating to Warranties and product returns. Set
forth in Schedule 4.10 to Seller's Disclosure Schedule is a summary of the
---------------------------------------------
average liabilities incurred by Seller with regards to claims made to Seller in
the eighteen-month period ended July 31, 1998 with respect to Warranties or
product returns for all products sold by Seller in the conduct of the Business.
4.11 Insurance. Seller has reasonably self-insured (based on standard
---------
industry practice) or reasonably insured with third party insurers the Purchased
Assets and the Folsom Real Property against loss or damage with all risk
coverage on a replacement cost basis.
13
<PAGE>
4.12 Compliance with Law/Permits.
---------------------------
(a) Seller is in compliance with all, and is not in violation of any,
law, ordinance, order, decree, rule or regulation of any governmental agency or
authority, the violation of or noncompliance with which could have a Material
Adverse Effect on the Business. No unresolved (i) charges of violations of laws
or regulations relating to the Business have been made or threatened, (ii)
proceedings or investigations relating to the Business are pending or, to
Seller's Knowledge, have been threatened, and (iii) citations or notices of
deficiency have been issued or have been threatened, against Seller relating to
or arising out of the Business by any governmental authorities, which has had or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, on the Business; and, to Seller's Knowledge, there are
no facts or circumstances upon which any such charges, proceedings,
investigations, or citations or deficiency notices, reasonably may be
instituted, issued or brought hereafter.
(b) Schedule 1.1(l) contains a true, correct and complete list of all
---------------
governmental licenses, permits, authorizations, franchises or certificates or
rights (contractual or other) relating to the Business that are held by Seller
(collectively, "Licenses and Permits"). All of the Licenses and Permits are in
full force and effect at the date hereof. There is no other license, permit,
authorization, franchise, certificate or right to operate the absence of which
has had, or could reasonably be expected to have, a Material Adverse Effect on
the Business. The Business is in compliance with the conditions and
requirements imposed by or in connection with such Licenses and Permits. Seller
has not received any notice, and to Seller's Knowledge there is no reason to
believe, that any governmental authority intends to cancel, terminate or modify
any of such Licenses or Permits or that there are valid grounds for any such
cancellation, termination or modification. Seller has delivered or made
available to Buyer a true, correct and complete copy of the most recent safety
inspection and quality assurance reports prepared by any employees or
consultants of Seller or by any governmental authorities relating to the
Business or the products licensed or sold or the services rendered by Seller in
the Business.
4.13 Taxes and Tax Returns. For purposes of this Agreement (a) the term
---------------------
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not; and (b) the term "Tax Return"
means any return, declaration, report, claim for refund, or information return
or statement (including, without limitation , information returns or reports
related to back-up withholding and any payments to third parties) relating to
any Taxes, including any
14
<PAGE>
schedule or attachment thereto, and including any amendment thereof. Subject to
the last sentence of Section 7.4, Buyer shall have no liability or obligation
whatsoever, and shall not incur any loss, expense or cost, and none of the
Purchased Assets, or any assets of Buyer, shall be subjected to any Encumbrance,
by reason of any Taxes arising out of (x) the Business as conducted by Seller
prior to the consummation of the sale hereunder of the Purchased Assets to
Buyer, or (y) any other operations or activities of Seller whether conducted
prior to the date hereof or hereafter. Seller further represents and warrants
that it is relying solely on its own accountants and advisors for advice as to
the tax consequences to it of the transactions contemplated hereby.
4.14 Litigation and Proceedings. There is no action, suit, proceeding or
--------------------------
investigation, or any counter or cross-claim in an action brought by or on
behalf of Seller, whether at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, that is pending or, to Seller's
Knowledge, threatened, against Seller, which (i) could reasonably be expected to
affect adversely Seller's ability to perform its obligations under this
Agreement or the Principal Agreements or complete any of the transactions
contemplated hereby or thereby, or (ii) to Seller's Knowledge, involves the
possibility of any judgment or liability, or which may become a claim, against
Buyer, the Business or the Purchased Assets. Seller is not subject to any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over Seller, any of the Purchased Assets or the Business
that affects, involves or relates to the Purchased Assets of the Business.
4.15 Operational Restrictions. The Business is not subject to (a) any
------------------------
restrictions under any applicable laws or regulations or (b) any charter or
other corporate or contractual restriction or (c) any judgment, order, writ,
injunction, decree or order, which has had or could reasonably be expected to
have a Material Adverse Effect on the Business. Seller does not know of any
facts, circumstances or events which has had, or with the passage of time may
have, a Material Adverse Effect on any of the Purchased Assets or on the
Business.
4.16 No Broker. Seller has not retained or used the services of an agent,
---------
finder or broker in connection with the transactions contemplated by this
Agreement.
4.17 Representations and Warranties of Seller. The representations and
-----------------------------------------
warranties of Seller contained herein, and the disclosures contained in Seller's
--------
Disclosure Schedule do not contain any statement of a material fact that was
- -------------------
untrue when made or omits any information necessary to make any such statement
contained therein, in light of the circumstances under which such statement was
made, not misleading. Seller has not made any representations or warranties to
Buyer with respect to the federal, state or local income or other tax
consequences to Buyer of the consummation by it of the transactions
15
<PAGE>
contemplated hereby.
Article 5. Representations and Warranties of Buyer.
Subject to the disclosures and exceptions set forth in the disclosure
schedule delivered by Buyer to Seller in the form attached to the Original
Agreement as Schedule 5, Buyer made the representations and warranties set forth
----------
hereinafter in this Section 5 to Seller as of the date thereof, except for the
representations and warranties set forth in Section 5.1(b) with respect to the
Principal Agreements. Subject to the disclosures and exceptions set forth in
the disclosure schedule delivered by Buyer to Seller in the form attached hereto
as Schedule 5, Buyer hereby makes the representations and warranties set forth
----------
hereinafter in this Section 5 to Seller as of the Closing.
5.1 Authority and Binding Effect.
----------------------------
(a) Buyer has the full corporate power and authority to execute and
deliver this Agreement and the Principal Agreements. This Agreement and the
Principal Agreements and the consummation by Buyer of its obligations contained
herein and therein have been duly authorized by all necessary corporate actions
of Buyer, and such agreements have been duly executed and delivered by Buyer.
(b) This Agreement is a valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, and upon execution and
delivery each of the Principal Agreements will be a valid and binding agreement
of Buyer, and will be enforceable against it in accordance with its terms, in
each case except as enforceability of the obligations of Buyer hereunder and
thereunder may be limited by (i) bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally, and (ii) general principles
of equity relating to the availability of equitable remedies (whether such
agreements are sought to be enforced in a proceeding at law or a proceeding in
equity).
(c) Other than Buyer's filing under the HSR Act, it is not
necessary for Buyer to take any action or to obtain any approval, consent or
release by or from any third person, governmental or other, to enable Buyer to
enter into or perform its obligations under this Agreement or any of the
Principal Agreements.
5.2 Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
5.3 No Conflicts. Neither the execution and delivery nor the
------------
performance of this Agreement or any of the Principal Agreements by Buyer will
or could result in any of the following:
(a) a default or an event that, with notice or lapse of time, or
both, would
16
<PAGE>
constitute a default, breach or violation of the Certificate of Incorporation or
Bylaws of Buyer, any contract, lease, license, franchise, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust,
security or pledge agreement, or other agreement, instrument or arrangement to
which Buyer is a party or is subject and which is material to Buyer (a "Material
Buyer Contract");
(b) the termination of any Material Buyer Contract or the
acceleration of the maturity of any indebtedness or other monetary obligation of
Buyer that is material in amount to Buyer; or
(c) a violation or breach of any writ, injunction or decree of any
court or governmental instrumentality to which Buyer is a party or by which any
of its properties is bound or any laws or regulations applicable to Buyer, where
the violation would have a Material Adverse Effect on Buyer.
5.4 Broker. Buyer has not retained or used the services of an agent,
------
finder or broker in connection with the transactions contemplated by this
Agreement.
5.5 Financial Resources. Subject to Buyer's obtaining bank or other
-------------------
financing, Buyer has the financial resources to enable it to fulfill its
obligations to Seller hereunder and the Principal Agreements, including, without
limitation, the payment of the Purchase Price to Seller on the Closing Date.
5.6 Representations and Warranties. The representations and warranties
------------------------------
of Buyer do not contain any statement of a material fact that was untrue when
made or omits any information necessary to make any statement of material
contained therein, in light of the circumstances under which such statement was
made, not misleading. Buyer has not made any representations or warranties to
Seller with respect to the federal, state or local income or other tax
consequences to Seller of the consummation by it of the transactions
contemplated hereby.
Article 6 Conduct of Business Pending the Closing.
Between the date hereof and the Closing, and except as otherwise consented
to by Buyer in writing, Seller covenants as follows:
6.1 Access. Seller shall give to Buyer and its representatives, from
------
and after the date of execution of this Agreement, on prior reasonable request
therefor from Buyer or such representatives, such access to the premises,
employees, agents and consultants of Seller, and such copies of the Financial
Statements, books and records, and contracts and leases and other documentation,
so as to enable Buyer to inspect and evaluate all aspects of the Business and
operations, assets, operating results, financial condition, capitalization,
ownership and legal affairs relating to the Business. Buyer agrees to conduct
its review,
17
<PAGE>
and to cause its representatives to conduct their review, in a manner designed
to minimize any disruption of the Business. Buyer further agrees that, if
requested by Seller, Seller's representatives will enter into confidentiality
agreements in a form reasonably satisfactory to Seller prior to accessing any
such information pursuant to this Section 6.1.
6.2 Conduct of Seller's Business. From the date of this Agreement and
----------------------------
until the Closing or termination of this Agreement, whichever first occurs,
Seller shall operate and conduct the Business diligently and only in the
ordinary course, consistent with past practices. In furtherance thereof, unless
Seller obtains Buyer's prior consent to do otherwise (which consent Buyer shall
not unreasonably withhold or delay), Seller shall:
(a) Organization. Use its commercially reasonable efforts to
------------
preserve intact its organization and use its reasonable efforts to retain the
Selected Employees involved in the Business and the services of all vendors,
suppliers, agents and consultants to Seller, commensurate with the requirements
of the Business;
(b) Insurance. Maintain self-insurance or third party insurance,
---------
including liability and errors and omissions insurance, consistent with past
practices and, unless comparable insurance is substituted therefor or is not
generally available to the Business, not take any action to terminate or modify,
or permit the lapse or termination of, the present self-insurance or third party
insurance policies and coverages of Seller;
(c) Lawsuits, Claims.
----------------
(i) Promptly notify Buyer of any lawsuit or other legal
proceeding that is commenced, or that is threatened, in writing, against Seller
and that (A) relates to or arises out of the Business and, if adversely
determined against Seller, would be expected to have a Material Adverse Effect
on the Business, or (B) relates to any of the Purchased Assets or any of the
transactions contemplated by this Agreement; and
(ii) Not settle any action or proceeding on terms that are
expected to have a Material Adverse Effect on the Business; not release, settle,
compromise or relinquish any claims, causes of action or rights involving more
than two hundred thousand dollars ($200,000) individually or in the aggregate
which Seller may have against any other persons relating to the Business,
including, without limitation, claims or rights to reimbursement or payment for
services rendered by Seller;
(d) Certain Changes. Not encumber or place any liens or security
---------------
interests on any of the Purchased Assets, other than (i) liens or security
interests in existence on the date hereof, (ii) statutory liens to secure taxes
that are not yet due and payable, and (iii) purchase money security interests in
connection with the acquisition of equipment in the ordinary course of the
Business consistent with past practice;
18
<PAGE>
(e) Condition of Assets. Maintain in good working order and
-------------------
condition, ordinary wear and tear excepted, all of the Purchased Assets;
(f) Agreements.
----------
(i) Use its commercially reasonable efforts to observe and
perform all of its obligations under the Assigned Contracts;
(ii) Except as required by any existing contracts or agreements,
not enter into any new agreement that would constitute an Assigned Contract or
amend any Assigned Contract, or incur any new monetary obligation involving more
than two hundred thousand dollars ($200,000) individually or in the aggregate,
other than monetary obligations that are incurred in the ordinary course of the
Business consistent with past practices;
(iii) Promptly notify Buyer in writing of the occurrence of any
breach or default of any Assigned Contract;
(iv) Not directly encourage or incent any employee involved in
the Business, who is one of the Selected Employees, to leave his or her current
position or alter his or her responsibilities with Seller; provided, however,
that (i) Seller will have no such obligation in the event any of the Selected
Employees initiates contact with Seller or Buyer regarding leaving his or her
current position with Seller or altering his or her responsibilities with
Seller, and (ii) this obligation shall not apply to general solicitations of
employment; and
(v) With respect to any employee involved in the Business who is
not a Selected Employee, or who initiates contact with Seller regarding leaving
his or her current position with Seller or altering his or her responsibilities
with Seller, use commercially reasonable efforts to ensure that any such
employee is available to Buyer to enable Buyer to contact such employee for
purposes of (A) evaluating the Business and operations, assets, operating
results, financial condition, capitalization, ownership and legal affairs
relating to the Business, and (B) obtaining information from such employees to
enable Buyer to commence conducting the Business following the Closing Date.
(g) Consents; Compliance with Laws to the Extent Related to the
-----------------------------------------------------------
Business.
- --------
(i) Use commercially reasonable efforts to obtain and maintain
all consents, assignments or approvals of, and licenses, permits and franchises
and rights to operate the Business granted by, governmental authorities;
(ii) Not take any action which would reasonably be expected to
19
<PAGE>
result in a violation of or in the noncompliance with any laws or regulations
applicable to the Business; and
(iii) Cooperate with Buyer and render to Buyer such assistance
as Buyer may reasonably request, at Buyer's sole expense, in obtaining such
governmental approvals; and
(h) Taxes. Pay, when due, and prior to the imposition or assessment
-----
of any interest, penalties or liens by reason of the nonpayment of, all Taxes,
due or assessed against it, except for any Taxes being contested in good faith
and for which reserves have been established by Seller.
Article 7 Obligations Surviving the Date of this Agreement and the Closing.
7.1 Consents to Assignment; Termination of Encumbrances.
---------------------------------------------------
(a) If any of the Purchased Assets or any claim, right or
benefit thereunder, including performance bonds and letters of credit posted by
Seller with respect to the Purchased Assets (collectively, the "Rights"), is not
by its terms assignable or transferable or is not assignable or transferable
without the consent, approval or waiver of any person who is not a party hereto
and such consent, approval or waiver has not been obtained at or prior to the
Closing Date, or the assignment or transfer thereof to Buyer would constitute a
breach of any contract, law, statute, ordinance, regulation, rule, judgment,
decree or order, then, subject to Buyer's prior written consent, Seller shall
hold such Rights and all benefits derived thereunder and therefrom in trust for
Buyer. Seller shall continue to use commercially reasonable efforts to obtain,
where possible, as Buyer may direct, acting reasonably, any necessary consents,
approvals or waivers to the assignment or transfer of the Rights to Buyer
following the Closing Date. Until such consent, approval or waiver has been
obtained or, if it cannot be obtained, Seller shall continue to maintain the
existence of the Rights, comply with the terms and provisions of the Rights as
agent for Buyer at Seller's expense (except that, in the case of performance
bonds and letters of credit, such expense shall be limited to any draw thereon
by the party holding such bond or letter of credit) and for the benefit of
Buyer, take all such actions and do or cause to be done all such things as Buyer
may reasonably direct, at Seller's expense, in order to preserve such Rights and
provide the benefits thereof to Buyer, including collecting and paying promptly
to Buyer all monies payable under or with respect to such Rights, and enforcing
at the request and expense of Buyer, or terminating at the direction of Buyer,
any of such Rights (until, in the case of such performance bonds and letters of
credit, such time as it is possible for Buyer, using its best efforts, to
replace them, whereupon they may be terminated by Seller).
(b) Notwithstanding anything to the contrary contained herein
(i) for up to an aggregate of twenty-five thousand dollars (US$25,000), Seller,
and (ii) for any
20
<PAGE>
additional amounts, Buyer shall be responsible for the payment of, and shall
bear any direct costs associated with, obtaining all third party consents
necessary to effect the assignment by Seller to Buyer of the Assigned Contracts
pursuant hereto. In addition, Buyer shall be responsible for the payment of, and
shall bear any costs associated with, maintenance, service and support, upgrade
and other similar costs associated with usage of the Purchased Assets and of
software under the Assigned Contracts after the Closing Date.
(c) If it is determined at any time hereafter that Seller failed to
remove or cause to be removed, without liability or cost or expense to Buyer and
without the disposition or diminution in the value of any of the Purchased
Assets, any Encumbrance on any of the Purchased Assets that was in existence on
or prior to the Closing Date, or if any Encumbrance is imposed or placed on any
of the Purchased Assets (or any replacements thereof) after the Closing Date as
a result of any act or omission of Seller, occurring on, prior to or after the
Closing Date, then, without limiting any other right or remedy Buyer may have,
Seller shall, cause such Encumbrance to be removed at no expense or liability to
Buyer, and without any disposition or diminution in the value of any of the
Purchased Assets.
7.2 Further Assurances. Each party hereto shall execute and deliver after
------------------
the date hereof such instruments and take such other actions as the other party
may reasonably request in order to carry out the intent of this Agreement or to
better evidence or effectuate the transactions contemplated herein.
7.3 Expenses. Each party shall pay all of its respective costs and
--------
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in carrying out and closing the transactions contemplated by this
Agreement whether or not this Agreement or the transactions contemplated hereby
are ever consummated. Each party shall pay the costs and expenses of its
independent auditors incurred in connection with the preparation of the SEC
Financial Statements.
7.4 Taxes. Seller shall pay all Taxes of any kind or nature arising from
-----
the conduct or operation of the Business up to the Closing Date and the conduct
or operation by Seller, prior to or after the Closing Date, of any other
business or business activities operations. If any taxes required under this
Section 7.5 to be borne by Seller are assessed against Buyer or any of the
Purchased Assets, Buyer shall notify Seller in writing promptly thereafter and
Seller shall be entitled to contest, in good faith, such assessment or charge as
long as such assessment does not adversely affect Buyer or the Purchased Assets
or the Business. Notwithstanding the foregoing, Buyer may (but shall not be
obligated to) pay any such Taxes assessed against it, the Business or any of the
Purchased Assets, but which are payable by Seller pursuant hereto, if Buyer's
failure to do so, in the judgment of Buyer, could result in the imposition of a
Encumbrance on any of the Purchased Assets or any other assets of Buyer or would
constitute a violation of any agreement to which Buyer is subject, or if Seller
fails to contest such assessment or charge diligently and in good faith.
21
<PAGE>
If Buyer pays any Taxes which pursuant hereto are required to be borne by
Seller, Buyer shall be entitled to reimbursement thereof from Seller on demand.
Buyer shall pay all Taxes of any kind or nature arising from the consummation of
the transactions contemplated hereby, including, without limitation, all sales,
use or similar Taxes, if any, that may arise from or be assessed by reason of
the sale of the Purchased Assets by Seller to Buyer.
7.5 Non-Competition and Non-Solicitation.
------------------------------------
(a) For purposes of this Section 7.5:
(i) The term "Competitive Business" shall mean the business
of designing, manufacturing and/or marketing [*]
(ii) The term "Territory" shall mean worldwide.
(b) For a period of [*] from the Closing Date, within the
Territory, Seller shall not, directly, or indirectly through one or more other
persons or entities, engage in any Competitive Business, or acquire or have any
controlling ownership, financial or other interests (whether as a principal,
partner, member, joint venturer, shareholder, consultant, lender or otherwise,
in any case, a "Partner") in, any person, firm, corporation, limited liability
company, partnership or joint venture, or association or other business entity
that engages in any Competitive Business. Notwithstanding the foregoing, this
Section 7.5 shall not prohibit Seller from acquiring or having any ownership,
financial or other interests (whether as a Partner or otherwise) in any
telecommunications, multimedia or telecommunications equipment firm that may own
or have a financial or other interest (whether as a Partner or otherwise) in a
business similar to a Competitive Business for predominantly its own internal
needs.
(c) For a period of [*] after the Closing Date, Seller
shall not solicit or recruit, for its own benefit or for the benefit of any
other person or entity, any officer or employee of Buyer; provided, however,
that the terms "solicit" or "recruit" shall not be deemed to include general
solicitations of employment not specifically directed towards officers or
employees of Buyer.
__________
[*] Confidential Treatment Requested.
22
<PAGE>
(d) It is a condition precedent to execution and delivery by Buyer of
this Agreement, and the performance by Buyer of its obligations thereunder, that
Seller agree to comply with this Section 7.5; and Seller understands and
acknowledges that Seller's agreeing to its obligations under this Section 7.5 is
a material inducement to Buyer upon which it is relying in entering into, and
consummating the transactions contemplated by, this Agreement.
(e) Seller agrees that if, in any judicial proceeding, the geographic
coverage or respective periods of time contained in this Section 7.5 should be
adjudged unreasonable, then, such geographic coverage or such period or periods
of time, as the case may be, shall be reduced to the extent necessary to enable
the court to enforce the covenants and restrictions in this Section 7.5 to the
fullest extent permitted under applicable law.
7.6 SEC Financial Statements. Within sixty-five (65) days and seventy-
------------------------
three (73) days following the Closing Date, Seller shall deliver to Buyer, in
draft form and final form, respectively, financial statements of Seller relating
to the Business as at and for the periods ended as required in that certain
letter, dated August 24, 1998, from the Securities and Exchange Commission (the
"SEC") to Buyer in the form attached hereto as Exhibit F (the "SEC Financial
---------
Statements"), all of which shall be prepared in accordance with GAAP,
consistently applied, and fairly present, on an accrual basis, the financial
condition of Seller relating to the Business, and the results of operations of
the Business as at the relevant dates thereof and for the respective periods
covered thereby.
7.7 Delivery of Purchased Assets. Seller will use commercially reasonable
----------------------------
efforts to deliver to Buyer, at Seller's sole expense:
(a) Folsom Assets. Immediately following, but in no event later
-------------
than five (5) days after, the Closing Date, at the facility located on the
Folsom Real Property, or, upon Buyer's written request to Seller at least ten
(10) days prior to the Closing, at Buyer's Irvine, California facility, all
Purchased Assets which are not located at such facility.
(b) Malaysia. To the locations and at the times after the
--------
Closing Date specified by Buyer to Seller in writing, all Purchased Assets
located in Malaysia;
provided, however, that Seller shall not have any responsibility or liability
for delivering to Buyer any Purchased Assets located at Seller's vendors.
7.8 Accounting System. Seller shall provide Buyer such financial and
-----------------
accounting information so as to enable Buyer reasonably to maintain the
financial and accounting system relating to the Business in substantially the
same manner as Seller maintained its system prior to the Closing Date.
23
<PAGE>
7.9 Risk of Loss. From the date hereof up to the Closing, the Purchased
------------
Assets shall be and remain at the risk of Seller. If, prior to the Closing, all
or any part of the Purchased Assets which are necessary to carry on the Business
as currently conducted are destroyed or damaged by fire or any other casualty or
shall be appropriated, expropriated or seized by governmental authority or other
lawful authority, Buyer, unless Buyer terminates its obligations under this
Agreement as contemplated by Section 12.1, shall complete the purchase without
reduction of the Purchase Price, in which event all proceeds of insurance or
compensation for expropriation or seizure shall be paid to Buyer at the Closing
and all right and claim of Seller to any such amounts not paid by the Closing
Date shall be assigned at the Closing to Buyer. Without limiting the foregoing,
Seller shall be responsible for the risk of loss of, or damage to, any Purchased
Assets located in Malaysia, until such time as such Purchased Assets are
delivered to Buyer, at which time Buyer shall be responsible for the risk of
loss of, or damage to, the Purchased Assets.
7.10 Purchased Assets on Leased Property. At the Closing, Seller shall
-----------------------------------
transfer title to Buyer to any of the Purchased Assets located at Seller's
warehouse facilities located in West Sacramento, California and Rancho Cordova,
California. Upon Buyer's written request to Seller at least ten (10) days prior
to the Closing, Buyer may request Seller to move such Purchased Assets as
quickly as practicable to the Folsom Real Property or Buyer's facility in,
California.
7.11 FTO Transfer. Buyer shall permit each Seller employee who accepts an
------------
employment offer from Buyer to transfer to Buyer on the commencement of such
employment up to a maximum of two hundred (200) hours of accrued flexible time-
off ("FTO") with Seller. Seller shall deliver to Buyer prior to the Closing a
Schedule 7.11, which shall set forth the individual employee and aggregate
- -------------
amounts of FTO to be so transferred.
7.12 [*].
---
(a) Seller will assume responsibility for and sole control over [*],
and Seller will retain sole discretion as to [*]; provided, however, that,
notwithstanding the foregoing, in determining Seller's [*], and in the course of
[*], Seller shall act in good faith, and no less diligently than Seller would,
had [*] of Seller in the Business.
(b) Subject to [*] (as the case may be), Buyer shall [*] requested
by Seller with respect to the [*] promptly and in any event within two (2) years
after the date
__________
[*] Confidential Treatment Requested.
24
<PAGE>
hereof.
(c) Buyer shall perform [*]. For the purpose of this Section 7.12(b),
"[*]" shall mean initially (i) [*], and (ii) [*]. Seller and Buyer acknowledge
that such costs consist of the following: [*]. The amounts do not include [*]
incurred in connection with any [*] and any other costs directly attributable to
[*]. In the event that any of the foregoing enumerated costs increases or
decreases, then Seller and Buyer agree to meet periodically to discuss adjusting
upward or downward the amount to be charged by Buyer to Seller for such [*].
(d) Buyer will send Seller a monthly invoice for any [*] performed by
Buyer pursuant to Section 7.12(b) above. Buyer will credit Seller for charges
for the [*] of such [*] against the amount of the Prepayment. When the charges
for such [*] exceed the amount of the Prepayment, Seller will pay the invoice
within thirty (30) calendar days after date of the invoice.
(e) At Seller's expense, Seller or its agent may audit Buyer's costs
of such [*]. Seller or its agent shall conduct such audit in a reasonable manner
and only upon five (5) business days written notice to Buyer, which shall
reasonably cooperate with Seller or its agent in its performance of such audit,
including without limitation making such persons and records available to Seller
or its agent during such audit as are reasonably necessary to permit Seller or
its agent to perform such audit.
(f) In the event that [*], having previously agreed with Seller
that:
(i) [*] from Seller prior to the Closing Date, which [*]
are included in the [*]; and
(ii) [*] would share in [*],
pays to Buyer, at any time after the Closing, any amounts in connection with
such [*], either in the form of;
(x) [*]
__________
[*] Confidential Treatment Requested.
25
<PAGE>
[*] pays to Buyer for the [*] on the backlog (i.e, ordered but not delivered);
or
(y) paying Powerwave [*] after the shipment of each of the
first [*], the next [*] and the final [*] of the [*] on the backlog; or
(z) in any other form of cash payment,
then Buyer shall promptly reimburse Seller on a dollar-for-dollar basis for up
to [*].
(g) If, as part of resolving [*], Seller agrees to provide any [*],
then Buyer shall provide, and Seller shall bear the costs of, such [*].
7.13 Inventory and Purchase Price Adjustment. Within twenty-one (21) days
---------------------------------------
after the Closing, Seller shall deliver to Buyer a true and complete list of all
of the Inventory and stock in trade owned by Seller immediately prior to the
Closing to the extent used in, relating to or arising out of the Business, to be
attached hereto as Schedule 7.13. In the event there is a depletion of
-------------
Inventory reflected on Schedule 7.13 (the "Depletion of Inventory") in an
-------------
amount, with a valuation based on Seller's standard practices, greater than [*]
of the Inventory reflected on Schedule 4.5(c) to the Original Seller's
----------------------------------------
Disclosure Schedule, Seller, within seven (7) days after the delivery of
- -------------------
Schedule 7.13, shall reimburse to Buyer, by wire transfer in immediately
- -------------
available funds to such account as Buyer shall advise Seller in writing, an
amount, without interest, equal to the amount by which the Depletion of
Inventory exceeds [*].
Article 8 Survival of Representations and Warranties.
Except for the representations and warranties of Seller contained in
Section 4.10 that shall not survive the Closing, the representations and
warranties of Buyer and Seller contained in this Agreement shall survive the
Closing for twelve (12) months.
Article 9 Conditions Precedent to the Obligations of Buyer.
The obligation of Buyer to consummate the purchase of the Purchased Assets
from Seller is subject to the fulfillment, or the waiver by Buyer, at or prior
to the Closing, of each of the following conditions precedent:
9.1 Representations and Warranties. The representations and warranties
------------------------------
made
__________
[*] Confidential Treatment Requested.
26
<PAGE>
by Seller in the Original Agreement shall have been true and correct, in all
material respects, on the date of the Original Agreement, and the
representations and warranties made by Seller in this Agreement shall be true
and correct, in all material respects, at and as of the Closing Date.
9.2 Absence of Material Litigation. There shall be (a) no pending or
------------------------------
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against Seller or
Buyer, that seeks to enjoin the consummation of any of the transactions
contemplated by this Agreement, (b) no order that has been issued by any court
or governmental agency having jurisdiction that restrains or prohibits the
consummation of the purchase and sale of the Purchased Assets hereunder and no
proceedings pending which are reasonably likely to result in the issuance of
such an order; and (c) no pending or overtly threatened litigation, which has
had or is expected to have a Material Adverse Effect on the Business or the
Purchased Assets.
9.3 Performance of Obligations. Seller shall have performed and complied,
--------------------------
in all material respects, with all of the covenants required by this Agreement
to have been performed prior to the Closing.
9.4 No Material Adverse Change. Since July 31, 1998, there shall not have
--------------------------
been any change in or other event affecting the business or the condition
(financial or other) or operating results of Seller that has had or is expected
to have a Material Adverse Effect on the Business or the Purchased Assets.
9.5 Certificates. Buyer shall have received from Seller a certificate
------------
executed by an authorized employee of Seller, dated as of the Closing Date and
reasonably satisfactory in form and substance to Buyer, certifying that (i) each
of the representations and warranties of Seller contained in the Original
Agreement was true and correct, in all material respects, when made, and each of
the representations and warranties of Seller contained in this Agreement is true
and correct, in all material respects, on and as of the Closing Date, (ii)
Seller has performed and complied, in all material respects, with all of their
covenants required to have been performed or complied with by it pursuant hereto
on or prior to the Closing Date, and (iii) all of the conditions precedent to
Buyer's obligations the satisfaction of which was the responsibility of Seller
have been satisfied, except to the extent waived by Buyer.
9.6 Delivery of Additional Instruments. On the Closing Date, Seller shall
----------------------------------
deliver, or cause to be delivered to Buyer, the following documents and
instruments, in form and substance satisfactory to Buyer and its counsel, unless
waived in writing by Buyer:
(a) The Bill of Sale and Assumption Agreement in substantially the
form of Exhibit G hereto, duly executed by Seller (the "Bill of Sale");
---------
27
<PAGE>
(b) Evidence of the receipt of all third party consents necessary to
enable Seller to consummate the transactions contemplated herein and to utilize
the Licenses and Permits referenced in Section 4.12(b) hereof;
(c) UCC Termination Statements, and such instruments and other
documents as Buyer may reasonably request, from all persons holding any security
interests or other Encumbrances or any other adverse interests in or on any of
the Purchased Assets, terminating and discharging all of such security interests
and Encumbrances;
(d) The Principal Agreements, duly executed by Seller;
(e) A legal opinion, in substantially the form attached hereto as
Exhibit H-1, of Charles N. Charnas, counsel to Seller;
- -----------
(f) A good standing certificate, dated as of a date that is not more
than ten (10) days prior to the Closing Date, from the Secretary of State of
Delaware, for Seller; and
(g) Such other documents and instruments as Buyer or Buyer's counsel
may reasonably request so as better to evidence or effectuate the transactions
contemplated hereby.
9.7 Real Property Purchase. All of the conditions precedent to the
----------------------
obligations of Buyer under the Real Property Purchase Agreement, as set forth in
the Real Property Purchase Agreement, shall have been fulfilled.
9.8 Hart-Scott-Rodino. Any waiting period (and any extension thereof)
-----------------
under the HSR Act applicable to the transactions contemplated by this Agreement
shall have expired or shall have been terminated.
9.9 Approval of Board of Directors. This Agreement and the transactions
------------------------------
contemplated hereby shall have been duly approved by the Board of Directors of
Buyer.
9.10 Continuity of Business. Subject to Section 7.1 hereof, upon the
----------------------
consummation of the transactions contemplated by this Agreement (a) to Seller's
Knowledge, Buyer will not be hindered or prevented from continuing to use any of
the assets or property, tangible or intangible, that are the subject of a
Assigned Contract in the manner in which they are currently used; (b) to
Seller's Knowledge, Buyer will not be subject to any additional costs (other
than scheduled fee increases) as a condition to the continued use of such assets
or property which are not currently in effect; (c) to Seller's Knowledge, all
agreements with material customers, distributors, suppliers and those
28
<PAGE>
parties who license goods and products used in the conduct of the Business,
including without limitation, those set forth on Schedule 4.9 to Seller's
------------------------
Disclosure Schedule (each a "Business Partner"), shall have been assigned to
- -------------------
Buyer as of the Closing Date and shall continue in full force and effect after
the assignment of such agreements to Buyer; and (d) if no binding agreement
exists with a Business Partner, Buyer shall have no reasonable basis to believe
that a Business Partner intends to terminate or diminish its relationship with
the Business as conducted by Buyer after the Closing Date.
