<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C> <C>
MARK ONE:
- - -------------
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-11879
</TABLE>
VLSI TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
94-2597282
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
1109 McKay Drive, San Jose, California 95131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(408) 434-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Shares outstanding of the Registrant's Common Stock as of July 1,
1994: 36,089,965
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS -- UNAUDITED
(THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JULY 1, JUNE 26, JULY 1, JUNE 26,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues............................. $ 148,048 $ 127,963 $ 286,171 $ 245,266
Cost of sales............................ 84,237 78,837 167,257 157,528
---------- ---------- ---------- ----------
Gross profit............................. 63,811 49,126 118,914 87,738
---------- ---------- ---------- ----------
Operating expenses
Research and development............... 24,133 20,688 47,774 39,478
Marketing, general and
administrative...................... 26,012 22,851 49,126 43,036
Special charge......................... -- 1,008 -- 1,008
---------- ---------- ---------- ----------
Operating income......................... 13,666 4,579 22,014 4,216
Interest income and other expenses,
net.................................... 707 508 1,510 874
Interest expense......................... (2,043) (1,932) (4,048) (4,085)
---------- ---------- ---------- ----------
Income before provision for taxes
on income.............................. 12,330 3,155 19,476 1,005
Provision for taxes on income............ 2,993 200 4,778 200
---------- ---------- ---------- ----------
Net income............................... $ 9,337 $ 2,955 $ 14,698 $ 805
========== ========== ========== ==========
Net income per share..................... $ .25 $ .09 $ .40 $ .02
========== ========== ========== ==========
Weighted average common and common
equivalent shares outstanding.......... 37,599,995 34,306,877 37,201,208 34,091,579
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
1
<PAGE> 3
PART I (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS -- UNAUDITED
(THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 25,
1994 1993
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 57,113 $ 41,536
Liquid investments.............................................. 28,018 31,100
Accounts receivable, net of allowance for doubtful accounts and
customer returns of $2,550 ($2,250 at December 25, 1993)..... 84,799 70,666
Inventories:
Raw materials................................................ 6,147 8,831
Work-in-process.............................................. 39,761 39,178
Finished goods............................................... 6,614 14,103
--------- ----------
Total inventories............................................... 52,522 62,112
Deferred and refundable income taxes............................ 11,966 11,966
Prepaid expenses and other current assets....................... 5,463 5,066
--------- ----------
Total current assets.................................... 239,881 222,446
Property, plant and equipment, at cost............................ 467,310 412,693
Accumulated depreciation and amortization......................... (258,478) (228,767)
--------- ----------
Net property, plant and equipment............................ 208,832 183,926
Other assets...................................................... 6,083 5,851
--------- ----------
TOTAL ASSETS...................................................... $ 454,796 $412,223
========= ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE> 4
PART I (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS -- UNAUDITED (CONTINUED)
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 25,
1994 1993
-------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 48,551 $ 39,446
Accrued compensation and benefits................................ 20,863 15,762
Deferred income.................................................. 7,756 9,121
Other accrued liabilities........................................ 27,950 29,088
Current capital lease obligations................................ 9,175 8,314
Current portion of long-term debt................................ 7,445 6,292
-------- ----------
Total current liabilities................................ 121,740 108,023
Non-current capital lease obligations.............................. 5,844 10,944
Long-term debt..................................................... 88,293 74,911
Deferred income taxes.............................................. 5,837 5,837
Stockholders' equity:
Preferred Shares, $.01 par value................................. -- --
Common Stock, $.01 par value..................................... 361 351
Junior Common Stock, $.01 par value.............................. -- 2
Additional paid-in capital....................................... 226,559 221,013
Retained earnings (Accumulated deficit).......................... 6,162 (8,536)
Stockholders' notes receivable................................... -- (322)
-------- ----------
Total stockholders' equity............................... 233,082 212,508
-------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $454,796 $412,223
======== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 5
PART I (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS -- UNAUDITED
(THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JULY 1, JUNE 26,
1994 1993
-------- --------
INCREASE (DECREASE)
IN CASH
AND CASH EQUIVALENTS
<S> <C> <C>
Operating activities:
Net income......................................................... $ 14,698 $ 805
Adjustments to reconcile net income to net cash generated by
operations:
Write-off of in-process research & development.................. -- 1,008
Depreciation and amortization................................... 29,773 22,899
Changes in operating assets and liabilities:
Accounts receivable........................................... (14,133) (7,710)
Inventories................................................... 9,590 2,921
Accounts payable, accrued liabilities and deferred income..... 11,703 6,824
Other......................................................... (1,549) (1,402)
-------- --------
Net cash generated by operations........................... 50,082 25,345
-------- --------
Investing activities:
Purchases of property, plant and equipment......................... (35,463) (33,108)
Purchases of liquid investments.................................... (50,306) (12,959)
Proceeds from sales and maturities of liquid investment............ 53,388 --
Other.............................................................. (350) (716)
-------- --------
Net cash flow used for investing activities................ (32,731) (46,783)
-------- --------
Financing activities:
Payments on debt and capital lease obligations..................... (7,650) (7,302)
Issuance of Common Shares, net..................................... 5,876 2,001
-------- --------
Net cash flow used for financing activities................ (1,774) (5,301)
-------- --------
Net increase (decrease) in cash and cash equivalents................. 15,577 (26,739)
Cash and cash equivalents, beginning of period....................... 41,536 69,674
-------- --------
Cash and cash equivalents, end of period............................. $ 57,113 $ 42,935
======== ========
Supplemental disclosures:
Cash outflows for property, plant and equipment.................... $ 35,463 $ 33,108
Add: Secured equipment loans.................................... 17,946 --
Add: Capital lease obligations incurred......................... -- 4,479
-------- --------
Property, plant and equipment additions....................... $ 53,409 $ 37,587
======== ========
Interest paid...................................................... $ 4,218 $ 4,243
======== ========
Income taxes paid (refund), net.................................... $ 4,113 $ (46)
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 6
PART I (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
VLSI TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying interim consolidated condensed financial statements
have been prepared in conformance with generally accepted accounting principles,
consistent with those applied in the VLSI Technology, Inc. Annual Report on Form
10-K for the year ended December 25, 1993 (the 1993 Annual Report). This
Quarterly Report on Form 10-Q (Form 10-Q) should be read in conjunction with the
1993 Annual Report. The interim financial statements are unaudited, but reflect
all normal recurring adjustments which are, in the opinion of management,
necessary to a fair statement of results for the interim periods presented. The
results for the quarter and six-month period ended July 1, 1994 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 30, 1994.
2. Effective with the beginning of fiscal 1994, the Company changed its
fiscal year end from the last Saturday in December to the last Friday in
December. While most fiscal years consist of 52 weeks, fiscal 1994 will consist
of 53 weeks. The extra week is reflected in the first quarter of 1994, resulting
in 14 weeks for the quarter ended April 1, 1994 compared to 13 weeks for the
quarter ended March 27, 1993 and all other quarters presented.
3. The 1994 year-to-date tax provision reflects the benefit of tax credit
carryforwards.
4. The Company is a named defendant in a lawsuit filed by Texas Instruments
Incorporated (TI) in 1990 claiming patent infringement. For more information,
see Note 4 of Notes to Consolidated Financial Statements on pages 25 and 26 of
the Company's 1993 Annual Report and Item 1 in Part II of this Form 10-Q.
5. The Company entered into two new credit facilities during the quarter
ended July 1, 1994:
CREDIT AGREEMENT
in June 1994, a two-year Credit Agreement (the Credit Agreement) was
entered into with a syndicate of banks providing for borrowings of up to
$52,500,000 at various rates of interest. All borrowings under the Credit
Agreement are due no later than June 7, 1996. The Credit Agreement has various
covenants that preclude the Company from, among other things, paying dividends
and also limit the Company's ability to purchase its own stock, dispose of its
properties and make certain investments. The Company is required to maintain
certain financial ratios as defined in the Credit Agreement. The Credit
Agreement also calls for a variable limit on the Company's dollar amount of
capital spending. Annual commitment fees are charged on the unused portion of
the committed credit amount. Borrowings outstanding under the Credit Agreement
are unsecured. At July 1, 1994, the Company had no borrowings outstanding.
TERM LOAN
In June 1994, the Company entered into a Term Loan Agreement with a
financial institution. Under the agreement, payments of principal and interest
are to be made quarterly in arrears and amortized over a seven-year period.
Interest is fixed at the time of loan advance and is indexed based on seven-year
U.S. Treasury securities. The Term Loan Agreement does not specify any material
restrictive financial covenants and is secured by security interests in certain
capital equipment. At July 1, 1994, the Company had outstanding borrowings on
this Term Loan Agreement of $17.1 million.
6. The special charge of $1.0 million in the quarter ended June 26, 1993
represents a charge for purchased in-process research and development relating
to the acquisition of certain assets by COMPASS Design Automation, Inc.
(COMPASS), a Company subsidiary. The aggregate purchase price totaled $2.4
million, including the assumption of liabilities.
5
<PAGE> 7
PART I (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
VLSI TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
7. The results for the six months ended July 1, 1994 include a $2.5 million
reduction in research and development (R&D) expenditures reflecting
reimbursement by Intel Corporation (Intel) of R&D activities in accordance with
the Technology and Manufacturing Agreement of July 8, 1992, as amended. The
parties are currently modifying that agreement. VLSI has been informed of
Intel's desire to dispose of its equity ownership interest in VLSI. In
accordance with the terms of the Intel/VLSI Stock and Warrant Purchase Agreement
dated July 8, 1992, VLSI may be obligated to pay for certain costs, including
brokerage commissions or underwriters' discount, associated with the sale of
VLSI securities held by Intel. Such costs cannot be readily determined prior to
the sale of the securities. When known, the costs borne by VLSI would be applied
against the Company's equity as an element of the costs of the 1992 private
placement transaction with Intel. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" -- "Factors Affecting Future
Results" and -- "Liquidity and Capital Resources".
8. Effective December 26, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115 -- "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115), which creates certain classification categories
for such investments, based on the nature of the securities and the intent and
investment goals of the Company. FAS 115 has been adopted on a prospective
basis, and the financial statements of prior years have not been restated. The
cumulative effect of the change was not material.
6
<PAGE> 8
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS -- FIRST SIX MONTHS OF 1994 COMPARED TO THE FIRST SIX
MONTHS OF 1993
This Management's Discussion and Analysis of Financial Condition and
Results of Operations (MDA) should be read in conjunction with the MDA in the
1993 Annual Report.
The following table summarizes the Company's operating results for the
27-week, six-month period ended July 1, 1994 as compared to the 26-week,
six-month period ended June 26, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
--------------------------------------------------------
1994 1993
--------------------------------- --------------------
PERCENT PERCENT PERCENT
OF NET CHANGE OF NET
AMOUNTS REVENUES FROM 1993 AMOUNTS REVENUES
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues.......................... $286,171 100.0% 16.7% $245,266 100.0%
Cost of sales......................... 167,257 58.4 6.2 157,528 64.2
-------- -------- -------- --------
Gross margin.......................... 118,914 41.6 35.5 87,738 35.8
Research & development................ 47,774 16.7 21.0 39,478 16.1
Marketing, general and
administrative...................... 49,126 17.2 14.2 43,036 17.6
Special charge........................ -- -- * 1,008 0.4
-------- -------- -------- --------
Operating income...................... 22,014 7.7 422.2 4,216 1.7
Interest expense & other, net......... (2,538) 0.9 (21.0) (3,211) 1.3
Income taxes.......................... 4,778 1.7 * 200 0.1
-------- -------- -------- --------
Net income............................ $ 14,698 5.1 1725.8 $ 805 0.3
======== ======== ======== ========
</TABLE>
- - ---------------
* Not meaningful
The Company recorded net income of $14.7 million for the first half of
1994, compared to net income of $0.8 million in the comparable period of 1993.
The increase is primarily due to enhanced gross margins resulting from
manufacturing efficiencies, lower assembly costs and product mix. The first six
months of 1993 were adversely affected by a manufacturing process difficulty
that was isolated to a single manufacturing facility and affected a limited
number of customers. This issue was discovered late in the first quarter of
1993. No comparable adverse event was experienced during the first half of 1994.
Net revenues for the first six months of 1994 increased 16.7% from the
corresponding period of 1993, reflecting revenue increases between periods in
the Company's silicon product divisions. Net revenues from the Company's
application-specific standard products (ASSPs) for the 486-based personal
computer (PC) marketplace increased between the first six months of 1993 and the
first six months of 1994. Unit volumes shipped were higher in 1994 as compared
to 1993 and average sales prices of these devices increased due to the effect of
new products on the Company's sales mix. The Company's application-specific
integrated circuit (ASIC) net revenues increased in 1994 from the corresponding
period of 1993 despite a decrease in the Company's net revenues from Apple
Computer, Inc. (Apple). ASIC average sales prices have increased slightly in
1994 as compared to 1993 prices. Software net revenues have increased between
the periods, as COMPASS' library products have gained market acceptance.
International revenues, which include export sales, increased 10.0% over
the first half of 1993, but decreased as a percentage of revenues, accounting
for 46.0% of consolidated net revenues in the first half of 1994 compared to
48.8% in the first half of 1993. European revenues decreased 4.2% from the first
half of 1993 due to decreased unit volume shipments for the PC market. Export
sales, which are predominantly to the Asia-Pacific region, increased 21.3% from
the first half of 1993, reflecting an increase in units shipped for the portable
computer market as VLSI's customers utilize overseas manufacturing operations in
the Asia-Pacific
7
<PAGE> 9
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS -- FIRST SIX MONTHS OF 1994 COMPARED TO THE FIRST SIX
MONTHS OF 1993 -- (CONTINUED)
region. Sales to the Japan market increased by over 20% between the first six
months of 1993 and the first six months of 1994.
Gross margin as a percentage of net revenues increased to 41.6% in the
first half of 1994 from 35.8% in the first half of 1993. The increase was driven
primarily by better production yields, combined with lower assembly costs. The
Company continues to pursue die size reductions on its SCAMP(TM) IV devices in
order to reduce production costs. However, volume production of these devices
will be postponed until early 1995, pending the qualification of these lower
cost versions by the Company's customers. The Company also continues to seek to
reduce its manufacturing costs through enhanced yields on newer technologies,
smaller device geometries and selective equipment additions to remove production
bottlenecks. Future gross margins will depend in part upon the economic
environment, customer acceptance of new products, product functionality and
capabilities, changes in product mix and the effects of manufacturing cost
reduction activities.
The Company's gross margins are also affected by variations in
semiconductor manufacturing operations, including defect densities, scheduled
and unscheduled plant shutdowns and wafer yields. Depending upon the nature and
reasons for such variations, differences in cost can either be inventoried as
capitalized manufacturing variances and expensed as the related product is sold
(often in a subsequent quarter) or charged to cost of sales in the period
incurred. In general, material unusual, unfavorable variances are expensed in
the period in which incurred, while other variances are capitalized. As
mentioned above, cost of sales for the first half of 1993 included charges for
an isolated manufacturing process difficulty encountered during that period.
Total research and development expenditures, on a net basis, increased $8.3
million in the first half of 1994 compared to the same 1993 period. The increase
in research and development expenses primarily reflects development of new
products and technologies, including the Company's SuperCore(TM) SC590 Pentium-
compatible chip set, devices for wireless technologies and software for the
Electronic Design Automation market. The Company is continuing to invest in new
manufacturing technologies and future design and production capabilities in
geometries smaller than 0.6-micron. VLSI expects to continue to maintain its
emphasis on research and development investment. The special charge of $1.0
million in 1993 for in-process research and development reflects the second
quarter acquisition of certain assets by COMPASS.
The $6.1 million increase in marketing, general and administrative expenses
in the first half of 1994 over the first half of 1993 reflects an increase in
various costs, including sales costs due to higher sales volumes and increased
marketing activities. Marketing, general and administrative costs as a
percentage of net revenues have decreased between the periods, reflecting the
fact that these costs increased at a slower pace than net revenues over the same
period.
Interest expense and other, net, decreased to $2.5 million in the first
half of 1994 from $3.2 million in the comparable period a year ago. Interest
expense was substantially unchanged, reflecting a relatively consistent
weighted-average balance of loans and capitalized leases. Interest income
increased slightly between periods, reflecting the effect of slightly higher
interest rates and higher cash balances.
Both the 1994 and 1993 year-to-date tax provisions reflect benefits for tax
carryforwards. In both years, the utilization of operating loss and credit
carryforwards have been subject to alternative minimum tax limitations. The
provision for income taxes in the second half of 1994 will depend on the overall
profitability of the Company, as well as those countries in which profits and
losses are incurred.
8
<PAGE> 10
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -- SECOND QUARTER OF 1994 COMPARED TO THE SECOND QUARTER
OF 1993
The following table summarizes the Company's operating results for the
three-month period ended July 1, 1994 as compared to the three-month period
ended June 26, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
SECOND QUARTER
---------------------------------------------------------
1994 1993
--------------------------------- --------------------
PERCENT PERCENT PERCENT
OF NET CHANGE OF NET
AMOUNTS REVENUES FROM 1993 AMOUNTS REVENUES
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues......................... $148,048 100.0% 15.7% $127,963 100.0%
Cost of sales........................ 84,237 56.9 6.8 78,837 61.6
-------- -------- -------- --------
Gross margin......................... 63,811 43.1 29.9 49,126 38.4
Research & development............... 24,133 16.3 16.7 20,688 16.2
Marketing, general and
administrative..................... 26,012 17.6 13.8 22,851 17.8
Special charge....................... -- -- * 1,008 0.8
-------- -------- -------- --------
Operating income..................... 13,666 9.2 198.4 4,579 3.6
Interest expense & other, net........ (1,336) 0.9 (6.2) (1,424) 1.1
Income taxes......................... 2,993 2.0 * 200 0.2
-------- -------- -------- --------
Net income........................... $ 9,337 6.3 216.0 $ 2,955 2.3
======== ======== ======== ========
</TABLE>
- - ---------------
* Not meaningful
The Company earned a profit of $9.3 million in the second quarter of 1994,
more than tripling the $3.0 million profit posted in the second quarter of 1993.
The 1994 profit was driven by increased average sales prices for silicon devices
from the effect of new devices in the Company's sales mix, as well as strong
gross margin contributions from the sales of ASIC devices.
Net revenues in the second quarter of 1994 increased 15.7% from the
comparable 1993 period, reflecting higher net revenues for 486-based PC devices.
Net revenues from the sale of ASIC devices increased between the periods,
despite a decrease in net revenues from Apple. Software net revenues increased
due to focused COMPASS marketing efforts in Japan and North America, as well as
market acceptance of COMPASS library products.
Second quarter 1994 international revenues increased in terms of both
volume and percentage of revenues over the second quarter of 1993, primarily due
to increases in export sales. European revenues decreased 12.7% from the
comparable 1993 period due to lower unit volumes of devices for the PC market.
Export revenues, primarily from shipments to the Asia-Pacific area, increased
47.7% over the second quarter of 1993, due to a significant increase in
shipments of devices for the portable PC market.
Higher gross margins in the second quarter of 1994 were driven by enhanced
manufacturing efficiency in the form of better yields and lower costs for
assembly of certain high volume packages.
Research and development expenditures in the second quarter of 1994 were
higher in dollar amount compared to expenditures in the same 1993 period,
reflecting development program costs as previously described for the first half
of 1994. In the second quarter of 1993, VLSI expensed $1.0 million as a special
charge for in-process research and development projects associated with the
acquisition of certain assets.
Marketing, general and administrative expenses for the second quarter of
1994 increased by $3.2 million from the second quarter of the prior year,
reflecting increased costs associated with higher revenue levels.
9
<PAGE> 11
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -- SECOND QUARTER OF 1994 COMPARED TO THE SECOND QUARTER
OF 1993 (CONTINUED)
Interest expense and other, net, decreased to $1.3 million in the current
quarter from $1.4 million in the same period a year ago. Interest expense
increased, reflecting higher balances of loans and capitalized leases, while
interest income increased from slightly higher investment yields on relatively
higher cash balances.
FACTORS AFFECTING FUTURE RESULTS
The Company is making significant investments in research and development
of new products in 1994. New product development often requires long-term
forecasting of markets, market trends, development and implementation of new
processes and technologies and a substantial capital commitment. No assurance
can be given that the Company's product and process development efforts will be
successful, that new product introductions will achieve market acceptance or
that the market in question will develop. For example, the Company expended
considerable financial and technical resources during 1993 through the second
quarter of 1994 toward the development of its Polar(TM) product, a device
intended for the handheld computer market integrating Intel's 386SL(TM)
microprocessor. To date, the handheld market has developed far more slowly than
expected. This, along with the limited success of certain other handheld
computer devices, leads the Company to believe that significant uncertainty
exists as to the timing of revenue potential of the handheld market in general.
As a result, the Company and its partner in the Polar development effort, Intel,
have decided to limit production of the Polar product. To that end, the Company
and Intel are currently modifying the amended July 8, 1992 Technology and
Manufacturing Agreement between the companies.
As discussed in the 1993 Annual Report, the semiconductor industry has a
history of cyclicality and is characterized by shortening product life cycles,
continuous evolution of process technology, high fixed costs, additions of
manufacturing capacity in large increments, intense competition and wide
fluctuations in product supply and demand. The Company's products are
susceptible to pricing pressures and the Company continually attempts to pursue
cost reductions in the form of process enhancements and die size reductions in
order to maintain favorable gross margins. Future gross margins will also vary
with the general condition of the economy, customer acceptance of new
technologies and products, product functionality and capabilites, shifts in
product mix and the success of ongoing manufacturing cost reduction activities.
The Company, from time to time, may begin risk production of new products prior
to final internal and/or external qualification of such products. If these
products do not prove to be production-worthy, the Company could face the loss
of potentially significant future revenues from the devices and a corresponding
reduction in profitability. As an example of risk production, the Company has
begun to ramp production of its SuperCore SC590 chip set for Pentium-based
computer systems prior to the Company's full internal qualification.
Approximately two-thirds of the Company's net revenues for the second
quarter and first half of 1994 were derived from sales to its top 20 customers,
a large percentage of which are in the personal computer business. In addition,
shipments to a single customer in the personal computer business, Compaq
Computer Corporation (Compaq), accounted for 24% of net revenues during the
second quarter of 1994. Shipments to Compaq were up sharply from 1993, when they
accounted for less than 10% of the Company's net revenues for that year. The
personal computer market, from which the Company derives approximately half of
its net revenues, is volatile and subject to significant shifts in technologies
and demand as well as severe pricing pressures. As a result of this
concentration of its customer base, the Company's operating results would be
materially adversely affected by the loss of business from, or the cancellation
of orders by, any such customers. During the first half of 1994, the Company
continued to experience such a decrease in orders from Apple, which resulted in
a decrease in Apple net revenues to less than 10% of net revenues in the first
half of 1994, as compared to over 20% of net revenues in the first half of 1993.
10
<PAGE> 12
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
FACTORS AFFECTING FUTURE RESULTS (CONTINUED)
Other factors that may adversely affect VLSI's future results include
pending litigation and contingencies, environmental regulations and earthquakes.
(See the 1993 Annual Report for a more detailed discussion of Factors Affecting
Future Results.)
The status of the Company's pending material legal proceeding is set forth
in Item 1, Part II of this Form 10-Q. The Company cannot accurately predict the
eventual outcome of this matter with TI. Management believes the ultimate
outcome of this matter will not result in a material adverse effect on VLSI's
consolidated financial position or results of operations. An unfavorable outcome
could, however, have an adverse effect on VLSI's future business operations and
could be material to any particular quarter's results of operations. In
addition, the ongoing costs of defending lawsuits utilizes cash and management
resources.
LIQUIDITY AND CAPITAL RESOURCES
VLSI generates cash from operations, equipment financings and sales of its
securities. Principal uses of cash include purchases of capital equipment needed
for semiconductor manufacturing and engineering and payments of debt and lease
obligations.
At July 1, 1994, total cash, cash equivalents and liquid investments
increased $12.5 million from the 1993 fiscal year-end balance due to cash from
operations, loan borrowings and the timing of fixed asset purchases and payments
of debt and capital leases in the first half of 1994. Working capital increased
slightly, to $118.1 million at July 1, 1994, as compared to $114.4 million at
December 25, 1993.
During the 27-week, six-month period ended July 1, 1994, the Company
generated $50.1 million of cash from operations, a 98% increase over the $25.3
million of cash generated for the 26-week, six-month period ended June 26, 1993.
Accounts receivable were $14.1 million higher at July 1, 1994 than at December
25, 1993 reflecting higher sales volume. Inventory levels have declined $9.6
million from December 25, 1993 levels, as 1994 shipments of desktop PC and Apple
devices have depleted that inventory. Accounts payable and accrued liabilities
have increased by $11.7 million since December 25, 1993 as a result of the
timing of payments for the higher level of spending for fixed assets and for
increases in production volumes, as well as increases in accrued compensation
and benefits and other liabilities that reflect the timing of payments.
Cash used for investing activities was $32.7 million for the 27-week,
six-month period ended July 1, 1994, as compared to $46.8 million for the
26-week, six-month period ended June 26, 1993. VLSI invested $53.4 million in
property, plant and equipment during the first six months of 1994 compared to
$37.6 million in the comparable 1993 period. Capital additions during 1994 were
financed by cash and equipment loans. The 1994 and 1993 six-month investments in
property, plant and equipment included acquisition of equipment for sub-micron
wafer fabrication, upgrades to manufacturing and office facilities and computers
and software to support research and development activity. As part of second
quarter 1994 capital purchases, VLSI acquired the land and buildings associated
with the wafer fabrication and test areas at its San Jose, California
headquarters for approximately $6.0 million. The Company expects to continue to
utilize debt and/or lease financing for portions of its 1994 capital
expenditures.
Cash used for financing activities was $1.7 million in the first half of
1994 compared to $5.3 million in the same 1993 period. This change reflects
increased proceeds from the exercise of stock options under various employee
stock option plans. Unused committed credit facilities approximated $57.0
million at July 1, 1994.
VLSI currently estimates that total capital expenditures for 1994 will
exceed $100 million and will include expenditures for further increases in
0.6-micron wafer fabrication capability.
11
<PAGE> 13
PART I (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Intel, which owns 5.36 million shares, or 14.8%, of the Company's Common
Stock, and a warrant to purchase an additional 2.68 million shares of the
Company's Common Stock at an exercise price of $11.69 per share, elected in July
1994 to waive its right to maintain its percentage of equity ownership interest
in the Company's Common Stock and its right to have an observer attend meetings
of the Company's Board of Directors. Intel has also informed VLSI that Intel
desires to dispose of all of its equity ownership interests. In accordance with
the terms of the Intel/VLSI Stock and Warrant Purchase Agreement dated July 8,
1992, VLSI may be obligated to pay for certain costs, including brokerage
commissions or underwriters' discount, associated with the sale of VLSI
securities held by Intel. Such costs cannot be readily determined prior to the
sale of the securities. When known, the costs borne by VLSI would be applied
against the Company's equity balances as an element of the cost of the 1992
private placement transaction with Intel.