9.11 Financing. Buyer shall have obtained financing on terms acceptable
---------
to Buyer, sufficient to permit Buyer to consummate the transactions contemplated
hereby.
Article 10 Conditions Precedent to Obligations of Seller.
The obligation of Seller to consummate the sale of the Purchased Assets to
Buyer is subject to the fulfillment, or the waiver by Seller, at or prior to the
Closing, of each of the following conditions precedent:
10.1 Representations and Warranties. The representations and warranties
------------------------------
made by Buyer in the Original Agreement shall have been true and correct, in all
material respects, on the date of the Original Agreement, and the
representations and warranties made by Buyer in this Agreement shall be true and
correct, in all material respects, at and as of the Closing Date.
10.2 Absence of Material Litigation. There shall be (a) no pending or
------------------------------
overtly threatened litigation (other than litigation which is determined by the
parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against Seller or
Buyer that seeks to enjoin the consummation of any of the transactions
contemplated by this Agreement, (b) no order that has been issued by any court
or governmental agency having jurisdiction that restrains or prohibits the
consummation of the purchase and sale of the Purchased Assets hereunder or any
proceedings pending which are reasonably likely to result in the issuance of
such an order; and (c) no other pending or overtly threatened litigation, which
has had or is expected to materially and adversely affect the ability of the
parties to consummate the transactions contemplated hereby.
10.3 Performance of Obligations. Buyer shall have performed and complied,
--------------------------
in all material respects, with all of its covenants required by this Agreement
to have been performed by it at or prior to the Closing.
10.4 Certificates. Seller shall have received from Buyer a certificate
------------
executed by an executive officer of Buyer, dated as of the Closing Date and
reasonably satisfactory in form and substance to Seller, certifying that (i)
each of the representations and warranties of Buyer contained in the Original
Agreement was true and correct, in all material respects, when made, and each of
the representations and warranties contained
29
<PAGE>
herein is true and correct, in all material respects, on and as of the Closing
Date, (ii) Buyer has performed and complied, in all material respects, with all
of its covenants required to have been performed or complied, in all material
respects, with by it pursuant hereto on or prior to the Closing Date, and (iii)
all of the conditions precedent to Seller's obligations the satisfaction of
which was the responsibility of Buyer have been satisfied, except to the extent
waived by Seller.
10.5 Delivery of Additional Instruments. On the Closing Date, Buyer shall
----------------------------------
deliver, or cause to be delivered to Seller, the following documents and
instruments, in form and substance satisfactory to Seller and their counsel,
unless waived in writing by Seller:
(a) The Principal Agreements, duly executed by Buyer;
(b) Good standing certificates, dated not more than ten (10) days
prior to the Closing Date, from the Delaware Secretary of State, for Buyer;
(c) A legal opinion in substantially the form of Exhibit H-2, of
-----------
Stradling, Yocca, Carlson & Rauth, counsel to Buyer;
(d) Such other documents and instruments as Seller or Seller's
counsel may reasonably request to better evidence or effectuate the transactions
contemplated hereby.
10.6 Approval of Executive Committee of the Board of Directors. This
---------------------------------------------------------
Agreement and the transactions contemplated hereby shall have been duly approved
by the Executive Committee of the Board of Directors of Seller.
10.7 Hart-Scott-Rodino. Any waiting period (and any extension thereof)
-----------------
under the HSR Act applicable to the transactions contemplated by this Agreement
shall have expired or shall have been terminated.
Article 11 The Closing.
The consummation of the transactions contemplated hereby (the "Closing")
shall take place on October 6, 1998 at the offices of Seller at 3000 Hanover
Street, Palo Alto, California 94304 or at such other date and place as the
parties may agree and shall be deemed to occur at 11:59 p.m., local time, on
such date.
11.1 Closing Deliveries of Seller. At the Closing, Seller shall deliver,
----------------------------
or cause to be delivered to Buyer, the documents and instruments set forth in
Section 9 above, in form and substance reasonably satisfactory to Buyer and its
counsel.
30
<PAGE>
11.2 Closing Deliveries of Buyer. At the Closing, Buyer shall deliver, or
---------------------------
cause to be delivered, the Purchase Price to Seller and the documents and
instruments set forth in Section 10 above, in form and substance reasonably
satisfactory to Seller and its counsel.
Article 12 Termination.
12.1 Methods of Termination. This Agreement may be terminated and the
----------------------
transactions herein contemplated may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of Buyer and Seller;
(b) By Buyer, if there has been a material breach by Seller of any
of its material representations, warranties, agreements or covenants set forth
herein, or a failure of any material condition to which the obligations of Buyer
are subject;
(c) By Seller, if there has been a material breach by Buyer of any
of its material representations, warranties, agreements or covenants set forth
herein, or a failure of any material condition to which the obligations of
Seller are subject; or
(d) By either Buyer or Seller if the Closing has not occurred prior
to October 31, 1998.
12.2 Procedure upon Termination. In the event of termination of this
--------------------------
Agreement by Buyer or Seller or by both Buyer and Seller pursuant to Section
12.1 hereof, written notice thereof shall forthwith be given to the other party
or parties hereto and the transactions contemplated herein shall be abandoned
without further action by Buyer or Seller. In addition, if this Agreement is
terminated as provided herein:
(a) Each party will either (i) redeliver all documents, workpapers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same, or (ii) destroy such materials and provide written
certification to the furnishing party that such destruction has been completed.
(b) All information of a confidential nature received by any party
hereto with respect to the business of any other party (other than information
which is a matter of public knowledge or which has heretofore been or is
hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall continue to be subject
to the provisions of Section 14 of this Agreement, which provisions shall
survive any such termination.
(c) Upon any termination of this Agreement pursuant to this Section
12, the respective obligations of the parties hereto under this Agreement shall
terminate and no
31
<PAGE>
party shall have any liability whatsoever to any other party hereto by reason of
such termination, irrespective of the cause of such termination, except as set
forth in this Section 12 and Section 14 hereof.
Article 13. Indemnification.
13.1 Indemnification by Seller. Seller shall indemnify and hold buyer
-------------------------
harmless from any and all Losses suffered or incurred by Buyer as a result of or
arising directly or indirectly out of or in connection with:
(a) Any breach by Seller or any inaccuracy of any representation or
warranty of Seller contained in this Agreement or contained in any of the
Principal Agreements (other than the Real Property Purchase Agreement and the
Product Supply Agreement, each of which contains independent indemnities) or in
any agreement, instrument, certificate or other document delivered pursuant
hereto or the Principal Agreements (other than the Real Property Purchase and
the Product Supply Agreement) (provided that Seller shall not be required to
indemnify or hold Buyer harmless in respect of any such breach or inaccuracy of
any representation or warranty unless Buyer shall have provided notice to Seller
in accordance with Section 13.3 on or prior to the expiration of any applicable
time period related to such representation and warranty set out in Article 8);
(b) Any breach or non-performance by Seller of any covenant to be
performed by it which is contained in this Agreement or in any agreement (other
than the Real Property Purchase Agreement and the Product Supply Agreement, each
of which contain independent indemnities), instrument, certificate or other
document delivered pursuant hereto;
(c) Any liabilities, obligations or commitments of Seller (whether
accrued, contingent or otherwise and whether or not determined or determinable)
related to the Purchased Assets, existing at or prior to the Closing Date, other
than the Assumed Obligations;
(d) Any claims by any employees of the Business, including claims
with respect to Seller employee benefit plans other than claims by Selected
Employees relating to their employment with Buyer after the Closing Date;
(e) Any commission or other remuneration payable or alleged to be
payable to any broker, agent or other intermediary who purports to act or have
acted for or on behalf of Seller; and
(f) The existence of any latent defects in any products (i) sold by
Seller in connection with the conduct of the Business prior to the Closing Date,
or (ii) designed by
32
<PAGE>
Seller prior to the Closing Date and sold by Buyer within the period ending
[*] after the Closing Date, whether or not the foregoing constitutes a
breach of the representations or warranties of Seller contained in Section 4.10
or is disclosed in this Agreement or Seller's Disclosure Schedule, provided that
----------------------------
the Losses therefor are incurred prior to the date which is [*] from the Closing
Date. Solely for the purpose of this Section 13.1(f), "Losses" shall mean (i) an
adverse final judgment or final, binding arbitration award based upon an
explicit finding of fact that the actual damages were caused, solely or in
substantial part, by (A) a latent defect in the product sold prior to the
Closing Date, or (B) a latent defect in the product designed by Seller prior to
the Closing Date and sold by Buyer within the period ending [*] after the
Closing Date, and shall not mean a settlement voluntarily entered into by Buyer,
unless Seller expressly agrees to the settlement in writing and expressly
acknowledges that the settlement triggers this Section 13.1(f), or (ii) Losses
related to the [*]. For the purpose of this Section 13.1(f), an adverse final
judgment or final, binding arbitration award can include a judgment or
arbitration award against Seller on the Claim by Buyer. Without limiting the
foregoing, in the event that, during the period ending [*] after the Closing
Date, Buyer becomes aware of the existence of a latent defect in any product
designed by Seller prior to the Closing Date, Buyer shall promptly notify Seller
and any customer of Buyer that has purchased such product. Buyer shall use
commercially reasonable efforts to remedy the latent defect in the product
design. [*].
13.2 Indemnification by Buyer. Buyer agrees to indemnify and hold Seller
------------------------
harmless from any and all Losses suffered or incurred by Seller as a result of
or arising directly or indirectly out of or in connection with:
(a) Any breach by Buyer or any inaccuracy of any representation or
warranty of Buyer contained in this Agreement or contained in any of the
Principal Agreements (other than the Real Property Purchase Agreement and the
Product Supply Agreement, each of which contains independent indemnities) or in
any agreement, instrument, certificate or other document delivered pursuant
hereto or the Principal Agreements (other than the Real Property Purchase and
the Product Supply Agreement) (provided that Buyer shall not be required to
indemnify or hold Seller harmless in respect of any such breach or inaccuracy of
any representation or warranty unless Seller shall have provided notice to Buyer
in accordance with Section 13.3 on or prior to the expiration of any applicable
time period related to such representation and warranty set out in Article 8);
(b) Any breach or non-performance by Buyer of any covenant to be
performed by it which is contained in this Agreement or in any agreement (other
than the
__________
[*] Confidential Treatment Requested.
33
<PAGE>
Real Property Purchase Agreement and the Product Supply Agreement, each of which
contain independent indemnities), instrument, certificate or other document
delivered pursuant hereto;
(c) The operations of the Business and the use of the Purchased
Assets after the Closing Date, including the manufacturing and sale of products
by the Business after the Closing Date in respect of which product liability
claims, warranty claims and other claims with respect to the quality,
suitability or compliance with specifications or orders of such products may be
made by customers of the Business or other persons or any failure by Buyer to
pay, satisfy, discharge, perform or fulfill any of the Assumed Obligations;
(d) Any claims by Selected Employees and contract employees engaged
by Buyer after the Closing Date, including claims with respect to Buyer employee
benefit plans relating to their employment with Buyer after the Closing Date;
and
(e) Any commission or other remuneration payable or alleged to be
payable to any broker, agent or other intermediary who purports to act or have
acted for or on behalf of Buyer.
13.3 Notice of Claim. In the event that any party (the "Indemnified
---------------
Party") shall assert a First Party Claim or become aware of any Third Party
Claim in respect of which another party (the "Indemnifying Party") agreed to
indemnify the Indemnified Party pursuant to this Agreement, the Indemnified
Party shall promptly give notice thereof to the Indemnifying Party. Such notice
shall specify whether the Claim arises as a result of a claim asserted by a
third person against the Indemnified Party (a "Third Party Claim") or whether
the Claim is asserted by the other party (a "First Party Claim") and shall also
specify with reasonable particularity (to the extent that the information is
available):
(a) The factual basis for the Claim; and
(b) The amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does not
receive notice of any Claim in time to contest effectively the determination of
any liability susceptible of being contested, the Indemnifying Party shall be
entitled to set off against the amount claimed by the Indemnified Party the
amount of any Losses incurred by the Indemnifying Party resulting from the
Indemnified Party's failure to give such notice on a timely basis.
13.4 First Party Claims. With respect to any First Party Claim, following
------------------
receipt of notice from the Indemnified Party of the Claim, the Indemnifying
Party shall have sixty (60) days to make such investigation of the Claim as is
considered necessary or
34
<PAGE>
desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such sixty-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim, failing which the matter shall be referred to
dispute resolution pursuant to Section 15.8.
13.5 Third Party Claims. With respect to any Third Party Claim, the
------------------
Indemnifying Party shall have the right, at its expense, to participate in or
assume control of the negotiation, settlement or defense of the Claim and, in
such event, the Indemnifying Party shall reimburse the Indemnified Party for all
the Indemnified Party's out-of-pocket expenses as a result of such participation
or assumption. Subject to Section 13.6, if the Indemnifying Party elects to
assume such control, the Indemnified Party shall have the right to participate
in, but not control, the negotiation, settlement or defense of such Third Party
Claim and to retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless the
Indemnifying Party consents to the retention of such counsel or unless the
representation of both the Indemnifying Party and the Indemnified Party by the
same counsel would be inappropriate due to the actual or potential differing
interests between them (such as the availability of different defenses). If the
Indemnifying Party, having elected to assume such control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party
shall be entitled to assume such control. In such event, the Indemnifying Party
shall be bound by the results obtained by the Indemnified Party with respect to
such Third Party Claim.
13.6 Settlement of Third Party Claims. If the Indemnifying Party fails to
--------------------------------
assume control of the defense of any Third Party Claim in accordance with
Section 13.5, the Indemnified Party shall have the exclusive right to contest,
settle or pay the amount claimed. Whether or not the Indemnifying Party assumes
control of the negotiation, settlement or defense of any Third Party Claim, the
Indemnifying Party shall not settle any Third Party Claim without the written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed; provided, however, that the liability of the Indemnifying
Party shall be limited to the proposed settlement amount if any such consent is
not obtained within a reasonable period of time for any reason.
13.7 Co-operation. The Indemnified Party and the Indemnifying Party shall
------------
co-operate fully with each other with respect to Third Party Claims and shall
keep each other fully advised with respect thereto (including supplying copies
of all relevant documentation promptly as it becomes available).
13.8 Monetary Limit on Indemnification. No Claim shall be made pursuant
---------------------------------
to
35
<PAGE>
Sections 13.1 or 13.2 until the aggregate Losses suffered or incurred by the
Indemnified Party in respect of all matters which could be the subject of such a
Claim exceed [*] (the "Deductible"), at which time the Indemnifying Party shall
be liable only for the amount of such Losses in excess of [*], subject to the
provisions set forth in the next sentence of this Section 13.8. An Indemnifying
Party shall have no liability to indemnify an Indemnified Party for any Losses
after the aggregate Claims made by such Indemnified Party suffered or incurred
by it exceed [*] dollars ($[*]) (the "Cap"); provided, however, that during the
period beginning on the first anniversary of the Closing Date and ending on the
[*] anniversary of the Closing Date, the Cap shall be decreased by (a) the
amount of any Losses claimed pursuant to Section 13.1(f) during the twelve-month
period after the Closing Date, and (b) the actual costs incurred by Seller for
[*] pursuant to the [*] (other than amounts paid by Seller pursuant to Section
7.12(g) hereof); and, provided further, that the Cap for any Losses claimed
pursuant to Section 13.1(f) after the [*] anniversary of the Closing Date shall
be decreased to zero. The Deductible and the Cap shall not apply with respect to
Claims made by Buyer with respect to Section 7.4 hereof.
13.9 Exclusivity. The provisions of this Article 13 shall apply to any
-----------
Claim for breach of any covenant, representation, warranty or other provision of
this Agreement or any agreement, certificate or other document delivered
pursuant hereto (other than a claim for specific performance or injunctive
relief) with the intent that all such Claims shall be subject to the limitations
and other provisions contained in this Article 13. Notwithstanding the
foregoing, any Claims for fraud or intentional misconduct by either party shall
not be subject to the limitations and other provisions contained in this Article
13.
13.10 Taxes and Insurance. The amount of the Indemnifying Party's
-------------------
liability under this Agreement shall be determined taking into account any
applicable insurance proceeds actually received by, and other savings, other
than a decrease in Taxes due to a deduction for Losses, that actually reduce the
overall impact of the Losses upon, the Indemnified Party.
13.11 No Consequential Damages. Notwithstanding anything contained in this
------------------------
Agreement to the contrary, no party shall be liable to the other party for
indirect, special, punitive or consequential loss or damage (including any loss
of revenue or profit) arising out of this Agreement. Both parties shall mitigate
their damages.
Article 14. Confidentiality.
14.1 Confidentiality. The Confidential Disclosure Agreement, effective
---------------
March 6, 1998, by and between Buyer and Seller shall terminate as of the Closing
and shall be of no further force and effect thereafter. In place thereof and as
a further condition to the
__________
[*] Confidential Treatment Requested.
36
<PAGE>
obligations of Seller and Buyer to Closing, Seller and Buyer shall enter into
the New Confidential Disclosure Agreement in substantially the form attached
hereto as Exhibit I (the "New CDA") at the Closing.
---------
14.2 Public Announcements. Neither Seller or Buyer shall make any public
--------------------
announcements concerning matters set forth in this Agreement or the negotiation
thereof without the prior written consent of the other party unless such
disclosure is required by law or rules and regulations of the SEC or any
applicable stock exchange. Any such disclosure shall be provided for review to
the other party in advance of public release to the extent reasonably practical.
Article 15. Miscellaneous.
15.1 Assignment. Neither Seller nor Buyer may assign this Agreement, or
----------
assign its rights or delegate its duties hereunder, without the prior written
consent of the other party hereto.
15.2 Severability. Any provision of this Agreement which is illegal,
------------
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
15.3 Governing Law. This Agreement is deemed to have been made in the
-------------
State of Delaware and its interpretation, its construction and the remedies for
its enforcement or breach are to be applied pursuant to, and in accordance with,
the laws of the State of Delaware for contracts made and to be performed in that
state.
15.4 Entire Agreement; Amendment. This Agreement, and the Exhibits (when
---------------------------
executed) and Schedules hereto, and each additional agreement and document to be
executed and delivered pursuant hereto constitute all of the agreements of the
parties with respect to, and supersede all prior agreements and understandings
relating to the subject matter of, this Agreement or the transactions
contemplated by this Agreement. This Agreement may not be modified or amended
except by a written instrument specifically referring to this Agreement signed
by the parties hereto.
15.5 Waiver. No waiver by one party of the other party's obligations, or
------
of any breach or default hereunder by any other party, shall be valid or
effective, unless such waiver is set forth in writing and is signed by the party
giving such waiver; and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature or any other breach
or default by such other party.
15.6 Interpretation; Headings. This Agreement is the result of arms-
------------------------
length negotiations between the parties hereto and no provision hereof, because
of any ambiguity found to be contained therein or otherwise, shall be construed
against a party by reason of
37
<PAGE>
the fact that such party or its legal counsel was the draftsman of that
provision. The section, subsection and any paragraph headings contained herein
are for the purpose of convenience only and are not intended to define or limit
or affect, and shall not be considered in connection with, the interpretation of
any of the terms or provisions of this Agreement.
15.7 Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.8 Dispute Resolution. Any dispute arising out of or relating to this
------------------
Agreement shall be resolved in accordance with the procedures specified in this
Section 15.8, which shall be the sole and exclusive procedure for the resolution
of any such disputes. For any dispute or claim arising out of or relating to
this Agreement, or breach hereof, the parties, prior to filing any claims in a
court of law or to seeking binding arbitration, shall in good faith first
negotiate a written resolution of such dispute or claim within a period not to
exceed fifteen (15) days from the date of receipt of a party's request for such
negotiation. Such negotiations shall be conducted by managers of each party who
have authorization to resolve any such dispute or claim. In the event the
parties cannot negotiate a written resolution to such dispute or claim during
this fifteen-day negotiation period, and prior to filing any claims in a court
of law or to binding arbitration, the parties shall then submit such dispute or
claim to non-binding mediation with JAMS/ENDISPUTE or its successor. The
mediation may be initiated by the written request of either party to the other
party, shall commence within fifteen (15) days of the receipt of such notice and
shall be conducted in Orange County, California in accordance with such
mediation procedures established by JAMS/ENDISPUTE or its successor, unless
otherwise agreed by the parties. The mediation shall not exceed a period of
thirty (30) days. In the event the parties do not resolve such dispute or claim
as a result of such mediation or in the event such dispute or claim is not
resolved within thirty (30) days of the commencement of the mediation, either
party may seek to resolve the dispute or claim in a court of competent
jurisdiction or seek other legal or equitable resolution. The judgment or decree
of a court shall be deemed final when the time for appeal, if any, shall have
expired and no appeal shall have been taken or when all appeals taken shall have
been finally determined. Notwithstanding the foregoing, either party at any time
may apply to any court of competent jurisdiction for injunctive relief in the
event of an alleged breach of this Agreement or otherwise to prevent irreparable
harm.
15.9 Notices. All notices, requests, demands or other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given to the
person designated below (i) on the date of delivery if delivered in person; (ii)
on the first business day after being sent by fax, provided that the successful
transmission of the fax has been confirmed through a confirmation function sheet
provided by the fax machine used for such transmission; (iii) on the third
business day following the deposit thereof in the
38
<PAGE>
United States Mail, provided it is mailed by certified mail, return-receipt
requested and postage prepaid and properly addressed; or (iv) on the second
business day after being sent by air courier. Any party hereto may from time to
time, by written notice to the other parties, designate a different address,
which shall be substituted for the one specified below:
If to Seller:
Hewlett-Packard Company
3175 Bowers Avenue
Santa Clara, California 95054
Fax no.: (408) 654-8732
Attention: General Manager,
Wireless Infrastructure Division
with a copy to:
Hewlett-Packard Company
3000 Hanover Street, MS: 20BQ
Palo Alto, California 943004
Fax no.: (650) 857-4392
Attention: General Counsel
If to Buyer, to:
Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, California 92614
Fax no.: (949) 757-0941
Attention: President and Chief Executive Officer
with a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660-6441
Fax no.: (949) 725-4100
Attn: Nick E. Yocca, Esq.
15.10 Amendment and Restatement of Original Agreement. The Original
-----------------------------------------------
Agreement is hereby amended and restated as provided herein, and the Original
Agreement is hereby superseded and shall have no further force and effect.
39
<PAGE>
Article 16. Definitions.
For the purposes of this Agreement, unless the context otherwise requires,
the following terms shall have the respective meanings set forth below and
grammatical variations of such terms shall have corresponding meanings:
"Agreement" shall have the meaning set forth in the first paragraph
"Application Limitation Period" shall have the meaning set forth in
Section 13.4.
"Assigned Contracts" shall have the meaning set forth in Section
1.1(c)
"Assumed Obligations" shall have the meaning set forth in Section 2.1.
"at cost" shall have the meaning set forth in Section 2.1.
"Bill of Sale" shall have the meaning set forth in Section 9.6(a).
"Business" shall have the meaning set forth in the Recitals.
"Business Financial Information" shall have the meaning set forth in
Section 4.3.
"Business Partner" shall have the meaning set forth in Section 9.10.
"Buyer" shall have the meaning set forth in the first paragraph.
"Buyer's Liabilities" shall have the meaning set forth in Section
13.1(d).
"Cap" shall have the meaning set forth in Section 13.8.
"Capital Equipment" shall have the meaning set forth in Section
1.1(a).
"Claim" shall mean any claim, action, demand, lawsuit or proceeding.
"Closing" shall have the meaning set forth in Article 11.
"Closing Date" shall have the meaning set forth in Article 11.
"Code" shall have the meaning set forth in Section 3.2.
"Competitive Business" shall have the meaning set forth in Section
7.5(a)(i).
40
<PAGE>
"Contest Notice" shall have the meaning set forth in Section 13.4.
"Deductible" shall have the meaning set forth in Section 13.8.
"Depletion of Inventory" shall have the meaning set forth in Section
7.13.
"due inquiry" shall have the meaning set forth in Section 4.7(m).
"Encumbrance" means any encumbrance, lien, charge, hypothecation,
pledge, mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, right of set-off, reservation, easement, right of
occupation, any matter capable of registration against title, option, right of
pre-emption, privilege or any contract to create any of the foregoing.
"Excluded Assets" shall have the meaning set forth in Section 1.2.
"Expensed Assets" shall have the meaning set forth in Section 1.1(b).
"First Party Claims" shall have the meaning set forth in Section 13.3.
"Folsom Real Property" shall have the meaning set forth in Section
1.1(g).
"FTO" shall have the meaning set forth in Section 7.11.
"GAAP" shall have the meaning set forth in Section 4.3.
"FWA" shall have the meaning set forth in the Recitals.
"HSR Act" shall have the meaning set forth in Section 4.1(c).
"Indemnified Party" shall mean a person seeking indemnification as set
out in Section 13.3 and each of its directors, officers, stockholders, employees
and agents and the respective successors and assigns of such person and other
persons (each of the foregoing, individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties").
"Indemnifying Party" shall mean a person providing indemnification as
set out in Section 13.3.
"Intellectual Property Rights" shall have the meaning set forth in
Section 4.6(a).
41
<PAGE>
"Inventory" shall have the meaning set forth in Section 1.1(h).
"Leased Property" shall have the meaning set forth in Section
4.5(b)(ii).
"License Agreement" shall have the meaning set forth in Section 1.3.
"Licensed Intellectual Property Rights" shall mean the HP Intellectual
Property Rights, as defined in the License Agreement.
"Licenses and Permits" shall have the meaning set forth in Section
4.12(b).
"Losses" in respect of any matter means all claims, demands,
proceedings, losses, damages, obligations, liabilities, deficiencies, costs and
expenses (including all legal and other professional fees and disbursements,
interest, penalties and amounts paid in settlement) arising, directly or
indirectly, as a result of such matter (but excluding any consequential losses).
"[*]" shall have the meaning set forth in Section 2.2(h).
"[*]" shall have the meaning set forth in Section 2.2(h).
"Material Adverse Effect on Business" shall have the meaning set forth
in Section 4.2(b), second paragraph.
"Material Adverse Effect on Buyer" shall have the meaning set forth in
Section 4.2(b).
"Material Adverse Effect on Seller" shall have the meaning set forth
in Section 4.2(b), second paragraph.
"Material Buyer Contract" shall have the meaning set forth in Section
5.3(a).
"New CDA" shall have the meaning set forth in Section 14.2.
"Notice of Claim" shall have the meaning set forth in Section 13.4.
"Original Agreement" shall have the meaning set forth in the Recitals.
"Original Seller's Disclosure Schedule" shall have the meaning set
forth in the introductory paragraph of Article 4.
__________
[*] Confidential Treatment Requested.
42
<PAGE>
"Partner" shall have the meaning set forth in the in Section 7.5(b).
"PCS" shall have the meaning set forth in the in the Recitals.
"Permitted Encumbrances" means:
(a) liens for Taxes, assessments and governmental charges due
and being contested in good faith and diligently by appropriate proceedings (and
for the payment of which adequate provision has been made);
(b) servitudes, easements, restrictions, rights-of-way and other
similar rights in real property or any interest therein, provided the same are
not of such a nature as to materially and adversely affect the use of the
property subject thereto or require the payment of any Taxes, assessments or
other amounts in connection therewith;
(c) liens for Taxes either not due and payable or due but for
which notice of assessment has not been given;
(d) assignments of insurance provided to landlords (or their
mortgagees) pursuant to the terms of any lease, and liens or rights reserved in
any lease for rent or for compliance with the terms of such lease;
(e) the reservations in any original grants from the government
of any real property or interest therein and statutory exceptions to title which
do not materially detract from the value of the real property concerned or
materially impair its use in the operation of the Business; and
(f) the Encumbrances described in Section 4.5(d) of Seller's
--------
Disclosure Schedule;
- -------------------
"Prepayment" shall have the meaning set forth in Section 3.1(b).
"Principal Agreements" shall mean, collectively, the License
Agreement, the Product Supply Agreement, the Real Property Purchase Agreement,
the Transition Services Agreement, the New CDA and the Bill of Sale and the
Assignment Agreement.
"Product Supply Agreement" shall have the meaning set forth in Section
1.4.
"Proprietary Materials" shall have the meaning set forth in Section
1.1(f).
43
<PAGE>
"Purchase Price Allocation" shall have the meaning set forth in
Section 3.2.
"Purchase Price" shall have the meaning set forth in Section 3.1.
"Purchased Assets" shall have the meaning set forth in Section 1.1.
"Real Property Purchase Agreement" shall have the meaning set forth in
Section 1.5.
"Recruit" shall have the meaning set forth in Section 7.5(c).
"Retained Liabilities" shall have the meaning set forth in Section
2.2.
"Rights" shall have the meaning set forth in Section 7.1(a).
"RLL" shall have the meaning set forth in the Recitals.
"[*]" shall have the meaning set forth in Section 2.2(h).
"SEC" shall have the meaning set forth in Section 7.6.
"SEC Financial Statements" shall have the meaning set forth in Section
7.6.
"Selected Employees" shall mean any employee of Seller employed in the
Business to whom Buyer has made or shall make a formal written employment offer.
"Seller's Disclosure Schedule" shall have the meaning set forth in
Article 4, first paragraph.
"Seller's Knowledge" shall have the meaning set forth in Section 4.6.
"Seller" shall have the meaning set forth in the first paragraph.
"SMR" shall have the meaning set forth in the Recitals.
"Solicit" shall have the meaning set forth in Section 7.5(c).
"Tax" or "Taxes" shall have the meaning set forth in Section 4.13.
"Tax Returns" shall have the meaning set forth in Section 4.13.
"Technical Documentation" shall have the meaning set forth in Section
__________
[*] Confidential Treatment Requested.
44
<PAGE>
1.1(d).
"Territory" shall have the meaning set forth in Section 7.5(a)(ii).
"Third Party Claims" shall have the meaning set forth in Section 13.3.
"Transition Services Agreement" shall have the meaning set forth in
Section 1.6.
"Warranties" shall have the meaning set forth in Section 4.10.
"Warranty Claims" shall have the meaning set forth in Section 2.1.
"WLL" shall have the meaning set forth in the Recitals.
45
<PAGE>
IN WITNESS WHEREOF, each of Seller and Buyer has caused a duly authorized
representative to execute this Amended and Restated Asset Purchase Agreement on
the date first written above.
HEWLETT-PACKARD COMPANY POWERWAVE TECHNOLOGIES, INC.
By: /s/ Marianne Cali By: /s/ Kevin Michaels
-------------------------- ------------------------------
Print name: Marianne Cali Print name: Kevin Michaels
--------------------- -------------------------
Title: Group Business Development Title: Vice President, Finance and
-------------------------- ------------------------------
Manager Chief Financial Officer
-------------------------- ------------------------------
46
<PAGE>
EXHIBIT 2.2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
SELLER: Hewlett-Packard Company, a
Delaware corporation
BUYER: Powerwave Technologies, Inc.,
a Delaware corporation
DATED: August 31, 1998
<PAGE>
DEFINED TERMS
-------------
Execution Date: August 31, 1998
Seller: Hewlett-Packard Company,
a Delaware corporation
Seller's Address: 3000 Hanover Street, MS: 20BQ
Palo Alto, California 94304
Attn: General Counsel
Phone No.: (650) 857-1501
Fax No.: (650) 857-4392
Buyer: Powerwave Technologies, Inc.,
a Delaware corporation
Buyer's Address: 2026 McGaw Avenue
Irvine, California 92614
Attn: Kevin Michaels
Phone No.: (949) 757-0530
Fax No.: (949) 757-6675
Seller's Counsel: 3000 Hanover Street, MS: 20BQ
Palo Alto, California 94304
Attn: Frank Pedraza
Phone No.: (650) 857-3532
Fax No.: (650) 857-4392
Buyer's Counsel: Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attn: Nick E. Yocca, Esq.
Phone No.: (949) 725-4040
Fax No.: (949) 725-4100
Property: That certain real property located in the City of
Folsom, County of Sacramento, State of California,
commonly known as 104 Woodmere Road, as legally
described on Exhibit A attached hereto, together with a
---------
commercial building containing approximately
____________ (_____) square feet and all other
improvements to such real property, and all of Seller's
right, title and interest in and to all rights,
privileges, easements and appurtenances benefiting such
property
Purchase Price: The amount set forth in the Purchase Price Allocation,
attached as Exhibit E to the Asset Purchase Agreement
---------
(as defined in Section 2 below)
i
<PAGE>
Closing Date: Concurrent with the "Closing" as defined in the Asset
Purchase Agreement
Title Company: First American Title Insurance Company
2830 Glendale Lane, Suite 100
Sacramento, California 95825
Attn: David Pratt
Phone No.: (916) 920-3335
Fax No.: (916) 925-1480
Escrow Holder: First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
Attn: Mickey Elkinton
Phone No.: (714) 558-3211
Fax No.: (714) 285-0329
ii
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PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
This Purchase and Sale Agreement and Joint Escrow Instructions
("Agreement") is made and entered into as of the Execution Date by and between
Seller and Buyer.
In consideration of the mutual covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Buyer agree as follows:
1. Purchase and Sale. Seller hereby agrees to sell the Property to
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Buyer, and Buyer hereby agrees to purchase the Property from Seller, on the
terms and conditions set forth in this Agreement.