VLSI believes that its existing cash balances, together with cash flow from
operations and available credit facilities, will be sufficient to meet its
liquidity and capital expenditure needs through 1994. While the Company believes
that its current capital resources are sufficient to meet its near-term needs,
in order to meet its longer-term needs, VLSI continues to investigate the
possibility of generating financial resources through technology or
manufacturing partnerships, as well as from equity or debt financing based on
market conditions. However, as a result of Intel's desire to sell such a large
number of shares of Common Stock, VLSI may be effectively precluded from raising
capital through the sale of equity in the near term. There can be no assurance
that the Company will be able to obtain future financing when needed or on
favorable terms.
12
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 25, 1993 for discussions of certain pending legal
proceedings. Except as discussed below, there have been no material developments
in any of these matters since the filing referenced above.
TEXAS INSTRUMENTS
With respect to the TI actions against the Company and four other
defendants, in February 1992, the United States International Trade Commission
(ITC) affirmed the decision of the Administrative Law Judge that the Company's
old plastic encapsulation gating process infringed TI's patent, but found the
Company's newly developed process to be non-infringing. The U.S. Executive
Branch affirmed the order in the second quarter of 1992. The United States Court
of Appeal, for the Federal Circuit, affirmed the ITC decision in the first
quarter of 1993. In the first quarter of 1994, the parties filed cross motions
for summary judgment, which were denied in August 1994. A trial date for TI's
patent infringement action in the United States District Court for the Northern
District of Texas, Dallas Division, has been set for April 1995.
WALDRON ACTION
In December 1993, four civil class action complaints relating to the drop
in price of VLSI stock were filed in U.S. District Court, Northern District of
California, against the Company and certain of its officers and directors,
alleging violations of federal securities laws for alleged material
misrepresentations and omissions of facts concerning the Company's business. The
consolidated amended complaint, known as Waldron et al. vs. Fiebiger et al.,
Civ. No. C-93-20930-RMW (PVT) (N.D. Cal. filed March 9, 1994), was filed on
behalf of the named plaintiffs and all others who purchased the Company's stock
between June 28, 1993 and December 3, 1993. On April 25, 1994, the case was
dismissed with prejudice as a result of a stipulation entered into by all
parties. No consideration was paid.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on May 5,
1994 (the Meeting):
(b) The following directors were elected at the Meeting:
Pierre S. Bonelli
Robert P. Dilworth
James J. Kim
Alfred J. Stein
Horace H. Tsiang
13
<PAGE> 15
PART II (CONTINUED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
(c) The results of the vote on the matters voted upon at the Meeting are:
<TABLE>
<CAPTION>
(i) ELECTION OF DIRECTORS FOR WITHHELD
----------------------------------------------- ---------- --------
<C> <S> <C> <C>
Pierre S. Bonelli.............................. 33,153,104 262,555
Robert P. Dilworth............................. 33,156,224 259,435
James J. Kim................................... 33,164,453 251,206
Alfred J. Stein................................ 33,136,438 279,221
Horace H. Tsiang............................... 33,156,207 259,452
</TABLE>
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAINED NON-VOTES
---------- --------- --------- --------
<C> <S> <C> <C> <C> <C>
(ii) Approval of amendments to the
Directors' Stock Option
Plan......................... 29,760,917 3,375,369 279,373 1,970,173
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED
---------- ------- ---------
<C> <S> <C> <C> <C>
(iii) Ratification of the selection of
Ernst & Young to serve as auditors
for fiscal 1994.................... 33,182,240 83,907 149,512
</TABLE>
The foregoing matters are described in more detail in the Registrant's
definitive proxy statement dated March 23, 1994 relating to the Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- See Index to Exhibits on Page 16.
(b) Reports on Form 8-K -- None.
14
<PAGE> 16
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 thereunto duly authorized.
VLSI TECHNOLOGY, INC.
(Registrant)
<TABLE>
<S> <C>
Date August 10, 1994 By: /s/ GREGORY K. HINCKLEY
Gregory K. Hinckley
Vice President, Finance and
Chief Financial Officer
Date August 10, 1994 By: /s/ BALAKRISHNAN S. IYER
Balakrishnan S. Iyer
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)
</TABLE>
15
<PAGE> 17
VLSI TECHNOLOGY, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 1, 1994
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- - ------- ----------------------------------------------------------------------------------
<S> <C>
10.1* Credit Agreement dated June 6, 1994 between Continental Bank N. A., as Agent, and
the Registrant
10.2* Term Loan and Security Agreement dated June 17, 1994 and Promissory Notes dated
June 17 and June 30, 1994 between Heller Financial, Inc. and the Registrant
10.3 Acquisition and Participation Agreement and Escrow Instructions dated April 22,
1994 between Brazos Asset Management, Inc. and the Registrant
10.4 Letter dated July 18, 1994 from Intel Corporation to the Registrant waiving
certain rights under the Intel/VLSI Stock and Warrant Purchase Agreement dated
July 8, 1992
11.1 Calculation of Earnings Per Share
</TABLE>
- - ---------------
* Denotes a document for which SEC confidential treatment has been requested for
selected portions.
16
<PAGE> 1
EXHIBIT 10.1
_______________________________________________________________
$52,500,000
CREDIT AGREEMENT
dated as of June 6, 1994
among
VLSI TECHNOLOGY, INC.
THE LENDERS NAMED HEREIN,
and
CONTINENTAL BANK N.A.
as Agent
______________________________________________________________
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<PAGE> 2
The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS........................................... 1
1.1 Certain Defined Terms........................................................ 1
1.2 Other Definitional Provisions................................................ 14
1.3 Accounting and Financial Determinations...................................... 14
SECTION 2. THE COMMITMENTS............................................................ 15
2.1 Revolving Loan Commitment.................................................... 15
2.2 LC Commitment................................................................ 15
2.3 Commitments and Other Terms.................................................. 15
SECTION 3. THE LOANS.................................................................. 16
3.1 Various Types of Loans....................................................... 16
3.2 Notice of Borrowing.......................................................... 16
3.3 Funding...................................................................... 16
3.4 Funding Reliance............................................................. 17
3.5 Conversion and Continuation of Loans......................................... 17
3.6 Repayment of Revolving Loans; Revolving Notes................................ 18
3.7 Recordkeeping................................................................ 18
SECTION 4. THE LETTERS OF CREDIT...................................................... 19
4.1 Request for Issuance of Letters of Credit.................................... 19
4.2 Expiration and other Terms................................................... 19
4.3 Participation................................................................ 19
4.4 Notification of Demand for Payment........................................... 20
4.5 Funding by Issuing Lender.................................................... 20
4.6 Non-Conforming Demand For Payment............................................ 20
4.7 Return of Letter of Credit................................................... 20
4.8 Reimbursement Agreement of the Borrower...................................... 21
4.9 Funding By Lenders........................................................... 21
4.10 Return of Funds Related to Non-Conforming Demand............................ 22
4.11 Obligation to Reimburse for or Participate in Letter of Credit Payments..... 22
4.12 Mandatory Payment to Agent of LC Obligations................................ 23
SECTION 5. INTEREST AND FEES, ETC..................................................... 23
5.1 Revolving Loan Interest Rates................................................ 23
5.2 Default Interest Rate........................................................ 25
5.3 Interest Payment Dates....................................................... 25
5.4 Interest Periods............................................................. 25
5.5 Setting and Notice of Rates.................................................. 25
5.6 Computation of Interest...................................................... 26
5.7 Fees......................................................................... 26
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 6. REDUCTION OR TERMINATION OF THE COMMITMENTS; PAYMENTS AND PREPAYMENTS...... 28
6.1 Voluntary Reduction or Termination of the Revolving Loan Commitments.............. 28
6.2 Voluntary Reduction or Termination of the LC Commitments.......................... 28
6.3 Voluntary Prepayments............................................................. 29
6.4 Mandatory Prepayments............................................................. 29
6.5 Making of Payments................................................................ 29
6.6 Application of Payments........................................................... 29
6.7 Due Date Extension................................................................ 30
6.8 Sharing of Payments............................................................... 30
6.9 Setoff............................................................................ 31
6.10 Net Payments..................................................................... 31
SECTION 7. CHANGES IN CIRCUMSTANCES................................................... 32
7.1 Increased Costs................................................................... 32
7.2 Change in Rate of Return.......................................................... 33
7.3 Basis for Determining Interest Rate Inadequate or Unfair.......................... 33
7.4 Changes in Law Rendering Certain Loans Unlawful................................... 34
7.5 Funding Losses.................................................................... 35
7.6 Right of Lenders to Fund Through Other Offices.................................... 35
7.7 Discretion of Lenders as to Manner of Funding..................................... 35
7.8 Conclusiveness of Statements; Survival of Provisions.............................. 36
SECTION 8. REPRESENTATIONS AND WARRANTIES............................................. 36
8.1 Organization, etc................................................................. 36
8.2 Authorization..................................................................... 36
8.3 No Conflict....................................................................... 36
8.4 Governmental Consents............................................................. 37
8.5 Validity.......................................................................... 37
8.6 Financial Statements.............................................................. 37
8.7 Material Adverse Change........................................................... 37
8.8 Litigation and Contingent Obligations............................................. 37
8.9 Liens............................................................................. 37
8.10 Subsidiaries..................................................................... 37
8.11 Pension and Welfare Plans........................................................ 37
8.12 Investment Company Act........................................................... 38
8.13 Public Utility Holding Company Act............................................... 38
8.14 Margin Regulation................................................................ 38
8.15 Taxes............................................................................ 38
8.16 Accuracy of Information.......................................................... 39
8.17 Environmental Warranties......................................................... 39
8.18 Proceeds......................................................................... 41
8.19 Insurance........................................................................ 41
8.20 Securities Laws.................................................................. 41
8.21 Governmental Authorizations...................................................... 41
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 9. AFFIRMATIVE COVENANTS...................................................... 41
9.1 Reports, Certificates and Other Information....................................... 41
9.2 Corporate Existence; Foreign Qualification........................................ 45
9.3 Books, Records and Inspections.................................................... 45
9.4 Maintenance of Properties and Insurance........................................... 45
9.5 Taxes............................................................................. 46
9.6 Pension Plans and Welfare Plans................................................... 46
9.7 Compliance with Laws.............................................................. 46
9.8 Maintenance of Permits............................................................ 46
9.9 Environmental Compliance.......................................................... 46
SECTION 10. NEGATIVE COVENANTS........................................................ 46
10.1 Limitation on Indebtedness....................................................... 47
10.2 Liens............................................................................ 47
10.3 Consolidation, Merger, etc....................................................... 50
10.4 Asset Disposition, etc........................................................... 50
10.5 Restricted Payments.............................................................. 51
10.6 Investments...................................................................... 52
10.7 Change of Control................................................................ 54
10.8 Subordinated Debt................................................................ 54
10.9 Take or Pay Contracts............................................................ 54
10.10 Regulations G and U............................................................. 54
10.11 Subsidiaries.................................................................... 55
10.12 Other Agreements................................................................ 55
10.13 Business Activities............................................................. 55
10.14 Transactions with Affiliates.................................................... 55
10.15 Contingent Obligations.......................................................... 56
SECTION 11. FINANCIAL COVENANTS....................................................... 56
11.1 Quick Ratio...................................................................... 56
11.2 Leverage Ratio................................................................... 57
11.3 Minimum Profitability............................................................ 57
11.4 Fixed Charge Coverage Ratio...................................................... 57
11.5 Capital Expenditures............................................................. 57
11.6 Consolidated Tangible Net Worth.................................................. 57
11.7 Cash and Cash Equivalents........................................................ 58
SECTION 12. CONDITIONS................................................................ 58
12.1 Conditions to Effectiveness...................................................... 58
12.2 All Loans and Letters of Credit.................................................. 59
SECTION 13. EVENTS OF DEFAULT AND THEIR EFFECT........................................ 60
13.1 Events of Default................................................................ 60
13.2 Effect of Event of Default....................................................... 63
SECTION 14. THE AGENT................................................................. 63
14.1 Authorization and Action......................................................... 63
14.2 Liability of the Agent........................................................... 64
14.3 Continental and Affiliates....................................................... 64
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14.4 Lender Credit Decision........................................................... 65
14.5 Indemnification.................................................................. 65
14.6 Successor Agent.................................................................. 65
SECTION 15. ASSIGNMENTS AND PARTICIPATIONS............................................ 66
15.1 Assignments...................................................................... 66
15.2 Participations................................................................... 67
15.3 Confidentiality.................................................................. 68
15.4 Foreign Transferees.............................................................. 68
SECTION 16. MISCELLANEOUS............................................................. 69
16.1 Waivers and Amendments........................................................... 69
16.2 Notices.......................................................................... 70
16.3 Payment of Costs and Expenses.................................................... 70
16.4 General Indemnity................................................................ 71
16.5 Subsidiary References............................................................ 71
16.6 Captions......................................................................... 72
16.7 Governing Law.................................................................... 72
16.8 Counterparts..................................................................... 72
16.9 SUBMISSION TO JURISDICTION; WAIVER OF VENUE...................................... 72
16.10 WAIVER OF JURY TRIAL............................................................ 73
16.11 Successors and Assigns.......................................................... 73
</TABLE>
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<PAGE> 6
SCHEDULES AND EXHIBITS
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I Schedule of Lenders and Percentages-Section 1.1
SCHEDULE II Contingent Obligations-Sections 8.8, 10.15
SCHEDULE III Subsidiaries-Section 8.10
SCHEDULE IV ERISA-Section 8.11
SCHEDULE V Environmental Matters-Section 8.17
SCHEDULE VI Indebtedness-Section 10.1
SCHEDULE VII Liens-Section 10.2
SCHEDULE VIII Investments-Section 10.6
EXHIBITS
- - --------
EXHIBIT A Form of Revolving Note-Section 1.1
EXHIBIT B Form of Borrowing Request-Section 3.2
EXHIBIT C Form of Continuation/Conversion Notice-Section 3.5
EXHIBIT D Form of Compliance Certificate-Section 9.1.3
EXHIBIT E [ ]
EXHIBIT F-1 Form of Opinion of Heller, Ehrman, White &
McAuliffe, counsel to the Borrower and the
Domestic Subsidiaries-Section 12.1.3
EXHIBIT F-2 Form of Opinion of Thomas F. Mulvaney, General
Counsel to the Borrower and the Subsidiaries -
Section 12.1.3
EXHIBIT G Form of Officer's Certificate-Section 12.1.4
EXHIBIT H Form of Assignment Agreement-Section 15.1
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
Complete document separately filed with the Securities and Exchange Commission.