2. Asset Purchase Agreement. Concurrently with the execution of this
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Agreement, Seller and Buyer shall enter into an Asset Purchase Agreement (the
"Asset Purchase Agreement"), pursuant to which, at the Closing (as defined
below), Seller shall agree to sell to Buyer all of Seller's right, title and
interest in and to the Purchased Assets described therein.
3. Payment of Purchase Price. The Purchase Price for the Property shall
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be paid by Buyer to Seller in cash at the Closing by wire transfer of
immediately available funds to an account designated by Seller.
4. Escrow.
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(a) Opening of Escrow. For the purposes of this Agreement, the escrow
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("Escrow") shall be deemed opened ("Opening of Escrow") on the date that Escrow
Holder receives a copy of this Agreement fully executed by Buyer and Seller.
Buyer and Seller shall use their best efforts to cause the Opening of Escrow to
occur on or before three (3) business days after the Execution Date. Escrow
Holder shall promptly notify Buyer and Seller in writing of the date of the
Opening of Escrow. Buyer and Seller agree to execute, deliver and be bound by
any reasonable or customary supplemental escrow instructions or other
instruments reasonably required by Escrow Holder to consummate the transaction
contemplated by this Agreement; provided, however, that no such instruments
shall be inconsistent or in conflict with, amend or supersede any portion of
this Agreement. If there is any conflict or inconsistency between the terms of
such instruments and the terms of this Agreement, then the terms of this
Agreement shall control.
(b) Closing. For purposes of this Agreement, the "Closing" shall be
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the date that the Deed (as defined below) is recorded pursuant to applicable law
in the county in which the Property is located. Unless changed in writing by
Buyer and Seller, the Closing shall occur on the Closing Date, subject to
Sections 7 and 8 of this Agreement.
5. Seller's Delivery of Property Documents. Seller shall deliver to Buyer
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within two (2) business days after the Opening of Escrow the documents and other
materials relating to the Property set forth below (collectively, the "Property
Documents") to the extent Seller has such items in its possession or control or
can reasonably acquire or prepare them.
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(a) Zoning Compliance; Permits. Information regarding all applicable
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governmental ordinances, rules and regulations, including, but not limited to,
zoning and building regulations and any and all other governmental approvals
(such as building permits, building inspection approvals and certificates of
occupancy) and/or authorizations relating to the Property.
(b) Agreements. Copies of all architect contracts, construction
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contracts, service contracts, reciprocal easement agreements and any other
contracts or agreements affecting or relating to the ownership, use, occupancy,
operation, maintenance, construction or development of the Property, including,
but not limited to, copies of all guaranties and warranties with respect
thereto (collectively, the "Contracts").
(c) Tax Statements. Copies of the bills for all real property taxes
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and assessments payable with respect to the Property, or any portion thereof,
for the past two (2) years.
(d) Utilities. Evidence that all electricity, water, gas, sewer and
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other utilities required by Buyer are available to the Property including, but
not limited to, copies of any utility will serve letters.
(e) Reports, Studies, Plans and Specifications. Soils, environmental,
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engineering and building reports, studies and data relating to the Property or
any portion thereof and any and all architectural studies and plans and
specifications, topographical maps, ALTA surveys, grading plans, and similar
data relating to the Property.
(f) Maps. Any and all tentative and/or final maps and any other
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governmentally approved or processed documents relative to the subdivision of
the Property.
(g) Authority Documents. Evidence acceptable to Buyer and the Title
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Company indicating that Seller, and each individual or entity comprising Seller,
has complete power and authority to enter into this Agreement and to convey the
Property to Buyer.
(h) Flood and Other Natural Disaster Information. A copy of the Flood
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Zone Map prepared by the Federal Emergency Management Agency and any other
publication or information relating to natural hazards or disasters that could
impact the Property.
(i) Miscellaneous. Such other documents or other materials in
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Seller's possession or control relating to the Property that Buyer may
reasonably request.
6. Right of Entry. From and after the Opening of Escrow through the
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earlier to occur of the termination of this Agreement or the Closing, Buyer and
Buyer's agents, consultants, contractors and subcontractors shall have the right
to enter upon the Property to conduct or make any and all inspections and tests
as Buyer deems necessary or desirable. Buyer hereby indemnifies and holds the
Property, Seller, and Seller's shareholders, partners, members, officers,
directors, managers, employees, agents and contractors free and harmless from
and against any and all direct claims, costs, losses, damages or expenses
arising out of or resulting from such entry by Buyer or its agents, consultants,
contractors or subcontractors; provided, however, that such indemnity shall not
include consequential damages (including, but not limited to, lost profits or
the loss of value due to the discovery of environmental contamination or any
other matters). Buyer shall keep the Property free
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and clear of any mechanics' liens or materialmen's liens arising out of Buyer's
right of entry and the activities contemplated in this Section.
7. Buyer's Conditions Precedent and Termination Right.
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(a) Conditions Precedent. The obligation of the Buyer to consummate
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the purchase of the Property from Seller shall be subject to the fulfillment, or
the waiver by the Buyer, at or prior to the Closing, of each of the following
conditions precedent (collectively, "Buyer's Contingencies"):
(i) Title Review. Within five (5) business days of the date
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hereof, Buyer shall, with Seller's full cooperation, cause the Title Company to
deliver to Buyer a preliminary title report (the "Report") describing the title
to the Property, together with legible copies of the exceptions (the
"Exceptions") set forth in the Report and a color coded plot of all easements
referenced as Exceptions in the Report (the "Easement Plot"). On or before the
Closing Date, Buyer shall have approved in writing, in Buyer's sole and absolute
discretion, any matters of title disclosed by the following (collectively, the
"Title Documents"): (i) the Report; (ii) the Exceptions; (iii) the Easement
Plot, (iv) the legal description of the Property; and (v) an ALTA survey in a
form acceptable to Buyer. Buyer shall be responsible, at its sole expense, for
obtaining such ALTA survey. Buyer shall have the same rights to approve,
disapprove or conditionally approve any exceptions to title that are not created
by Buyer and that come into existence after issuance of the Report but prior to
Closing. Seller shall, on or before the Closing, remove all deeds of trust,
mortgages, mechanics liens, delinquent taxes and all other monetary liens (other
than the lien for real property taxes or assessments not yet due or payable).
(ii) Title Policy. On or before the Closing, the Title Company
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shall, upon payment of the Title Company's regularly scheduled premium, have
agreed to issue to Buyer, an ALTA extended coverage owner's policy of title
insurance ("Buyer's Title Policy") in the amount of the Purchase Price showing
fee title to the Property vested solely in Buyer and subject only to the (i) the
standard, preprinted exceptions to Buyer's Title Policy (but not including any
arbitration, co-insurance, creditors' rights or regional exceptions); (ii) a
lien (or liens) to secure payment of real property taxes or assessments not yet
due or payable; (iii) matters affecting the Property created by or with the
written consent of Buyer; and (iv) those matters specifically approved in
writing by Buyer. Buyer shall have sole responsibility for obtaining, and
bearing the cost of, any survey required by the Title Company for such extended
coverage.
(iii) Physical Inspections and Studies. On or before the
--------------------------------
Contingency Date, Buyer shall have approved in writing, in Buyer's sole and
absolute discretion, the results of any inspections, investigations, tests and
studies Buyer elects to make or obtain, including, but not limited to,
investigations with regard to zoning, building codes and other governmental
regulations; architectural inspections and engineering tests; soils, seismic and
geologic reports; environmental audits, inspections and studies (including Phase
I and Phase II testing); and any other physical inspections and/or
investigations as Buyer may elect to make or obtain.
(iv) Absence of Material Litigation. There shall be (i) no
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pending or overtly threatened litigation (other than litigation which is
determined by the parties in good faith, after consulting their respective
attorneys, to be without legal or factual substance or merit), whether brought
against Seller or the Buyer, that seeks to enjoin the consummation of the
transaction contemplated by this Agreement, (ii) no order that has been issued
by any court or governmental
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agency having jurisdiction that restrains or prohibits the consummation of the
purchase and sale of the Property hereunder and no proceedings pending which are
reasonably likely to result in the issuance of such an order; and (iii) no
pending or overtly threatened litigation, which has had or is expected to have a
Material Adverse Effect on the Property (as hereinafter defined).
(v) Property Documents. On or before the Contingency Date,
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Buyer shall have approved in writing, in Buyer's sole and absolute discretion,
the terms, conditions and status of all of the Property Documents.
(vi) Asset Purchase Agreement. All of the conditions precedent
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to the obligations of the Buyer under the Asset Purchase Agreement, as set forth
in the Asset Purchase Agreement, shall have been fulfilled.
(vii) Concurrent Closing. The "Closing" under the Asset Purchase
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Agreement shall occur concurrently with the Closing under this Agreement.
(viii) No Changes. As of the Closing, the physical condition of
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the Property shall be substantially the same as the condition existing as of the
Execution Date.
(ix) Representations and Warranties. All representations and
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warranties of Seller contained in this Agreement shall be materially true and
correct as of the date made and as of the Closing with the same effect as if
those representations and warranties were made at and as of the Closing.
(x) Performance of Obligations. Seller shall have performed
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and complied, in all material respects, with all of the covenants required by
this Agreement to have been performed prior to the Closing.
(b) Termination Right. Should any of Buyer's Contingencies not be
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met, Buyer may, by written notice to Seller ("Termination Notice"), terminate
this Agreement. In the event that this Agreement is so terminated, any escrow,
title or other cancellation fees shall be split equally between Buyer and Seller
unless Seller is in default hereunder, in which case Seller shall pay all such
fees.
(c) Seller's Cure Right. Buyer shall notify Seller, in the
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Termination Notice of Buyer's disapproval or conditional approval of any Title
Documents. Seller shall then have the right, but not the obligation, to (i)
remove from title any disapproved or conditionally approved Exception(s) (or
cure such other title matters that are the basis of Buyer's disapproval or
conditional approval of the Title Documents) within five (5) business days after
Seller's receipt of the Termination Notice, or (ii) provide assurances
satisfactory to Buyer that such Exception(s) will be removed (or other matters
cured) on or before the Closing. If Seller cannot or does not elect to remove
any of the disapproved Exception(s) (or cure other matters) within that period,
Buyer shall have three (3) business days after the expiration of such five (5)
business day period to give Seller written notice that Buyer elects to proceed
with the purchase of the Property subject to the disapproved Title Document(s).
If Buyer does not give such notice within the three (3) business day period,
this Agreement shall be deemed terminated.
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8. Seller's Conditions Precedent and Termination Right.
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(a) Conditions Precedent. The obligation of Seller to consummate the
--------------------
sale of the Property to Buyer shall be subject to the fulfillment, or the waiver
by Seller, at or prior to the Closing, of each of the following conditions
precedent ("Seller's Contingencies"):
(i) Representations and Warranties. All representations and
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warranties of Buyer contained in this Agreement shall be materially true and
correct as of the date made and as of the Closing with the same effect as if
those representations and warranties were made at and as of the Closing.
(ii) Performance of Obligations. Buyer shall have performed and
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complied, in all material respects, with all of its covenants required by this
Agreement to have been performed by it at or prior to the Closing.
(iii) Concurrent Closing. The "Closing" under the Asset Purchase
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Agreement shall occur concurrently with the Closing under this Agreement.
(iv) Absence of Material Litigation. There shall be (i) no
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pending or overtly threatened litigation (other than litigation which is
determined by the parties in good faith, after consulting their respective
attorneys, to be without legal or factual substance or merit), whether brought
against Seller or the Buyer that seeks to enjoin the consummation of the
transaction contemplated by this Agreement, (ii) no order that has been issued
by any court or governmental agency having jurisdiction that restrains or
prohibits the consummation of the purchase and sale of the Property hereunder or
any proceedings pending which are reasonably likely to result in the issuance of
such an order; and (iii) no other pending or overtly threatened litigation,
which has had or is expected to materially and adversely affect the ability of
the parties to consummate the transaction contemplated hereby.
(b) Termination Right. Should any of Seller's Contingencies not be
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met, Seller may, by written notice to Buyer, terminate this Agreement. If this
Agreement is so terminated, then any escrow, title or other cancellation fees
shall be split equally between Buyer and Seller unless Buyer is in default
hereunder, in which case Buyer shall pay all such fees.
9. Seller's Covenants During Escrow. Effective as of the Execution Date,
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Seller hereby covenants with Buyer as follows:
(a) Maintain Insurance. Up to and including the Closing, Seller shall
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maintain, at its sole cost and expense, all insurance maintained by Seller with
respect to the Property as of the Execution Date.
(b) Maintenance of Property. Up to and including the Closing, Seller
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shall maintain, at its sole cost and expense, the Property in good condition and
repair and consistent with past practices.
(c) No Material Alterations. Seller shall make no material
-----------------------
alterations, additions or improvements to the Property without the prior written
consent of Buyer, which consent shall not be unreasonably withheld.
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10. Seller's Deliveries to Escrow Holder.
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(a) Seller's Delivered Documents. At least one (1) business day prior
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to the Closing Date, Seller shall deposit or cause to be deposited with Escrow
Holder the following items, duly executed and, where appropriate, acknowledged
("Seller's Delivered Items"):
(i) Deed. The Grant Deed in the form attached hereto as Exhibit
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B (the "Deed").
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(ii) FIRPTA. Seller's Certification of Non-Foreign Status in
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the form attached hereto as Exhibit C (the "FIRPTA Certificate").
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(iii) General Assignment. Four (4) original counterparts of the
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General Assignment in the form attached hereto as Exhibit D (the "General
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Assignment").
(iv) Authority. Such proof of Seller's authority and
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authorization to enter into this Agreement, on the part of each individual or
entity comprising Seller, and to consummate the transaction contemplated hereby
as may be reasonably requested by Buyer or the Title Company.
(v) Further Documents or Items. Any other documents or items
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reasonably required to close the transaction contemplated by this Agreement.
(b) Failure to Deliver. Should any of Seller's Delivered Items not be
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timely delivered to Escrow, Buyer may, by written notice to Seller, terminate
this Agreement; provided, however, that Buyer may (but shall not be obligated
to) in such notice provide Seller with three (3) business days to deliver all of
Seller's Delivered Items. If Buyer's notice provides Seller such three (3)
business days to deliver Seller's Delivered Items, and if Seller's Delivered
Items are not delivered within such period, then this Agreement shall
automatically terminate without further action or notice, and Buyer shall be
entitled to pursue all rights and remedies against Seller available to Buyer.
If this Agreement is so terminated, then any escrow, title or other cancellation
fees shall be paid by Seller.
11. Buyer's Deliveries to Escrow.
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(a) Buyer's Delivered Items. At least one (1) business day prior to
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the Closing Date, Buyer shall deposit or cause to be deposited with Escrow
Holder the following ("Buyer's Delivered Items"):
(i) Funds. The Purchase Price, by wire transfer of immediately
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available funds to an account designated by Seller, plus or minus Buyer's share
of closing costs and charges and Buyer's share of prorations set forth on the
Proration and Expense Schedule (as defined below).
(ii) General Assignment. Four (4) original counterparts of the
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General Assignment duly executed by Buyer.
(iii) Further Documents or Items. Any other documents or items
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reasonably required to close the transaction contemplated by this Agreement.
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(b) Failure to Deliver. Should any of Buyer's Delivered Items not be
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timely delivered to Escrow, Seller may, by written notice to Buyer, terminate
this Agreement; provided, however, that Seller may (but shall not be obligated
to) in such notice provide Buyer with three (3) business days to deliver all of
Buyer's Delivered Items. If Seller's notice provides Buyer such three (3)
business days to deliver Buyer's Delivered Items, and if Buyer's Delivered Items
are not delivered within such period, then this Agreement shall automatically
terminate without further action or notice. If this Agreement is so terminated,
then any escrow, title or other cancellation fees shall be paid by Buyer.
12. Costs and Expenses.
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(a) Seller's Costs. If the transaction contemplated by this Agreement
--------------
is consummated, then Seller shall bear the following costs and expenses: (i)
one-half (1/2) of Escrow Holder's fee; (ii) Seller's share of prorations; (iii)
the portion of the cost of Buyer's Title Policy equal to the cost of a CLTA
owner's title policy; (iv) one-half (1/2) of all document recording fees; and
(v) documentary transfer taxes and fees (collectively, "Seller's Costs").
(b) Buyer's Costs. If the transaction contemplated by this Agreement
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is consummated, then Buyer shall bear the following costs and expenses: (i) any
additional cost for an ALTA extended coverage owner's title policy (including
the cost of any survey necessary to obtain such extended coverage) and any title
endorsements required by Buyer; (ii) one-half (1/2) of all document recording
fees; (iii) one-half (1/2) of Escrow Holder's fee; and (iv) Buyer's share of
prorations (collectively, "Buyer's Costs").
(c) Generally. Buyer and Seller shall pay, respectively, Escrow
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Holder's customary charges to buyers and sellers for document drafting,
recording and miscellaneous charges. If, through no fault of either Buyer or
Seller, Escrow fails to close, Buyer and Seller shall share equally all of
Escrow Holder's fees and charges; however, if the transaction fails to close as
the result of the default of either party, then such defaulting party shall bear
all Escrow Holder's fees and expenses. Each party shall bear the costs of its
own attorneys and consultants in connection with the negotiation and preparation
of this Agreement and the consummation of the transaction contemplated hereby.
All other costs and expenses shall be allocated between Buyer and Seller in
accordance with the customary practice of the county in which the Property is
located. The items provided in this Section are hereinafter referred to as
"General Expenses".
13. Prorations. All revenues (if any) and expenses relating to the
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Property, currently received by or incurred by Seller (including, but not
limited to, property taxes and insurance), shall be prorated as of the Closing.
Not less than seven (7) business days prior to the Closing, Seller shall deliver
to Buyer a tentative schedule of prorations ("Proration and Expense Schedule")
for Buyer's approval. If any prorations made under this Section shall require
final adjustment after the Closing, then the parties shall make the appropriate
adjustments promptly when accurate information becomes available and either
party hereto shall be entitled to an adjustment to correct the same. Any
corrected or adjustment proration shall be paid promptly in cash to the party
entitled thereto.
14. Closing Procedure. When the Title Company is ready to issue the Title
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Policy and all required documents and funds have been deposited with Escrow
Holder, and the parties are prepared to close under the Asset Purchase
Agreement, Escrow Holder shall immediately close Escrow in the manner and order
provided below.
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(a) Recording. Escrow Holder shall cause the Deed, and any other
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documents that the parties hereto may mutually direct, to be recorded pursuant
to applicable law in the county in which the Property is located and obtain
conformed copies thereof for distribution to Buyer and Seller. Escrow Holder
shall prepare and submit to the recorder's office a separate documentary
transfer tax statement showing the amount of documentary transfer tax due, which
statement and the information contained therein shall not be made a matter of
public record.
(b) Disburse Funds. Escrow Holder shall debit or credit (as provided
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herein) all Buyer's Costs, Seller's Costs and General Expenses; prorate all
matters based upon the agreed upon Proration and Expense Schedule; disburse the
Purchase Price to Seller promptly upon the Closing; and disburse the remaining
funds, if any, to Buyer.
(c) Documents to Seller. Escrow Holder shall disburse to Seller two
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(2) original, fully executed General Assignments, each other document (or copies
thereof) deposited into Escrow by Buyer pursuant hereto, and a conformed copy of
the Deed.
(d) Documents to Buyer. Escrow Holder shall deliver to Buyer the
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original FIRPTA Certificate executed by Seller, two (2) original, fully executed
General Assignments, each other document (or copies thereof) deposited into
Escrow by Seller pursuant hereto, and a conformed copy of the Deed.
(e) Title Company. Escrow Holder shall cause the Title Company to
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issue the Buyer's Title Policy to Buyer.
(f) Closing Statement. Escrow Holder shall forward to both Buyer and
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Seller a separate accounting of all funds received and disbursed for each party.
(g) Informational Reports. Escrow Holder shall file any information
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reports required by Internal Revenue Code Section 6045(e), as amended.
15. Representations and Warranties.
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(a) Seller's Representations and Warranties. In consideration of
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Buyer entering into this Agreement and as an inducement to Buyer to purchase the
Property, Seller makes the following representations and warranties as of the
Execution Date and at and as of the Closing, each of which is material and is
being relied upon by Buyer (and the truth and accuracy of which shall constitute
a condition precedent to Buyer's obligations hereunder). When used in this
Agreement, the phrases "Material Adverse Effect on Seller" and "Material Adverse
Effect on the Property" shall both mean a circumstance, state of facts, event,
consequence or result that materially and adversely affects, or could reasonably
be expected to materially and adversely affect the Property or the ability of
Seller to consummate the transaction which it is required to consummate
hereunder; and the phrase "Material Adverse Effect on Buyer" shall mean a
circumstance, state of facts, event, consequence or result that materially and
adversely affects, or could reasonably be expected to materially and adversely
affect the financial condition or operating results of Buyer, or the ability of
Buyer to consummate the transactions it is required to consummate hereunder.
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(i) Compliance with Laws; Licenses and Permits.
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(A) Seller is in compliance with all, and is not in
violation of any, law, ordinance, order, decree, rule or regulation of any
governmental agency or authority, the violation of or noncompliance with which
could have a Material Adverse Effect on the Property. No unresolved (i) charges
of violations of laws or regulations relating to the Property have been made or
threatened, (ii) proceedings or investigations relating to the Property are
pending or to Seller's Knowledge (as defined below), have been threatened, and
(iii) citations or notices of deficiency have been issued or have been
threatened, against Seller relating to or arising out of the Property by any
governmental authorities, which has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, on the Property;
and, to Seller's Knowledge, there are no facts or circumstances upon which any
such charges, proceedings, investigations, or citations or deficiency notices,
reasonably may be instituted, issued or brought hereafter.
(B) Schedule 1 attached hereto contains a true, correct
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and complete list of all governmental licenses, permits, authorizations,
franchises, or certificates or rights (contractual or other) relating to the
Property, that are held by Seller (collectively, "Licenses and Permits"). All of
the Licenses and Permits are in full force and effect at the date hereof. There
is no other license, permit, authorization, franchise, certificate or right to
operate, the absence of which has had, or could reasonably be expected to have,
a Material Adverse Effect on the Property. The Property is in compliance with
the conditions and requirements imposed by or in connection with such Licenses
and Permits. Seller has not received any notice, and to Seller's Knowledge there
is no reason to believe, that any governmental authority intends to cancel,
terminate or modify any of such Licenses or Permits or that there are valid
grounds for any such cancellation, termination or modification. Seller has
delivered or made available to Buyer a true, correct and complete copies of the
most recent safety inspection and quality assurance reports prepared by any
employees or consultants of Seller or by any governmental authorities relating
to the Property.
(C) As used in this Agreement, "Seller's Knowledge" shall
mean (x) as of the date hereof, only the actual knowledge of the following
employees of Seller or the knowledge such employees would reasonably be expected
to have: Dave Allen, Ross Wooley and Steve Cooper; and (y) as of the Closing
Date, only the actual knowledge of the following employees of Seller or the
knowledge such employees would reasonably be expected to have: Dave Allen, Ross
Wooley, Steve Cooper, Caroline Husted, Don Whitelaw, Ed Rogers, Ulrich Lippuner,
Rich Silvers and Melanie Daniels.
(ii) No Broker. Seller has not retained or used the services
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of an agent, finder, or broker in connection with the transaction contemplated
by this Agreement.
(iii) Property Documents. All of the copies of the Property
------------------
Documents delivered to Buyer are true and complete copies of their respective
originals and are true, accurate and correct in all material respects.
(iv) Litigation. There is no action, suit, proceeding or
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investigation, or any counter or cross-claim in an action brought by or on
behalf of Seller, whether at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind, that is pending or, to the best
knowledge of
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Seller, threatened, against Seller, which (i) could reasonably be expected to
affect adversely Seller's ability to perform its obligations under this
Agreement or complete the transaction contemplated hereby, or (ii) involves the
possibility of any judgment or liability, or which may become a claim, against
Buyer or the Property. Seller is not subject to any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
Seller or the Property that affects, involves, or relates to the Property.
(v) Property Matters. To Seller's Knowledge, there is not now
----------------
pending or threatened any proceeding for the rezoning of the Property or any
portion thereof, or the taking of any other action by governmental authorities
that would have a Material Adverse Effect on the value of the Property or use
thereof. There is no pending or, to Seller's Knowledge, threatened condemnation,
eminent domain, or similar proceeding affecting the Property or any portion
thereof.
(vi) No Defaults. There are no defaults under any of the
-----------
Property Documents or Title Documents, nor has any event occurred that with
notice or the passage of time, or both, would constitute a default thereunder.
(vii) Other Agreements. To Seller's Knowledge, there are no
----------------
other contracts, leases, licenses, commitments, understandings or other
agreements affecting or relating to the Property (including but not limited to
any option or other right to lease or acquire the Property), in which Seller is
a party, other than those that have been disclosed to Buyer in writing.
(viii) Representations and Warranties of Seller. The
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representations and warranties of Seller contained herein do not contain any
statement of a material fact that was untrue when made or omits any information
necessary to make any such statement contained therein, in light of the
circumstances under which such statement was made, not misleading. Seller has
not made any representations or warranties to Buyer with respect to the federal,
state or local income or other tax consequences to Buyer of the consummation by
it of the transaction contemplated hereby.
(b) Subsequent Changes to Seller's Representations and Warranties.
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If, subsequent to the Execution Date and on or before the Closing, Seller
obtains knowledge that any of the foregoing representations or warranties have
become incorrect in any respect, Seller shall promptly notify Buyer in writing
of the occurrence of such event. Buyer shall have the right to approve or
disapprove any such change and to terminate this Agreement by written notice to
Seller if Buyer disapproves any such change. If, following the disclosure of
such change, Buyer terminates this Agreement, the Escrow shall automatically
terminate, and Seller shall promptly reimburse Buyer for all out-of-pocket costs
incurred by Buyer in connection with the preparation, negotiation and due
diligence for this Agreement and the Asset Purchase Agreement. Upon any such
change, regardless of whether this Agreement is terminated, Buyer shall retain
all rights and remedies available against Seller for such change.
(c) Seller's Indemnity for Breach of Representations and Warranties.
---------------------------------------------------------------
Subject to the provisions of Section 16, Seller hereby agrees that it will
indemnify, hold harmless and defend Buyer and each of its directors, officers,
stockholders, employees and agents and the respective successors and assigns of
Buyer and such other persons (all of the foregoing, collectively, the
"Indemnified Parties" or, individually, an "Indemnified Party"), from and
against any and all Buyer Liabilities (as hereinafter defined) that arise from
or are in connection with any facts, circumstances or
10
<PAGE>
events, the existence or happening of which constitutes a breach of or
inaccuracy in any of the representations or warranties of Seller contained in
this Agreement or other documents contemplated hereby.
"Buyer Liabilities," as used in this Agreement, shall mean: (x)
demands, claims, actions, suits, and any other legal or investigative
proceedings brought against any or all of the Indemnified Parties, and any
judgments rendered therein or settlements thereof, and (y) all liabilities,
damages, losses, Taxes (as defined in the Asset Purchase Agreement, costs and
expenses, including, without limitation, credits, refunds or exchanges, and
reasonable attorneys' fees, incurred by any of the Indemnified Parties, whether
or not they have arisen from or were incurred in or as a result of any demand,
claim, action, suit, assessment or other proceeding or any settlement or
judgment.
(d) "AS-IS" Purchase. Buyer is familiar with the Property, including,
----------------
but not limited to, the physical condition of the Property and the condition of
title for the Property. Buyer has conducted all studies, investigations and
reviews of the Property's physical condition, soil, environmental condition and
all other aspects of the Property as the Buyer has seen to fit to study,
investigate and review. Except as expressly set forth in this Section, Seller
makes no representations or warranties, written or oral, of any kind or nature
with respect to the Property. Buyer hereby purchases the Property in an "AS-
--
IS", "WHERE-IS", and "WITH-ALL-FAULTS" condition.
- -- -------- ---------------
16. Survival of Representations and Warranties and Covenants. All of the
--------------------------------------------------------
representations and warranties of Seller set forth in this Agreement, except as
provided in Section 17 below, shall survive the consummation of the transaction
contemplated hereby for a period of one (1) year from the Closing Date. The
covenants of any party hereto that cannot be or are not fully performed by such
party on or prior to the Closing Date shall survive the Closing until fully and
finally performed.
17. Environmental Matters.
---------------------
(a) Environmental Compliance. The use and ownership of the Property
------------------------
is in compliance in all material respects with all federal, state, regional and
local statutes, laws, ordinances, rules, regulations and orders relating to the
protection of human health and safety, natural resources of the environment,
including, but not limited to, air pollution, water pollution, noise control,
on-site or off-site hazardous substance discharge, disposal or recovery, toxic
or hazardous substances, training, information and warning provisions relating
to toxic or hazardous substances, and employee safety relating to the Property
(collectively, the "Environmental Laws"); and no notice of violation of any
Environmental Laws or of any permit, license or other authorization relating
thereto has been received or, to Seller's Knowledge, is threatened against
Seller in connection with the Property, and to Seller's Knowledge, is there any
factual basis for the giving of any such notice. No underground or above-ground
storage tanks or surface impoundments are located on the Property, except in
compliance with applicable Environmental Laws and any licenses or permits
relating thereto, and, except in compliance with any applicable Environmental
Laws and any licenses or permits relating thereto, there has been no generation,
use, treatment, storage, transfer, disposal, or release in, at, under, from, to
or into, or on the Property of toxic or hazardous substances during the
occupancy thereof by Seller or, to Seller's Knowledge, prior to such occupancy.
Seller has not received any notice or claim to the effect that Seller is or may
be liable to any governmental authority or private party as a result of the
release or threatened release of any toxic or hazardous substances in connection
with the conduct or operation of the Property, and, to Seller's Knowledge, none
of the operations of the Seller is the subject of any
11
<PAGE>
federal, state or local investigation evaluating whether any remedial action is
needed to respond to a release or a threatened release of any toxic or hazardous
substances at the Property. Seller has not, in connection with the conduct or
operation of the Property, disposed, or had disposed of on its behalf, toxic or
hazardous substances at any site other than a federal and state licensed
hazardous waste treatment, storage and disposal facility. For purposes of this
Section, "toxic" or "hazardous substances" shall include any material, substance
or waste that, because of its quantity, concentration or physical or chemical
characteristics, is deemed under any federal, state, local or regional statute,
law, or ordinance, regulation or order, or by any governmental agency pursuant
thereto, to pose a present or potential hazard to human health or safety or the
environment, including, but not limited to, (i) any material, waste or substance
which is defined as a "hazardous substance" pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. (S)
9601, et seq.), as amended, and its related state and local counterparts, (ii)
asbestos and asbestos containing materials and polychlorinated biphenyls, and
(iii) any petroleum hydrocarbon including oil, gasoline (refined and unrefined)
and their respective constituents and any waste associated with the exploration,
development or production of crude oil, natural gas or geothermal energy.
(b) Seller's Environmental Indemnification. Seller agrees to
--------------------------------------
indemnify, protect, hold harmless, and defend Buyer, its shareholders,
directors, officers, employees, agents and any successors to Buyer's interest in
the chain of title to the Property (including such successors' shareholders,
directors, officers, employees, and agents), from and against any and all
claims, liabilities, penalties, damages, forfeitures, losses, expenses and costs
(including, but not limited to, investigation, monitoring, remediation, removal,
clean-up, abatement, response and attorneys' fees and costs) arising out of or
relating to (i) any facts, circumstances or events, the existense or happening
of which constitutes a breach of or inaccuracy in any of the representations or
warranties of Seller contained in this Agreement, or (ii) the release or
threatened release to soil or ground water of hazardous substances by any person
in, at, under, from, to or into, or on the Property before the Closing Date.
Seller's environmental indemnity set forth in this Section shall survive the
consummation of the transaction contemplated hereby for a period of four (4)
years from the Closing Date. Notwithstanding anything to the contrary stated in
this Agreement, the parties hereby agree that Seller's liability in connection
with any violation(s) of this Section shall be limited to a maximum aggregate
amount of Ten Million and No/100 Dollars ($10,000,000.00).
(c) Buyer's Environmental Indemnification. Buyer agrees to indemnify,
-------------------------------------
protect, hold harmless, and defend Seller, its shareholders, directors,
officers, employees and agents, from and against any and all claims,
liabilities, penalties forfeitures, losses, expenses or costs (including, but
not limited to, investigation, monitoring, remediation, removal, clean-up,
abatement, response and attorney's fees and costs) arising out of or relating to
any release or threatened release to soil or ground water of hazardous
substances by Buyer on the Property after the Closing Date. Buyer's
environmental indemnity set forth in this Section shall survive the consummation
of the transaction contemplated hereby for a period of four (4) years from the
Closing Date. Notwithstanding anything to the contrary stated in this
Agreement, the parties hereby agree that Buyer's liability in connection with
any violation(s) of this Section shall be limited to a maximum aggregate amount
of Ten Million and No/100 Dollars ($10,000,000.00).
12
<PAGE>
18. Dispute Resolution Provision.
----------------------------
(a) Any dispute arising out of or relating to this Agreement shall be
resolved in accordance with the procedures specified in this Section 17(a),
which shall be the sole and exclusive procedures for the resolution of any such
disputes.