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<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 6, 1994, among VLSI
Technology, Inc., a Delaware corporation (herein called the "Borrower"), the
lenders party hereto (herein, together with any Eligible Assignees thereof,
collectively called the "Lenders" and each individually called a "Lender"), and
Continental Bank N.A. (herein called "Continental"), as agent for the Lenders
(herein, in such capacity, together with any successor thereto in such
capacity, called the "Agent").
WHEREAS, the Borrower wishes to be able to borrow funds from
the Lenders from time to time and subject to the terms and conditions set forth
herein; and
WHEREAS, the Lenders are willing to make loans and issue or
participate in the issuance of letters of credit, all subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affected Lender" - see Section 7.4.
"Affiliate" of any Person shall mean any other Person (other than, in
the case of the Borrower or any of its Subsidiaries, a Subsidiary) which,
directly or indirectly, controls, is controlled by or is under common control
with such Person (excluding any trustee under, or any commitment with
responsibility for administering, any Pension Plan). A Person shall be deemed
to be "controlled by" any other Person if such other Person possesses, directly
or indirectly, power (i) to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of directors or
managing general partners; or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agent" - see Preamble.
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"Agreement" shall mean this Credit Agreement, as hereafter amended,
modified, restated, refinanced, refunded or renewed from time to time in whole
or in part.
"Alternate Reference Rate" shall mean, for any day, a fluctuating rate
per annum equal to the greater of (i) the Reference Rate or (ii) a rate per
annum (rounded upward to the next higher 1/8 of 1% if not already an integral
multiple of 1/8 of 1%) equal to the Federal Funds Rate in effect at the
commencement of business on such day plus .5% per annum.
"Assignment Agreement" - see Section 15.1.
"Authorized Officer" shall mean the President, any Vice President, the
Chief Financial Officer and the Assistant Treasurer.
"Base Rate Loan" shall mean any Loan which bears interest at or by
reference to the Alternate Reference Rate.
"Beneficiary" shall mean the beneficiary under any Letter of Credit.
"Borrower" - see Preamble.
"Borrowing" shall mean a borrowing hereunder consisting of Revolving
Loans made to the Borrower at the same time by the Lenders pursuant to Section
2. A Borrowing may be a Base Rate Borrowing or a Fixed Rate Borrowing.
"Borrowing Request" - see Section 3.2.
"Business Day" shall mean: any day of the year on which banks are
open for business in Chicago and San Francisco; and in the case of a Business
Day which relates to a Fixed Rate Loan, any day of the year on which banks are
open for business in Chicago, San Francisco and New York and on which dealings
are carried on in the interbank eurodollar market.
"Capitalized Lease" shall mean, with respect to any Person, any lease
of (or other agreement conveying the right to use) any personal property by
such Person which, in conformity with GAAP, is accounted for as a capitalized
lease on the balance sheet of such Person.
"Capitalized Lease Liabilities" shall mean with respect to any Person,
all rental payment obligations of such Person under any Capitalized Lease, and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount
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thereof, determined in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"CD Loan" shall mean any Loan which bears interest at a rate
determined with reference to the CD Rate (Reserve Adjusted).
"CD Rate" shall mean, with respect to each Interest Period for a CD
Loan, the rate of interest determined by the Agent to be the average (rounded
upward, if necessary, to the nearest 1/100 of 1%) of the prevailing bid rates
per annum at or about the time of determination of the CD Rate on the first day
of such Interest Period for the purchase by certificate of deposit dealers in
New York or Chicago of recognized standing from the Agent at face value of
certificates of deposit issued by the Agent in an amount approximately equal or
comparable to the amount of such CD Loan and having a maturity comparable to
such Interest Period.
"CD Rate (Reserve Adjusted)" shall mean, with respect to any CD Rate
Loan for any Interest Period, a rate per annum (rounded upward, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following formula:
<TABLE>
<S> <C> <C>
CD Rate = CD Rate + FDIC
----------------------------
(Reserve Adjusted) 1-CD Rate Reserve Percentage Assessment Rate
</TABLE>
"CD Rate Reserve Percentage" shall mean, with respect to any CD Loan
for any Interest Period, a percentage (expressed as a decimal) equal to the
daily reserve requirements (including all basic, supplemental, marginal and
other reserves), as specified under Regulation D of the Federal Reserve Board,
or any other regulation of the Federal Reserve Board which prescribes reserve
requirements applicable to non-personal time deposits as presently defined in
Regulation D, as then in effect, as applicable to the class of banks of which
the Agent is a member, on deposits of the type used as a reference in
determining the CD Rate (Reserve Adjusted) and having a maturity approximately
equal to such Interest Period.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended.
"CERCLIS" shall mean the Comprehensive Environmental Response
Compensation Liability Information System List.
"Charges" - see Section 6.10.
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"Class One Cash Equivalents" means (i) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (ii)
certificates of deposit, eurodollar time deposits, overnight bank deposits,
bankers' acceptances and repurchase agreements of any Lender or any other
commercial bank whose unsecured long-term debt obligations are rated at least
A-1 by Standard & Poor's Corporation or A3 by Moody's Investors Service, Inc.
having maturities of one year or less from the date of acquisition, and (iii)
commercial paper or other securities with maturities from the date of the
acquisition thereof of one year or less and in each case rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc., or
carrying an equivalent rating by a nationally recognized rating agency, if both
of the two named rating agencies cease publishing ratings of investments. The
total Dollar amount of Class One Cash Equivalents at any time outstanding shall
be calculated by using the fair market value of such Class One Cash Equivalents
as of such date as quoted by the Wall Street Journal, if so quoted, and if not
so quoted, as determined in good faith by the Borrower.
"Class Two Cash Equivalents" means any security or other financial
instrument not issued by a Subsidiary or Affiliate which does not constitute a
Class One Cash Equivalent. The total Dollar amount of Class Two Cash
Equivalents at any time outstanding shall be calculated by using the fair
market value of such Class Two Cash Equivalents as of such date as quoted by
the Wall Street Journal, if so quoted, and if not so quoted, as determined in
good faith by the Borrower.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial LC Commitment Fee" - see Section 5.7(c).
"Commitment Fee" - see Section 5.7(a).
"Commitment(s)" - see Section 2.3.
"COMPASS" shall mean COMPASS Design Automation, Inc., a Delaware
corporation.
"Compliance Certificate" - see Section 9.1.3.
"Consolidated Capital Expenditures" shall mean, for any period, the
capital expenditures of the Borrower and its Subsidiaries for such period, as
the same are (or would in accordance with GAAP be) set forth in the
consolidated statement
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of cash flows of the Borrower and its Subsidiaries for such period.
"Consolidated Quick Ratio" - see Section 11.1.
"Consolidated Tangible Net Worth" shall mean the consolidated
shareholder's equity of the Borrower and its Subsidiaries less the amount of
any intangible assets.
"Continental" shall mean Continental Bank N.A., a national banking
association having its principal place of business at 231 South LaSalle Street,
Chicago, Illinois 60697, and any successor thereto, in its individual capacity.
"Contingent Obligation" shall mean, with respect to any Person at any
date, without duplication: (i) any obligations with respect to undrawn letters
of credit issued for the account of such Person; (ii) any Hedging Obligations
of such Person; and (iii) any agreement, undertaking or arrangement by which
such Person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide
funds for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the debt, obligation or other
liability of any other Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. As of any date of
determination, the amount of any Person's obligation under any Contingent
Obligation shall (subject to any limitation set forth therein) be deemed to be,
with respect to clause (i) hereof, the undrawn face amount of such letter of
credit; with respect to clause (ii) hereof, the notional amount of such Hedging
Obligation; and with respect to clause (iii) hereof, the outstanding principal
amount of the debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" - see Section 3.5.
"Controlled Group" shall mean all members of a group of corporations
and all members of a group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under section 414(b) or section 414(c) of the
Code. For purposes of this definition, the term Borrower shall be deemed to
include any and all Domestic Subsidiaries of the Borrower.
"Convertible Subordinated Debt" shall mean those certain 7%
Convertible Subordinated Debentures due May 1, 2012.
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"Default" shall mean any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"Domestic Subsidiary" shall mean any Subsidiary which is organized
under the laws of a state or other U.S. jurisdiction.
"EBITDA" - see Section 11.4.
"Effective Date" shall mean the date of this Agreement as set forth in
the Preamble.
"Eligible Assignee" shall mean, in the case of the Revolving Loan
Commitments, Revolving Notes, LC Commitments or Letters of Credit, any bank
which at the time of any related assignment has a commercial paper rating of at
least A-1 or the equivalent by Standard & Poor's Corporation or P-1 or the
equivalent by Moody's Investors Service, Inc. and which meets the requirements
of Section 15.4, if applicable.
"Environmental Laws" shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
common law and consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Eurocurrency Reserve Percentage" shall mean, with respect to any
Eurodollar Loan for any Interest Period, a percentage (expressed as a decimal)
equal to the daily average during such Interest Period, as prescribed by the
Federal Reserve Board, for determining the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other reserves)
applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other
then-applicable regulation of the Federal Reserve Board which prescribes
reserve requirements applicable to "Eurocurrency liabilities," as defined in
Regulation D, as applicable to the class of banks of which the Agent is a
member. For purposes of this Agreement, any Eurodollar Loan hereunder shall be
deemed to be "Eurocurrency liabilities," as defined in Regulation D, and, as
such, shall be deemed to be subject to such reserve requirements without the
benefit of, or credit for, proration,
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exceptions or offsets which may be available to the Agent or any Lender from
time to time under Regulation D.
"Eurodollar Loan" shall mean any Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, the rate of interest equal to the average (rounded upward,
if necessary, to the next higher 1/16 of 1%) rate per annum at which Dollar
deposits in immediately available funds are offered to the Lending Office of
Continental two Business Days prior to the beginning of such Interest Period by
prime banks in the interbank eurodollar market as at or about the relevant
local time of such Lending Office, for delivery on the first day of such
Interest Period, for the number of days comprised therein and in an amount
equal or comparable to the amount of the Fixed Rate Loan of the Agent for such
Interest Period. As used herein, "relevant local time" shall mean 11:00 A.M.,
London time, when the Lending Office of Continental is located in Europe, or
10:00 A.M., Chicago time, when such Lending Office is located in North America
or otherwise outside of Europe.
"Eurodollar Rate (Reserve Adjusted)" shall mean, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
<TABLE>
<S> <C> <C>
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
</TABLE>
"Event of Default" shall mean any of the events described in Section
13.1.
"Facility Fee" - see Section 5.7(b).
"FDIC Assessment Rate" shall mean, with respect to any CD Loan for any
Interest Period, the annual assessment rate (rounded upward, if necessary, to
the nearest 1/100 of 1%) actually incurred by the Agent to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of the Agent in the United
States of America during the most recent period for which such rate has been
determined prior to the commencement of such Interest Period, as adjusted as
hereinafter provided. If the annual assessment rate for the Federal Deposit
Insurance Corporation's (or any successor's) insuring such time deposits is
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scheduled to change during such Interest Period from that which was in effect
during the most recent period for which such rate has been determined prior to
the commencement of such Interest Period, the FDIC Rate shall be the weighted
average (rounded upward, if necessary, to the nearest 1/100 of 1%) of the
annual assessment rate in effect during such most recent period and the revised
annual assessment rate taking effect during such Interest Period. The Agent's
determination of the FDIC Assessment Rate with respect to any CD Loan for any
Interest Period shall be conclusive in the absence of manifest error.
"Federal Funds Rate" shall mean at any time an interest rate per annum
equal to the weighted average of the rates for overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day for such transactions received by
the Agent from three Federal funds brokers of recognized standing selected by
it, it being understood that the Federal Funds Rate for any day which is not a
Business Day shall be the Federal Funds Rate for the next preceding Business
Day.
"Financial LC Commitment Fee" - see Section 5.7(c).
"Financial Letters of Credit" means any Letter of Credit determined by
the Issuing Lender to be a "financial guaranty-type standby letter of credit"
as defined in footnote 13 to Appendix A to the Risk Based Capital Guidelines
issued by the Comptroller of the Currency.
"Fiscal Quarter" or "FQ" shall mean any fiscal quarter of a Fiscal
Year.
"Fiscal Year" or "FY" shall mean any period of twelve consecutive
calendar months ending (i) with respect to calendar year 1994 and thereafter,
on the last Friday of December; (ii) with respect to calendar years 1990
through 1993, the last Saturday of December; and (iii) with respect to all
calendar years preceding 1990, the last Sunday of December; references to a
Fiscal Year with a number corresponding to any calendar year (e.g., the "1994
Fiscal Year") refer to the Fiscal Year ending on the last Friday, Saturday or
Sunday, as applicable, of December, occurring during such calendar year.
"Fixed Rate Loans" - see Section 3.1.
"Foreign Subsidiary" shall mean any Subsidiary organized under the
laws of a non-U.S. jurisdiction.
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"GAAP" - see Section 1.3.