(i) For any dispute or claim arising out of or relating to this
Agreement, or breach hereof, the parties, prior to filing any claims in a court
of law or to seeking binding arbitration, shall in good faith first negotiate a
written resolution of such dispute or claim within a period not to exceed
fifteen (15) days from the date of receipt of a party's request for such
negotiation. Such negotiations shall be conducted by managers of each party who
have authorization to resolve any such dispute or claim. In the event the
parties cannot negotiate a written resolution to such dispute or claim during
this fifteen-day negotiation period, and prior to filing any claims in a court
of law or to binding arbitration, the parties shall then submit such dispute or
claim to non-binding mediation with JAMS/ENDISPUTE or its successor. The
mediation may be initiated by the written request of either party to the other
party, shall commence within fifteen (15) days of the receipt of such notice and
shall be conducted in Orange County, California accordance with such mediation
procedures established by JAMS/ENDISPUTE or its successor, unless otherwise
agreed by the parties. The mediation shall not exceed a period of thirty (30)
days.
(ii) In the event the parties do not resolve such dispute or
claim as a result of such mediation or in the event such dispute or claim is not
resolved within ninety (90) days of the commencement of the mediation, either
party may seek to resolve the dispute or claim in a court of competent
jurisdiction or seek other legal or equitable resolution. The judgment or decree
of a court shall be deemed final when the time for appeal, if any, shall have
expired and no appeal shall have been taken or when all appeals taken shall have
been finally determined. Notwithstanding the foregoing, either party at any time
may apply to any court of competent jurisdiction for injunctive relief in the
event of an alleged breach of this Agreement or otherwise to prevent irreparable
harm.
19. General Provisions.
------------------
(a) Condemnation. If any portion of the Property shall be taken or
------------
appropriated by a public or quasi public authority exercising the power of
eminent domain, Buyer shall have the right, at its option, to (i) terminate this
Agreement or (ii) proceed with the purchase of the Property and receive all of
the award or payment made in connection with such taking.
(b) Notices. All notices, requests, demands or other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given, (i)
on the date of delivery if delivered in person; (ii) on the second business day
after being sent by fax, provided that the successful transmission of the fax
has been confirmed through a confirmation function sheet provided by the fax
machine used for such transmission and a true and correct copy thereof is sent
by first class mail to the party to which the fax was sent within one (1)
business day thereafter; or (iii) on the third business day following the
deposit thereof in the United States Mails, provided it is mailed by certified
mail, return-receipt requested and postage prepaid and properly addressed, as
set forth herein. Any party hereto may from time to time, by written notice to
the other parties, designate a different address, which shall be substituted for
the one specified herein.
13
<PAGE>
(c) Brokers. Each party hereto hereby represents and warrants to the
-------
other that it has dealt with no broker or finder in connection with this
transaction other than as set forth in the Asset Purchase Agreement. Each party
hereto agrees to indemnify, defend and hold harmless the other party from and
against any and all losses, liens, claims, judgments, liabilities, costs,
expenses or damages (including reasonable attorneys' fees and court costs) of
any kind of character arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by such party or on its
behalf with any broker or finder in connection with this Agreement or the
transaction contemplated hereby. The foregoing indemnity shall survive the
Closing or the termination of this Agreement and shall not be limited by any
provision of this Agreement.
(d) Termination. This Agreement may be terminated and the
-----------
transactions herein contemplated may be abandoned for the reasons, and in the
manner, set forth in the Asset Purchase Agreement.
(e) Assignment. Neither Seller nor Buyer may assign this Agreement,
----------
or assign its rights or delegate its duties hereunder, without the prior written
consent of the other party hereto.
(f) Confidentiality. This Agreement shall be subject to the
---------------
Confidentiality provisions that are set forth in the Asset Purchase Agreement.
(g) Severability. Any provision of this Agreement which is illegal,
------------
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
(h) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
(i) No Obligations to Third Parties. Except as otherwise expressly
-------------------------------
provided herein, the execution and delivery of this Agreement shall not be
deemed to confer any rights upon, nor obligate any of the parties to this
Agreement to, any person or entity other than the parties hereto.
(j) Exhibits and Schedules. The exhibits and schedules attached
----------------------
hereto are incorporated herein by this reference for all purposes.
(k) Interpretation; Headings. This Agreement is the result of arms'-
------------------------
length negotiations between the parties hereto and no provision hereof, because
of any ambiguity found to be contained therein or otherwise, shall be construed
against a party by reason of the fact that such party or its legal counsel was
the draftsman of that provision. The section, subsection and any paragraph
headings contained herein are for the purpose of convenience only and are not
intended to define or limit or affect, and shall not be considered in connection
with, the interpretation of any of the terms or provisions of this Agreement.
(l) Waiver. No waiver by one party of the other party's obligations,
------
or of any breach or default hereunder by any other party, shall be valid or
effective, unless such waiver is set forth in writing and is signed by the party
giving such waiver; and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature or any other breach
or default by such other party.
14
<PAGE>
(m) Governing Law. This Agreement is deemed to have been made in the
-------------
State of California and its interpretation, its construction and the remedies
for its enforcement or breach are to be applied pursuant to, and in accordance
with, the laws of the State of California for contracts made and to be performed
in that state.
(n) Entire Agreement; Amendment. This Agreement, and the Exhibits and
---------------------------
Schedules hereto, and each additional agreement and document to be executed and
delivered pursuant hereto, constitute all of the agreements of the parties with
respect to, and supersede all prior agreements and understandings relating to
the subject matter of, this Agreement or the transactions contemplated by this
Agreement. This Agreement may not be modified or amended except by a written
instrument specifically referring to this Agreement signed by the parties
hereto.
(o) Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
(p) Possession. Possession of the Property shall be delivered to
----------
Buyer on the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
------------------
the day and year first written above.
"Seller"
Hewlett-Packard Company,
a Delaware corporation
By: /s/ MARIANNE CALI
---------------------------------------
Its: Group Business Development Manager
---------------------------------------
By: /s/ CHARLES CHARNAS
---------------------------------------
Its: Corporate Counsel
---------------------------------------
"Buyer"
Powerwave Technologies, Inc.,
a Delaware corporation
By: /s/ KEVIN MICHAELS
---------------------------------------
Its: Vice President, Finance and Chief
---------------------------------------
Financial Officer
---------------------------------------
By: /s/ BRUCE EDWARDS
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
15
<PAGE>
Acceptance by Escrow Holder:
First American Title Insurance Company, a California corporation, hereby
acknowledges that it has received a fully executed copy of the foregoing
Purchase and Sale Agreement and Joint Escrow Instructions by and between
Hewlett-Packard Company, a Delaware corporation, as Seller, and Powerwave
Technologies, Inc., a Delaware corporation, as Buyer, and agrees to act as
Escrow Holder thereunder and to be bound by and strictly perform the terms
thereof as such terms apply to Escrow Holder.
Dated: _____________, 1998
First American Title Company
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
16
<PAGE>
---------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
--------------------------------------
among
--------------------------------------
POWERWAVE TECHNOLOGIES, INC.,
as Borrower
--------------------------------------
COMERICA BANK-CALIFORNIA,
not in its individual capacity,
but solely as Agent for the Lenders
and
The Financial Institutions
parties hereto from time to time,
as Lenders
---------------------------------------------------------------------
Dated as of September 30, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS........................................................... 1
2. CREDIT FACILITIES..................................................... 13
2.1 Term Loan...................................................... 13
2.2 Purpose Loan................................................... 13
2.3 Revolving Loan................................................. 14
2.4 Borrowing Procedure............................................ 14
2.5 Lenders' Records............................................... 14
3. PAYMENTS OF PRINCIPAL, INTEREST AND OTHER AMOUNTS..................... 15
3.1 Interest....................................................... 15
3.2 Interest Payments and Computations............................. 16
3.3 Principal Payments............................................. 16
3.4 LIBOR Lending Unlawful......................................... 17
3.5 Deposits Unavailable........................................... 17
3.6 Increased LIBOR Loan Costs, etc................................ 17
3.7 Funding Losses................................................. 17
3.8 Direct Debit Authorization..................................... 18
4. PLEDGE OF COLLATERAL.................................................. 18
4.1 Grant of Security Interest..................................... 18
4.2 Agent as Attorney-in-Fact...................................... 19
4.3 Performance of Borrower's Obligations.......................... 20
5. CONDITIONS PRECEDENT.................................................. 20
5.1 Initial Borrowing.............................................. 20
5.2 Subsequent Borrowings.......................................... 22
6. REPRESENTATIONS AND WARRANTIES........................................ 23
6.1 Existence and Authority........................................ 23
6.2 Authorization.................................................. 23
6.3 Binding Effect................................................. 23
6.4 Ownership Interests............................................ 23
6.5 Business Operations and Other Information; Financial Condition. 24
6.6 Subsidiaries................................................... 25
6.7 Litigation; No Violation of Governmental Orders or Laws........ 25
6.8 Outstanding Indebtedness; Investments.......................... 25
6.9 Consents, etc.................................................. 25
6.10 Title to Properties............................................ 25
6.11 Taxes.......................................................... 26
6.12 No Conflicts with Agreements, Etc.............................. 26
6.13 Related Documents.............................................. 27
6.14 Disclosure..................................................... 27
6.15 Broker's or Finder's Commissions............................... 27
6.16 Labor Matters.................................................. 27
6.17 Environmental Matters.......................................... 28
6.18 Possession of Franchises, Licenses, Etc........................ 29
6.19 Intellectual Property.......................................... 29
6.20 Margin Regulations; Use of Proceeds............................ 29
i
<PAGE>
6.21 Compliance with ERISA.......................................... 30
6.22 Material Contracts............................................. 31
6.23 Insurance...................................................... 31
6.24 Solvency....................................................... 31
6.25 Status under Certain Laws...................................... 31
6.26 Places of Business............................................. 31
6.27 Other Names.................................................... 31
6.28 Account Warranties............................................. 31
6.29 Equipment...................................................... 32
6.30 Year 2000...................................................... 32
6.31 Reliance by Agent and Lenders; Cumulative...................... 32
7. COVENANTS............................................................. 32
7.1 Financial Statements and Information........................... 33
7.2 Payment of Principal, Interest and Fees; to Keep Books;
Reserves; Etc.................................................. 35
7.3 Payment of Taxes and Claims.................................... 35
7.4 Maintenance of Properties and Corporate Existence.............. 36
7.5 Insurance...................................................... 36
7.6 Further Assurances............................................. 37
7.7 Restrictions on Indebtedness................................... 37
7.8 Restrictions on Liens.......................................... 37
7.9 Operating Leases............................................... 38
7.10 Sale-Leaseback Transactions.................................... 39
7.11 Transactions with Affiliates................................... 39
7.12 Consolidation, Merger or Disposition of Assets; Acquisitions... 39
7.13 Sale or Discount of Receivables................................ 39
7.14 Certain Contracts.............................................. 39
7.15 Restricted Payments and Investments............................ 40
7.16 Financial Covenants............................................ 40
7.17 Acquisition of Margin Securities............................... 41
7.18 Collateral Locations........................................... 41
7.19 Negative Pledges, Restrictive Agreements, etc.................. 41
7.20 Deposit Account................................................ 41
7.21 Additional Collateral Matters.................................. 41
7.22 Future Subsidiaries............................................ 42
8. EVENTS OF DEFAULT; REMEDIES........................................... 42
8.1 Events of Default.............................................. 42
8.2 Remedies....................................................... 44
8.3 Remedies with Respect to Collateral............................ 44
9. THE AGENT............................................................. 45
9.1 Actions........................................................ 45
9.2 Funding Reliance, etc.......................................... 45
9.3 Exculpation.................................................... 46
9.4 Successor...................................................... 46
9.5 Loans and other Transactions by Comerica....................... 46
9.6 Credit Decisions............................................... 46
9.7 Copies, etc.................................................... 46
10. GENERAL PROVISIONS.................................................... 47
10.1 Notices........................................................ 47
10.2 Successors and Assigns......................................... 47
ii
<PAGE>
<TABLE>
<S> <C> <C>
10.3 Section Headings........................... 48
10.4 Interpretation............................. 48
10.5 Severability of Provisions................. 48
10.6 Amendments and Waivers..................... 48
10.7 Set-Offs................................... 49
10.8 Attorneys' Fees and Costs.................. 49
10.9 Indemnification............................ 50
10.10 Dissemination.............................. 50
10.11 Counterparts............................... 50
10.12 Integration................................ 50
10.13 No Waiver; Remedies Cumulative............. 50
10.14 GOVERNING LAW.............................. 51
10.15 WAIVER OF JURY TRIAL....................... 51
</TABLE>
EXHIBITS
EXHIBIT A - Form of Term Note
EXHIBIT B - Form of Purpose Note
EXHIBIT C - Form of Revolving Note
EXHIBIT D - Form of Legal Opinion
EXHIBIT E - Form of Borrowing Base Certificate
EXHIBIT F - Form of Copyright Mortgage
EXHIBIT G - Form of Trademark Security Agreement
EXHIBIT H - Form of Patent Security Agreement
EXHIBIT I - Form of Landlord Waiver
EXHIBIT J - Form of Subsidiary Guarantee
iii
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
This LOAN AND SECURITY AGREEMENT (this "Agreement") is made and entered
---------
into as of September 30, 1998 by and among Powerwave Technologies, Inc., a
Delaware corporation (the "Borrower"), COMERICA BANK-CALIFORNIA, a California
--------
banking corporation, as agent for the Lenders (the "Agent"), and the various
-----
financial institutions that are (or may from time to time hereafter become)
parties hereto as lenders (each a "Lender" and collectively the "Lenders").
------ -------
RECITALS
--------
WHEREAS, Borrower has requested that the Lenders provide certain credit
facilities to Borrower; and
WHEREAS, the Lenders are willing to provide such credit facilities to
Borrower on the terms and conditions set forth herein; and
WHEREAS, the proceeds of the credit facilities herein provided shall be
used (i) to facilitate Borrower's acquisition from Hewlett-Packard Company of
certain assets, operations and business related to the design, manufacture and
marketing of radio frequency power amplifiers for use in the communication
infrastructure market (the "Business"), pursuant to that certain Asset Purchase
--------
Agreement, dated August 31, 1998 by and between Hewlett-Packard Company and the
Borrower (the "Acquisition Agreement") and (ii) for Borrower's working capital
---------------------
and general business purposes; and
WHEREAS, the Obligations shall be secured by a first-priority lien and
security interest in and to all of Borrower's personal property, as more
specifically provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
-----------
respective meanings (such meanings to be equally applicable to both the singular
and the plural forms of the terms defined) provided below in this Section 1:
---------
"Accountants" is defined in Section 7.1(B)(1).
----------- -----------------
"Account Debtor" means the party who is obligated on or under an Account.
--------------
"Accounts" of any Person means all of such Person's presently existing and
--------
hereafter arising or acquired accounts, accounts receivable, margin accounts,
futures positions, book debts, notes, drafts, acceptances, chattel paper, rights
under Contracts, rights to the payment of money and other forms of obligations
now or hereafter owned or held by or payable to such Person relating in any way
to Inventory or arising from the sale or other disposition of Inventory or the
rendering of services by such Person or howsoever otherwise arising, including
the right to payment of any interest or finance charges with respect thereto,
together with all goods represented by any of the Accounts; all such goods that
may be reclaimed or repossessed or returned to such Person; all of such Person's
rights as an unpaid vendor, including stoppage in transit, reclamation,
replevin, and sequestration; all pledged assets and all letters of credit,
guaranty claims, liens, and security interests held by or granted to such Person
to secure payment of any of
1
<PAGE>
the foregoing; all proceeds and products of all of the foregoing; and all
proceeds of insurance with respect thereto, including the proceeds of any
applicable credit insurance or fidelity bond, whether payable in cash or in
kind; and all customer lists, ledgers, books of account, records, computer
programs, computer disks or tape files, computer printouts, computer runs, and
other computer prepared information relating to any of the foregoing, and all
other records identifying or evidencing any of the foregoing.
"Accounts Trial Balance" is defined in Section 7.1(E).
---------------------- --------------
"Acquisition" means the Acquisition by Borrower from Seller of the Property
-----------
associated with the Business, as contemplated by the Acquisition Agreement.
"Acquisition Agreement" is defined in the Recitals.
--------------------- --------
"Advance" is defined in Section 2.3.
------- -----------
"Affiliate" means, as to any Person, (a) any Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with
such Person, (b) any Person who is a director, officer, partner or principal (i)
of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above, or (c) any individual who is a relative of any
Person described in clause (a) or clause (b) above. For purposes of this
definition, "control" (including the terms "controlling", "controlled by" and
"under common control with") of a Person shall mean the power, direct or
indirect, (i) to vote or direct the voting of 10% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise. For the purposes of this Agreement,
neither Agent nor any Lender shall be deemed to be an Affiliate of Borrower or
any of its Subsidiaries.
"Agent" is defined in the preamble.
----- --------
"Applicable Base Rate Margin" means with respect to any Loan, the
---------------------------
applicable percentage set forth below based upon Borrower's ratio of Funded Debt
at the date of determination to EBITDA for the most recently ended period of
four consecutive fiscal quarters (it being expressly understood and agreed that
the use of the Funded Debt/EBITDA ratios set forth in this definition is solely
for purposes of determining an interest rate margin and shall not be construed
to excuse any failure of Borrower to comply with any covenant of Borrower set
forth in this Agreement to maintain certain Funded Debt/EBITDA ratios as of
certain dates):
Funded Debt / EBITDA ratio Applicable Base Rate Margin
-------------------------- ---------------------------
More than 2.50 0.25%
2.50 or less 0.00%
"Applicable LIBOR Margin" means with respect to any Loan, the applicable
-----------------------
percentage set forth below based upon Borrower's ratio of Funded Debt at the
date of determination to EBITDA for the most recently ended period of four
consecutive fiscal quarters (it being expressly understood and agreed that the
use of the Funded Debt/EBITDA ratios set forth in this definition is solely for
purposes of determining an interest rate margin and shall not be construed to
excuse any failure of Borrower to comply with any covenant of Borrower set forth
in this Agreement to maintain certain Funded Debt/EBITDA ratios as of certain
dates):
Funded Debt / EBITDA Ratio Applicable LIBOR Margin
-------------------------- -----------------------
More than 2.50 2.25%
1.75 or more but not more than 2.50 1.75%
2
<PAGE>
Less than 1.75 1.50%
"Available Amount" means, at any time, an aggregate outstanding principal
----------------
amount of Revolving Loans not in excess of the lesser of (i) the Borrowing Base
and (ii) the Revolving Commitment Limit.
"Base Rate" means a variable rate of interest per annum which is announced
---------
from time to time by Agent as the "prime rate," "reference rate," "base rate,"
or other similar rate. The Base Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer
by Agent.
"Borrowing Base" means an amount as of any time of determination equal to
--------------
80% of the Eligible Accounts (or, in the case of foreign accounts receivable
that are deemed Eligible Accounts solely because they are backed by a letter of
credit as contemplated by clause (a) of the definition of Eligible Accounts, 25%
of such Eligible Accounts); provided, that at no time may (i) more than 50% of
--------
the Borrowing Base consist of Eligible Accounts owing from Northern Telecom
Limited and its Subsidiaries and Affiliates; (ii) more than 35% of the Borrowing
Base consist of Eligible Accounts owing from Lucent Technologies Inc. and its
Subsidiaries and Affiliates; and (iii) more than 35% of the Borrowing Base
consist of Eligible Accounts owing from LM Ericsson Telephone Company and its
Subsidiaries and Affiliates.
"Borrowing Base Certificate" has the meaning specified in Section 7.1(E).
-------------------------- --------------
"Borrowing Request" is defined in Section 2.4.
----------------- -----------
"Business" is defined in the Recitals.
-------- --------
"Business Day" means any day on which members of the Federal Reserve system
------------
are not required to close, and, if such day relates to a borrowing of, a payment
or prepayment of principal of or interest on, or a Conversion of or into, or an
Interest Period for, a Loan bearing interest with reference to LIBOR or a notice
by Borrower with respect to any such Loan, a day which is also a day on which
dealings in Dollar deposits are carried out on the London interbank market.
"Capital Expenditures" means the expenditures of any Person which should be
--------------------
capitalized on the balance sheet of such Person in accordance with GAAP (but
only that portion of Capitalized Lease Obligations paid in cash during the
relevant period) and which are made in connection with the purchase,
construction, development or improvement of items properly classified on such
balance sheet as Property, plant, equipment or other fixed assets or
intangibles, provided that Capital Expenditures shall not include the portion of
--------
any such expenditures paid for with (a) the Net Cash Proceeds of any property
insurance or condemnation award or (b) the Net Cash Proceeds of a sale of
Property permitted hereunder to the extent used within the period provided under
Section 3.3(d) to purchase like or similar Property.
- --------------
"Capitalized Lease" means any lease of Property which in accordance with
-----------------
GAAP should be capitalized on the balance sheet of any Person or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet.
"Capitalized Lease Obligation" means the amount of the liability of any
----------------------------
Person which in accordance with GAAP should be capitalized or disclosed on the
balance sheet of such Person in respect of a Capitalized Lease.
"Change of Control" means any Person, or any group of Persons acting in
-----------------
concert, becoming the direct or indirect beneficial owner (within the meaning of
Rule 13d under the Exchange Act) of more than 30% of the outstanding shares of
Borrower's capital stock having ordinary voting power.
"Chattel Paper" of any Person means any of such Person's "chattel paper,"
-------------
as such term is defined in Section 9105(1) (b) of the UCC, and shall include,
without limitation, all writings owned or held by
3
<PAGE>
such Person which evidence both a monetary obligation and a security interest in
or a lease of specific goods; when a transaction is evidenced both by a security
agreement or a lease and by an Instrument or a series of Instruments, the group
of writings taken together constitutes Chattel Paper.
"Closing Date" means the date of the initial disbursement of Loans
------------
hereunder, which (subject to satisfaction of the applicable conditions set forth
herein) shall occur at 12:00 P.M. (Pacific time) on September 30, 1998, or such
other time and date as shall be mutually acceptable to Borrower and Agent and at
the offices of Manatt, Phelps & Phillips, LLP, 11355 West Olympic Blvd., Los
Angeles, CA 90064, or at such other place as the parties may agree.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" is defined in Section 4.1.
---------- -----------
"Commitment" means each commitment of a Lender under this Agreement to
----------
advance Loan funds to Borrower, as set forth on Schedule I.
----------
"Consolidated Current Assets" of any Person means all cash, marketable
---------------------------
securities and net trade accounts receivable of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" of any Person means all liabilities of
--------------------------------
such Person and its Subsidiaries on a consolidated basis maturing on demand or
within one year from the date as of which such liabilities are to be determined,
and such other liabilities (including, but not limited to, accrued taxes) as may
properly be classified as current liabilities in accordance with GAAP, and
including, in any event, the outstanding principal balance of the Revolving
Loan, but excluding, in any event, any principal balance under the Purpose Loan.
"Consolidated Interest Expense" of any Person means, for any period, total
-----------------------------
interest expense (including, but not limited to, that portion of any Capitalized
Lease Obligations attributable to interest expense in conformity with GAAP and
amortization of capitalized interest) paid or accrued with respect to all
outstanding Indebtedness of such Person and its Subsidiaries, including all
commissions, discounts and other fees and charges owed with respect to letter of
credit and bankers acceptance financing, prepayment charges, agency fees,
administrative fees, commitment fees, capitalized transaction costs allocated to
interest expense, payments owed under any interest rate hedging, cap or similar
agreement or arrangement, all as determined for such Person and its Subsidiaries
on a consolidated basis for such period in accordance with GAAP.
"Consolidated Net Income (Loss)" means, for any period, the net income (or
------------------------------
loss) of Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period, determined in accordance with GAAP (but in
any event without deduction of dividends paid or payable in respect of any
equity interest of Borrower); provided that in determining Consolidated Net
--------
Income (Loss) there shall be excluded (i) the income (or loss) of any Person
(other than a Subsidiary of Borrower) in which any Person other than Borrower or
any of its Subsidiaries has a joint interest or partnership interest, except to
the extent of the amount of dividends or other distributions actually paid to
Borrower or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Borrower or is merged into or consolidated with Borrower or any of its
Subsidiaries or that Person's assets are acquired by Borrower or any of its
Subsidiaries, (iii) the proceeds of any life insurance policy, (iv) gains and
losses from the sale, exchange, transfer or other disposition of Property or
assets not in the ordinary course of business, and related tax effects in
accordance with GAAP, (v) any other extraordinary or non-recurring gains and
losses, and related tax effects in accordance with GAAP, and (vi) the income of
any Subsidiary of Borrower to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of
4
<PAGE>
its charter or of any agreement, instrument, judgment, decree, Order, statute,
rule or governmental regulation applicable to that Subsidiary.
"Continue", "Continuation" and "Continued" shall refer to the continuation
-------- ------------ ---------
pursuant to Section 3.1 hereof of a LIBOR Loan from one Interest Period to the
-----------
next Interest Period.
"Contracts" of any Person means all contracts, undertakings, or other
---------
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which such Person may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 3.1 hereof of (a) a LIBOR Loan into a Floating Rate Loan, or
-----------
(b) a Floating Rate Loan into a LIBOR Loan.
"Default" means any event or condition which, with due notice or lapse of
-------
time or both, would become an Event of Default.
"Deposit Account" is defined in Section 5.1(j).
--------------- --------------
"Document" means, with respect to any Person, any "document," of such
--------
Person, as such term is defined in Section 9105(1)(f) of the UCC, and shall
include, without limitation, any bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of Inventory owned or held by such
Person, together with any other document or receipt which in the regular course
of business or financing is treated as adequately evidencing that the person in
possession of it is entitled to receive, hold and dispose of the document and
the goods it covers.
"EBITDA" means, for any period, Consolidated Net Income (Loss) for such
------
period plus all amounts deducted in determining such Consolidated Net Income
----
(Loss) on account of Consolidated Interest Expense (net of interest income),
taxes based on or measured by income, depreciation expense, amortization expense
and other non-cash items (including, without limitation, adjustments related to
the write-up in the book value of any assets arising out of the Transactions, to
the extent such adjustments are made pursuant to APB Nos. 16 and 17 and are
deducted in determining Consolidated Net Income (Loss) for such period, but
exclusive of extraordinary and non-recurring items), all as determined for
Borrower on a consolidated basis in accordance with GAAP.
"Eligible Account" means each account receivable of Borrower or any of its
----------------
Subsidiaries:
(a) that arises out of the sale by Borrower or such Subsidiary of
Inventory in the ordinary course of its business to an Account Debtor
located within the United States of America, provided that accounts
--------
receivable owed by Samsung Electronics Co. Ltd., Hyundai Electronics
Industries Co. and LG Information & Communications, Ltd. may be
considered Eligible Accounts to the extent backed by a letter of
credit in form and substance satisfactory to Agent and the Lenders and
issued by a bank acceptable to Agent and the Lenders and provided,
--------
further that this clause (a) shall not be construed to exclude, or to
-------
require a letter of credit in support of, Accounts owed by Northern
Telecom Limited and its Subsidiaries and Affiliates, Lucent
Technologies Inc. and its Subsidiaries and Affiliates, LM Ericsson
Telephone Company and its Subsidiaries and Affiliates or Siemens AG
and its Subsidiaries and Affiliates;
(b) that is the valid, binding and legally enforceable obligation of the
Account Debtor obligated thereon and such Account Debtor is not (i) an
Affiliate of Borrower or of any Subsidiary of Borrower, (ii) a
director, officer or employee of Borrower or of any Subsidiary or
Affiliate of Borrower, (iii) the United States of America or any
department, agency or instrumentality
5
<PAGE>
thereof (or any state or municipality), (iv) a debtor under any
proceeding under the United States Bankruptcy Code or any other
comparable bankruptcy or insolvency law applicable under the law of
any other country or political subdivision thereof, or (v) an assignor
for the benefit of creditors;
(c) that is assignable and not evidenced by an instrument or chattel paper
unless the same has been endorsed and delivered to Agent;
(d) that is subject to a perfected, first priority Lien in favor of Agent,
for the benefit of the Lenders, and is free and clear of any other
Lien other than Permitted Liens;
(e) that is net of any credit or allowance given by Borrower or such
Subsidiary to such Account Debtor;
(f) for which Borrower or such Subsidiary is not and will not become
liable to the Account Debtor for goods sold or services rendered by
such Account Debtor to Borrower or such Subsidiary;
(g) that is not subject to any asserted offset, counterclaim or other
defense with respect thereto, provided, however, that this clause (g)
-------- -------
shall not cause an Account to fail to be an Eligible Account to the
extent of the portion thereof, if any, that is not subject to any
asserted offset, counterclaim or other defense;
(h) that is not unpaid more than 90 days after earlier of (x) the date of
the applicable invoice and (y) the date of shipment;
(i) that is not owed by an Account Debtor who is obligated on accounts
owed to Borrower and its Subsidiaries more than 25% of the aggregate
unpaid balance of which have been past due for longer than either of
the relevant periods specified in clause (h) above unless Agent has
approved expressly in writing the continued eligibility thereof;
(j) to the extent that it would not cause the total Eligible Accounts
owing from any one Account Debtor or its Affiliates to exceed 20% (or
such other limitation that may otherwise be applicable to such Account
Debtor pursuant to the definition of "Borrowing Base") of all Eligible
Accounts owed to Borrower or any of its Subsidiaries; and
(k) that does not arise from a sale to an Account Debtor on a bill-and-
hold, guaranteed sale, sale-or-return, sale-on-approval, consignment
or any other repurchase or return basis.
"Environmental Laws" means the Comprehensive Environmental Response,
------------------
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right to Know Act, the Safe Drinking Water Act,
the Hazardous Materials Transportation Act, the Clean Air Act, the Clean Water
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Noise Control
Act, Occupational Safety and Health Act, the Toxic Substances Control Act, any
so-called "Superfund" or "Superlien" Laws, any regulation promulgated under any
of the foregoing or any other Federal, state, or local statute, law, ordinance,
code, rule, regulation, order, decree, common law or other requirement of any
Governmental Body regulating, relating to or imposing liability or standards of
conduct concerning the environment, health and safety, siting, wetlands, coastal
zone management, air emissions, discharges to surface or ground water,
discharges to any sewer or septic system, noise emissions, solid waste disposal
or any Hazardous Material, or the generation, use, transportation or other
management of Hazardous Materials, all as now or at any time hereafter may be in
effect.
"Environmental Matter" means any claim, investigation, notice letter,
--------------------
information request, litigation,
6
<PAGE>
administrative proceeding, cleanup or remediation order, whether pending or, to
the knowledge of Borrower, threatened, or judgment or Order, relating to any
Hazardous Materials, the release thereof, or any Environmental Law.
"Equipment" of any Person means all of such Person's now owned and
---------
hereafter acquired equipment (as defined in Section 9109(2) of the UCC)
including, but not limited to, all machinery, office equipment, furniture,
furnishings, fixtures, computers, office equipment and other tangible personal
Property, as well as purchase options with respect to all of such types of
Property leased by such Person; together with all present and future additions
and accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto, wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any corporation or other Person which is a member
---------------
of the same controlled group (within the meaning of Section 414(b) of the Code)
of corporations or other Persons as Borrower or any of its Subsidiaries, or
which is under common control (within the meaning of Section 414(c) of the Code)
with Borrower or any of its Subsidiaries, or any corporation or other Person
which is a member of an affiliated service group (within the meaning of Section
414(m) of the Code) with Borrower or any of its Subsidiaries, or any corporation
or other Person which is required to be aggregated with Borrower or any of its
Subsidiaries pursuant to Section 414(o) of the Code or the regulations
promulgated thereunder, to the extent effective.
"Event of Default" is defined in Section 8.1.
---------------- -----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
------------
any similar Federal statute then in effect, and a reference to a particular
section thereof shall include a reference to the comparable section, if any, of
any such similar Federal statute.
"Facilities" and "Facility" are defined in Section 2.
---------- -------- ---------
"Fair Market Value" means the amount a willing buyer would pay to a willing
-----------------
seller for the assets in question, neither party being under compulsion to act
and both having reasonable knowledge of all relevant facts.
"Funded Debt" of any Person means all Indebtedness of such Person other
-----------
than Indebtedness of the types described in clauses (vii) and (viii) of the
definition of "Indebtedness" set forth herein.
"GAAP" means generally accepted accounting principles as in effect from
----
time to time in the United States of America, applied on a consistent basis as
to classification of items and amounts.
"General Intangibles" of any Person means all "general intangibles" of such
-------------------
Person, as such term is defined in Section 9106 of the UCC, and shall include,
without limitation, choses in action, causes of action and all other kinds of
intangible personal property of every kind or nature owned by such Person,
including, but not limited to, contract rights, (including rights pursuant to or
arising under the Acquisition Agreement) corporate or other business records,
inventions, designs, patents, patent applications, service marks, trademarks,
trademark applications, trade names, trade secrets, engineering drawings,
goodwill, registrations, copyrights, copyright applications, licenses,
franchises, leasehold interests in personal property, customer lists, tax refund
claims, business interruption insurance and proceeds thereof, property, casualty
or any similar type of insurance and any proceeds thereof, royalty, licensing
and product rights, rights to the retrieval from third parties of electronically
processed and recorded data pertaining to any Collateral and all rights to
payment under any judgment; and all customer lists, ledgers, books of account,
7
<PAGE>
records, computer programs, computer disks or tape files, computer printouts,
computer runs, and other computer prepared information relating to any of the
foregoing.
"Governmental Body" means any Federal, state, county, city, town, village,
-----------------
municipal or other governmental department, commission, board, bureau, agency,
authority or instrumentality, domestic or foreign.
"Guaranty" means any guaranty or other contingent liability (other than
--------
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect, with respect to any obligations of another Person, through
an agreement or otherwise, including, without limitation, (a) any other
endorsement or discount with recourse or undertaking substantially equivalent to
or having economic effect similar to a guarantee in respect of any such
obligations and (b) any agreement (i) to purchase, or to advance or supply funds
for the payment or purchase of, any such obligations, (ii) to purchase, sell or
lease Property, products, materials or supplies, or transportation or services,
in respect of enabling such other Person to pay any such obligation or to assure
the owner thereof against loss regardless of the delivery or nondelivery of the
Property, products, materials or supplies or transportation or services or (iii)
to make any loan, advance or capital contribution to or other investment in, or
to otherwise provide funds to or for, such other Person in respect of enabling
such Person to satisfy any obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum equity, working
capital or other balance sheet condition in respect of any such obligation. The
amount of any Guaranty shall be equal to the outstanding amount of the
obligations directly or indirectly guaranteed.
"Hazardous Material" and "Hazardous Materials" mean, and shall be deemed to
------------------ -------------------
refer to:
(1) any "hazardous substance" as defined in, or for purposes of, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C.A. (S)(S) 9601 & 9602, or any other so-called "superfund" or
"superlien" law and any judicial interpretation of any of the
foregoing;
(2) any "regulated substance" as defined pursuant to 40 C.F.R. Part 280;
(3) any "pollutant or contaminant" as defined in 42 U.S.C.A. (S) 9601(33);
(4) any "hazardous waste" as defined in, or for purposes of, the Resource
Conservation and Recovery Act;
(5) any "hazardous chemical" as defined in 29 C.F.R. Part 1910;
(6) any "hazardous material" as defined in, or for purposes of, the
Hazardous Materials Transportation Act; and
(7) any other substance, regardless of physical form, or form of energy or
pathogenic agent that is subject to any other past, present or future
law or requirement of any Governmental Body regulating, relating to,
or imposing obligations, liability, or standards of conduct concerning
the protection of human health, plant life, animal life, natural
resources, Property or the reasonable enjoyment of life or Property
from the presence in the environment of any solid, liquid, gas, odor,
pathogen or form of energy, from whatever source.
Without limiting the generality of the foregoing, the term "Hazardous
Material" thus includes, but is not limited to, any material, waste or substance
that contains petroleum or any fraction thereof, asbestos, or polychlorinated
biphenyls, or that is flammable, explosive or radioactive.
8
<PAGE>
"Indebtedness" of any Person means, without duplication, (i) all
------------
indebtedness of such Person for borrowed money, (ii) any obligation incurred for
all or any part of the purchase price of Property or services, other than
accounts payable and accrued expenses included in current liabilities and
incurred in respect of Property or services purchased in the ordinary course of
business, (iii) indebtedness or obligations evidenced by bonds, debentures,
notes or similar written instruments, (iv) the face amount of all letters of
credit issued for the account of such Person and all drafts drawn thereunder,
(v) any obligation (whether or not such Person has assumed or become liable for
the payment of such obligation) secured by a Lien on any Property of such
Person, (vi) Capitalized Lease Obligations of such Person, (vii) all
indebtedness, contingent or otherwise, with respect to any interest rate
agreement, including without limitation any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations in
interest rates; (viii) any indebtedness, contingent or otherwise, under any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person against fluctuations in currency
values; and (ix) all Guaranties of such Person in respect of any obligations of
the foregoing description of any other Person.
"Instrument" of any Person means any "instrument" of such Person, as such
----------
term is defined in Section 9105(1) (i) of the UCC, and shall include, without
limitation, any draft, check, certificate of deposit, note, bill of exchange,
security (including equity securities) or any other writing owned or held by
such person which evidences a right to the payment of money and is not itself a
security agreement or lease and is of a type which is transferred in the
ordinary course of business by delivery with any necessary endorsement or
assignment.
"Intellectual Property" is defined in Section 6.19.
----------------------- ------------
"Interest Period" means, with respect to any portion of the outstanding
---------------
principal of the Loans bearing interest from time to time with reference to
LIBOR, the period commencing on and including the date such principal is
advanced or is Converted from the Floating Rate to LIBOR, or the last day of the
immediately preceding Interest Period for such principal (if previously bearing
interest with reference to LIBOR), and ending on but excluding the 30th, 60th,
90th or 180th day thereafter; provided that if any Interest Period would end on
--------
a day that is not a Business Day, such Interest Period shall be extended to the
next day that is a Business Day (unless extending such Interest Period to the
next Business Day would cause the Interest Period to end in a different calendar
month, in which case the last day of such Interest Period shall be the
immediately preceding Business Day). In no event shall an Interest Period
extend beyond the Revolving Maturity Date; and if any Interest Period would
otherwise commence before and end after the Revolving Maturity Date, then the
LIBOR shall not be available hereunder for such period.
"Inventory" of any Person means any "inventory" of such Person, as such
---------
term is defined in Section 9109 (4) of the UCC, and shall include, without
limitation, any and all goods owned or held by or for the account of such
Person, for sale or lease, or for furnishing under a contract of service, or as
raw materials, work in process, materials incorporated in or consumed in the
production, packaging, delivery or shipping of any of the foregoing, supplies,
and all property the sale, lease or other disposition of which has given rise to
Accounts and which has been returned to such Person or repossessed by such
Person or stopped in transit, all substitutions and replacements therefor and
all additions and accessions thereto; and all customer lists, ledgers, books of
account, records, computer programs, computer disks or tape files, computer
printouts, computer runs, and other computer prepared information relating to
any of the foregoing.
"Investment" means with respect to any Person, any investment of such
----------
Person so classified under GAAP, and, whether or not so classified, includes (a)
any loan or advance made by such Person to any other Person, (b) any Guaranty,
and (c) any ownership or similar interest in any other Person; and the amount of
any Investment shall be the original principal or capital amount thereof less
all cash returns of principal or equity thereof (and without adjustment by
reason of the financial condition of such other
9
<PAGE>
Person).
"LIBOR" means, with respect to any portion of the outstanding Loans for any
-----
Interest Period therefor, the offered rate per annum for deposits of Dollars for
a period equal to such Interest Period that appears on Telerate Page 3750 as of
11:00 A.M. (London, England time) two Business Days prior to the commencement of
such Interest Period. If no such offered rate exists, the rate in respect of
such Interest Period will be the rate of interest per annum, as determined by
Agent (rounded upwards, if necessary, to the nearest 1/16 of 1%) at which
deposits of Dollars in immediately available and freely transferable funds are
offered at 11:00 A.M. (London, England time) two Business Days prior to the
commencement of such Interest Period by major financial institutions reasonably
satisfactory to Agent in the London interbank market for a period equal to such
Interest Period and for an amount equal or comparable to such portion of the
principal amount of the Loans.
"LIBOR Rate" is defined in Section 3.1.
---------- -----------
"LIBOR Loan" is defined in Section 3.1.
---------- -----------
"Lien" means any security interest, mortgage, pledge, lien, claim, charge,
----
encumbrance of any kind, or any other type of preferential arrangement, title
retention agreement, any easement, right of way or other encumbrance on title to
real property, or lessor's interest under a Capitalized Lease or analogous
instrument.
"Loan" means each of the Revolving Loan, the Purpose Loan or the Term Loan,
----
or any portion thereof, and "Loans" means all of such loans collectively.
-----
"Loan Documents" means this Agreement, the Notes, each Subsidiary Guarantee
--------------
and all other documents, instruments and agreements (including financing
statements and certificates executed and delivered from time to time in
connection with or pursuant to this Agreement).
"Material Adverse Effect" means any change or changes or effect or effects
-----------------------
that individually or in the aggregate are or are reasonably likely to be
materially adverse to (i) the assets, business, operations, income, prospects or
condition (financial or otherwise) of Borrower and its Subsidiaries taken as a
whole, (ii) the Transactions, (iii) the ability of Borrower and its Subsidiaries
to perform their respective obligations under this Agreement, the Notes, and the
other Loan Documents to which they may be parties or (iv) the validity or
enforceability of any of the Loan Documents in any manner that would impair the
practical realization by the Agent or the Lenders of their respective rights,
benefits or remedies under thereof.
"Multiemployer Plan" means a multiemployer plan as defined in Section 3(37)
------------------
or Section 4001(a)(3) of ERISA or Section 414(f) of the Code contributed to by
Borrower or any of its ERISA Affiliates and which is subject to Title IV of
ERISA.
"Net Cash Proceeds" means, with respect to (a) the issuance and sale by the
-----------------
Borrower or any of its Subsidiaries of any of any equity interests or
Indebtedness (other than an issuance of equity by a Subsidiary of Borrower to
Borrower or to another Subsidiary), (b) any sale, lease, transfer or other
voluntary or involuntary disposition of any Property of Borrower or any of its
Subsidiaries (other than sales or other distributions of Inventory in the
ordinary course of business) or (c) any receipt of fire, property, casualty or
similar insurance proceeds or condemnation awards in respect of such Property or
other insurance proceeds received in respect of a loss incurred by Borrower or
any such Subsidiary, the aggregate amount of such cash consideration received by
Borrower or such Subsidiary in connection with such transaction after deduction
of (i) all fees, costs and expenses directly incurred by Borrower or such
Subsidiary in connection therewith, including, but not limited to, underwriting
discount, brokerage or selling commissions, if any, (ii) taxes paid or payable
in connection with such transaction, (iii) in the case of any sale, lease,
transfer or disposition of Property, the amount of Indebtedness secured by such
Property required to be
10
<PAGE>
repaid in connection with such transaction, and (iv) the reasonable fees and
disbursements of counsel paid by Borrower or such Subsidiary in connection
therewith.
"Notes" means, collectively, the Term Notes, the Purpose Notes, and the
-----
Revolving Notes.
"Obligations" means all obligations (monetary or otherwise) of Borrower and
-----------
its Subsidiaries to Agent and the Lenders arising under or in connection with
this Agreement, the Notes and each other Loan Document to which any such Person
is or may be a party.
"Officer's Certificate" means with respect to any Person a certificate
---------------------
signed on such Person's behalf by the Chairman of the Board, the President, one
of the Vice Presidents, or the chief financial officer of the specified Person,
in the signer's capacity as such officer.
"Order" means any order, writ, injunction, decree, judgment, award,
-----
determination or written direction or demand of any court, arbitrator or
Governmental Body.
"Packaging" means, with respect to any Inventory, containers, wrapping and
---------
packaging materials used to store or ship such Inventory which does not
constitute a part of the product offered for sale.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
----
agency or Governmental Body performing similar functions.
"Pension Plan" means an employee pension benefit plan, as defined in
------------
Section 3(2) of ERISA which is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA, excluding a Multiemployer Plan, maintained by or
contributed to by Borrower or any of its ERISA Affiliates.
"Percentage" means, with respect to any Lender, the percentage of the
----------
aggregate Commitments of all Lenders represented by the Commitment of such
Lender.
"Permitted Investments" means, (i) marketable obligations issued or fully
---------------------
guaranteed by the United States of America or an instrumentality or agency
thereof maturing within 180 days after acquisition thereof, (ii) open market
commercial paper, maturing within 180 days after acquisition thereof, which has
a credit rating of a minimum of either A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc., (iii) U.S. dollar certificates of
deposit, time deposits or bankers acceptances maturing within 180 days after
acquisition thereof, issued or guaranteed by a commercial bank which is a member
of the Federal Reserve System and which has a credit rating of a minimum of
either A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service,
Inc., and has capital and surplus and undivided profits in excess of
$1,000,000,000, and (iv) money market funds which provide for daily liquidation
and are rated not lower than the equivalent of either A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc.
"Permitted Liens" is defined in Section 7.8.
--------------- -----------
"Person" means any natural person, corporation, partnership, firm,
------
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Property" means, with respect to any Person, any interest of such Person
--------
in any kind of property or asset, whether real, personal, or mixed, tangible or
intangible.
"Purpose Loan" is defined in Section 2.2.
------------ -----------
"Purpose Note" is defined in Section 2.2.
------------ ------------
"Required Lenders" means, as of any date of determination, Lenders holding
----------------
Commitments comprising 100% or more of the aggregate Commitments of all of the
Lenders.
11
<PAGE>
"Restricted Payment" means, with respect to any Person,
------------------
(a) the declaration or payment of any dividend or other distribution on,
or the incurrence of any liability to make any other payment in respect of,
capital stock or other equity interest of such Person (other than one payable
solely in the same class of capital stock of such Person),
(b) any payment or distribution on account of the purchase, redemption,
defeasance (including in-substance or legal defeasance) or other retirement of
any capital stock of such Person, or of any warrant, option or other right to
acquire such capital stock, or any other payment or distribution made in respect
thereof, and
(c) any payment or distribution by such Person on account of the principal
of or prepayment charge, if any, or interest or other amounts, with respect to
any Indebtedness of Borrower which is subordinated and subject in right of
payment to the prior payment of the Obligations.
The amount of any Restricted Payment made in the form of Property shall be
deemed to be the Fair Market Value of such Property as of the date of such
payment.
"Revolving Commitment Limit" is defined in Section 2.3.
-------------------------- -----------
"Revolving Loan" is defined in Section 2.3.
-------------- -----------
"Revolving Maturity Date" is defined in Section 2.3.
----------------------- -----------
"Revolving Note" is defined in Section 2.3.
-------------- -----------
"SEC" means the United States Securities and Exchange Commission and any
---
other agency or Governmental Body that may hereafter succeed to the functions
thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal statute then in effect, and a reference to a particular section
thereof shall include a reference to the comparable section, if any, of any such
similar Federal statute.
"Solvent" means, when used with respect to any Person, that (A) the fair
-------
value of the property of such Person is greater than the total amount of
liabilities (including, without limitation, contingent liabilities) of such
Person, (B) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liabilities of
such Person on its debts as they become absolute and matured, (C) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (D) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital. For such purposes, any
contingent liability (including, but not limited to, pending litigation,
Guaranties, pension plan liabilities and claims for federal, state, local and
foreign taxes, if any) is valued at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subsidiary" means as to any Person (a) a corporation of which outstanding
----------
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
Board of Directors of such corporation are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such Person and (b)
any partnership, association, joint venture or other business entity the
controlling interest of which is at the time owned, directly or indirectly
through one or more intermediaries, or both, by such Person.
12
<PAGE>
"Subsidiary Guarantee" means a guaranty executed and delivered by a
--------------------
Subsidiary of Borrower pursuant to Section 7.22 in favor of Agent, for the
------------
benefit of the Lenders, substantially in the form of Exhibit J.
---------
"Term Loan" is defined in Section 2.1.
--------- -----------
"Term Note" is defined in Section 2.1.
--------- -----------
"Transactions" means the Loans and the other transactions contemplated by
------------
the Acquisition Agreement.
"UCC" means the Uniform Commercial Code as the same may, from time to time,
---
be in effect in the State of California; provided, however, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Agent's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" means the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. CREDIT FACILITIES. Lenders shall provide the following three (3) credit
-----------------
facilities to Borrower (the Term Loan, the Purpose Loan and the Revolving Loan,
each as defined below, are sometimes referred to herein collectively as the
"Facilities" and individually as a "Facility"):
---------- --------
2.1 Term Loan. Lenders agree to provide Borrower with a term loan ("Term
--------- ----
Loan") in the principal amount of up to EIGHTEEN MILLION Dollars ($18,000,000),
- ----
which Term Loan shall be evidenced by one or more Term Notes, each substantially
in the form of Exhibit A hereto (each a "Term Note" and collectively the "Term
--------- --------- ----
Notes"). Subject to the terms and conditions of this Agreement, the Term Loan
shall be disbursed in a single advance at the Closing. In no event may Borrower
re-borrow any principal portion of the Term Loan that has been repaid. The Term
Loan proceeds shall be applied to pay a portion of the purchase price under the
Acquisition Agreement. Principal shall be payable as provided in Section 3.3,
-----------
and interest shall accrue and be payable as provided in Section 3.1.
-----------
2.2 Purpose Loan. Lenders agree to provide Borrower with an additional
------------
term loan ("Purpose Loan") in the principal amount of SEVEN MILLION Dollars
------------
($7,000,000) which Purpose Loan shall be evidenced by one or more Term Notes,
each substantially in the form of Exhibit B hereto (each a "Purpose Note" and
--------- ------------
collectively the "Purpose Notes"). Subject to the terms and conditions of this
-------------
Agreement, the Purpose Loan shall be disbursed in a single advance on the
Closing Date. In no event may Borrower re-borrow any principal portion of the
Purpose Loan that has been repaid. The Purpose Loan proceeds shall be applied
to pay that portion of the purchase price under the Acquisition Agreement
allocable to certain real property formerly owned and operated by Seller in
connection with the Business commonly known as 104 Woodmere Road located in
Folsom, California. Principal of the Purpose Loan shall be payable as provided
in Section 3.3, and interest shall accrue and be payable as provided in Section
----------- -------
3.1.
- ---
2.3 Revolving Loan. Lenders agree to make available to the Borrower a
--------------
revolving line of credit ("Revolving Loan") in the maximum principal amount
----------------
outstanding at any one time of TEN MILLION Dollars ($10,000,000) (the "Revolving
---------
Commitment Limit"), which Revolving Loan shall be evidenced by one or more
- ----------------
Revolving Notes, each substantially in the form of Exhibit C hereto (each, a
---------
"Revolving Note" and collectively the "Revolving Notes"). Each Revolving Note
--------------
shall be registered in the name of a Lender and shall have a maximum principal
amount equal to such Lender's Commitment. The Revolving Loan shall mature and be
payable in full on April 30, 2001 (the "Revolving Maturity Date") as provided in
-----------------------
Section 3.3, and interest on the Revolving Loan shall accrue and be payable as
- -----------
provided in Section 3.1. Borrower may
-----------
13
<PAGE>
from time to time repay all or a portion of the amounts outstanding under the
Revolving Loan (together with accrued interest to the date of repayment on the
principal amount so repaid), which amounts may be re-borrowed (subject to the
Available Amount) so long as the Commitment of the Lenders to make Advances
under the Revolving Loan has not been terminated. With respect to each
disbursement of funds under the Revolving Loan (an "Advance"), each Lender is
-------
hereby authorized to record, on its books and records, the date and amount of
such Advance, the duration of each Interest Period therefor and the interest
rate applicable to such Interest Period. The information so recorded by each
Lender shall be conclusive and binding in the absence of manifest error.
Notwithstanding the foregoing, the failure by any Lender to record any such
information shall not impair the liability of Borrower to make any payment of
the Obligations when due. Notwithstanding any other provision of this Agreement,
Borrower shall have a minimum unused Available Amount of not less than
$5,000,000 at the Closing Date after giving effect to the initial Advance and
shall maintain such minimum unused Available Amount for a period of not less
than 30 consecutive days following the Closing Date.
2.4 Borrowing Procedure. Borrower may request an Advance pursuant to
-------------------
written notice or pursuant to telephonic notice confirmed in writing or by
facsimile (each a "Borrowing Request"). Each Borrowing Request shall be made not
-----------------
later than the applicable time and date specified in Section 3.1, and shall
-----------
specify the date and amount of the requested Advance, the initial Interest
Period therefor (in the case of a LIBOR Loan), and whether such Advance is to
bear interest with reference to LIBOR or the Floating Rate for such Interest
Period. All Borrowing Requests and confirmations thereof in writing or by
facsimile must be signed by an officer of Borrower who has been identified in
writing to Agent as an officer authorized to make Borrowing Requests on behalf
of Borrower. If there is any discrepancy between a telephonic notice and the
subsequent written confirmation thereof and Agent has already acted upon the
original telephonic notice, the terms of such telephonic notice shall be
determinative. Borrower indemnifies Agent, each Lender and their respective
officers, employees and agents, and holds each such Person harmless from all
liability, loss, cost and expense in connection with any act resulting from any
Borrowing Request (whether telephonic, written or by facsimile) which is
reasonably believed to have been made by an officer authorized to make Borrowing
Requests on behalf of Borrower. The foregoing indemnification shall survive the
termination of this Agreement.
2.5 Lenders' Records. With respect to each Loan, each Lender is hereby
----------------
authorized to mark the date, principal amount, interest rate and Interest Period
(if any) applicable thereto and any payments made thereon on its books and
records (either manually or by electronic entry) and/or on any schedule attached
to the applicable Note, which notations shall be conclusive evidence of the
information marked, in the absence of manifest error.
2.6 Up-front Fee. As an up-front fee for underwriting the Facilities
------------
provided hereunder, Borrower shall pay to Agent on or prior to the Closing Date,
for the ratable benefit of the Lenders, an amount equal to 0.50% of the sum of
the aggregate maximum principal amounts of the Facilities.
2.7 Commitment Fee. Borrower will to pay to Agent, for the ratable
--------------
benefit of the Lenders, an unused commitment fee on a quarterly basis in arrears
(accruing from the Closing Date), in an amount equal to the applicable
percentage set forth below (based upon Borrower's ratio of Funded Debt at the
end of the most recently ended fiscal quarter to EBITDA for the period of four
consecutive fiscal quarters ended on the last day of the most recently ended
fiscal quarter) of the daily average unused portion of the Revolving Commitment
Limit during such quarter:
Funded Debt / EBITDA ratio Commitment Fee
-------------------------- --------------
More than 2.50 0.500%
1.75 or more not more than 2.50 0.375%
Less than 1.75 0.250%
14
<PAGE>
3. PAYMENTS OF PRINCIPAL, INTEREST AND OTHER AMOUNTS.
-------------------------------------------------
3.1 Interest. Amounts outstanding under the Loans shall bear interest
--------
based at the rate per annum equal to the sum of the Base Rate from time to time
plus the Applicable Base Rate Margin (the "Floating Rate") or, at Borrower's
election (which election shall not be available at any time when an Event of
Default is continuing) subject to the following provisions of this Section 3.1,
-----------
at the rate per annum equal to the sum of LIBOR plus the Applicable LIBOR Margin
(the "LIBOR Rate"); provided, that following the occurrence and during the
---------- --------
continuance of an Event of Default, all amounts outstanding under each Facility
shall, at the option of Agent, bear interest at the rate per annum equal to the
sum of the Floating Rate (computed at the highest Applicable Base Rate Margin)
plus 2%. A portion of principal outstanding hereunder bearing interest at the
Floating Rate shall be referred to as a "Floating Rate Loan"; and a portion of
------------------
principal outstanding hereunder bearing interest at the LIBOR Rate shall be
referred to as a "LIBOR Loan". With respect to any Floating Rate Loan, any
----------
Advance shall be requested upon at least one (1) Business Day's prior notice
given to the Agent prior to 12:00 noon California time (but Lenders will
consider Advancing, to the extent practicable, Floating Rate Loans on the same
day requested). With respect to any LIBOR Loan, Borrower may, at the end of the
applicable Interest Period (or, subject to Section 3.7, on any other Business
-----------
Day), Convert such loan to a Floating Rate Loan. Borrower may at any time
(subject to the following sentence) Convert a Floating Rate Loan into a LIBOR
Loan. At the time any Advance is requested to which Borrower desires the LIBOR
Rate to be applicable, and/or Borrower wishes to have the LIBOR Rate apply to
all or a portion of the outstanding principal of the Loans, and at the end of
any Interest Period for a LIBOR Loan which Borrower wishes to Continue as a
LIBOR Loan, Borrower shall give Agent notice (which notice shall be delivered
not less than three (3) Business Days prior to the first day of the Interest
Period) specifying (i) the interest rate option selected by Borrower, (ii) the
principal amount to be subject to such interest rate, and (iii) if the LIBOR
Rate is selected, the length of the applicable Interest Period. Any such notice
may be given by telephone so long as, in the case of LIBOR Loans, Agent received
written confirmation of such telephonic notice not later than three (3) Business
Days after such telephonic notice is given. Notwithstanding the foregoing,
Borrower may only request the LIBOR Rate for amounts of principal that are at
least $1,000,000 in the aggregate and integral multiples of $500,000, and no
more than five (5) LIBOR Loans may be outstanding at any time. If, upon any
request to have the LIBOR Rate apply to any portion of the Loans, Borrower does
not immediately accept the LIBOR Rate quoted by Agent, any subsequent acceptance
by Borrower shall be subject to a redetermination of the LIBOR Rate by Agent;
provided that if Borrower fails to accept any such quotation as given, then the
- --------
quoted rate shall expire and Agent shall be under no obligation to permit
Borrower to select the LIBOR Rate on such day. With respect to any portion of
the Loans for which the LIBOR Rate has not been duly selected in accordance with
the foregoing provisions of this Section 3.1, Borrower will be deemed to have
-----------
selected the Floating Rate.
3.2 Interest Payments and Computations. Accrued interest on all
----------------------------------
outstanding Floating Rate Loans shall be due and payable on the last Business
Day of each month. Accrued interest on all outstanding LIBOR Loans shall be due
and payable on the last day of the applicable Interest Period, but in no event
later than 90 days following the commencement of such Interest Period. Interest
on LIBOR Loans shall be computed on the basis of a 360-day year and shall be
assessed for the actual number of days elapsed from the first day of the
applicable Interest Period, but excluding the last day of such period. Interest
on each Floating Rate Loan shall be computed on the basis of a 365- or 366-day
year and shall be assessed for the actual number of days elapsed.
3.3 Principal Payments. The outstanding principal of the Loans shall be
------------------
payable as follows:
(a) The principal of the Term Loan shall be payable in equal monthly
installments of $500,000 each, payable on the last Business Day of each month,
and the entire unpaid principal balance of the Term Loan shall be due and
payable on September 30, 2001.
(b) The outstanding principal of the Revolving Loan shall be payable
in full on the
15
<PAGE>
Revolving Maturity Date.
(c) The outstanding principal of the Purpose Loan shall be payable in
full upon the first to occur of (i) January 5, 2000 and (ii) 10 days following
the close of escrow for the sale by Borrower of the real property located at 104
Woodmere Avenue, Folsom, California as acquired by Borrower in connection with
the Acquisition.
(d) Not later than 30 days prior to each date on which Borrower or any
of its Subsidiaries is to receive any Net Cash Proceeds which would cause the
aggregate amount of Net Cash Proceeds received by Borrower and its Subsidiaries
during the current fiscal quarter to equal or exceed $250,000 (or promptly upon
becoming aware that any Net Cash Proceeds are to be received, if less than 30
days prior to the anticipated date of receipt), Borrower shall deliver to Agent
an officer's certificate setting forth in reasonable detail a description of the
transaction or event generating such Net Cash Proceeds, and stating the date
such transaction or event is expected to occur and the amount of the Net Cash
Proceeds expected to be received by Borrower or any of its Subsidiaries in
connection therewith. Unless within 30 days after receipt of such notice, Agent
(at the direction of the Required Lenders) shall deliver a written notice to
Borrower declining to accept such Net Cash Proceeds, concurrently with the
receipt by Borrower or any of its Subsidiaries of such Net Cash Proceeds, the
entire amount of such Net Cash Proceeds shall be paid to Agent (for the benefit
of the Lenders) in immediately available funds, together with unpaid interest
accrued on such amount to the date of such payment but without prepayment charge
or premium (it being understood that in the absence of an Event of Default
Borrower shall only be required to offer Net Cash Proceeds to the repayment of
the Obligations to the extent that they exceed $250,000 in any fiscal quarter or
$1,000,000 in any fiscal year). Notwithstanding the foregoing, in the case of
any such receipt of insurance proceeds or condemnation award, Borrower shall
have the option to apply all or any portion of such amount, (A) within 30 days
following the date of receipt thereof (the "Receipt Date") to replace the
------------
Property in respect of which such sums were received or to purchase other
Property to be used in the ordinary course of Borrower's business or (B) to
repair or restore such Property or other Property used in the ordinary course of
Borrower's business; provided, that (1) to the extent that Borrower so elects to
--------
restore or repair Property, it shall commence such repairs or restoration
promptly upon the receipt of insurance proceeds (and in no event later than 30
days after the Receipt Date) and shall diligently pursue at all times thereafter
such repair or restoration, which shall be completed not more than 60 days
following the Receipt Date, (2) pending the application of any such insurance
proceeds or condemnation award pursuant to clause (A) or (B) of this sentence,
any amounts to be so applied shall be retained and invested solely in Permitted
Investments, and (3) any portion of such insurance proceeds or condemnation
award that is not to be so applied shall be paid to Agent in accordance with the
second sentence of this subsection (d).
--------------
(e) Anything herein to the contrary notwithstanding, the aggregate
outstanding principal amount of the Revolving Loan shall not at any time exceed
the Available Amount as from time to time determined (in accordance with the
most recently delivered Borrowing Base Certificate), and no Advance may be
requested unless after giving effect thereto Borrower is in compliance with
foregoing requirement. In the event that the aggregate outstanding principal
amount of the Revolving Loan shall at any time and for any reason (including,
without limitation, a decrease in the amount of the Borrowing Base) exceed the
Available Amount then in effect, Borrower shall, without notice or demand, pay
not later than the Business Day after the date such excess is determined the
amount of such excess to Agent as a prepayment of the principal amount of the
Revolving Loan, together with all unpaid interest accrued on the amount of such
excess to such date but without prepayment charge or premium. Upon any
determination by Borrower that a prepayment of the Revolving Loan is required
pursuant to this Section 3.3(e), Borrower shall immediately notify Agent in
--------------
writing of such determination, specifying the amounts of principal and interest
required to be prepaid hereunder and the date on which such prepayment will
occur.
3.4 LIBOR Lending Unlawful. If any Lender shall determine in its
----------------------
reasonable discretion (which determination shall, upon notice thereof to
Borrower and Agent, be conclusive and binding on Borrower) that the introduction
of or any change in or in the interpretation of any law makes it unlawful, or
any central
16
<PAGE>
bank or other Governmental Body asserts that it is unlawful, for such Lender to
make, continue or maintain any loan as, or to convert any loan into, a LIBOR
Loan, the obligations of such Lender to make, continue, maintain or convert any
such loans shall, upon such determination, forthwith be suspended until Lender
shall notify Borrower and Agent that the circumstances causing such suspension
no longer exist, and all LIBOR Loans shall automatically convert into Floating
Rate Loans at the end of the then current Interest Periods with respect thereto
or sooner, if required by such law or assertion.
3.5 Deposits Unavailable. If any Lender shall have determined in its
--------------------
reasonable discretion that by reason of circumstances affecting such Lender's
relevant market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBOR Loans, then, upon notice from such Lender to
Borrower, the obligations of such Lender to make or continue any loans as, or to
convert any loans into, LIBOR Loans shall forthwith be suspended until such
Lender shall notify Borrower and Agent that the circumstances causing such
suspension no longer exist.
3.6 Increased LIBOR Loan Costs, etc. Borrower agrees to reimburse each
-------------------------------
Lender for any increase in the cost to such Lender of, or any reduction in the
amount of any sum receivable by such Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain) any loans as,
or of converting (or of its obligation to convert) any loans into, LIBOR Loans.
Each Lender shall promptly notify Borrower and Agent in writing upon the earlier
of (i) Lender's determination that any such event is likely to occur and (ii)
the occurrence of any such event, which notice shall state, in reasonable
detail, the reasons therefor and the additional amount required fully to
compensate such Lender for such increased cost or reduced amount. Such
additional amounts shall be payable by Borrower directly to such Lender within
five days of its receipt of such notice, and such notice shall, in the absence
of manifest error, be conclusive and binding on Borrower.
3.7 Funding Losses. In the event that any Lender shall incur any loss or
--------------
expense (including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to make,
Continue or maintain any portion of the principal amount of any loan as, or to
convert any portion of the principal amount of any loan into, a LIBOR Loan) as a
result of (a) any Conversion or repayment or prepayment of the principal amount
of any LIBOR Loan on a date other than the scheduled last day of the Interest
Period applicable thereto, for any reason, or (b) any loans not being made as
LIBOR Loans in accordance with Borrower's request therefor; then, upon the
written notice of such Lender to Borrower and Agent, Borrower shall, within five
days of its receipt thereof, pay directly to such Lender such amount as will (in
such Lender's reasonable determination) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
Borrower.
3.8 Direct Debit Authorization. Agent is hereby authorized, but shall not
--------------------------
be required, to deduct automatically from Borrower's account number 1891120121
maintained at Comerica Bank-California, scheduled payments of principal of and
interest on the Loans as and when the same shall become due and payable.