"Hazardous Material" shall mean: (i) any "hazardous substance," as
defined by CERCLA; (ii) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended; (iii) any petroleum product; or (iv)
any pollutant or contaminant or hazardous, dangerous or toxic chemical,
material or substance within the meaning of any other applicable federal, state
or local law, regulation, ordinance or requirement (including consent decrees
and administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended or hereafter amended.
"Hedging Obligation" means all obligations arising under any interest
rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designated to
protect a Person against fluctuations in interest rates, currency exchange
rates or commodity prices.
"Indebtedness" shall mean, with respect to any Person at any date,
without duplication: (i) all obligations of such Person with respect to
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments including, without limitation,
all obligations comprising Subordinated Debt of such Person; (iii) all
reimbursement obligations in respect of letters of credit, issued for the
account of such Person, following any draw under such letters of credit, if not
paid when due; (iv) all obligations in respect of bankers' acceptances issued
for the account of such person after designation of, and delivery to, a payee;
(v) all Capitalized Lease Liabilities of such Person; and (vi) whether or not
included as liabilities in accordance with GAAP, obligations secured by a Lien
on property owned or being purchased by such Person (including obligations
arising under conditional sales or other title retention agreements) whether or
not such obligations shall have been assumed by such Person or are limited in
recourse.
"Interest Period" - see Section 5.4.
"Investment" shall mean any investment in any Person, including,
without limitation, whether by means of equity purchase, capital contribution
or loan.
"Issuing Lender" shall mean Continental in its capacity as the issuer
of Letters of Credit for the Borrower's account pursuant to the terms of this
Agreement.
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"LC Administrative Fees" - see Section 5.7(d).
"LC Application" shall mean a letter of credit application in the form
then used by Continental for the type of letter of credit required.
"LC Commitment(s)" - see Section 2.2.
"LC Commitment Fees" means collectively, the Financial LC Commitment
Fee, the Non-Financial LC Commitment Fee and the Commercial LC Commitment Fee.
"LC Obligations" shall mean any and all obligations of every
description of the Borrower in connection with the Letters of Credit issued
pursuant to this Agreement, including without limitation all reimbursement
obligations (whether absolute or contingent) under any LC Application, and all
obligations in respect of related fees or expenses.
"Lenders" or "Lender" - see Preamble.
"Lending Office" shall mean, with respect to any Lender, any office
designated by such Lender in its sole discretion beneath its signature hereto
(or in an Assignment Agreement) or otherwise from time to time by written
notice to the Borrower and the Agent, as a Lending Office for purposes
hereunder. A Lender may designate separate Lending Offices for the purposes of
making, maintaining or continuing Base Rate Loans, CD Rate Loans or Eurodollar
Rate Loans and, with respect to Eurodollar Rate Loans, such Lending Office may
be a foreign branch or an Affiliate of such Lender or such Lender's holding
company; provided that any such Lending Office shall meet the requirements of
Section 15.4(a).
"Letters of Credit" - see Section 2.2.
"Leverage Ratio" shall mean the ratio of (i) the Borrower's total
consolidated liabilities plus the undrawn face amount of all outstanding
letters of credit issued for the account of the Borrower or any Subsidiary to
(ii) Consolidated Tangible Net Worth.
"Liabilities" shall mean all obligations of the Borrower to the
Lenders, the Issuing Lender and the Agent howsoever created, arising or
evidenced, whether direct or indirect, joint or several, absolute or
contingent, or now or hereafter existing, or due or to become due, which arise
out of or in connection with this Agreement, the Revolving Notes, the Letters
of Credit or the other Loan Documents.
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"Lien" shall mean any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement (intended as security),
encumbrance, lien (statutory or other), claim or other priority or preferential
arrangement (intended as security) of any kind or nature whatsoever.
"Litigation" shall mean any litigation, proceeding (including without
limitation any governmental proceeding or arbitration proceeding), claim,
lawsuit, and/or investigation pending or threatened in writing against or
involving the Borrower or any Subsidiary or any of its or their businesses or
operations.
"Loan Documents" shall mean this Agreement, the Revolving Notes, the
LC Applications, the Letters of Credit and [
] and any and all other documents or instruments furnished or required
to be furnished pursuant to Section 12, as the same may be amended or modified
from time to time.
"Loans" - see Section 2.3.
"Material Adverse Change" or "Material Adverse Effect" shall mean any
change, event, action, condition or effect which individually or in the
aggregate (i) impairs the validity or enforceability of this Agreement (other
than Section 16.10), or any other Loan Document in any material respect, or
(ii) materially and adversely affects the current or future consolidated
business, operations, or financial condition of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower and its
Subsidiaries to perform their respective obligations under this Agreement and
the other Loan Documents.
"Material Litigation" or "Material Litigation Development" shall mean
any Litigation, or development in any Litigation, as the case may be (i) which
involves this Agreement, any Loan Document or other transactions contemplated
hereby or thereby, or (ii) which is reasonably likely to have a Material
Adverse Effect.
"Non-Financial LC Commitment Fee" - see Section 5.7(c).
"Non-Financial Letters of Credit" means any standby Letter of Credit
other than a Financial Letter of Credit.
"Pension Plan" shall mean a "pension plan," as such term is defined in
section 3(2) of ERISA (including a multiemployer plan
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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as defined in section 4001(a)(3) of ERISA), to which the Borrower or any
corporation, trade or business that is, along with the Borrower, a member of a
Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA. For purposes of this
definition, the term Borrower shall be deemed to include any and all
Subsidiaries of the Borrower.
"Percentage" shall mean, relative to any Lender, the percentage set
forth opposite such Lender's name onSchedule I (as such Percentage may be
adjusted from time to time pursuant to Assignment Agreement(s) executed by such
Lender and its Eligible Assignee) and delivered pursuant to Section 15.1.
"Permitted Liens" - seeSection 10.2.
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Quarterly Payment Date" shall mean the last day of each March, June,
September and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Reference Rate" shall mean, at any time, the rate of interest then
most recently announced by the Agent as its Reference Rate. For purposes of
this Agreement, each change in any interest rate due to a change in the
Reference Rate shall take effect on the effective date of the change in the
Reference Rate. The Reference Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
The Lenders may make commercial loans or other loans at rates of interest at,
above or below the Reference Rate.
"Release" shall mean a "release," as such term is defined in CERCLA.
"Reportable Event" shall have the meaning assigned to such term in
ERISA.
"Required Lenders" shall mean Lenders having at least 66-2/3% or more
of the Commitments, or if the Commitments have terminated or expired, 66-2/3%
of the aggregate Loans and LC Obligations outstanding at such time.
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"Restricted Subsidiary" shall mean any (i) Domestic Subsidiary and
(ii) any Foreign Subsidiary which the Borrower has designated, in writing, as
being restricted, [
]
"Revolving Loan(s)" - see Section 2.1.
"Revolving Loan Commitment(s)" - see Section 2.1.
"Revolving Note" shall mean a promissory note, substantially in the
form of Exhibit A with blanks appropriately completed in conformity herewith,
evidencing the Revolving Loans of any Lender.
"SEC" shall mean the Securities and Exchange Commission (or any
governmental authority succeeding to its functions).
"Significant Subsidiary" shall mean any Subsidiary which would be a
"significant subsidiary" under either clause (2) or clause (3) of the
definition of "significant subsidiary" in Rule 1-02 of Regulation S-X under the
Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, as
such Regulation is in effect on the date hereof, assuming that the Borrower is
the "registrant" referred to in such definition.
"Subordinated Debt" shall mean Indebtedness having payment terms and
other terms, and subordinated in form and substance, satisfactory to the
Required Lenders.
"Subsidiary" shall mean any Person (other than an individual) of which
the Borrower and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares of stock, partnership units or other equity
interests as have more than 50% of the ordinary voting power for the election
of directors or other managers of such Person; notwithstanding the foregoing,
except for purposes of financial reporting and computation of the financial
covenants set forth herein (i) ComAtlas, S.A., a French corporation, shall not
be deemed a "Subsidiary" hereunder and (ii) the Required Lenders may from time
to time in writing deem other Persons not to be "Subsidiaries" hereunder.
[ ]
"Taxes" shall mean all taxes of any nature whatsoever and however
denominated, including, without limitation, excise, import, governmental fees,
duties and all other charges, as well as additions to tax, penalties and
interest thereon, imposed by
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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any government or instrumentality, whether federal, state, local, foreign or
other.
"Termination Date" shall mean the earlier of (i) the second
anniversary of the date hereof, or (ii) the date of termination in whole of the
Commitments pursuant to Sections 6.1, 6.2 and 13.2.
"Transferee" - see Section 15.4.
"Type of Loan or Borrowing" - see Section 3.1. The various Types of
Loans or Borrowings under this Agreement are as follows: Base Rate Loans or
Borrowings and Fixed Rate Loans or Borrowings.
"Welfare Plan" shall mean a "welfare plan," as such term is defined in
section 3(1) of ERISA.
SECTION 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
above-defined meanings when used in any other Loan Document, or any
certificate, report or other document made or delivered pursuant to
this Agreement, unless the context therein shall clearly otherwise
require.
(b) The words "hereof," "herein," "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(c) The words "amended or modified" when used in this
Agreement or any other Loan Document shall mean with respect to this
Agreement or any other Loan Document such document as from time to
time, in whole or in part, amended, modified, supplemented, restated
or renewed.
(d) Unless otherwise specified, in the computation of periods
of time in this Agreement from a specified date to a later specified
date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding."
SECTION 1.3 Accounting and Financial Determinations. For purposes of
this Agreement, unless otherwise specified, all accounting terms used herein or
in any other Loan Document shall be interpreted, all accounting determinations
and computations hereunder or thereunder shall be made, and all financial
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statements required to be delivered hereunder or thereunder shall be prepared
in accordance with, those generally accepted accounting principles ("GAAP")
applied in the preparation of the financial statements referred to in Section
8.6.
SECTION 2. THE COMMITMENTS
Subject to the terms and conditions of this Agreement and relying on
the representations and warranties herein set forth:
SECTION 2.1 Revolving Loan Commitment. Each of the Lenders,
severally and for itself alone, agrees to make loans (herein collectively
called "Revolving Loans" and individually called a "Revolving Loan") to the
Borrower on a revolving basis from time to time before the Termination Date in
such Lender's Percentage of such aggregate amounts as the Borrower may from
time to time request from all Lenders. The aggregate principal amount of
Revolving Loans which any Lender shall be committed to have outstanding to the
Borrower, when added to the amount of such Lender's participation in the
Letters of Credit issued and outstanding pursuant to Section 2.2 or drawn and
not reimbursed pursuant to Section 4.8, shall not at any one time exceed the
amount set opposite such Lender's name on Schedule I hereto in the column
labeled "Revolving Loan Commitment." The aggregate principal amount of
Revolving Loans which all Lenders shall be committed to have outstanding
hereunder to the Borrower, when added to the aggregate face amount of Letters
of Credit issued and outstanding pursuant to Section 2.2 and all Letters of
Credit drawn and not reimbursed pursuant to Section 4.8, shall not at any one
time exceed $52,500,000 (or such reduced amount as may be fixed pursuant to
Sections 6.1 or 6.2). The foregoing commitment of each Lender is herein called
its "Revolving Loan Commitment" and collectively the "Revolving Loan
Commitments."
SECTION 2.2 LC Commitment. The Issuing Lender agrees for itself and
the Lenders to issue from time to time before the Termination Date such
commercial and/or standby letters of credit (such letters of credit being
herein collectively called "Letters of Credit" and individually a "Letter of
Credit") as the Borrower may request, it being understood that, pursuant to
Section 4.3, concurrently with the issuance of each such Letter of Credit, each
Lender shall be deemed to have automatically purchased from the Issuing Lender
a participation in such Letter of Credit. The foregoing commitment of each
Lender is herein called its "LC Commitment" and collectively the "LC
Commitments."
SECTION 2.3 Commitments and Other Terms. The Revolving Loan
Commitments, and the LC Commitments are herein sometimes
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collectively called the "Commitments" and individually as to each Lender called
a "Commitment."
SECTION 3. THE LOANS
SECTION 3.1 Various Types of Loans. Each Loan shall be either a Base
Rate Loan or a Fixed Rate Loan (each being herein called a "Type" of Loan), as
the Borrower shall specify in the related Borrowing Request or
Continuation/Conversion Notice pursuant to Section 3.2 or Section 3.5.
Eurodollar Loans and CD Loans are herein sometimes called "Fixed Rate Loans".
Base Rate Loans and Fixed Rate Loans may be outstanding at the same time;
provided that (a) in the case of Fixed Rate Loans, not more than three
different Interest Periods shall be outstanding at any one time for all such
Loans, and (b) the Borrower shall specify Revolving Loans and Interest Periods
such that no payment or prepayment of any principal on any Revolving Loan shall
result in a break-up of any Interest Period.
SECTION 3.2 Notice of Borrowing. The Borrower shall give an
irrevocable notice (herein called a "Borrowing Request") to the Agent of each
proposed Borrowing by 11:30 A.M., Chicago time, on a day which in the case of a
Base Rate Borrowing is at least one (1) Business Day prior to the proposed date
of such Borrowing, and in the case of a Fixed Rate Borrowing is at least three
(3) Business Days prior to the proposed date of such Borrowing. Each Borrowing
Request shall be effective upon receipt by the Agent, shall be in writing (or
by telephone to be promptly confirmed in writing) by the Borrower substantially
in the form of Exhibit B, and shall specify the date, amount and Type of
Borrowing, and in the case of a Fixed Rate Borrowing, the initial Interest
Period for such Borrowing.
SECTION 3.3 Funding. Promptly upon receipt of a Borrowing Request,
but in any event no later than 3:00 P.M., Chicago time, on the same day as the
Agent's receipt of such notice, the Agent shall advise each Lender thereof.
Not later than 12:30 P.M., Chicago time, on the date of a proposed Borrowing,
each Lender shall provide the Agent at the principal office of the Agent in
Chicago with immediately available funds covering such Lender's Percentage of
the Borrowing, and subject to receipt by the Agent of the documents required
under Section 12 with respect to such Borrowing the Agent shall pay over such
funds to the Borrower on the requested Borrowing date. Each Borrowing
involving Revolving Loans of the same Type shall be on a Business Day and, in
the case of Base Rate Loans, shall be in an aggregate principal amount of at
least $1,000,000 or any larger integral multiple of $500,000 and, in the case
of Fixed Rate Loans shall be in an
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aggregate amount of at least $2,000,000 or any larger integral multiple of
$1,000,000. All Borrowings shall be pro rata among the Lenders in accordance
with their respective Commitments.
SECTION 3.4 Funding Reliance. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 P.M.,
Chicago time, on the day prior to a Borrowing that such Lender will not make
available the amount which would constitute its Percentage of such Borrowing on
the date specified therefor, the Agent may assume, subject to the satisfactory
fulfillment by the Borrower of the conditions precedent set forth in Section
12, that such Lender will make such amount available to the Agent and, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Borrower severally agree to repay
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Agent made such amount available to the
Borrower to the date such amount is repaid to the Agent, at the interest rate
applicable at the time to Revolving Loans comprising such Borrowing.
SECTION 3.5 Conversion and Continuation of Loans. The Borrower may,
by delivery to the Agent of a Continuation/ Conversion Notice (herein called a
"Continuation/Conversion Notice") in the form of Exhibit C attached hereto with
appropriate insertions, before 11:30 A.M., Chicago time, three (3) Business
Days prior to conversion or continuation, convert or continue Revolving Loans
as follows: (a) convert CD Loans into Eurodollar Loans or Base Rate Loans, (b)
convert Eurodollar Loans into Base Rate Loans or CD Loans, (c) convert Base
Rate Loans into CD Loans or Eurodollar Loans, and (d) continue any such
Revolving Loan into a subsequent Interest Period of the same duration or of any
other duration permitted hereunder, subject to the following:
(i) the Interest Period applicable to any Fixed Rate Loan
resulting from a conversion shall be specified by the Borrower in the
Continuation/ Conversion Notice delivered pursuant to this
Section;provided, however, that if no such Interest Period shall be
specified, the Borrower shall be deemed to have selected an Interest
Period, in the case of a CD Loan, of 30 days' duration, and in the
case of a Eurodollar Loan, of one month's duration. If the Borrower
shall not have given timely notice to continue any Revolving Loan into
a subsequent Interest Period and shall not otherwise have given notice
to convert such Revolving Loan, such Revolving Loan unless repaid
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pursuant to the terms hereof shall automatically be converted into a
Base Rate Loan;
(ii) if less than all Revolving Loans at the time outstanding
shall be converted or continued, such conversion or continuation shall
be made pro rata among the Lenders, as applicable, in accordance with
the respective principal amounts of Revolving Loans of such Type (and
have the same Interest Period) held by such Lenders immediately prior
to such conversion or continuation;
(iii) in the case of a conversion or continuation of less
than all Revolving Loans, the aggregate principal amount of such
Revolving Loans converted or continued shall be not less than
$1,000,000 or any larger integral multiple of $500,000;
(iv) if any Fixed Rate Loan is converted at a time other than
the last day of an Interest Period applicable thereto, the Borrower
shall at the time of conversion pay any loss or expense (including,
without limitation, breakage losses and expenses) associated therewith
pursuant toSection 7.5; and
(v) any portion of a Revolving Loan maturing or required to
be repaid in less than thirty (30) days may not be converted into, or
continued as, a CD Loan; and any portion of a Revolving Loan maturing
or required to be repaid in less than one month may not be converted
into, or continued as, a Eurodollar Loan.
Notwithstanding the foregoing, so long as any Default shall exist, no Revolving
Loans shall be converted to or continued as Fixed Rate Loans.
SECTION 3.6 Repayment of Revolving Loans; Revolving Notes. The
Revolving Loans of each Lender shall be payable (and the Borrower agrees to pay
such Revolving Loans) on the Termination Date. The Revolving Loans of each
Lender shall be evidenced by a Revolving Note, payable to the order of such
Lender in the principal amount of the Revolving Loan Commitment of such Lender
(or, if less, in the aggregate unpaid principal amount of all of such Lender's
Revolving Loans hereunder outstanding on the Termination Date).
SECTION 3.7 Recordkeeping. Each Lender shall record in its records,
or at its option on the schedule attached to its Revolving Note, the date and
amount of each Loan made by such
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Lender, each repayment or conversion thereof, and in the case of each Fixed
Rate Loan the dates on which each Interest Period for such Revolving Loan shall
begin and end. The information so recorded shall be rebuttable presumptive
evidence of the accuracy thereof. The failure to so record any such
information or any error in so recording any such information shall not,
however, limit or otherwise affect the obligations of the Borrower hereunder or
under any Revolving Note to repay the principal amount of the Revolving Loans
together with all interest accruing thereon.
SECTION 4. THE LETTERS OF CREDIT
SECTION 4.1 Request for Issuance of Letters of Credit. The Borrower
shall give the Agent and the Issuing Lender at least three (3) Business Days'
prior written notice of a request for issuance of each Letter of Credit, each
such request to be accompanied by an LC Application duly executed by the
Borrower and in all respects in form and substance satisfactory to the Agent or
the Issuing Lender, together with such other documentation as the Agent and the
Issuing Lender may request in support thereof. The Agent shall promptly notify
each Lender of the Borrower's request that such Letter of Credit be issued, but
in any event at least one (1) Business Day prior to the issuance of each Letter
of Credit. Promptly following the end of each month, the Issuing Lender shall
deliver to the Agent, and the Agent shall deliver to each Lender, a notice
describing the aggregate undrawn amount of all Letters of Credit at the end of
such month. Upon the request of any Lender from time to time, the Issuing
Lender shall deliver to the Agent, and the Agent shall deliver to such Lender,
any other information reasonably requested by such Lender with respect to each
Letter of Credit then outstanding. All Letters of Credit shall be issued
pursuant to and subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any subsequent revisions thereto.
SECTION 4.2 Expiration and other Terms. Each Letter of Credit shall
expire on or before the Termination Date unless the Borrower shall have pledged
cash collateral to the Agent therefor in an amount, and pursuant to
documentation, reasonably satisfactory to each Lender, the Issuing Lender and
the Agent.
SECTION 4.3 Participation. Concurrently with the issuance of each
Letter of Credit, the Issuing Lender shall be deemed to have sold and
transferred to each other Lender, and each Lender shall be deemed irrevocably
and unconditionally to have
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automatically purchased and received from the Issuing Lender, without recourse
or warranty, an undivided interest and participation, to the extent of such
other Lender's Percentage, in such Letter of Credit and the Borrower's related
LC Obligations.
SECTION 4.4 Notification of Demand for Payment. The Issuing Lender
shall promptly notify the Agent, who shall in turn promptly notify the Borrower
and each Lender of the amount of each demand for payment under a Letter of
Credit and of the date on which such payment is to be made.
SECTION 4.5 Funding by Issuing Lender. With respect to each demand
for payment pursuant to a Letter of Credit, the Issuing Lender shall, promptly
following its receipt thereof, examine all documents purporting to represent
such demand to ascertain that the same appear on their face to be in conformity
with the terms and conditions of such Letter of Credit. If the Issuing Lender
determines that a demand for payment under a Letter of Credit conforms to the
terms and conditions of such Letter of Credit, then the Issuing Lender shall
make payment to the Beneficiary in accordance with the terms of such Letter of
Credit.
SECTION 4.6 Non-Conforming Demand For Payment. If, after examination
of a demand for payment under a Letter of Credit, the Issuing Lender shall have
determined that such demand does not conform to the terms and conditions of
such Letter of Credit, then the Issuing Lender shall, as soon as reasonably
practicable, give notice to the related Beneficiary and to the Borrower to the
effect that demand was not in accordance with the terms and conditions of such
Letter of Credit, stating the reasons therefor and that the relevant document
is being held at the disposal of the Beneficiary or is being returned to the
Beneficiary, as the Issuing Lender may elect. The Beneficiary may attempt to
correct any such non-conforming demand for payment under such Letter of Credit
if, and to the extent that, the Beneficiary is entitled (without regard to the
provisions of this sentence) and able to do so.
SECTION 4.7 Return of Letter of Credit. With respect to each Letter
of Credit, the Issuing Lender shall have the right, provided the Issuing Lender
is not then in default under such Letter of Credit by reason of its having
wrongfully failed to honor a demand for payment previously made by a
Beneficiary under such Letter of Credit, to require the Beneficiary to
surrender such Letter of Credit to the Issuing Lender on the stated expiration
date. The Borrower agrees, if necessary, to use its
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reasonable efforts to cause the Beneficiary to surrender such Letter of Credit.
SECTION 4.8 Reimbursement Agreement of the Borrower. The Borrower
hereby unconditionally and irrevocably agrees to reimburse the Issuing Lender
for each payment or disbursement made by the Issuing Lender under a Letter of
Credit honoring a demand for payment made by the Beneficiary thereunder in each
case on the date that such payment or disbursement is made unless such payment
or disbursement by the Issuing Lender constituted gross negligence or willful
misconduct of the Issuing Lender. Subject to Borrower's ability to satisfy
the conditions precedent set forth in Section 12.2, if any amount shall not be
reimbursed by the Borrower on the date of such payment or disbursement, the
Borrower automatically shall be deemed to have requested as of the immediately
preceding Business Day a Base Rate Loan pursuant to Section 3.2 in the amount
of such payment or disbursement (which need not be in the principal amount of
$1,000,000 or an integral multiple thereof) and a Base Rate Loan shall be made
on such Business Day with the proceeds thereof applied to payment in full of
Borrower's reimbursement obligation; provided, that if at the time of such
request Revolving Loans are not then available to the Borrower, such request
shall not be granted and the Borrower's reimbursement obligations set forth
above shall remain in place.
SECTION 4.9 Funding By Lenders. If the Issuing Lender makes any
payment or disbursement under any Letter of Credit and the Borrower has not
reimbursed the Issuing Lender in full for such payment or disbursement or a
Revolving Loan in the amount of such payment or disbursement has not been made
pursuant to Section 4.8, on the date on which payment is made under a Letter of
Credit, or if any reimbursement received by the Issuing Lender from the
Borrower is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Borrower or otherwise, each Lender, promptly upon notice,
shall make available to the Agent, for the account of the Issuing Lender in
Dollars and in same day funds, such Lender's Percentage of the amount of such
payment or disbursement, if such notice is given by the Agent to the Lenders
not later than 3:00 P.M., Chicago time on any Business Day, such payment shall
be made on such Business Day and if such notice is given after 3:00 P.M.,
Chicago time, such payment shall be made on the next Business Day. If and to
the extent any Lender shall not have made such amount available to the Agent on
any such date, such Lender agrees to pay interest on such amount to the Agent
for the account of the Issuing Lender forthwith on demand for each day from and
including the date on which such payment was to be made to but excluding the
date such amount is made available to the Agent for
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the account of the Issuing Lender. Such interest shall be determined at a rate
per annum equal to the Federal Funds Rate from time to time in effect, based
upon a year of 360 days. Any Lender's failure to make available to the Agent
its Percentage of any payment under a Letter of Credit shall not relieve any
other Lender of its obligation to make available to the Agent its Percentage of
such payment on the date such payment is to be made, but no Lender shall be
responsible for the failure of any other Lender to make available to the Agent
such other Lender's Percentage of any such payment.
SECTION 4.10 Return of Funds Related to Non-Conforming Demand. If the
Issuing Lender does not disburse funds to the Beneficiary for any reason after
the Agent has received such funds from any Lender pursuant to Section 4.9, the
Issuing Lender shall return such funds to the Agent, who shall promptly return
such funds to such other Lender, together with interest on such funds from and
including the date on which the Agent received such funds to but excluding the
day on which the Agent so returns such funds to the other Lenders at the
Federal Funds Rate for each such day, based upon a year of 360 days.
SECTION 4.11 Obligation to Reimburse for or Participate in Letter of
Credit Payments. The Borrower's obligation to reimburse the Issuing Lender for
payments made by the Issuing Lender under any Letter of Credit honoring a
demand for payment by the Beneficiary thereunder, and each Lender's obligation
to participate in and make available to the Issuing Lender its Percentage of
such payments in accordance with this Agreement, shall be irrevocable, absolute
and unconditional under any and all circumstances including, without
limitation, any of the following circumstances:
(a) any lack of legality, validity, regularity or
enforceability of this Agreement, any Letter of Credit or any other
Loan Document;
(b) the existence of any claim, setoff, defense or other
right which the Borrower may have or have had at any time against any
Beneficiary, the Agent, the Issuing Lender, any other Lender, any
transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting) or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower and the Beneficiary of any
Letter of Credit);
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(c) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(d) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents;
(e) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate or other document that
does not comply with the terms of such Letter of Credit unless such
payment by the Issuing Lender constituted gross negligence or willful
misconduct of the Issuing Lender; or
(f) the occurrence of any Default or Event of Default;
provided, however, that the Borrower shall not be obligated to reimburse the
Issuing Lender for, and no Lender shall be obligated to participate in, any
wrongful payment made by the Issuing Lender under any Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of the Issuing Lender or any of its officers, employees or agents.