4. PLEDGE OF COLLATERAL.
--------------------
4.1 Grant of Security Interest. As collateral security for the prompt and
--------------------------
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Obligations, Borrower hereby assigns,
conveys, mortgages, pledges, hypothecates and transfers to Agent, for the
benefit of the Lenders, a security interest in all of Borrower's right, title
and interest in, to and under the following, wherever located, whether now or
hereafter owned, existing or acquired (collectively, the "Collateral"):
----------
(a) all Inventory;
17
<PAGE>
(b) all Accounts;
(c) all Chattel Paper and Instruments;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles (including, without limitation,
Intellectual Property);
(g) any and all balances, credits, deposits, accounts or moneys of or
in its name in the possession or control of, or in transit to, Agent or any
other financial institution (including, without limitation, the Deposit Account
and all sums on deposit therein from time to time and all securities,
instruments and accounts in which such sums are invested from time to time);
(h) all other rights to the payment of money, including, without
limitation, amounts due from any Person, amounts due from any shareholder, tax
refunds and insurance proceeds;
(i) all other goods and personal property of Borrower whether
tangible or intangible or whether now owned or hereafter acquired by Borrower
and wherever located;
(j) all books, correspondence, credit files, records, invoices, bills
of lading and other documents relating to any of the foregoing, including,
without limitation, all tapes, cards, computer runs, ledgers and other papers
and documents in the possession or control of Borrower or any computer bureau
from time to time acting for Borrower;
(k) all rights in, to and under all policies insuring the life of any
officer, director, stockholder or employee of Borrower; and
(l) all accessions to, substitutions for, and replacements, proceeds
and products of any of the foregoing, including, without limitation, all rights
in, to and under all policies of insurance, including, without limitation,
claims or rights to payments thereunder and proceeds therefrom, and any credit
insurance.
4.2 Agent as Attorney-in-Fact.
-------------------------
(a) Borrower hereby irrevocably constitutes and appoints Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, without
notice to or assent by Borrower, to do the following:
(i) upon the occurrence and during the continuation of an Event of
Default, to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any Collateral
and, in the name of Borrower or its own name or otherwise, to take
possession of and endorse and collect any checks, drafts, notes,
acceptances or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by Borrower
for the purpose of collecting any and all such moneys due under any
Collateral whenever payable;
(ii) upon the occurrence and during the continuation of an Event of
Default, to pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Agreement and to pay all or any part of the
18
<PAGE>
premiums therefor and the costs thereof;
(iii) upon the occurrence and during the continuation of an Event of
Default, (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to Agent or as Agent shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and other amounts
due, and to become due at any time, in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other Documents constituting or relating to the Collateral; (D) to settle
and adjust any claims under all policies of insurance covering the
Collateral; (E) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of
any Collateral; (F) to defend any suit, action or proceeding brought
against Borrower with respect to any Collateral; (G) to settle, compromise
or adjust any suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as Agent may deem
appropriate; (H) to license or, to the extent permitted by an applicable
license, sublicense, whether general, special or otherwise, and whether on
an exclusive or non-exclusive basis, any patent, copyright or trademark,
throughout the world for such term or terms, on such conditions, and in
such manner, as Agent shall in its sole discretion determine; (I) to
receive and open Borrower's mail, and to appropriate therefrom any payment
in respect of Accounts or otherwise constituting Collateral and apply the
same to the Obligations (in furtherance of which Agent shall be entitled to
direct any party, including the U.S. Postal Service, to send Borrower's
mail to Agent) and (K) generally to sell, transfer, pledge, make any
agreement with respect or otherwise deal with any of the Collateral as
fully and completely as though Agent were the absolute owner thereof for
all purposes, and to do, at Agent's option, at any time, or from time to
time, all acts and things which Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and Agent's Lien therein,
in order to effect the intent of this Agreement, all as fully and
effectively as Borrower might do; and
(iv) at any time and from time to time, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to perfect or maintain
Agent's Liens against any of the Collateral.
(b) Borrower hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue hereof,
except for their respective gross negligence or willful misconduct and for
failure to exercise reasonable care with respect to any Collateral under their
respective possession or control. The power of attorney granted pursuant to this
Section 4.3 is a power coupled with an interest and shall be irrevocable until
- -----------
the Obligations are indefeasibly paid in full.
(c) The powers conferred on Agent hereunder are solely to protect
Agent's interests in the Collateral and shall not impose any duty upon Agent to
exercise any such powers. Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be responsible to
Borrower for any act or failure to act, except for its or their respective gross
negligence or willful misconduct and for failure to exercise reasonable care
with respect to any Collateral under its or their respective possession or
control.
(d) Borrower also authorizes Agent, at any time and from time to time
upon the occurrence and during the continuation of any Event of Default, (i) to
communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of Borrower in and under the
Contracts hereunder and other matters relating thereto and (ii) to execute, in
connection with the sale provided for in Section 8.3, any endorsements,
-----------
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
19
<PAGE>
4.3 Performance of Borrower's Obligations. If Borrower fails to perform or
-------------------------------------
comply with any of its agreements contained herein and Agent, as provided for by
the terms of this Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the reasonable expenses of Agent
incurred in connection with such performance or compliance, together with
interest thereon at the rate then in effect in respect of the Loans, shall be
payable by Borrower to Agent on demand and shall constitute Obligations secured
hereby.
5. CONDITIONS PRECEDENT.
--------------------
5.1 Initial Borrowing. The obligations of the Lenders to disburse the Term
-----------------
Loan, to make the initial loan under the Purpose Line and to make the initial
Advance under the Revolving Loan are subject to the fulfillment, to the
satisfaction of Agent, the Lenders and their counsel, of each of the following
conditions:
(a) Proceedings Satisfactory; Due Diligence. All corporate and other
---------------------------------------
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Agent and its counsel, and Lenders and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request. Agent shall have
completed its due diligence review of Borrower and the Collateral (including,
without limitation, the status of any litigation), the results of which shall be
satisfactory to Agent in all respects. Agent shall have received appraisals to
its satisfaction of all inventory and other Property of Borrower, including all
Property being acquired by Borrower pursuant to the Acquisition. In addition,
Agent shall have received a statement of the sources and uses of all funds being
transferred on the Closing Date in connection with the Transaction, all in
reasonable detail and satisfactory to Agent.
(b) Delivery of Notes. There shall have been delivered to each Lender
-----------------
such Lender's respective Term Note, Purpose Note and Revolving Note, each duly
executed by Borrower and dated the Closing Date, in the respective principal
amounts, having the required maturity date and as otherwise provided herein.
(c) Opinion of Borrower's Counsel. Agent and the Lenders shall have
-----------------------------
received from Stradling Yocca Carlson & Rauth, counsel for Borrower, legal
opinions addressed to Agent and the Lenders and dated the Closing Date
substantially to the effect of the matters set forth in Exhibit D. Agent and
---------
the Lenders shall also have received such opinions of local or special counsel
as they may reasonably request.
(d) Initial Borrowing Base Certificate. Prior to the Closing Date,
----------------------------------
Borrower shall have delivered to Agent a duly completed and executed Borrowing
Base Certificate and Accounts Trial Balance as at September 27, 1998,
satisfactory in form and substance to Agent. Agent shall be satisfied that
Borrower will have, after giving effect to the Transactions, an unused Available
Amount of not less than $5,000,000.
(e) Representations and Warranties True, Etc.; Certificates. The
-------------------------------------------------------
representations and warranties contained in Section 6 and elsewhere in this
---------
Agreement and the representations and warranties contained in the other Loan
Documents shall be true in all material respects on and as of the Closing Date
with the same effect as if such representations and warranties had been made on
and as of the Closing Date, except that any such representation or warranty
which is expressly made only as of a specified date need be true only as of such
date. Borrower shall have performed all material agreements on its part
required to be performed under this Agreement and the other Loan Documents on or
prior to the Closing Date; there shall exist on the Closing Date no Default or
Event of Default; Borrower shall have delivered to Agent an officer's
certificate, dated the Closing Date, to such effect and to the effects specified
in subsections (f), (g), (h) and (i) below, inclusive; and Agent shall have
received such certificates or other
20
<PAGE>
evidence as Agent may request to establish that the proceeds of the Loans made
on the Closing Date will be applied as contemplated by this Agreement.
(f) Acquisition and Other Transactions. Concurrently with the
----------------------------------
disbursement of the Loans, the Acquisition shall have been duly consummated in
accordance with the provisions of the Acquisition Agreement, and the Acquisition
shall become effective in accordance with the provisions of the Acquisition
Agreement, and Agent and the Lenders shall have received such certificates,
opinions and other evidence with respect to the foregoing as they shall request.
(g) Absence of Material Adverse Effect, Etc. Since December 28,
----------------------------------------
1997, except as disclosed in Borrower's periodic reports filed with the SEC, no
change or changes shall have occurred to the business, operations, Properties,
assets, income, prospects or condition, financial or otherwise, of Borrower
which Agent reasonably believes constitutes or is likely to have a Material
Adverse Effect.
(h) Consents and Approvals. All necessary consents, approvals and
----------------------
authorizations of, and declarations, registrations and filings with,
Governmental Bodies and nongovernmental Persons required in order to consummate
the Acquisition, the Loans and the other Transactions shall have been obtained
or made and shall be in full force and effect.
(i) Absence of Litigation, Orders, Etc. Except as disclosed on
-----------------------------------
Schedule 6.7, there shall not be pending or, to the knowledge of Borrower,
- ------------
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower or the respective assets or Property
of any of such Persons which seeks to enjoin or restrain any of the Transactions
or which Agent reasonably believes in good faith is likely to have a Material
Adverse Effect. No Order of any court, arbitrator or Governmental Body shall be
in effect which purports to enjoin or restrain any of the Transactions or which
Agent reasonably believes in good faith constitutes or is likely to have a
Material Adverse Effect.
(j) Deposit Account. Borrower shall have established a deposit
---------------
account with Agent (the "Deposit Account"), and Borrower shall have supplied
---------------
Agent with evidence of the filing of the appropriate financing statements and
other documents under the provisions of the UCC or under applicable foreign,
domestic or local laws, rules or regulations in each of the offices where such
filing is necessary or appropriate, and shall have taken all other action as may
be necessary or appropriate to grant Agent valid, enforceable, first priority
perfected Liens in the Deposit Account.
(k) Financing Statements; Assignments. On or prior to the Closing
---------------------------------
Date, Borrower shall have duly executed, delivered, and caused to be filed (or
permitted Agent to file) UCC financing statements identifying Borrower as
"debtor" and Agent, for the benefit of the Lenders, as "secured party" and
containing an adequate description of the Collateral, in all places deemed
necessary or desirable by Agent in order to perfect the security interest
granted pursuant to this Agreement. Borrower shall have executed and delivered
to Agent a Copyright Mortgage substantially in the form of Exhibit F, a
---------
Trademark Security Agreement substantially in the form of Exhibit G and a Patent
---------
Security Agreement substantially in the form of Exhibit H, in each case to the
---------
extent applicable to Borrower's Intellectual Property. In addition, Agent shall
have received such other assignments, endorsements and instruments as may be
necessary to perfect Agent's security interest in any Collateral).
(l) Constituent Documents. Agent shall have received copies of (i)
---------------------
the Articles or Certificate of incorporation of Borrower, certified as of a
recent date by the Secretary of State of the State of its incorporation, and
(ii) Borrower's By-Laws certified as of the Closing Date by the Secretary of
Borrower.
(m) Resolutions; Incumbency. Agent shall have received certified
-----------------------
resolutions of the Board of Directors of Borrower with respect to this Agreement
and the other Loan Documents, together with a certificate identifying Borrower's
incumbent President, Chief Executive Officer and Chief Financial Officer and
setting for specimen signatures of such officers.
21
<PAGE>
(n) Borrowing Request. Agent shall have received a Borrowing Request
-----------------
conforming to the requirements of Section 2.4.
-----------
(o) Discharge and Release of Other Obligations. Agent shall have
------------------------------------------
received evidence to its satisfaction that all existing Indebtedness and Liens
of Borrower that are not permitted to remain outstanding pursuant to Section 7.7
-----------
or Section 7.8 have been repaid, terminated and discharged.
-----------
(p) Fees Payable at Closing. Borrower shall have paid (i) Agent's
-----------------------
initial administrative fee as set forth in that certain letter agreement between
Borrower and Agent and (ii) the fees of Agent's counsel for the legal fees and
expenses incurred in their representation of Agent in connection with the
preparation and negotiation of this Agreement and the other Loan Documents and
the consummation of transactions contemplated hereby, to the extent invoiced in
reasonable detail at least two (2) days prior to the Closing Date.
(q) Insurance. Agent shall have received policies or certificates of
---------
insurance satisfactory to Agent demonstrating that Borrower has obtained
insurance as required by this Agreement.
(r) Syndication of Loans. Agent shall have received commitments from
--------------------
Lenders in aggregate amounts sufficient to fund the maximum principal amount of
the Facilities.
5.2 Subsequent Borrowings. The obligation of Lenders to make any Advance
---------------------
hereunder is further subject to the fulfillment, to the satisfaction of Agent,
the Lenders and their counsel, of each of the following conditions:
(a) Compliance with Warranties, No Default, etc. Both before and
-------------------------------------------
after giving effect to any Advance, (i) each of the representations and
warranties set forth in Section 6 shall be true and correct in all material
---------
respects with the same effect as if then made, except that any such
representation or warranty which is expressly made only as of a specified date
need be true only as of such date, (ii) there shall exist no Default or Event of
Default, and (iii) no condition shall exist and no event shall have occurred
which has had or could have a Material Adverse Effect.
(b) Borrowing Request. Agent shall have received a Borrowing Request
-----------------
conforming to the requirements of Section 2.4. The delivery of each Borrowing
-----------
Request shall constitute a representation and warranty by Borrower that on the
date of such Advance (both immediately before and after giving effect to such
Advance) the statements made in the foregoing subsection (a) are true and
correct.
(c) Available Amount Not Exceeded. The aggregate outstanding
-----------------------------
principal amount of the Revolving Loan, after giving effect to such Advance,
shall not exceed the Available Amount.
(d) Satisfactory Legal Form. All documents executed or submitted
-----------------------
pursuant hereto by or on behalf of Borrower shall be satisfactory in form and
substance to Agent, the Lenders and their counsel; Agent, the Lenders and their
counsel shall have received all information, approvals, opinions, documents or
instruments as they may reasonably request.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
------------------------------
representations and warranties to Agent and each Lender, it being understood
that for purposes of this Section 6 all references to Property of Borrower shall
be deemed to include any Property being acquired by Borrower in connection with
the Acquisition.
6.1 Existence and Authority. Borrower and each of its Subsidiaries (a) is
-----------------------
a corporation duly
22
<PAGE>
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified to do business in each
additional jurisdiction where the failure to so qualify would have a Material
Adverse Effect and (b) has all requisite power to own its Properties and to
carry on its business as now being conducted and as proposed to be conducted,
and to execute, deliver and perform its obligations under this Agreement and the
other Loan Documents to which it is a party to execute, issue, sell, deliver and
perform its obligations under the Notes (in the case of Borrower) and to engage
in the respective transactions contemplated by this Agreement and the Loan
Documents to which it is a party.
6.2 Authorization. The execution, delivery and performance by Borrower
-------------
and its Subsidiaries of this Agreement, the Notes and the Loan Documents to
which it is a party, are within its powers and have been duly authorized by all
necessary corporate action.
6.3 Binding Effect. This Agreement and the Loan Documents to which
--------------
Borrower and each of its Subsidiaries is a party are the legal, valid and
binding obligations of Borrower or such Subsidiary (as the case may be), and the
Notes when issued and delivered against payment therefor as herein provided will
be the legal, valid and binding obligations of Borrower and each of its
Subsidiaries, enforceable in accordance with their respective terms, except, in
each case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relative to or affecting
the enforcement of creditors' rights generally in effect from time to time and
by general principles of equity.
6.4 Ownership Interests. Except as set forth on Schedule 6.4A, Borrower
------------------- -------------
will not have outstanding any equity or ownership interests or other securities
convertible into or exchangeable for any of its equity or ownership interests,
nor will there be outstanding any rights to subscribe for or to purchase, or any
options or warrants for the purchase of, or any agreements (contingent or
otherwise) providing for the issuance of, or any calls, commitments or claims of
any character relating to, any of its equity or ownership interests or any
securities convertible into or exchangeable for any of its equity or ownership
interests. After giving effect to the Transactions, Borrower will not be subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of its equity interests.
6.5 Business Operations and Other Information; Financial Condition.
--------------------------------------------------------------
(a) Borrower has delivered to Agent and the Lenders true and complete
copies of (i) the audited consolidated balance sheets of Borrower as of December
29, 1996 and December 28, 1997, and the related audited statements of operations
and earnings (or deficit) and cash flows for each of the fiscal years then
ended, together with the notes thereto and the reports thereon of Deloitte &
Touche, LLP (the "Audited Financial Statements"), and (ii) the unaudited balance
----------------------------
sheets of Borrower as of March 29 and June 28, 1998, and the respective related
unaudited statements of operations and earnings and cash flows for the portions
of Borrower's fiscal year then ended (the "Unaudited Financial Statements" which
------------------------------
Audited Financial Statements and Unaudited Financial Statements are true and
correct; the Audited Financial Statements and the Unaudited Financial Statements
are sometimes hereinafter collectively referred to as the "Financial
---------
Statements"). True and complete copies of the Financial Statements are attached
hereto as Schedule 6.5A. The Financial Statements have been prepared in
-------------
accordance with GAAP (except as noted thereon) consistently applied throughout
the periods involved, and present fairly, in all material respects, the
financial position of Borrower as at each of the dates of the balance sheets
contained therein and the respective results of operations and cash flows of
Borrower for each of the respective periods then ended, subject, in the case of
the Unaudited Financial Statements, to non-material year-end audit adjustments
and absence of the notes required by GAAP. As of the date of each of the
balance sheets included in the Financial Statement Borrower had no Indebtedness
or liability, absolute or contingent, liquidated or unliquidated, except
Indebtedness and liabilities reflected or reserved against on such respective
balance sheets or described in the notes thereto.
(b) Except as contemplated herein or in the Loan Documents, or as
disclosed in Schedule 6.5B or in Borrower's periodic reports filed with the SEC,
-------------
since December 28, 1997, Borrower has not:
23
<PAGE>
(1) written off or been required by GAAP to write off any Accounts or
Inventory other than in the ordinary course of business in
accordance with its past practices; or
(2) suffered any Material Adverse Effect or any event or condition
which could reasonably be expected to result in a Material
Adverse Effect.
(c) Borrower has delivered to Agent and the Lenders its latest (as of
the Closing Date) projections of the income and cash flow (assuming completion
of the Transactions) for fiscal year 1999. Such projections have been prepared
in good faith by management of Borrower on the basis of assumptions, set forth
therein, which such management reasonably believes are fair and reasonable in
light of the historical financial performance of Borrower and the Business and
of current and reasonably foreseeable business conditions.
(d) Borrower has delivered to Agent and the Lenders a pro forma
balance sheet for Borrower as at the Closing Date after giving effect to the
Transactions, prepared by Borrower in good faith on the basis of the historical
balance sheets of Borrower as of September 30, 1998, and the historical
financial performance of the Business (the "Pro Forma Balance Sheet"). The Pro
-----------------------
Forma Balance Sheet fairly presents in all material respects the consolidated
financial position of Borrower as of the close of business on such date on a pro
forma basis after giving effect to the Transactions, and contains all pro forma
adjustments necessary in order to fairly reflect such assumption.
6.6 Subsidiaries. Except as set forth on Schedule 6.6, Borrower does not
------------ ------------
have (a) any Subsidiaries or (b) any capital stock or other equity interest in
any other Person or any option, warrant or right to purchase or acquire any such
capital stock or other equity interest. None of Borrower's Subsidiaries owns any
material assets or conducts any material business.
6.7 Litigation; No Violation of Governmental Orders or Laws.
-------------------------------------------------------
(a) Except as set forth in Schedule 6.7(a), there are no actions,
---------------
suits or proceedings pending, or, to the best knowledge of Borrower after due
inquiry, threatened against or affecting Borrower and each of its Subsidiaries
or against any officer or director of Borrower and each of its Subsidiaries
which is reasonably likely to individually or in the aggregate, a Material
Adverse Effect; or which seek to enjoin, or otherwise prevent the consummation
of, any of the Transactions in any court or before any arbitrator of any kind or
before or by any Governmental Body.
(b) Except as set forth in Schedule 6.7(b), Borrower and each of its
---------------
Subsidiaries will not be, after or as a result of giving effect to the
Transactions, in default under or in violation of any Order of any court,
arbitrator or Governmental Body or any statute or law or any rule or regulation
of any Governmental Body, which default or violation has or might have a
Material Adverse Effect; and none of them is subject to or a party to any Order
of any court or Governmental Body arising out of any action, suit or proceeding
under any statute or other law respecting antitrust, monopoly, restraint of
trade, unfair competition or similar matters.
6.8 Outstanding Indebtedness; Investments.
-------------------------------------
(a) Schedule 6.8A sets forth a correct and complete list and
-------------
description of each item of Indebtedness in excess $100,000 of Borrower and all
Liens securing such Indebtedness, now outstanding or existing, or which will be
outstanding or existing on the Closing Date after giving effect to the
Transactions.
(b) Schedule 6.8B sets forth a correct and complete list of each item
-------------
of Investments of
24
<PAGE>
Borrower which is now outstanding or existing, or which will be outstanding or
existing on the Closing Date after giving effect to the Transactions.
6.9 Consents, etc. No consent, approval or authorization of or
--------------
declaration, registration or filing with any Governmental Body or any
nongovernmental Person (including, without limitation, any creditor or
stockholder of Borrower, and also including, without limitation, any consent,
approval, authorization, declaration or filing or the expiration of any waiting
period under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended) is required in connection with the execution or delivery of this
Agreement, the Notes or any of the other Loan Documents by the respective
parties thereto or the performance by such parties of their respective
obligations thereunder, or in connection with the consummation of the
Transactions hereunder, or as a condition to the legality, validity or
enforceability of this Agreement, the Notes or any of the other Loan Documents,
except for such consents, approvals, authorizations, declarations, registrations
or filings as are listed in Schedule 6.9, all of which have been or will on or
------------
prior to the Closing Date be obtained and are or will then be in full force and
effect. The Acquisition is exempt from all applicable bulk sale and bulk
transfer laws.
6.10 Title to Properties.
-------------------
(a) Borrower and each of its Subsidiaries has (i) good and marketable
fee simple title to its respective real Properties (other than real Properties
which are leased from others), subject to no Lien of any kind except Liens
permitted by Section 7.8 and (ii) good title to all of its Equipment and other
-----------
personal Property and assets (other than Properties and assets leased from
others), subject to no Lien of any kind except Liens permitted by Section 7.8.
-----------
Schedule 6.10(a) sets forth a true and complete list and brief description of
- ----------------
all real Property owned or leased by Borrower and each of its Subsidiaries on
the Closing Date (after giving effect to the Acquisition), together with a true
and complete list of all leases of real Property to which Borrower and each of
its Subsidiaries is a party, identifying the parties to each such lease and the
Property to which it relates. True and complete copies of all such leases,
together with all amendments, modifications and supplements thereto to the date
hereof, have been delivered to Agent. Borrower and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all such leases to which it is
a party, none of which contains any unusual or burdensome provisions which might
reasonably be expected to have a Material Adverse Effect, and all such leases
are valid and subsisting and in full force and effect. Borrower and each of its
Subsidiaries are not in breach or violation of the terms of any of such leases
(except for such breaches and violations as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect), and after
due inquiry Borrower knows of no breach or violation of any of such leases by
any party other than Borrower and each of its Subsidiaries. None of the
personal Property owned or to be owned by Borrower or any such Subsidiary is
located or stored on sites other than those listed on Schedule 6.10(a). Except
----------------
as set forth in Schedule 6.10(a), as of the Closing Date the tangible Properties
----------------
of Borrower are and will be reasonably fit for the use for which they are being
put by each of such Persons in the ordinary course of its business and are in
reasonably sufficient and satisfactory condition to operate the business of each
of such Persons as presently conducted except for such tangible Properties with
respect to which the failure to be so fit or to be in such condition could not
reasonably be expected to give rise to a Material Adverse Effect. Schedule
--------
6.10(a) also contains a true, complete and correct list and brief descriptions
- -------
of all items of Equipment having a value of $10,000 or more owned or leased by
each of such Persons on the Closing Date.
(b) Except as disclosed in Schedule 6.10(b), the real Property of
----------------
Borrower is not in violation of any law or any building, zoning or other
ordinance, code, rule, order, requirement or regulation, except for violations
which, individually and in the aggregate, would not have a Material Adverse
Effect; all licenses and certificates of occupancy which are material to the
ownership or operation of such real Property have been obtained and are usable
by such respective Persons, and are transferable, if necessary, or consent to
such transfer will be obtained before the Closing Date (without cost or penalty
to Agent); and there is no pending or, to the best knowledge of Borrower after
due inquiry, threatened litigation, administrative action or examination, claim
or demand relating to such real Property.
25
<PAGE>
6.11 Taxes. Except as disclosed on Schedule 6.11, as of the Closing Date
----- -------------
Borrower and each of its Subsidiaries, and each Person required to file any tax
or informational return in respect of any consolidated group of which any of
them is or has been a member, as the case may be, has prepared and timely filed
or on behalf of each of such Persons there have been filed, all required
federal, state, local and foreign tax returns which are required to have been
filed by or on behalf of such Persons, which returns were prepared on a basis
consistent with its financial records and all taxes shown thereon to be due have
been timely paid in full. To the best of Borrower's knowledge, as of the Closing
Date no tax liens have been filed and no claims are being asserted with respect
to any such taxes. Except as disclosed on Schedule 6.11, as of the Closing Date
-------------
no tax assessment against any such Person has been proposed and all of their
respective tax liabilities are adequately provided for on their respective books
and financial statements in accordance with GAAP.
6.12 No Conflicts with Agreements, Etc. Neither the execution and
----------------------------------
delivery of this Agreement, the Notes or any other Loan Document nor the
fulfillment of or compliance with the terms and provisions hereof or thereof,
will conflict with, or result in a breach or violation of any of the terms,
conditions or provisions of, or constitute a default under, the charter or by-
laws of Borrower or any contract, agreement, mortgage, indenture, lease,
instrument, Order, statute, law, rule or regulation to which any of them or any
of their respective assets is subject, or (except pursuant to the Loan
Documents) result in the creation of any Lien on any Properties of Borrower and
each of its Subsidiaries, which conflict, breach, violations, defaults or Liens,
could reasonably be expected to have a Material Adverse Effect, or require for
its validity any authorization, consent, approval, exemption or other action by
or notice to any Governmental Body or any of the equity holders of any of them,
except for such authorizations, consents, approvals, exemptions or other actions
as have been taken or obtained prior to or on the Closing Date and are in full
force and effect on such date. Neither Borrower nor any of its Subsidiaries is
in violation of, or in default under, any (i) Order, law or administrative
regulation binding upon it or any of its Properties or (ii) any contract,
mortgage, indenture, lease, instrument or agreement binding upon it or any of
its Properties, which breach, conflict, violation or default could reasonably be
expected to have, individually or in the aggregate with all other such breaches,
conflicts, violations and defaults, a Material Adverse Effect.
6.13 Related Documents. Borrower has delivered to Agent and its counsel
-----------------
true and correct copies of the Acquisition Agreement and each of the other
documents executed and delivered in connection therewith (including all Exhibits
and Schedules thereto) as now in effect, including all amendments, modifications
and supplements thereto, and of each document, certificate or statement required
to be executed or delivered by any party thereunder (there being no amendments
or modifications to the Acquisition Agreement or any of such other documents,
and no waiver of any rights thereunder by Borrower, nor of any condition to the
obligations of Borrower under any thereof, except as heretofore disclosed to
Agent in writing).
6.14 Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Agent in writing by or on behalf of
Borrower and each of its Subsidiaries in connection herewith, including the
Acquisition Agreement, contained, as of its respective date, or now contains,
any untrue statement of a material fact or as of any such date omitted, or now
omits, to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact known to Borrower
(other than matters disclosed in Borrower's annual and quarterly reports filed
with the SEC pursuant to the Exchange Act and matters of a general economic or
political nature) which now has or could reasonably be expected to have a
Material Adverse Effect.
6.15 Broker's or Finder's Commissions. Except as set forth on Schedule
--------------------------------
6.15, no broker's or finder's fee or commission will be payable by Borrower with
respect to any of the Transactions. Borrower agrees to indemnify Agent and hold
Agent harmless against any loss, cost, claim or liability (including, without
limitation, reasonable attorneys' fees and disbursements for the investigation
and defense of claims) arising out of or relating to any such actual or alleged
fee or commission.
26
<PAGE>
6.16 Labor Matters.
-------------
(a) Borrower and each of its Subsidiaries is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours (except for such instances of non-
compliance as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect), and none of such Persons is engaged in
any unlawful labor or employment practice nor has received any notice of a
complaint, charge or allegation to the contrary (except for such instances of
the foregoing description as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect). There is no labor
strike, dispute, slowdown or work stoppage pending or, to Borrower's best
knowledge after due inquiry, threatened against or affecting Borrower and each
of its Subsidiaries. No material grievance or arbitration proceeding arising
out of or under any collective bargaining agreement to which Borrower and each
of its Subsidiaries is a party or subject is pending. To Borrower's best
knowledge after due inquiry, no present or former employee of Borrower and each
of its Subsidiaries has any claim for wrongful discharge (except for such claims
as could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect).
(b) During the five year period ending on the Closing Date, no present
or former employee or independent contractor of Borrower and each of its
Subsidiaries has any pending or threatened claim for (A) overtime pay, other
than overtime pay for the current period; (B) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period);
(C) vacations, time off or pay in lieu of vacation or time off, other than
vacation or time off (or pay in lieu thereof) earned in respect of the
employer's current fiscal year; (D) any violation of any statute, ordinance,
contract or regulation relating to minimum wages or maximum hours of work; (E)
discrimination against employees on any basis; (F) unlawful or wrongful
employment or termination practices; (G) unlawful retirement, termination or
labor relations practices, breach of contract or other claim arising under a
collective bargaining agreement, individual, express or implied contract, or
policy, practice or procedure manual or statement; (H) any violation of
occupational safety or health standards, or any violation of the Worker
Adjustment Retraining and Notification Act ("WARN"), except for such claims that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
6.17 Environmental Matters. Except as set forth in Schedule 6.17, as of
--------------------- -------------
the Closing Date:
(a) there is no pending Environmental Matter relating to Borrower and
each of its Subsidiaries or any of its Properties, and after due inquiry
Borrower is aware of no facts that could result in any such Environmental
Matter. None of such Persons has agreed to assume by contract or otherwise any
liability of any other Person for cleanup, compliance, or required capital
expenditures in connection with any Environmental Matter arising prior to the
date hereof;
(b) the Properties used, owned, leased, operated, managed or
controlled at any time by Borrower and each of its Subsidiaries are free of
contamination from Hazardous Materials, including, without limitation, any
contamination of the associated air, soil, groundwater or surface waters, and
are free of any other potentially injurious chemical or physical conditions;
(c) Borrower and each of its Subsidiaries is in compliance with all
applicable Environmental Laws (except for such instances of non-compliance as
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect), has cured any past violations or alleged violations of
Environmental Laws to the satisfaction of Governmental Bodies, is not currently
in receipt of any notice of violation, is not currently in receipt of any notice
of any potential liability for cleanup of Hazardous Materials and is not now
subject to any investigation or information request by a Governmental Body
concerning Hazardous Materials or any Environmental Laws. Borrower and each of
its Subsidiaries holds and is in compliance with all governmental permits,
licenses, and authorizations necessary to operate
27
<PAGE>
their businesses that relate to siting, wetlands, coastal zone management, air
emissions, discharges to surface or ground water, discharges to any sewer or
septic system, noise emissions, solid waste disposal or the generation, use,
transportation or other management of Hazardous Materials (except for such
instances of non-compliance as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect). To the best
knowledge of Borrower after due inquiry, such Persons have at all times
generated, manufactured, refined, recycled, discharged, emitted, released,
buried, processed, produced, reclaimed. stored. treated. transported and
disposed of Hazardous Materials in material compliance with all applicable laws
and regulations, including permit requirements;
(d) no real Property of Borrower or any of its Subsidiaries is (i)
listed or, to the best of Borrower's knowledge, proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, or on any comparable list maintained by any Governmental
Body;
(e) no Properties of Borrower and each of its Subsidiaries is subject
to any Lien or claim for Lien in favor of any Person as a result of any
Environmental Matter or response thereto;
(f) to the best knowledge of Borrower after due inquiry, no Hazardous
Materials, including leachate and effluents, generated, disposed of,
transported, managed or released by Borrower and each of its Subsidiaries have
caused or will cause in whole or in party any contamination or injury to the
environment, any person, any natural resource or any Property, including,
without limitation, Property through which or to which such materials were
shipped. To the best knowledge of Borrower after due inquiry, neither Borrower
nor any of its Subsidiaries has handled, transported, disposed of or managed any
Hazardous Material in any manner that may form the basis for any present or
future Environmental Matter, and no such Person has any material liabilities,
absolute or contingent, on the date hereof with respect thereto; and
(g) to the best knowledge of Borrower after due inquiry, all
facilities where any Person has treated, stored, disposed of, reclaimed, or
recycled any Hazardous Material on behalf of Borrower are in compliance in all
material respects with all applicable Environmental Laws.
6.18 Possession of Franchises, Licenses, Etc. Borrower and each of its
----------------------------------------
Subsidiaries is in possession of all material permits, licenses or other
authorizations of Governmental Bodies required for the conduct of its business
and the ownership of its respective Properties, and their respective businesses
are being conducted in accordance with the material requirements of such
permits, licenses or other authorizations of Governmental Bodies in effect on
the date hereof, and after due inquiry Borrower is not aware of any condition
that would prevent the renewal of such permits, licenses or other authorizations
or cause it to incur any material costs to renew such permits, licenses or other
authorizations.
6.19 Intellectual Property. Borrower is the sole owner of, or has the
---------------------
right to use, free from any restrictions, claims, rights, encumbrances or
burdens (including without limitation restrictions as to time or geography and
rights of reversion) which would limit or interfere in any material respect with
Borrower's use thereof in the ordinary course of its business, all patents,
copyrights, trademarks, trade names, service marks, registrations of and
applications for registration of any of the foregoing, inventions, trade
secrets, technology, data, documentation, computer programs, source codes,
object code and all other intellectual property or proprietary rights
(collectively, "Intellectual Property"), including each portion thereof, that
---------------------
are necessary for the operation of its business (including the Business as
heretofore conducted by Seller and as proposed to be conducted by Borrower),
other than computer software which is commercially available from third parties
and which is used solely for the internal operations of Borrower). All of the
applications for registration included in the Intellectual Property are still
pending in good standing and have not been abandoned. Schedule 6.19 identifies
-------------
any Intellectual Property as to which Borrower has any obligation to
28
<PAGE>
pay royalties or any other fees which are unpaid as of, or which may become due
after, the date of this Agreement, except for obligations which individually or
in the aggregate do not have a Material Adverse Effect. Adequate steps have been
taken to protect the confidentiality of any trade secrets or other confidential
information included in the Intellectual Property. All of Borrower's right,
title and interest in, to and under the Intellectual Property is freely
transferable, and is free and clear of any encumbrances, options, distribution
rights and restrictions except to the extent expressly set forth on Schedule
--------
6.19 hereto. Borrower has not granted any licenses to the Intellectual Property
- ----
to third parties. Except as identified on Schedule 6.7(a), there are no pending
---------------
or, to the best of Borrower's knowledge, threatened, claims, actions, suits,
proceedings, judgments, decrees or orders (whether or not purportedly on behalf
of Borrower) affecting or relating to the Intellectual Property, Borrower's
right, title and interest therein or the validity, use, transfer or potential
transfer of Borrower's right, title and interest therein, or alleging that the
Intellectual Property conflicts with, violates or infringes the proprietary or
contractual rights of others, which constitute, individually or in the
aggregate, a Material Adverse Effect, nor, to the best of Borrower's knowledge,
are there any existing grounds on which any such claim might be made or such
action, suit or proceeding might be commenced.
6.20 Margin Regulations; Use of Proceeds. Borrower neither owns nor now
-----------------------------------
intends to acquire any "margin stock" as defined in Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 207). The proceeds of the Loans
will be used as provided in the Recitals. No part of the proceeds of the Loans
--------
will be used directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve Borrower in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). As used in
this Section, the term "purpose of buying or carrying" has the meaning assigned
thereto in the aforesaid Regulation U.
6.21 Compliance with ERISA.
---------------------
(a) No Pension Plan which is subject to Part 3 of Subtitle B of Title
1 of ERISA or Section 412 of the Code had an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of such
Pension Plan heretofore ended;
(b) neither Borrower nor any ERISA Affiliate maintains or has
maintained, contributes to or has contributed to, or has any liability or
contingent liability with respect to a Pension Plan subject to Title IV of
ERISA;
(c) neither Borrower nor any ERISA Affiliate maintains or has
maintained, contributes to or has contributed to, or has any liability or
contingent liability with respect to a Multiemployer Plan;
(d) neither Borrower nor any ERISA Affiliate has any contingent
liability with respect to any post-retirement benefit under a welfare plan (as
such term is defined in Section 3(1) of ERISA) other than liability for
continuation coverage described in Part 6 of Title 1 of ERISA;
(e) Borrower and all Plans contributed to or maintained by any of
them are in compliance in all material respects with all applicable provisions
of ERISA and the Code and with the applicable law and administrative
requirements of any relevant jurisdiction and the regulations and published
interpretations thereunder, including, without limitation, the provisions of
ERISA and the Code requiring continuation coverage under Plans which are group
health plans subject to the Consolidated Omnibus Budget Reconciliation Act of
1985 or similar law;
(f) neither Borrower nor any of its ERISA Affiliates is a party in
interest with respect to any employee benefit plan (as defined in Section 3(3)
of ERISA) other than a Plan;
29
<PAGE>
(g) neither Borrower nor any of its ERISA Affiliates has breached any
of the responsibilities, obligations or duties imposed upon any of such Persons
by the Code or ERISA which breach has given rise, or could reasonably be
expected to give rise in the future to any obligation to pay money that would
have a Material Adverse Effect on any of such Persons;
(h) there are no actions, suits or claims other than for routine
claims for benefits pending or threatened, involving the Plans that would have a
Material Adverse Effect; and
(i) all required reports and descriptions of the Plans of Borrower or
its ERISA Affiliates (including but not limited to Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions) have been timely filed and
distributed, and any notices required by ERISA or the Code or the law of any
other applicable jurisdiction or any ruling or regulation of any administrative
agency of any applicable jurisdiction with respect to such Plans, including but
not limited to any notices required by Section 204(h) or Section 606 of ERISA or
Section 4980B of the Code have been appropriately given.
6.22 Material Contracts. Schedule 6.22 contains a list of all written
------------------ -------------
supply agreements, requirements contracts, customer agreements, franchise
agreements, license agreements, distribution agreements, joint venture
agreements, asset purchase agreements, stock purchase agreements, merger
agreements, agency or advertising agreements and other contracts, agreements and
commitments (other than purchase orders entered into in the ordinary course of
business, leases of real Property listed on Schedule 6.10, and other than this
-------------
Agreement, the Acquisition Agreement and the other Loan Documents, or any
agreement, instrument or document executed and delivered pursuant thereto) to
which Borrower or any of its Subsidiaries is now, or will be on the Closing Date
after giving effect to the Transactions, a party and which are now or will then
be material to the business, assets or operations of such Persons ("Material
--------
Contracts"). True and complete copies of each of the Material Contracts, with
- ---------
all material amendments, modifications and supplements thereto to the date
hereof, have previously been furnished by Borrower to Agent or its
representatives. Each of the Material Contracts is, and on the Closing Date
after giving effect to the Transactions will be, valid, subsisting and in full
force and effect, neither Borrower nor any of its Subsidiaries is in default
under any of the Material Contracts, nor has any such default under any of the
Material Contracts been asserted by any other party thereto, and there has not
occurred any event which, with the giving of notice or the passage of time, or
both, would constitute such a default. On the Closing Date, after giving effect
to the Transactions, neither Borrower nor any of its Subsidiaries will be a
party to any Material Contract or be subject to any restriction which has or is
reasonably likely to have a Material Adverse Effect.
6.23 Insurance. Schedule 6.23 sets forth a true and complete list, in all
--------- -------------
material respects, and brief descriptions of all policies of workers
compensation, general liability, fire, property, casualty, marine, business
interruption, errors and omissions, flood, earthquake and other insurance
carried by Borrower and its Subsidiaries, true and complete copies of which
policies have been previously delivered to Agent to the extent requested. Such
policies are in full force and effect on the date hereof, and none of such
Persons has received notice of cancellation with respect to any such policy. All
premiums payable with respect to such policies have been paid through the
Closing Date or otherwise will be paid in the ordinary course of business.
6.24 Solvency. Borrower and its Subsidiaries will be Solvent on the
--------
Closing Date after giving effect to the Transactions and the application of the
net proceeds of the Loans.
6.25 Status under Certain Laws. Neither Borrower nor any of its
-------------------------
Subsidiaries is an "investment company" or a "person directly or indirectly
controlled by or acting on behalf of an investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Company Holding Act of 1935, as
30
<PAGE>
amended. Borrower is not subject to regulation as a "common carrier" or
"contract carrier" or any similar classification under applicable state or
Federal laws.
6.26 Places of Business. The principal place of business and the chief
------------------
executive office of Borrower is, and on the Closing Date after giving effect to
the Transactions will be, located at 2026 McGaw Avenue, Irvine, California
92614. The books and records (including, without limitation, all records of
Accounts) of Borrower are, and on the Closing Date after giving effect to the
Transactions all will be, located at the location set forth above.
6.27 Other Names. The business conducted by Borrower has not been
-----------
conducted under any corporate, trade or fictitious name other than those names
listed on Schedule 6.27.
-------------
6.28 Account Warranties. With respect to Eligible Accounts scheduled,
------------------
listed or referred to in any Accounts Trial Balance delivered to Agent pursuant
to the terms hereof, Borrower represents and warrants that, except as disclosed
in the applicable Accounts Trial Balance, as of the date of each such Accounts
Trial Balance: (a) the Accounts are genuine, are in all respects what they
purport to be, and are not evidenced by a judgment; (b) they represent
undisputed, bona fide transactions; (c) the amounts shown on the applicable
Accounts Trial Balance and on Borrower's books and records and all invoices and
statements which may be delivered to Agent with respect thereto are actually and
absolutely owing solely to Borrower or one of Borrower's Subsidiaries and are
not contingent; (d) no payments have been made thereon; (e) there are no
material set-offs, counterclaims or disputes asserted or, to the best knowledge
of Borrower, existing with respect thereto and Borrower has not made any
agreement with any Account Debtor for any deduction therefrom except for
discounts or allowances allowed by Borrower and its Subsidiaries in the ordinary
course of business for prompt payment; (f) to the best of Borrower's knowledge,
there are no facts, events or occurrences which impair in any material respect
the validity or enforcement thereof or tend to reduce the amount payable
thereunder as shown on the respective Borrowing Base Certificate, Borrower's and
its Subsidiaries' books and records and all invoices and statements delivered to
Agent with respect thereto; (g) to the best of Borrower's knowledge, all Account
Debtors have the capacity to contract and are Solvent; except, as to Solvency,
for such Eligible Accounts as will not, in the aggregate, give rise to a
Material Adverse Effect; and (h) the services furnished and/or goods sold giving
rise thereto are not subject to any Lien except for the first and valid fully
perfected security interest granted to Agent hereunder, and except for Permitted
Liens.
6.29 Equipment. After giving effect to the Transactions, (a) Borrower has
---------
good, indefeasible and merchantable title to its respective Equipment, except as
set forth on Schedule 6.29; (b) the Equipment is located only on the premises
-------------
set forth on Schedule 6.10; (c) the Equipment is not subject to any Lien
-------------
whatsoever except for the first and valid fully perfected security interest
granted to Agent pursuant to the terms hereof, and except for Permitted Liens;
(d) the Equipment is in good condition and repair except for such Equipment, the
failure of which to be no good condition and repair, would not cause a Material
Adverse Effect, ordinary wear and tear excepted, and is currently used or usable
in Borrower's businesses.
6.30 Year 2000. Borrower has undertaken a detailed review and assessment
---------
of all areas within the business and operations of itself and its Subsidiaries
that could be adversely affected by the risk that computer applications may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to, and any date subsequent to, December 31, 1999 (such risk
being referred to as the "Year 2000 Problem"). Borrower's disclosure with
------------------
respect to the Year 2000 Problem set forth in its Quarterly Report on Form 10-Q
for the period ended June 28, 1998, is accurate in all material respects.
Borrower and its Subsidiaries expect to be able properly to perform, on a timely
basis, date-sensitive functions for all dates prior or subsequent to January 1,
2000 (that is, to be "Year 2000 Compliant"). The cost to Borrower and its
--------------------
Subsidiaries of becoming Year 2000 Compliant will not have a Material Adverse
Effect.
6.31 Reliance by Agent and Lenders; Cumulative. Each warranty and
-----------------------------------------
representation contained
31
<PAGE>
in this Agreement shall be automatically deemed repeated with each Advance and
shall be conclusively presumed to have been relied on by Agent and the Lenders
regardless of any investigation made or information possessed by Agent and the
Lenders. The warranties and representations set forth herein shall be cumulative
and in addition to any and all other warranties and representations that
Borrower shall now or hereinafter give, or cause to be given, to Agent and the
Lenders.
7. COVENANTS. Borrower covenants and agrees that, so long as any credit
---------
hereunder shall be available and until payment in full of the Obligations,
Borrower shall, and shall cause each of its Subsidiaries to comply with the
following provisions of this Section 7, it being understood that "causing" any
---------
Subsidiary to comply with such covenants shall require Borrower to prevent any
Subsidiary from taking any action that is prohibited hereunder:
7.1 Financial Statements and Information. So long as any of the
------------------------------------
Obligations shall be outstanding, Borrower will furnish to Agent (with
sufficient copies for each Lender):
(A) as soon as available and in any event within 30 days after the end
of each fiscal month, copies of the consolidated balance sheets of Borrower and
its Subsidiaries as of the end of such fiscal month, and of the related
consolidated statements of operations and cash flows for such month and for the
portion of the fiscal year of Borrower ended with the last day of such fiscal
month, all in reasonable detail, all such statements being certified by the
chief financial officer of Borrower;
(B) as soon as available and in any event within 100 days after the
end of each fiscal year of Borrower, copies of the audited consolidated and (to
the extent requested by Agent) consolidating balance sheets of Borrower and its
Subsidiaries as of the end of such fiscal year, and of the related audited
consolidated (and, if requested, consolidating) statements of operations,
earnings and cash flows for such fiscal year, together with the notes thereto,
all in reasonable detail and stating in comparative form the respective audited
consolidated (and, if requested, consolidating) figures as of the end of and for
the previous fiscal year, (x) in the case of such audited consolidated financial
statements, accompanied by a report thereon of Deloitte & Touche LLP, or other
independent public accountants selected by Borrower and acceptable to Agent (the
"Accountants"), which report shall be unqualified as to going concern and scope
-----------
of audit and shall state that such consolidated financial statements present
fairly the consolidated financial position of Borrower and its Subsidiaries as
at the end of such fiscal year and the consolidated results of their operations
and cash flows for such fiscal year in conformity with GAAP applied on a basis
consistent with prior years and that the examination by the Accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards, and (y) in the case of
any consolidating financial statements, Certified by the chief financial officer
of Borrower;
(C) within 30 days after the end of each fiscal quarter, an Officer's
Certificate of Borrower (1) setting forth calculations in reasonable detail
demonstrating whether or not as at the end of such fiscal quarter Borrower was
in compliance with Sections 7.7, 7.8, 7.9 and 7.16 of this Agreement and (2)
-------------------------------
stating that, based upon such examination or investigation and review of this
Agreement and other Loan Documents as in the opinion of the signer is necessary
to enable the signer to express an informed opinion with respect thereto, no
default by Borrower or any of its Subsidiaries in the fulfillment of any of the
terms, covenants, provisions or conditions of this Agreement or any of the Loan
Documents exists or has existed during such period or, if such a default shall
exist or have existed, the nature and period of existence thereof and what
action Borrower (or the applicable Subsidiary) has taken, is taking or proposes
to take with respect thereto;
(D) promptly after the same are available and in any event within 7
days of filing, copies of all such proxy statements, financial statements,
notices and reports as Borrower or any Subsidiary shall send or make available
generally to any of its securityholders, and copies of all regular and periodic
32
<PAGE>
reports (including without limitation annual reports on Form 10-K and quarterly
reports on Form 10-Q), all reports on Form 8-K and all registration statements
which Borrower or any Subsidiary may file with the SEC or with any securities
exchange;
(E) within 15 days after the last Business Day of each fiscal month,
Borrower shall deliver to Agent and each Lender (i) a certificate in the form of
Exhibit E hereto ("Borrowing Base Certificate") showing the Borrowing Base as of
- --------- --------------------------
the close of business on the last day of the immediately preceding fiscal month,
and (ii) an aged trial balance of all Accounts of Borrower and its Subsidiaries
as of such date ("Accounts Trial Balance"), indicating which Accounts are
----------------------
current, up to 90 days, and more than 90 days past the invoice date, in each
case certified as complete and correct on behalf of Borrower by an authorized
officer of Borrower;
(F) within 30 days after the commencement of each fiscal year,
Borrower shall deliver to Agent a copy of a consolidated business plan for
Borrower and its Subsidiaries for such fiscal year, which business plan shall
contain a summary annual consolidated budget of Borrower and its Subsidiaries
for such fiscal year, consolidated balance sheets as well as consolidated
projections of sales, cash flow and borrowing needs for such fiscal year, on a
quarterly basis, and Borrower shall deliver to Agent any material revision to
any such budget promptly upon the adoption thereof;
(G) at any time when an Event of Default shall have occurred and be
continuing, upon the request of Agent, Borrower shall provide Agent with a
Borrowing Base Certificate with such frequency as Agent shall specify. Upon
request by Agent, Borrower shall furnish copies of any other material reports,
documents or information, in a form and with such specificity as is reasonably
satisfactory to Agent (to the extent such reports, documents and information can
be produced or furnished without unreasonable cost), concerning Accounts
included, described or referred to in such Borrowing Base Certificates,
including without limitation, copies of all invoices prepared in connection with
such Accounts;
(H) promptly after the receipt thereof by Borrower and in any event
within 3 Business Days thereof, copies of any final reports as to material
inadequacies in accounting controls (including reports as to the absence of any
such inadequacies) submitted to Borrower by the Accountants in connection with
any audit of such corporation made by the Accountants;
(I) promptly (and in any event within 3 Business Days) after becoming
aware of (1) the existence of any Default or Event of Default, an officer's
certificate of Borrower specifying the nature and period of existence thereof
and what action Borrower (or any of its Subsidiaries) is taking or proposes to
take with respect thereto; or (2) any Indebtedness of Borrower or of any of its
Subsidiaries in excess of $100,000 in the aggregate being declared due and
payable before its expressed maturity, or any holder of such Indebtedness having
the right to declare such Indebtedness due and payable before its expressed
maturity, because of the occurrence of any default (or any event which, with
notice and/or the lapse of time, shall constitute any such default) under such
Indebtedness, an officer's certificate of Borrower describing the nature and
status of such matters and what action Borrower (or any of its Subsidiaries) is
taking or proposes to take with respect thereto;
(J) promptly and in any event within 3 Business Days after Borrower
knows or, in the case of a Pension Plan has reason to know, that a Reportable
Event with respect to any Pension Plan has occurred, that any Pension Plan or
Multi Employer Plan is or reasonably may be terminated, reorganized, partitioned
or declared insolvent under Title IV of ERISA, or Borrower or any of its ERISA
Affiliates will or reasonably may incur any material liability to or on account
of a Pension Plan or Multi Employer Plan under Title IV of ERISA or any other
liability under ERISA which could reasonably have a Material Adverse Effect has
been asserted against Borrower or any of its ERISA Affiliates, an officer's
certificate of Borrower setting forth information as to such occurrence and what
action, if any, Borrower or an ERISA Affiliate is required or proposes to take
with respect thereto, together with any notices concerning such occurrences
which are (a) required to be filed by Borrower or an ERISA Affiliate or the plan
administrator of any such Pension Plan
33
<PAGE>
controlled by Borrower or such ERISA Affiliate with the Internal Revenue Service
or the PBGC, or (b) received by Borrower or such ERISA Affiliate from any plan
administrator of a Pension Plan not under their control or from a Multi Employer
Plan;
(K) promptly after becoming aware of any Material Adverse Effect with
respect to which notice is not otherwise required to be given pursuant to this
Section 7.1, an officer's certificate of Borrower setting forth the details of
- -----------
such Material Adverse Effect and stating what action Borrower has taken or
proposes to take with respect thereto;
(L) promptly (and in any event within 7 days) after Borrower knows of
(a) the institution of, or reasonably credible threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or any of its Property, or (b) any material development in any such
action, suit, proceeding, governmental investigation or arbitration, which, in
either case, if adversely determined, is likely to have a Material Adverse
Effect, an Officer's Certificate of Borrower describing the nature and status of
such matter in reasonable detail;
(M) at least once in each fiscal year of Borrower, (i) an Officer's
Certificate setting forth all material insurance coverage maintained by Borrower
as of the date of such certificate and of all insurance planned to be maintained
by such Persons in such fiscal year, and (ii) certificates evidencing renewals
of such insurance;
(N) Agent shall conduct, on behalf of the Lenders and at Borrower's
expense, an audit of the Accounts and Inventory of Borrower and its Subsidiaries
within 30 days following the Closing Date and, thereafter, not less than once in
each calendar year, Agent shall conduct, on behalf of the Lenders and at
Borrower's expense, an audit of the Accounts and Inventory of Borrower and its
Subsidiaries, the results of which audits shall be reasonably satisfactory to
Agent and the Lenders in form and substance and shall be performed by Persons
reasonably acceptable to Agent and the Lenders, provided that at any time when
an Event of Default shall have occurred and be continuing Agent shall be
entitled to conduct such additional audits as it may require, at Borrower's sole
cost and expense; and
(O) any other information, including financial statements and
computations, relating to the performance of obligations arising under this
Agreement and/or the affairs of Borrower that Agent or any Lender may from time
to time reasonably request and which is capable of being obtained, produced or
generated without unreasonable cost by Borrower or of which Borrower has
knowledge.
7.2 Payment of Principal, Interest and Fees; to Keep Books; Reserves; Etc.
---------------------------------------------------------------------
Borrower will duly and punctually pay the principal of and interest and
fees on the Loans in accordance with the terms of the Notes and this Agreement.
Borrower will comply with all of the covenants, agreements and conditions
contained in this Agreement and the other Loan Documents to which it is a party.
Borrower's fiscal year end is the Sunday closest to December 31, and Borrower
will maintain the same fiscal year at all times. Borrower will keep proper
books of record and account and set aside appropriate reserves, all in
accordance with GAAP. Borrower will, and will cause each of its Subsidiaries
to, at all times from and after June 30, 1999, be Year 2000 Compliant (as
defined in Section 6.30).
------------
7.3 Payment of Taxes and Claims. Borrower will pay before they become
---------------------------
delinquent:
(A) all taxes (including excise taxes), assessments and governmental
charges or levies imposed upon it or its income or profits or upon its Property,
real, personal or mixed, or upon any part thereof;
(B) all claims for labor, materials and supplies which, if unpaid,
might result in the creation of a Lien upon its Property; and
34
<PAGE>
(C) all claims, assessments, or levies required to be paid by any of
them pursuant to any agreement, contract, law, ordinance or governmental rule or
regulation governing any pension, retirement, profit-sharing or any similar
plan;
provided, that, with respect to Property, items of the foregoing description
- --------
need not be paid while being diligently contested in good faith and by
appropriate proceedings so long as (i) adequate book reserves have been
established with respect thereto and (ii) Borrower's title to and right to use
its Property is not materially adversely affected by such non-payment. Borrower
will timely file all Federal and state tax returns and informational returns
required to be filed in connection with the payment of taxes and claims required
by this Section 7.3.
-----------
7.4 Maintenance of Properties and Corporate Existence. Borrower will:
-------------------------------------------------
(A) maintain its Property in good condition and make all necessary
renewals, repairs, replacements, additions, betterments, and improvements
thereto consistent with the historical practices of such Persons;
(B) keep true books of records and accounts in all material respects
in which entries will be made of all its business transactions that are full and
correct in all material respects and will reflect in its financial statements
adequate accruals and appropriations to reserves;
(C) do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and powers and
franchises including, without limitation thereof, any necessary qualification or
licensing in any foreign jurisdiction, except for such licenses and
qualifications the absence of which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(D) comply with (i) all applicable statutes, regulations, franchises,
and Orders of, and all applicable restrictions imposed by, any Governmental
Body, in respect of the conduct of its business and the ownership of its
Properties (including, without limitation, all Environmental Laws and all
applicable statutes, rules, ordinances, regulations and Orders relating to fair
labor standards, equal employment opportunities and occupational health and
safety) and (ii) all terms of any material mortgage, indenture, contract,
agreement or instrument, applicable to Borrower or any of its Properties, except
for such instances of non-compliance as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; and
(E) keep any Property it owns or operates free of contamination from
Hazardous Materials and any other potentially harmful chemical or physical
conditions. If Borrower or any Subsidiary receives notice of any Environmental
Matter or contamination with Hazardous Materials that relates to any of them or
their respective Properties, then Borrower agrees, upon request of Agent, to
provide Agent with such reports, certificates, engineering studies or other
written material or data as Agent may require so as to satisfy Agent that
Borrower is in compliance with its obligations under this Agreement. Borrower
covenants and agrees to cooperate fully with such consultant in any such audits,
including, without limitation, by providing such access to Borrower's books,
records, Properties, employees and agents and by furnishing such written and
oral information as such consultant may reasonably request in connection with
any such audits.
7.5 Insurance. Borrower will carry and maintain in full force and effect
---------
at all times with financially sound and reputable insurers, rated A or better by
AM Best & Co., provided that if the rating of such insurer is lowered so that it
--------
no longer complies with this provision, Borrower shall have 30 days to replace
(or to cause the applicable Subsidiary to replace) such insurance with other
insurance satisfying the requirements of this Section 7.5 (or, as to workers'
-----------
compensation or similar insurance, in an insurance fund or by self-insurance
authorized by the jurisdiction in which its operations are carried on): (i) all
workers'
35
<PAGE>
compensation or similar insurance as may be required under the laws of any
jurisdiction, (ii) business interruption insurance covering risk of loss as a
result of the cessation for all or any part of one year of all or any
substantial part of the business conducted by it, (iii) insurance against such
other risks as are usually insured against by corporations of established
reputation engaged in the same or similar businesses and similarly situated,
including, without limitation, fire, casualty, flood, public liability, products
liability insurance, and (iv) with respect to any Collateral consisting of
insurable Property, insurance against loss by fire, explosion, theft and such
other casualties as may be reasonably satisfactory to Agent and insurance
insuring Borrower against liability for personal injury and property damage
relating to such Collateral, in the forms and amounts required hereunder.
Insurance specified in clauses (ii) and (iii) shall be maintained in such
amounts (and with co-insurance, deductibles and self-insured retention, if any)
as such insurance is usually carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Insurance
specified in clause (iv) shall (A) be maintained in such form and amounts and
having such coverage as may be reasonably satisfactory to Agent, (B) provide
that no cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after receipt by
Agent of written notice thereof, (C) name Agent (for the benefit of the Lenders)
as loss payee or additional insured, as its interests may appear, and (D) be
reasonably satisfactory to Agent in all other respects.
7.6 Further Assurances. Borrower shall, and shall cause each of its
------------------
Subsidiaries to use all reasonable efforts to perfect all of their respective
interests in all material Intellectual Property rights by appropriate filings in
the U.S. Copyright Office or the U.S. Patent and Trademark Office (as
applicable) and any applicable state or local filing office (to the extent that
any such interest is registrable in any such office) and shall so perfect all
such interests hereafter acquired or created concurrently with the acquisition
or creation thereof, and shall cause all such perfected interests to be
subjected to a Copyright Mortgage, a Trademark Security Agreement or a Patent
Security Agreement, as applicable, in the respective forms referred to in
Section 5.1(k), in favor of Agent, duly recorded in the applicable
- --------------
filing office. Promptly upon reasonable request by Agent, Borrower shall (1)
promptly upon request by Agent, correct any material defect or error that may be
discovered in any Loan Document or in the execution, acknowledgment or
recordation thereof, and (2) promptly upon request by Agent, do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-register
any and all such further acts, deeds, conveyances, pledge agreements, mortgages,
deeds of trust, trust deeds, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances, powers, proxies and other
instruments as Agent may reasonably require from time to time in order (A) to
carry out more effectively the purposes of this Agreement or any other Loan
Document, (B) to subject to the Liens and security interests created by any of
the Loan Documents any of its Properties, rights or interests covered or now or
hereafter intended to be covered by any of the Loan Documents, (C) to perfect
and maintain the validity, effectiveness and priority of any of the Security
Documents and the Liens and security interests intended to be created thereby
and (iv) better to assure, convey, grant, assign, transfer, preserve, protect
and confirm to Agent the rights granted or now or hereafter intended to be
granted to it under any Loan Document or under any other instrument executed in
connection with or pursuant to any Loan Document.
7.7 Restrictions on Indebtedness. Borrower will not incur, create, assume
----------------------------
or suffer to exist any Indebtedness, other than the following:
(A) Indebtedness incurred pursuant to this Agreement and the other
Loan Documents;
(B) Accounts payable and other accrued liabilities arising in the
ordinary course of business;
(C) Indebtedness in addition to the Obligations in an aggregate
principal amount not to exceed $2,000,000 in at any one time outstanding; and
36
<PAGE>
(D) without duplication of any of the foregoing, Indebtedness secured
by Liens permitted under Section 7.8.
-----------
7.8 Restrictions on Liens. Borrower will not create, assume or suffer to
---------------------
exist any Lien upon any of its Properties (including without limitation any real
Property), whether now owned or hereafter acquired, except the following (herein
collectively referred to as "Permitted Liens"):
---------------
(A) Liens for taxes, assessments or governmental charges or claims the
payment of which is not at the time required by Section 7.3;
-----------
(B) Statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being diligently contested in
good faith, if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(C) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money), provided that the amount of Liens of Borrower referred to in
--------
this Subsection (C) outstanding at any time shall not exceed $100,000 in the
aggregate;
(D) Any attachment or judgment Lien (including judgment or appeal
bonds) which , within 30 days after the entry thereof, shall have been
discharged or bonded, or the execution thereof shall have been stayed pending
appeal;
(E) Leases or subleases granted to others not interfering with the
ordinary conduct of business;
(F) Easements, rights-of-way, restrictions and other similar charges
or encumbrances which do not, individually or in the aggregate, materially
interfere with the ordinary conduct of business;
(G) Any interest, title or Lien of a lessor under any permitted
operating lease;
(H) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(I) Liens incurred pursuant to the Loan Documents;
(J) Liens (including Capitalized Leases) in respect of Property
acquired or constructed or improved by Borrower after the Closing Date, which
Liens exist or are created at the time of acquisition or completion of
construction or improvement of such Property or within 60 days thereafter, but
any such Lien shall cover only the Property so acquired or constructed and any
improvements thereto (and any real Property on which such Property is located,
if such Property is a building, improvement or fixture), provided that the
--------
aggregate principal amount of all Indebtedness secured by Liens incurred
pursuant to this Subsection (J) in any fiscal year, together with any
Indebtedness incurred pursuant to Section 7.7(C), shall not exceed $2,000,000;
--------------
and
(K) Liens existing on the Closing Date after giving effect to the
Transactions and listed on Schedule 7.8(K).
---------------
7.9 Operating Leases. Borrower will not, and will not permit to, enter
----------------
into (as lessee) any lease
37
<PAGE>
of real or personal Property (other than Capitalized Leases) having a term
greater than one year (including options to renew or extend any term, whether or
not exercised) if, after giving effect thereto, the aggregate amount of rentals
and other payments required to be made by Borrower on a consolidated basis
during any fiscal year under all such leases would be greater than $3,000,000.
7.10 Sale-Leaseback Transactions. Borrower will not enter into any
---------------------------
arrangements with any lender or investor or to which such lender or investor is
a party providing for the leasing by Borrower of real or personal Property which
has been or is to be sold or transferred by Borrower to such lender or investor
or to any Person to whom funds have been or are to be advanced by such lender or
investor on the security of such Property or rental obligations of Borrower.
7.11 Transactions with Affiliates. Borrower will not directly or
----------------------------
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any Property or the
rendering of any service), with any Affiliate except in the ordinary course of
business and on terms that are not less favorable to Borrower or such Subsidiary
than those that would be obtainable at the time in an arm's-length transaction
with any Person who is not such an Affiliate; provided that Borrower shall be
permitted to enter into the transaction described on Schedule 7.12 with the
-------------
Affiliate referred to on such Schedule in the manner contemplated thereon.
7.12 Consolidation, Merger or Disposition of Assets; Acquisitions.
------------------------------------------------------------
Borrower will not enter into any transaction of merger or consolidation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
Property or fixed assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all of the business, Property or
fixed assets of, or stock or other evidence of beneficial interest in any
Person, except:
(A) Borrower may in the ordinary course of its business sell or
otherwise dispose of Inventory;
(B) Borrower may sell or otherwise dispose of, in the ordinary course
of business, Property that is worn out or obsolete or no longer used in its
business; and
(C) Borrower may consummate the transaction described on Schedule 7.12
-------------
as contemplated on such Schedule;
provided that this Section 7.12 shall not be construed to prohibit the sale of
- -------- ------------
the property located at 104 Woodmere Road located in Folsom, California as
otherwise contemplated in this Agreement.
7.13 Sale or Discount of Receivables. Borrower will not directly or
-------------------------------
indirectly, sell with or without recourse, or discount or otherwise sell any of
its notes or accounts receivable, other than discounts granted on accounts in
the ordinary course of business in a manner consistent with past practices.
7.14 Certain Contracts. Borrower will not enter into or be a party to,
-----------------
except pursuant to, or as otherwise permitted by, the Loan Documents,
(A) any contract providing for the making of loans, advances (other
than advances in the ordinary course of business to employees of Borrower with
respect to expenses expected to be incurred by such employees in connection with
their duties as employees) or capital contributions to any Person, or for the
purchase of any Property from any Person in each case primarily in order to
enable such Person to maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses, or
(B) any contract for the purchase of materials, supplies or other
Property or services if
38
<PAGE>
such contract (or any related document) requires that payment for such
materials, supplies or other Property or services shall be made regardless of
whether or not delivery of such materials, supplies or other Property or
services is ever made or tendered, or
(C) any contract to rent or lease (as lessee) any real or personal
Property if such contract (or any related document) requires that the lessee
purchase or otherwise acquire securities or obligations of the lessor, or
(D) any contract for the sale or use of materials, supplies or other
Property, or the rendering of services, if such contract (or any related
document) requires that payment for such materials, supplies or other Property,
or the use thereof, or payment for such services, shall be subordinated to any
Indebtedness (of the purchaser or user of such materials, supplies or other
Property or the Person entitled to the benefit of such services) owed or to be
owed to any Person, or
(E) any Guarantee or contract which, in economic effect, is
substantially equivalent to a Guarantee.