SECTION 4.12 Mandatory Payment to Agent of LC Obligations. The
Borrower agrees that, on any termination of the LC Commitments pursuant to
Section 6.2 or upon declaration of all Liabilities to be due and payable
pursuant to Section 13.2, it will pay to the Agent for the account of the
Issuing Lender and the other Lenders in Dollars and in same day funds an amount
equal to the amount of all LC Obligations, whether or not the related Letter of
Credit has been drawn (which amount shall be retained by the Agent in a
separate collateral account as security for the LC Obligations and other
Liabilities) plus the then aggregate accrued amount of unpaid fees arising
under Sections 5.7(c) and 5.7(d).
SECTION 5. INTEREST AND FEES, ETC.
SECTION 5.1 Revolving Loan Interest Rates. With respect to each
Revolving Loan, the Borrower hereby promises to pay interest on the unpaid
principal amount thereof for the period commencing on the date of such
Revolving Loan until such Revolving Loan is paid in full, as follows:
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(a) At all times while such Revolving Loan is a Base Rate
Loan, at a rate per annum equal to the Alternate Reference Rate from
time to time in effect, plus the applicable margin, based on the
Leverage Ratio, as set forth below:
<TABLE>
<CAPTION>
Leverage
Ratio Margin
-------- ------
<S> <C>
[ ] [ ]
[ ] [ ]
[ ]
</TABLE>
(b) At all times while such Revolving Loan is a Eurodollar
Rate Loan, for each Interest Period, at a rate per annum equal to the
Eurodollar Rate (Reserve Adjusted) applicable to such Interest
Period, plus the applicable margin, based on the Leverage Ratio, as
set forth below:
<TABLE>
<CAPTION>
Leverage
Ratio Margin
-------- ------
<S> <C>
[ ] [ ]
[ ] [ ]
[ ]
[ ] [ ]
</TABLE>
(c) At all times while such Revolving Loan is a CD Rate Loan,
for each Interest Period, at a rate per annum equal to the CD Rate
(Reserve Adjusted) applicable to such Interest Period, plus the
applicable margin, based on the Leverage Ratio, as set forth below:
<TABLE>
<CAPTION>
Leverage
Ratio Margin
-------- ------
<S> <C>
[ ] [ ]
[ ] [ ]
[ ]
[ ] [ ]
</TABLE>
For purposes of thisSection 5.1, on the Effective Date, the applicable
margin shall be: (i) for Base Rate Loans [ ]; (ii) for Eurodollar Rate Loans
[ ]; and (iii) for CD Rate Loans [ ]. The applicable margin shall be
adjusted, to the extent applicable, [ ] days (or in the case of the last Fiscal
Quarter of any Fiscal Year, [ ] days) after the end of each Fiscal Quarter
beginning on the [ ] day after the first Fiscal Quarter ending after the
Effective Date, based on the Leverage Ratio as of the last day of such Fiscal
Quarter; it being understood that if the
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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Borrower fails to deliver the financial statements required by Sections 9.1.1
or 9.1.2, as applicable, by the [ ] day (or, if applicable, the [ ] day)
after any Fiscal Quarter, the applicable margin shall be [ ] for Base Rate
Loans, [ ] for Eurodollar Rate Loans and [ ] for CD Rate Loans until such
financial statements are delivered.
SECTION 5.2 Default Interest Rate. Notwithstanding the provisions of
Section 5.1, after an Event of Default and during the continuance thereof, the
Borrower hereby promises to pay interest on the unpaid principal amount of any
Revolving Loan at a rate per annum equal to the rate from time to time in
effect (but not less than the applicable rate in effect as at such due date),
plus [ ] per annum.
SECTION 5.3 Interest Payment Dates. Accrued interest on each Base
Rate Loan shall be payable on [ ],
commencing with the first of such dates to occur after the date hereof.
Accrued interest on each Fixed Rate Loan shall be payable on [
] relating to such Revolving Loan (and if such [
] exceeds [ ] days, also payable on the [ ] day of such [
]), and at maturity. After maturity, accrued interest on all Revolving
Loans shall be payable on demand.
SECTION 5.4 Interest Periods. Each "Interest Period" for a
Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan was
made or converted from a Revolving Loan of a different Type, or on the
expiration of the immediately preceding Interest Period for such Fixed Rate
Loan, and shall end on the date which is [ ] thereafter, as the
Borrower may specify pursuant to Section 3.2 or Section 3.5 hereof. Each
"Interest Period" for a CD Rate Loan shall commence on the date such CD Rate
Loan was made or converted from a Revolving Loan of a different Type, or on the
expiration of the immediately preceding Interest Period for such Fixed Rate
Loan, and shall end on the date which is [ ] thereafter, as
the Borrower may specify pursuant to Section 3.2 or Section 3.5 hereof. Each
"Interest Period" for a Fixed Rate Loan which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the next
preceding Business Day).
SECTION 5.5 Setting and Notice of Rates. The applicable Eurodollar
Rate and CD Rate for each Interest Period shall be determined by the Agent, and
notice thereof shall be given by the Agent promptly to the Borrower and each
Lender. Each
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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determination of the applicable Eurodollar Rate and CD Rate by the Agent shall
be conclusive and binding upon the parties hereto, in the absence of
demonstrable error. If the Agent is unable to determine such a rate, the
provisions of Section 7.2 shall apply.
SECTION 5.6 Computation of Interest. Interest on all Loans shall be
computed for the actual number of days elapsed on the basis of a 360-day year.
SECTION 5.7 Fees. The Borrower agrees to pay the following fees (all
such fees being non-refundable):
(a) The Borrower agrees to pay to the Agent for the account
of each Lender, for the period (including any portion thereof when any
of its Commitments are suspended by reason of the Borrower's inability
to satisfy any condition of Section 12) commencing on the Effective
Date and continuing through the Termination Date, a commitment fee
(the "Commitment Fee") at the rate of [
]. Such Commitment Fees shall be payable by the
Borrower in arrears on each Quarterly Payment Date, commencing with
the first such day following the Effective Date, and on the
Termination Date.
(b) The Borrower agrees to pay to the Agent for the account
of each Lender a one time, nonrefundable credit facility fee (the
"Facility Fee") in an amount equal to [
, ]
payable on the Effective Date.
(c) The Borrower agrees to pay the following letter of credit
fees:
(i) to the Agent for the account of each Lender a
fee for each (x) Non-Financial Standby Letter of Credit (the
"Non-Financial LC Commitment Fee"), from the date of issuance
thereof to and including the earlier to occur of the
expiration or termination thereof or the date of final and
complete payment by the Issuing Lender thereunder, at a rate
per annum equal to [ ] of the aggregate undrawn face amount
of each such Non-Financial Letter of Credit, (y) Financial
Standby Letter of Credit (the "Financial LC
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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Commitment Fee"), from the date of issuance thereof to and
including the earlier to occur of the expiration or termination thereof
or the date of final and complete payment by the Issuing Lender
thereunder, at a rate per annum equal to [ ] of the aggregate
undrawn face amount of each such Financial Letter of Credit, and
(z) commercial Letter of Credit ("Commercial LC Commitment Fee"),
from the date of issuance thereof to and including the earlier to
occur of the expiration or termination thereof or the date of final
and complete payment by the Issuing Lender thereunder, at rate per
annum equal to [
] (or at such other times as the Agent shall
request, for any period prior to such date or time for which such LC
Commitment Fees shall not have been theretofore paid);
(ii) to the Issuing Lender for its sole account a fee for each
(y) Non-Financial Standby Letter of Credit and Financial Standby Letter
of Credit, from the date of issuance thereof to and including the
earlier to occur of the expiration or termination thereof or the date
of final and complete payment by the Issuing Lender thereunder, at a
rate per annum equal to [
] and (z) commercial Letter of Credit, from
the date of issuance thereof to and including the earlier to occur of
the expiration or termination thereof or the date of final and complete
payment by the Issuing Lender thereunder, at a rate per annum equal to
[
]; the foregoing fees set forth in this clause (ii) to
be payable in arrears on each Quarterly Payment Date (or at such other
times as the Issuing Lender shall request, for any period prior to such
date or time for which such fees shall not have been theretofore paid);
provided that if during any calendar quarter the fee set forth in this
clause (ii) with
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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respect to any single letter of credit shall be less than
[ ] then the Borrower agrees to pay in lieu of such fee
the sum of [ ].
(iii) notwithstanding the provisions of thisSection
5.7(c), after an Event of Default and during the continuance
thereof, the fees otherwise set forth in this Section 5.7(c)
shall increase by [ ] per annum.
(d) The Borrower agrees to pay such fees and other amounts
("LC Administrative Fees") as the Issuing Lender shall customarily
require in connection with the issuance, negotiation, processing
and/or administration of Letters of Credit in similar situations, such
fees to be in addition to the fees payable under Section 5.7(c), with
respect to the issuance and/or negotiation of each Letter of Credit.
All such fees shall be computed for the actual number of days elapsed on the
basis of a 360-day year without regard to any Default or Event of Default.
SECTION 6. REDUCTION OR TERMINATION OF THE COMMITMENTS;
PAYMENTS AND PREPAYMENTS
SECTION 6.1 Voluntary Reduction or Termination of the Revolving Loan
Commitments. The Borrower may from time to time prior to the Termination Date
on at least five (5) Business Days' prior written notice received by the Agent
(which shall promptly advise each Lender thereof) permanently reduce the amount
of the Revolving Loan Commitments (such reduction to be pro rata among the
Lenders according to their respective Percentages) to an amount not less than
the aggregate unpaid principal amount of the Revolving Loans then outstanding.
Any such reduction shall be in an aggregate amount of $1,000,000 or an integral
multiple thereof. The Borrower may at any time on like notice prior to the
Termination Date terminate the Revolving Loan Commitments upon payment in full
of the Revolving Loans and other obligations of the Borrower hereunder
pertaining to the Revolving Loans.
SECTION 6.2 Voluntary Reduction or Termination of the LC Commitments.
The Borrower may from time to time on at least five (5) Business Days' prior
written notice to the Agent permanently reduce the amount of the LC Commitments
to an amount not less than the maximum amount of the Letters of Credit then
outstanding or drawn and not reimbursed. The Borrower may at any time on like
notice terminate the LC Commitments in full upon payment to
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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the Agent in accordance with Section 4.12 of all LC Obligations (whether
absolute or contingent) in connection with the Letters of Credit.
SECTION 6.3 Voluntary Prepayments. The Borrower may from time to
time prepay the Revolving Loans in whole or in part, provided that (a) the
Borrower shall give the Agent (which shall promptly advise each Lender) not
less than five (5) Business Days' prior notice thereof, specifying the
Revolving Loans to be prepaid, and the date and amount of prepayment, (b)
subject to Section 7.3, Fixed Rate Loans shall be prepaid only on the last day
of the Interest Period relating thereto, (c) each partial prepayment shall be,
in the case of Fixed Rate Loans, in a principal amount of $1,000,000 or an
integral multiple thereof, and, in the case of Base Rate Loans, in a principal
amount of $500,000 or an integral multiple thereof, and (d) any prepayment of
the entire principal amount of all Revolving Loans shall include accrued
interest to the date of prepayment.
SECTION 6.4 Mandatory Prepayments. If, on any date, the aggregate
unpaid principal amount of the Revolving Loans plus the aggregate face amount
of Letters of Credit issued and outstanding and Letters of Credit drawn and not
reimbursed shall exceed $52,500,000, the Borrower shall promptly repay the
Revolving Loans and LC Obligations in an amount equal to such excess.
SECTION 6.5 Making of Payments. Except as otherwise provided, all
payments (including those made pursuant to Sections 5.7 (a), 5.7(b), 5.7(c)(i),
6.3 or 6.4) in respect of the Revolving Loans or the Letters of Credit shall be
made by the Borrower to the Agent in immediately available funds for the
account of the Lenders pro rata according to their respective Percentages. All
such payments shall be made to the Agent at its office in Chicago, not later
than 12:30 P.M., Chicago time, on the date due; and funds received after that
hour shall be deemed to have been received by the Agent on the next following
Business Day. The Agent shall promptly remit to each Lender its pro rata share
(based on its Percentage) of all such payments received in collected funds by
the Agent for the account of such Lender, but in any event not later than 5:00
P.M., Chicago time, on the day on which the Agent is deemed to have received
such payment. All payments under Sections 7.1 and 7.4 shall be made by the
Borrower directly to the Lender or Lenders entitled thereto. All payments
under Section 14.5 shall be made directly to, and for the sole account of, the
Agent. All payments under Sections 5.7(c)(ii) and 5.7(d) shall be made by the
Borrower directly to, and for the sole account of, the Issuing Lender.
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SECTION 6.6 Application of Payments. So long as no Default shall
exist or result therefrom, any payment (including any prepayment) of principal
or interest shall be applied to such Revolving Loans as the Borrower shall
direct in a notice to the Agent (or, absent such a notice, as the Agent shall
determine in its discretion).
SECTION 6.7 Due Date Extension. If any payment provided for
hereunder falls due on a Saturday, Sunday or other day which is not a Business
Day, then such due date shall be extended to the next following Business Day
(except as provided in the last sentence of Section 5.3), and additional fees
or interest, as applicable, shall accrue and be payable for the period of such
extension.
SECTION 6.8 Sharing of Payments. (a) If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
offset or otherwise) on account of any Revolving Loan or LC Obligation (other
than pursuant to the terms of Section 7) in excess of its pro rata share (based
on its Percentage) of payments and other recoveries obtained by all Lenders of
Revolving Loans or LC Obligations on account of principal of and interest on
Revolving Loans or reimbursement or fees with respect to LC Obligations then
held by them, such Lender shall purchase from the other Lenders such
participation in the Revolving Loans and LC Obligations held by them as shall
be necessary to cause such purchasing Lender to share the excess payment or
other recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of (i) the amount of such selling Lender's required repayment to the
purchasing Lender to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered.