7.15 Restricted Payments and Investments. Borrower will not directly or
-----------------------------------
indirectly, make any Restricted Payment or any Investment other than Permitted
Investments and Investments existing on the Closing Date and listed on Schedule
--------
6.8B. Notwithstanding the foregoing, so long as no Default or Event of Default
- ----
would exist after giving effect thereto, Borrower may (subject to compliance
with applicable laws) make open-market repurchases of up to 190,000 shares of
its capital stock for an aggregate purchase price not to exceed $3,000,000.
7.16 Financial Covenants. All financial covenants are determined for
-------------------
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.
(A) Funded Debt/EBITDA Ratio. Borrower will maintain a ratio of (i)
------------------------
Funded Debt as at the last day of each fiscal quarter to (ii) EBITDA for the
period of four consecutive fiscal quarters ended on such date of not more than
the ratio set forth below opposite the period in which the date of determination
occurs:
Period Funded Debt/EBITDA Ratio
------ ------------------------
Closing Date through April 4, 1999 3.0
July 4, 1999 through January 2, 2000 2.50
Following January 2, 2000 1.75
(B) Fixed Charge Coverage Ratio. Borrower will maintain, as at the
---------------------------
last day of each fiscal quarter for the period of four consecutive fiscal
quarters then ended, a ratio (the "Fixed Charge Coverage Ratio") of (i) EBITDA
---------------------------
to (ii) the sum of scheduled principal payments on Indebtedness (including
without limitation principal payments due under the Term Loan during such
period, but excluding in any event the principal of the Purpose Loan),
Consolidated Interest Expense, Capital Expenditures made in cash during such
period (and not financed) and cash taxes due and payable during such period, of
not less than the ratio set forth below opposite the period in which the date of
determination occurs:
Period Fixed Charge Coverage Ratio
------ ---------------------------
Closing Date through January 3, 1999 1.0
April 4, 1999 through October 3, 1999 1.25
Following October 3, 1999 1.50
(C) Profitability. Commencing with the 1999 fiscal year, Borrower's
-------------
Consolidated Net Income (Loss) for each fiscal year and each fiscal quarter
shall be a positive number; provided that
--------
39
<PAGE>
Borrower shall be permitted to have negative Consolidated Net Income (Loss) in
any one fiscal quarter during any fiscal year, not to exceed $2,000,000, so long
as Borrower remains in compliance with the annual requirement under this
Subsection (C).
(D) Quick Ratio. Borrower shall have a ratio of Consolidated Current
-----------
Assets to Consolidated Current Liabilities of not less than (i) 1.0 : 1.0 as at
the end of each fiscal quarter through and including the fiscal quarter ending
July 4, 1999 and (ii) 1.25 : 1.0 as at the end of each fiscal quarter
thereafter.
(E) Capital Expenditures. Borrower covenants that it will not make
--------------------
or incur any Capital Expenditure or any contractual commitment with respect to
any Capital Expenditure in any fiscal year if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by the Borrower during such fiscal
year would exceed $5,000,000; provided that Borrower may make additional Capital
--------
Expenditures during fiscal year 1999 of not more than $1,000,000 for the sole
purpose of contructing improvements to its facility at 2026 McGaw Avenue,
Irvine, California. This restriction is annual and non-cumulative.
(F) 1998 Charges. Borrower shall not permit its charges taken in
------------
fiscal year 1998 in respect of in-process research and development costs related
to the Acquisition to exceed $25,000,000 in the aggregate
7.17 Acquisition of Margin Securities. Borrower will not, and will not
--------------------------------
permit any Subsidiary to, own, purchase or acquire (or enter into any contract
to purchase or acquire) any "margin security" as defined by any regulation of
the Board of Governors of the Federal Reserve System as now in effect or as the
same may hereafter be in effect unless, prior to any such purchase or
acquisition or entering into any such contract, Agent shall have received an
opinion of counsel satisfactory to it to the effect that such purchase or
acquisition will not cause this Agreement or the Loans to be in violation of
Regulations G, T, U or X or any other regulation of such Board then in effect.
7.18 Collateral Locations. Neither the location of the principal place of
--------------------
business and chief executive office of Borrower nor the location of any
Collateral shall be changed nor shall there be established additional places of
business or additional locations at which Collateral is stored, kept or
processed except in compliance with the applicable provisions of this Agreement,
provided that Borrower shall be permitted to have test equipment (having an
aggregate value that is not material to Borrower's business) located at customer
sites for trials in the ordinary course of business.
7.19 Negative Pledges, Restrictive Agreements, etc. Borrower will not
---------------------------------------------
enter into any agreement (excluding the Loan Documents) prohibiting the creation
or assumption of any lien upon any of the Collateral, whether now owned or
hereafter acquired, or the ability of Borrower or any Subsidiary to amend or
otherwise modify any Loan Document to which it is a party.
7.20 Deposit Account. Borrower will use commercially reasonable efforts to
---------------
cause all of its receipts, income, receivables and other cash to be deposited in
the Deposit Account.
7.21 Additional Collateral Matters. Borrower will: (a) cause the lessor of
-----------------------------
its facility at 2026 McGaw Avenue, Irvine, California to execute and deliver to
Agent a landlord waiver substantially in the form of Exhibit I by not later than
---------
30 days after the Closing Date; (b) use best efforts have the lessors of its
other real Properties at which any material Collateral is located to execute and
deliver to Agent a landlord waiver substantially in the form of Exhibit I, and
---------
shall not enter into any new lease of real Property unless the lessor thereof
executes and delivers such a landlord waiver; (c) not open or suffer to exist
any banking or depositary account unless such account is either maintained with
Agent or made subject to a first priority security interest in favor of Agent
pursuant to an account take-over letter in form and substance satisfactory to
Agent executed by the institution at which such account is maintained; and (d)
notify warehousemen, bailees, processors and other third parties holding
Property having an aggregate Fair Market Value in
40
<PAGE>
excess of $250,000 of the Liens created in favor of Agent and the Lenders and
instruct such Person to hold such Property for Agent's account subject to
Agent's instructions.
7.22 Future Subsidiaries. Notwithstanding any other provision of this
-------------------
Agreement or the other Loan Documents, Borrower will not, and not permit any of
its Subsidiaries to, create or acquire any other Subsidiary (a "New Subsidiary")
--------------
unless (a) such New Subsidiary is an entity organized under the laws of the
United States (or such other jurisdictions as may be approved by Agent and the
Lenders, subject to such terms and conditions as they may reasonably require in
order to preserve, protect and perfect their rights and interests under the Loan
Documents, including without limitation, effective and enforceable Liens on the
Property of such New Subsidiary), (b) such New Subsidiary executes and delivers
a Subsidiary Guarantee and such other documentation as Agent may require in
order to receive a perfected, first priority Lien in and to all of such New
Subsidiary's Property, upon substantially the same terms as those provided in
this Agreement with respect to the Property of Borrower, (c) the ownership
interests in such New Subsidiary are pledged to Agent pursuant to a pledge
agreement satisfactory to Agent in form and substance, (d) Agent and the Lenders
receive, to the extent they shall request, an opinion of counsel to such
Subsidiary addressing, with respect to such New Subsidiary and its Loan
Documents, the matters addressed with respect to Borrower's on the Closing Date
in the opinion attached hereto as Exhibit D, and (e) after giving effect to the
---------
creation or acquisition of such New Subsidiary, no Default or Event of Default
shall have occurred and be continuing (for purposes of determining compliance
with this clause (e), Borrower shall deliver an Officer's Certificate in the
form required by Section 7.1(C) which shall set forth calculations of the
--------------
specified covenants on a pro-forma basis at last day of Borrower's most recently
ended fiscal quarter as if the New Subsidiary had been a Subsidiary of Borrower
during such fiscal quarter). Agent shall also be entitled to require the items
set forth in this Section 7.22 with respect to any Subsidiary of Borrower in
------------
existence on the Closing Date as to which Agent determines that the
representations and warranties set forth in the last sentence of Section 6.6 are
-----------
no longer true.
8. EVENTS OF DEFAULT; REMEDIES.
---------------------------
8.1 Events of Default. Any one or more of the following events shall
-----------------
constitute an Event of Default by Borrower under this Agreement.
(a) If Borrower fails to make any payment of all or any portion of the
Obligations when due and payable or when declared due and payable (whether
interest, fees or otherwise, including any interest which, but for the
provisions of the United States Bankruptcy Code, would have accrued on any of
the Obligations);
(b) If Borrower defaults in the performance or observance of any term,
provision, condition, covenant, or agreement contained in Section 7.1, 7.2, 7.5,
----------- --- ---
7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18, 7.19, or
- --- --- --- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.22;
- ----
(c) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the other Loan Documents other than as specified in subsections (a)
and (b) above and such failure or neglect continues unremedied for 30 days;
(d) If any material portion of the Properties of Borrower is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any judicial officer or assignee, and the foregoing has
not been vacated, discharged, stayed, satisfied or bonded pending appeal within
thirty (30) days from the entry thereof;
(e) If any bankruptcy, reorganization, receivership, liquidation,
assignment for the benefit of creditors or other insolvency proceeding (each, an
"Insolvency Proceeding") is commenced by
---------------------
41
<PAGE>
Borrower or any Subsidiary;
(f) If an Insolvency Proceeding is commenced against Borrower or any
Subsidiary and not dismissed within 60 calendar days;
(g) 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 and such injunction or other order is not released to the satisfaction
of Agent within 10 calendar days of the entry of such injunction, restraint or
order;
(h) If a notice of lien, levy, or assessment is filed of record with
respect to any Property of Borrower by any Governmental Body, or if any taxes or
debts owing at any time hereafter to any one or more of such entities becomes a
Lien, whether choate or otherwise, upon any of Borrower's Property and the same
is not paid on the payment date thereof, unless the same is being contested in
good faith by appropriate proceedings and with appropriate reserves and no Lien
has attached in respect thereof;
(i) If a judgment or other claim becomes a Lien upon any material
portion of Borrower's Property and is not being contested in good faith by
Borrower, execution on which has been stayed pending such contest;
(j) If Agent's Lien in any Collateral shall cease or fail to be a
valid, perfected first-priority Lien;
(k) If any Loan Document shall cease to be valid and enforceable
against Borrower, Borrower shall so assert;
(l) If any Change of Control shall occur;
(m) If there is a default in any agreement to which Borrower or any
Subsidiary is a party with third parties resulting in a right by such third
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness of Borrower or any such Subsidiary in an aggregate principal amount
of $250,000 or more;
(n) any Reportable Event shall occur which could reasonably be
expected to constitute grounds for termination by the PBGC of any Pension Plan
or for the appointment by the appropriate United States District Court of a
trustee to administer any Pension Plan and such Reportable Event is not
corrected and such determination is not revoked within thirty (30) days after
the administrator of any Pension Plan (if Borrower or any of its ERISA
Affiliates is the administrator) or Borrower or any of its ERISA Affiliates, as
the case may be, has knowledge thereof; or any proceedings shall be instituted
by the PBGC to terminate any Pension Plan or to appoint a trustee to administer
any Pension Plan; or a trustee shall be appointed by the appropriate United
States District Court to administer any Pension Plan; or any Pension Plan shall
be terminated by its sponsor; or there shall occur a complete or partial
withdrawal from any Multiemployer Plan by Borrower or any of its ERISA
Affiliates (including any transaction described in, and meeting the requirements
of, Section 4204 of ERISA); and
(o) If any representation, warranty, certification or statement made
by or on behalf of Borrower or any of its Subsidiaries or any officer of any of
them in this Agreement, any other Loan Document or in any certificate,
instrument, financial statement or other document now or hereafter delivered
hereunder or pursuant to or in connection with any provision hereof shall prove
to be false or incorrect or breached in any material respect on the date as of
which made.
8.2 Remedies. If any Event of Default described in clause (d) (e) or (f)
-------- ---------- --- ---
of Section 8.1 shall occur, the Facilities (if not theretofore terminated) shall
-----------
automatically terminate and the outstanding principal amount of all outstanding
Obligations shall automatically be and become immediately due and
42
<PAGE>
payable, without notice or demand. If any other Event of Default shall occur for
any reason, whether voluntary or involuntary, and be continuing, Agent may, by
notice to Borrower, declare all or any portion of the outstanding principal
amount of the Obligations to be due and payable and/or the Loans and the
Commitment (if not theretofore terminated) to be terminated, whereupon the full
unpaid amount of such Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment, and/or, as the case may be, the Loans and the Facilities shall
terminate. In addition, upon any Event of Default, Agent shall have the right to
exercise any and all remedies available to it at law or in equity as well as any
rights or remedies specified in any the Loan Documents.
8.3 Remedies with Respect to Collateral.
-----------------------------------
(a) In addition to the foregoing, if any Event of Default shall occur
and be continuing, Agent may exercise, in addition to all other rights and
remedies granted to it in this Agreement or by law, all rights and remedies of a
secured party under the UCC. Without limiting the generality of the foregoing,
Borrower expressly agrees that in any such event Agent may, without demand of
performance or other demand, advertisement, legal process or notice of any kind
(except as may be required by law or provided herein) to or upon Borrower or any
other Person (all and each of which demands, advertisements and/or notices are
hereby expressly waived to the maximum extent permitted by the UCC and other
applicable law), (i) at any time or times enter Borrower's premises and take
physical possession of the Collateral and maintain such possession on Borrower's
premises, without any obligation to pay rent or other compensation to Borrower,
(ii) remove the Collateral or any part thereof, to such other places as Agent
may desire, (iii) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or (iv) forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
at any of Agent's offices or elsewhere at such prices and on such terms as Agent
may deem commercially reasonable (irrespective of the impact of any such sales
on the market price of the Collateral), for cash or on credit or for future
delivery. Any such purchaser (including, without limitation, Agent and any
other Lender) of Collateral sold pursuant to this Section 8.3 shall purchase the
-----------
same absolutely free from any claim or right on the part of Borrower and
Borrower does hereby waive (to the maximum extent permitted by the UCC and other
applicable law) all rights of redemption, stay, and appraisal which Borrower now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Borrower further agrees, at Agent's request to
assemble the Collateral and make it available to Agent at places which Agent
shall reasonably select, whether at Borrower's premises or elsewhere. To the
maximum extent permitted by applicable law, Borrower waives all claims, damages,
and demands against Agent arising out of the repossession, retention or sale of
the Collateral except such as may arise out of the gross negligence or willful
misconduct of Agent or the failure of Agent to exercise reasonable care in the
custody and preservation of Collateral in its possession or under its control as
provided in Section 4.3. Borrower agrees that, to the extent notice of sale
-----------
shall be required by law, Agent need not give more than ten (10) days' notice of
the time and place of any public sale or of the time after which a private sale
may take place and that such notice shall constitute reasonable notification
within the meaning of Section 9504(3) of the UCC.
(b) Borrower also agrees to pay all reasonable costs of Agent and
Lenders, including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder,
including, without limitation, reasonable fees for attorneys employed by Agent
or any Lenders to collect any deficiency existing after the application of
proceeds from any sale of Collateral pursuant to this Section 8.3.
-----------
(c) Borrower hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Agreement or any Collateral.
(d) The proceeds of any disposition of any Collateral obtained
pursuant to this Section
-------
43
<PAGE>
8.3 shall be applied as follows:
- ---
(i) first, to the payment of any and all expenses and fees
(including reasonable attorney's fees) incurred by Agent in foreclosing on
and disposing of the Collateral;
(ii) next, any surplus then remaining to the payment of the
Obligations (whether matured or unmatured) in such order as Agent may
determine in its sole discretion; and
(iii) thereafter, if no other Obligations are outstanding, any
surplus then remaining shall be paid to Borrower or to such other person
legally entitled to same; it being understood that Borrower will remain
liable to Agent to the extent of any deficiency between the amount of the
Obligations and the aggregate of all amount realized from Collateral.
9. THE AGENT
---------
9.1 Actions. Each Lender hereby appoints COMERICA BANK-CALIFORNIA
-------
("Comerica") as its Agent under and for purposes of this Agreement and each
--------
other Loan Document. Each Lender authorizes Agent to act on behalf of such
Lender under this Agreement and each other Loan Document and, in the absence of
other written instructions from the Required Lenders received from time to time
by Agent (with respect to which Agent agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) Agent, pro rata
--- ----
according to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, Agent in any way relating to or arising out of this Agreement and any
other Loan Document, including reasonable attorneys' fees, and as to which Agent
is not reimbursed by Borrower; provided, however, that no Lender shall be liable
-------- -------
for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from Agent's gross
negligence or wilful misconduct. Agent shall not be required to take any action
hereunder, or under any other Loan Document, or to prosecute or defend any suit
in respect of this Agreement or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in favor of Agent
shall be or become, in Agent's determination, inadequate, Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
9.2 Funding Reliance, etc. Unless Agent shall have been notified by
---------------------
telephone, confirmed in writing, by any Lender by 12:00 p.m., Los Angeles,
California time, on the day prior to any Advance or disbursement that such
Lender will not make available the amount which would constitute its Percentage
of such Advance or disbursement on the date specified therefor, Agent may assume
that such Lender has made such amount available to Agent and, in reliance upon
such assumption, make available to Borrower a corresponding amount. If and to
the extent that such Lender shall not have made such amount available to Agent,
such Lender agrees to repay Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date Agent made such
amount available to Borrower to the date such amount is repaid to Agent, at the
interest rate applicable at the time to the portion of the Loans comprising such
Advance or disbursement, as the case may be.
9.3 Exculpation. Neither Agent nor any of its directors, officers,
-----------
employees or agents shall be liable to any Lender for any action taken or
omitted to be taken by it under this Agreement or any other Loan Document, or in
connection herewith or therewith, except for its own wilful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or therein,
nor for the effectiveness, enforceability, validity or due execution of this
Agreement or any other Loan Document, nor for the creation,
44
<PAGE>
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry respecting the
performance by Borrower or any of its Subsidiaries of their respective
obligations under the Loan Documents. Any such inquiry which may be made by
Agent shall not obligate it to make any further inquiry or to take any action.
Agent shall be entitled to rely upon advice of counsel concerning legal matters
and upon any notice, consent, certificate, statement or writing which Agent
believes to be genuine and to have been presented by a proper Person.
9.4 Successor. Agent may resign as such at any time upon at least 30
---------
days' prior notice to Borrower and all Lenders. If Agent at any time shall
resign, the Required Lenders may appoint another Lender as a successor Agent
which shall thereupon become Agent hereunder. If no successor Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
---------
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement; and Sections 10.8 and 10.9 shall continue to inure to its
------------- ----
benefit.
9.5 Loans and other Transactions by Comerica. Comerica shall have the
----------------------------------------
same rights and powers with respect to (x) the Revolving Loan made by it or any
of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any
other Lender and may exercise the same as if it were not Agent. Comerica and its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with Borrower, any of its Subsidiaries or any of their
Affiliates as if Comerica were not Agent hereunder.
9.6 Credit Decisions. Each Lender acknowledges that it has, independently
----------------
of Agent and each other Lender, and based on such Lender's review of the
financial information of Borrower and its Subsidiaries, this Agreement, the
other Loan Documents (the terms and provisions of which being satisfactory to
such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of Agent
and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
9.7 Copies, etc. Agent shall give prompt notice to each Lender of each
-----------
notice or request required or permitted to be given to Agent by Borrower
pursuant to the terms of this Agreement (unless concurrently delivered to the
Lenders by Borrower). Agent will distribute to each Lender each document or
instrument received for its account and copies of all other communications
received by Agent from Borrower for distribution to the Lenders by Agent in
accordance with the terms of this Agreement.
10. GENERAL PROVISIONS
------------------
10.1 Notices. All communications provided for hereunder shall be in
-------
writing and delivered by hand or sent by first class mail or sent by telecopy
(with such telecopy to be confirmed promptly in writing sent by first class
mail), sent (i) if to any Lender or Agent, to:
Comerica Bank-California
45
<PAGE>
611 Anton Boulevard
Costa Mesa, CA 92626-1904
Attention: Bonnie E. Kehe
Telecopy Number: 714-424-3857
or to such other address or telecopy number as Agent or such Lender may have
designated to Borrower in writing; and (ii) if to Borrower, to:
Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, CA 92614
Attention: Mr. Kevin Michaels
Telecopy Number: 949-757-6675
or to such other address or addresses or telecopy number or numbers as Borrower
may most recently have designated in writing to Agent and the Lenders by such
notice. All such communications shall be deemed to have been given or made when
so delivered by hand or sent by or telecopy, or three Business Days after being
so mailed.
10.2 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
- -------- -------
duties hereunder without Agent's prior written consent and any prohibited
assignment shall be absolutely void. No consent by Agent to an assignment by
Borrower shall release Borrower from its obligations. Each Lender may assign, or
sell participations in, its Commitment to one or more other Persons in
accordance with the following provisions of this Section 10.2; provided that any
------------ --------
assignment must be allocated ratably between the assigning Lender's Percentage
of the Revolving Loan, the Purpose Loan and the Term Loan.
(a) Assignments. Subject to the foregoing limitations, any Lender may
-----------
at any time, with notice to Borrower and Agent, assign and delegate to one or
more commercial banks or other financial institutions acceptable to Agent (each
Person to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's
---------------
Commitment (which assignment and delegation shall be of a constant, and not a
varying, percentage of all the assigning Lender's Commitment and shall be
allocated ratably among the Revolving Loan, the Purpose Loan and the Term Loan);
provided, however, that Borrower and Agent shall be entitled to continue to deal
- -------- -------
solely and directly with such Lender in connection with the interests so
assigned and delegated to an Assignee Lender until (i) written notice of such
assignment and delegation, together with payment instructions, addresses and
related information with respect to such Assignee Lender, shall have been given
to Borrower and Agent by such Lender and such Assignee Lender; and (ii) Agent
shall have received its customary processing fee from such Lender or Assignee
Lender and an executed assignment agreement in form and substance satisfactory
to Agent.
From and after the date that an assignment becomes effective as
provided in the preceding paragraph, (x) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such assignment, shall have the rights and obligations
of a Lender hereunder and under the other Loan Documents, and (y) the assignor
Lender, to the extent that rights and obligations hereunder have been assigned
and delegated by it in connection with such assignment, shall be released from
its obligations hereunder and under the other Loan Documents. Within 5 Business
Days after its receipt of notice of such assignment and the surrender of the
assignor Lender's Note(s), Borrower shall execute and deliver to Agent (for
delivery to the relevant Assignee Lender) new Notes evidencing such Assignee
Lender's assigned Commitment and, if the assignor Lender has retained a
Commitment hereunder, replacement Notes each in the principal amount of the
applicable Loan retained by the assignor
46
<PAGE>
Lender hereunder (each such Note to be in exchange for, but not in payment of,
the Note then held by such assignor Lender). Each such replacement Note shall be
dated the date of the predecessor Note. Accrued interest on that part of the
predecessor Note evidenced by the replacement Note, and accrued fees, shall be
paid as provided in the documentation effecting the Assignment. Accrued interest
on that part of the predecessor Note evidenced by the Revolving Note shall be
paid to the assignor Lender. Accrued interest and accrued fees shall be paid at
the same time or times provided in the predecessor Note and in this Agreement.
Any attempted assignment and delegation not made in accordance with this Section
-------
10.2(a) shall be null and void.
- -------
(b) Participations. Any Lender may at any time sell to one or more
--------------
commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests in any its
-----------
Commitment; provided, however, that
-------- -------
(i) no participation contemplated in this Section 10.2(b) shall
---------------
relieve such Lender from its Commitment or its other obligations hereunder
or under any other Loan Document;
(ii) such Lender shall remain solely responsible for the
performance of its Commitment and such other obligations;
(iii) Borrower and Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents;
(iv) no Participant, unless such Participant is itself a Lender,
shall be entitled to require such Lender to take or refrain from taking any
action hereunder or under any other Loan Document.
10.3 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 paragraph applies equally to this entire Agreement.
10.4 Interpretation. Neither this Agreement nor any uncertainty or
--------------
ambiguity herein shall be construed or resolved against Agent, any Lender or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties (each of which has had the
benefit of advice from legal counsel) 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.
10.5 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.
10.6 Amendments and Waivers. No amendment, modification, termination, or
----------------------
waiver of any provision of this Agreement, the other Loan Documents, or any
other document or instrument executed in connection herewith, or consent to any
departure by Borrower therefrom, shall in any event be effective without the
written concurrence of the Required Lenders; provided, however, that no such
-------- -------
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders shall be effective unless consented to by each
Lender;
(b) modify this Section 10.6, change the definition of "Required
------------ --------
Lenders", increase the Commitment of any Lender, reduce any fees payable to
-------
Agent or the Lenders, release any Collateral, except as otherwise
specifically provided in any Loan Document or extend the Maturity
47
<PAGE>
Date shall be effective without the consent of each Lender;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on any portion of any
Loan (or reduce the principal amount of or rate of interest on any Loan)
shall be effective without the consent of the holder of that Note
evidencing such portion of the applicable Loan; or
(d) affect adversely the interests, rights or obligations of Agent
qua Agent shall be effective without consent of Agent.
---
10.7 Set-Offs. Upon the occurrence and during the continuance of any
--------
Event of Default, Agent and each Lender is hereby authorized at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower), to set off and apply to the payment of the Obligations
(whether or not then due and regardless of whether Agent shall have made any
demand therefor), and (as security for such Obligations) Borrower hereby grants
to Agent (for the benefit of the Lenders) a continuing security interest in, any
and all balances, credits, deposits, accounts or moneys of Borrower then or
thereafter maintained with Agent or any Lender (whether general or special, time
or demand, provisional or final). Agent and each Lender agrees promptly to
notify Borrower after set-off and application made by Agent or any Lender, as
the case may be, provided that the failure to give such notice shall not affect
--------
the validity of such set-off and application. The provisions of this Section
-------
10.7 are in addition to other rights and remedies (including, without
- ----
limitation, other rights of set-off) which Agent may have.
10.8 Attorneys' Fees and Costs. Borrower agrees to pay, whether or not
-------------------------
the transactions contemplated hereby are consummated, all reasonable expenses of
Agent (including the reasonable fees and out-of-pocket expenses of counsel to
Agent, of local counsel, if any, who may be retained by Agent or its counsel,
and allocated costs of in-house counsel to Agent), in each case promptly
following receipt of an invoice therefor in reasonable detail, in connection
with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby are consummated, and
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
Borrower further agrees to pay, and to save Agent harmless from all liability
for, any stamp or other taxes (other than income taxes) which may be payable in
connection with the execution or delivery of this Agreement, the Borrowings
hereunder, or the issuance of the Notes or any other Loan Documents. Borrower
also agrees to reimburse Agent upon demand for all reasonable out-of-pocket
expenses (including attorneys' fees and legal expenses) incurred by Agent and
the Lenders in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations and any Lien in favor of Agent.
10.9 Indemnification. In consideration of the execution and delivery of
---------------
this Agreement by Agent and Lenders and Lenders' agreement to provide the Loans
hereunder, Borrower hereby indemnifies, exonerates and holds Agent, each Lender
and each of their respective parents, officers, directors, employees, equity
holders and agents (collectively, the "Indemnified Parties") free and harmless
-------------------
from and against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
-----------------------
Indemnified Parties or any of them as a result of,
48
<PAGE>
or arising out of, or relating to any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the Loans; except
for any such Indemnified Liabilities arising for the account of a particular
Indemnified Party by reason of the relevant Indemnified Party's gross negligence
or wilful misconduct. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
10.10 Dissemination. Agent or any Lender obtaining non-public financial
-------------
or other information pursuant to this Agreement which is designated in writing
as such by Borrower shall hold all such information confidential, in accordance
with its customary procedures for handling confidential information of this
nature, unless such information shall be publicly disclosed or become publicly
available other than by an action of such Person that violates the provisions of
this sentence; provided, however, that Agent or any Lender may make such
-------- -------
disclosures (i) as may be consistent with such Persons's customary business
practices to its parents, subsidiaries, affiliates and service providers
(provided that the recipient thereof agrees in writing to hold such information
confidential in a similar fashion), (ii) as may be reasonably required by that
Person in connection with the contemplated transfer of any Note or of any
interest therein or in the Loan Documents (provided that the potential
transferee thereof agrees in writing to hold such information confidential in a
similar fashion), or (iii) as required or requested by any court, arbitrator,
Governmental Body or regulatory authority. Borrower acknowledges that Agent and
the Lenders may provide information regarding Borrower and the Loans to each of
their respective parents, Subsidiaries, Affiliates, attorneys and accountants
who agree to be bound by the terms of this Section 10.10.
-------------
10.11 Counterparts. 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.
10.12 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, modified, or
qualified by any other agreement, oral or written, whether before or after the
date hereof.
10.13 No Waiver; Remedies Cumulative. Agent and the Lenders shall not by
------------------------------
any act, delay, omission or otherwise be deemed to have waived any of its rights
or remedies hereunder, and no waiver shall be valid unless in writing, signed by
Agent and the Lenders and then only to the extent expressly provided therein. A
waiver by Agent and the Lenders of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which Agent and
the Lenders would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of Agent and the Lenders, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law.
10.14 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND ALL OTHER LOAN
-------------
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES OF SUCH STATE).
10.15 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT
--------------------
THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.
EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES (AFTER CONSULTING OR HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL OF
THEIR CHOICE) ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION
49
<PAGE>
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR AGENT AND EACH LENDER TO ENTER INTO THIS AGREEMENT AND
EACH SUCH OTHER LOAN DOCUMENT.
[remainder of page intentionally left blank; signatures follow]
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan and Security
Agreement as of the date first set forth above.
Borrower: POWERWAVE TECHNOLOGIES, INC.
- --------
By: /s/ BRUCE EDWARDS
-----------------------------------
Print Name: Bruce C. Edwards
---------------------------
Title: President and Chief Executive
--------------------------------
Officer
--------------------------------------
By: /s/ KEVIN MICHAELS
-----------------------------------
Print Name: Kevin T. Michaels
---------------------------
Title: Vice President, Finance & Chief
--------------------------------
Financial Officer
--------------------------------------
Agent: COMERICA BANK-CALIFORNIA
- -----
By: /s/ BONNIE E. KEHE
-----------------------------------
Print Name: Bonnie E. Kehe
---------------------------
Title: Vice President/Regional Manager
--------------------------------
Lenders: COMERICA BANK-CALIFORNIA
- -------
By: /s/ BONNIE E. KEHE
-----------------------------------
Print Name: Bonnie E. Kehe
---------------------------
Title: Vice President/Regional Manager
--------------------------------
FLEET NATIONAL BANK
By: /s/ MICHAEL S. BARCLAY
-----------------------------------
Print Name: Michael S. Barclay
---------------------------
Title: Vice President
--------------------------------
<PAGE>
EXHIBIT 99.1
POWERWAVE TECHNOLOGIES
ANNOUNCES COMPLETION OF ACQUISITION OF HP'S RF POWER AMPLIFIER BUSINESS AND
FACILITY
IRVINE, Calif., October 9, 1998 Powerwave Technologies, Inc. (NASDAQ:PWAV)
today announced that it has completed the previously announced acquisition of
Hewlett-Packard Company's radio frequency (RF) power amplifier business and its
manufacturing facility in Folsom, Calif. The acquisition closed today, October
9, 1998, and the cash price paid was approximately $57.4 million. Powerwave
financed the acquisition utilizing $25 million of a new $35 million secured
credit facility, with the remaining funds coming from its existing cash
balances.
This business was part of HP's Wireless Infrastructure Division and is
focused on the design and manufacture of RF power amplifiers for wireless
communications, including cellular, PCS and wireless local loop.
"We are excited to begin the transition and integration phase of the
acquisition and we look forward to marketing our newly expanded product
portfolio of single-carrier RF power amplifiers in addition to our existing
portfolio of multi-carrier RF power amplifiers," stated Bruce C. Edwards,
president and chief executive officer of Powerwave Technologies. "With this
acquisition, Powerwave is expanding both its product offerings and customer
base."
Powerwave purchased from HP certain assets, operations and the business
related to the design, manufacture and marketing of RF power amplifiers for use
in wireless communications, which include cellular, PCS, SMR, fixed wireless
access, radio in the local loop and wireless local loop systems. Powerwave also
is hiring approximately 35 HP employees and purchased the
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Folsom manufacturing facility. Most of the remaining HP Folsom employees will
work as contractors to Powerwave during the transition period.
Company Background
Powerwave Technologies, Inc., an ISO 9001 quality certified company, is a
leading supplier of high performance RF power amplifiers for use in wireless
communications networks. Powerwave designs, manufacturers and markets both
single carrier and multi-carrier amplifiers, with a primary focus on multi-
carrier amplifiers. Powerwave's products are utilized in both cellular and PCS
base stations in both digital and analog networks. Powerwave also produces RF
power amplifiers for the land mobile radio market and the wireless local loop
market. Corporate headquarters are located at 2026 McGaw Avenue, Irvine, Calif.
92614. Telephone (949) 757-0530. For more information on Powerwave's high
performance ultra-linear RF power amplifiers and amplifier systems, please call
(888)-PWR-WAVE (797-9283) or visit our web site at http://www.POWERWAVE.com.