(b) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to Section 6.8(a) may, to the fullest extent
permitted by law, exercise all its rights of payment (including pursuant to
Section 6.9) with respect to such participation as fully as if such Lender were
the direct creditor of the Borrower in the amount of such participation. If
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which
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this Section applies, such Lender shall, to the extent practicable, exercise
its rights in respect to such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section to share in the benefits of
any recovery of such secured claim.
SECTION 6.9 Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in Section 13.1.3 or, upon acceleration in
accordance with Section 13.2, have the right to appropriate and apply to the
payment of the Liabilities owing to it any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with such
Lender. Any such appropriation and application shall be subject to the
provisions of Section 6.8. Each Lender agrees promptly to notify the Borrower
and the Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff under applicable law or otherwise) which such Lender may have.
SECTION 6.10 Net Payments. All payments by the Borrower of principal
of, and interest on, the Revolving Loans and all other amounts payable
hereunder shall be made free and clear of and without deduction for any present
or future income, stamp or other Taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, other than
Taxes imposed on or measured by any Lender's net income or receipts (such
non-excluded items being called "Charges"). In the event that any withholding
or deduction from any payment to be made by the Borrower hereunder is required
in respect of any Charges pursuant to any applicable law, rule or regulation,
then the Borrower will:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
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Upon request of the Borrower, each Lender that is organized under the laws of a
jurisdiction other than the U.S. shall, prior to the due date of any payments
under the Loans or LC Obligations, execute and deliver to the Borrower, on or
about the first scheduled payment date in each calendar year, a United States
Internal Revenue Service Form 4224 or Form 1001, as may be applicable (or any
successor form), appropriately completed. Without prejudice to the survival of
any other agreement of the Borrower hereunder or any other document, the
agreements of the Borrower contained in this Section shall survive satisfaction
of the Liabilities and termination of this Agreement.
SECTION 7. CHANGES IN CIRCUMSTANCES
SECTION 7.1 Increased Costs. If after the date hereof (a) Regulation
D of the Board of Governors of the Federal Reserve System, or (b) the adoption
of any applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any Lending Office of
such Lender) with any request or directive (whether or not having the force of
law) or any such authority, central bank or comparable agency,
(i) shall subject any Lender (or any Lending Office of such
Lender) to any tax, duty or other charge with respect to its Fixed
Rate Loans, its Revolving Loans or its LC Obligations or its
obligation to make Fixed Rate Loans, or issue Letters of Credit or
shall change the basis of taxation of payments to any Lender of the
principal of or interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate Loans or its
obligation to make Fixed Rate Loans or its LC Obligations (except for
changes in the rate of Tax, other than Taxes covered by Section 6.10,
on the overall gross or net income of such Lender or its Lending
Office); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve
included in the determination of interest rates pursuant to Section 5),
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (or any
Lending Office of such Lender); or
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(iii) shall impose on any Lender (or its Lending Office) any
other condition affecting its Fixed Rate Loans or its LC Obligations;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D referred to above, to impose a cost on) such Lender (or
any Lending Office of such Lender) of making or maintaining any Fixed Rate
Loan, or any Letter of Credit or participation therein or to reduce the amount
of any sum received or receivable by such Lender (or the Lending Office or such
Lender) under this Agreement or under its Loans with respect thereto, then
within 30 days after demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis of such demand), the Borrower shall pay
directly to such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or such reduction.
SECTION 7.2 Change in Rate of Return. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any person controlling
such Lender, and such Lender reasonably determines that the rate of return on
its or such controlling person's capital as a consequence of its Commitments,
the Loans or the Letters of Credit made by such Lender (or any participating
interest therein held by such Lender) is reduced to a level below that which
such Lender or such controlling person could have achieved but for the
occurrence of any such circumstance, then, in any such case the Borrower shall,
within 30 days after demand by such Lender to the Borrower of a written request
therefor, pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling person for such reduction in rate of
return under this Agreement. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any method of
averaging and attribution that it shall deem reasonably applicable. Each
Lender shall notify the Borrower of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to compensation
pursuant to this Section 7.2.
SECTION 7.3 Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period:
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(a) the Agent is advised by Continental that deposits in
Dollars (in the applicable amounts) are not being offered to
Continental in the relevant market for such Interest Period, or the
Agent otherwise determines (which determination shall be binding and
conclusive on all parties) that by reason of circumstances affecting
the interbank eurodollar market adequate and reasonable means do not
exist for ascertaining the applicable Eurodollar Rate; or
(b) any Lender advises the Agent that the Eurodollar Rate
(Reserve Adjusted) or CD Rate (Reserve Adjusted), as the case may be,
as determined by the Agent, will not adequately and fairly reflect the
cost to such Lender of maintaining or funding such Loans for such
Interest Period, or that the making or funding of CD Loans or
Eurodollar Loans has become impracticable as a result of an event
occurring after the date of this Agreement which in the opinion of
such Lender materially changes such Loans,
then, so long as such circumstances shall continue: (i) the Agent shall
promptly notify the other parties thereof, (ii) no Lender shall be under any
obligation to make or convert into Fixed Rate Loans so affected, and (iii) on
the last day of the then current Interest Period for Loans of the Type so
affected, such Loans shall, unless then repaid in full, automatically convert
to Base Rate Loans. If conditions subsequently change so that the foregoing
conditions no longer exist, the Agent in the case of clause (A) or such Lender
in the case of clause (B) will promptly notify the Borrower and the Lenders
thereof, and upon the receipt of such notice, the obligations of all Lenders to
make or continue Fixed Rate Loans shall be reinstated.
SECTION 7.4 Changes in Law Rendering Certain Loans Unlawful. In the
event that any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it unlawful for a Lender or the Lending
Office of such Lender ("Affected Lender") to make, maintain or fund a Type of
Fixed Rate Loans, then (a) the Affected Lender shall promptly notify each of
the other parties hereto, (b) the obligation of all Lenders to make or convert
into the Type of Fixed Rate Loans made unlawful for the Affected Lender shall,
upon the effectiveness of such event, be suspended for the duration of such
unlawfulness, and (c) on the last day of the current Interest Period for Fixed
Rate Loans of such Type (or, in any event, if the Affected Lender so requests,
on such
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earlier date as may be required by the relevant law, regulation or
interpretation), the Fixed Rate Loans of such Type shall, unless then repaid in
full, automatically convert to Base Rate Loans. If conditions subsequently
change so that the foregoing conditions no longer exist, such Lender will
promptly notify the Borrower and the other Lenders thereof, and upon the
receipt of such notice, the obligations of all Lenders to make or continue
Fixed Rate Loans of such Type shall be reinstated.
SECTION 7.5 Funding Losses. The Borrower hereby agrees that upon
demand by any Lender (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Lender against any net loss or expense which such Lender
may sustain or incur (including, without limitation, any net loss or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund or maintain Fixed Rate Loans), as
reasonably determined by such Lender, as a result of (a) any payment or
prepayment or conversion of any Fixed Rate Loan of such Lender on a date other
than the last day of an Interest Period for such Loan, or (b) any failure of
the Borrower to borrow or convert any Loans on a date specified therefor in a
Borrowing Request or Continuation/Conversion request pursuant to this
Agreement. For this purpose, all notices to the Agent pursuant to this
Agreement shall be deemed to be irrevocable.
SECTION 7.6 Right of Lenders to Fund Through Other Offices. Each
Lender may, if it so elects, fulfill its Commitment as to any Eurodollar Loan
by causing its Lending Office to make such Loan, provided that in such event
for the purposes of this Agreement, such Loan shall be deemed to have been made
by such Lender and the obligation of the Borrower to repay such Loan shall
nevertheless be to such Lender and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
SECTION 7.7 Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Loans in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if
such Lender had actually funded and maintained each Fixed Rate Loan during each
Interest Period for such Loan through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the CD Rate or Eurodollar Rate, as the case may be, for such Interest
Period.
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SECTION 7.8 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of any Lender pursuant to Sections 7.1, 7.2, 7.3,
7.4 or 7.5 shall be conclusive absent demonstrable error. The provisions of
Sections 7.1, 7.2 and 7.5 shall survive termination of this Agreement.
SECTION 8. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make
Revolving Loans and to induce the Issuing Lender to issue or the Lenders to
participate in Letters of Credit hereunder, the Borrower represents and
warrants to the Agent, the Issuing Lender and to each of the Lenders that:
SECTION 8.1 Organization, etc. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; each Subsidiary is a corporation or partnership, as the case may be,
duly existing and in good standing (or in the case of a Foreign Subsidiary, the
foreign equivalent, if any, thereof) under the laws of its jurisdiction of
organization; and each of the Borrower and each Subsidiary is duly qualified to
transact business and in good standing as a foreign corporation or partnership,
as the case may be, authorized to do business (or in the case of a Foreign
Subsidiary, the foreign equivalent, if any, thereof) in each jurisdiction where
the failure to so qualify is reasonably likely to have a Material Adverse
Effect.
SECTION 8.2 Authorization. Each of the Borrower and each Restricted
Subsidiary (a) has the corporate power or partnership power, as the case may
be, to execute, deliver and perform each of the Loan Documents to which it is a
party, and (b) has taken all necessary corporate or partnership action to
authorize the execution, delivery and performance by it of such Loan Documents.
SECTION 8.3 No Conflict. The execution, delivery and performance by
the Borrower and each Restricted Subsidiary of each of the Loan Documents to
which it is a party does not and will not (a) contravene or conflict with any
provision of any law, statute, rule or regulation applicable to it, (b)
contravene or conflict with, result in any breach of, or constitute a default
under, any agreement or instrument binding on it, (c) result in the creation or
imposition of or the obligation to create or impose any Lien (except for
Permitted Liens) upon any of the property or assets of the Borrower or any
Subsidiary, or (d) contravene or conflict with any provision of its articles of
incorporation, by-laws or partnership documents, as the case may be.
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SECTION 8.4 Governmental Consents. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Effective Date) or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required in connection with the execution, delivery and performance
by the Borrower and each Restricted Subsidiary of each of the Loan Documents to
which it is a party.
SECTION 8.5 Validity. Each of the Borrower and each Restricted
Subsidiary has duly executed and delivered each of the Loan Documents to which
it is a party and each of such documents constitutes the legal, valid and
binding obligation of the Borrower or such Restricted Subsidiary, as the case
may be, enforceable in accordance with its terms.
SECTION 8.6 Financial Statements. The Borrower's audited
consolidated financial statements as at December 25, 1993 and its unaudited
consolidated financial statements as at April 1, 1994, copies of which have
been furnished to each Lender, have been prepared in conformity with GAAP
applied on a basis consistent with that of the preceding Fiscal Year, and
fairly present the financial condition of the Borrower and its Subsidiaries as
at such dates and the results of operations for the periods then ended.
SECTION 8.7 Material Adverse Change. No Material Adverse Change has
occurred since December 25, 1993.
SECTION 8.8 Litigation and Contingent Obligations. There is no
Material Litigation except as set forth in the Borrower's Form 10-K for the
1993 Fiscal Year or Form 10-Q for the first Fiscal Quarter of the 1994 Fiscal
Year. The Borrower and its Subsidiaries have no Contingent Obligations other
than as provided for or disclosed on Schedule II or in the financial statements
referred to in Section 8.6, which are reasonably likely to have a Material
Adverse Effect.
SECTION 8.9 Liens. None of the assets of the Borrower or any
Subsidiary is subject to any Lien, except for Permitted Liens.
SECTION 8.10 Subsidiaries. The Borrower has no Subsidiaries,
except as set forth on Schedule III.
SECTION 8.11 Pension and Welfare Plans.
(a) During the twelve-consecutive-month period prior to the
Effective Date of this Agreement and prior
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to the date of any Borrowing hereunder, no steps have been taken to
terminate or completely or partially withdraw from any Pension Plan or
Welfare Plan, and no contribution failure has occurred with respect to
any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA;
(b) no condition exists or event or transactions have
occurred with respect to any Pension Plan which is reasonably likely
to result in the incurrence by the Borrower or any other member of the
Controlled Group of any material liability, fine, Tax or penalty;
(c) except as disclosed in Schedule IV, neither the Borrower
nor any member of the Controlled Group has any vested or contingent
liability with respect to any post-retirement benefit under a Welfare
Plan, other than liability for continuation coverage described in Part
6 of Title I of ERISA; and
(d) no Pension Plan maintained by or contributed to by the
Borrower or any other member of the Controlled Group and subject to
section 302 of ERISA or section 412 of the Code has incurred an
accumulated funding deficiency as defined in section 302(a)(2) of
ERISA and section 412(a) of the Code, whether or not waived.
SECTION 8.12 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 8.13 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is 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
Holding Company Act of 1935, as amended.
SECTION 8.14 Margin Regulation. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System).
SECTION 8.15 Taxes. The Borrower and each of its Subsidiaries have
filed all tax returns and reports required by
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law to have been filed by them and have paid or provided adequate reserves for
all Taxes thereby shown to be owing, except for (i) any such Taxes which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves have been established and are being maintained in
accordance with GAAP, and (ii) reports and returns if the failure to file such
reports and returns is not reasonably likely to have a Material Adverse Effect.
There is no ongoing audit or, to the Borrower's knowledge, other governmental
investigation of the tax liability of the Borrower or any of its Subsidiaries
and there is no unresolved claim by a taxing authority concerning the
Borrower's or any such Subsidiary's tax liability, for any period for which
returns have been filed or were due, which is reasonably likely to have a
Material Adverse Effect. The liability stated for Taxes as of December 25,
1993 in the financial statements described in Section 8.6 is sufficient in all
material respects for all Taxes as of such date.
SECTION 8.16 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Agent, the Issuing Lender or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Agent, the Issuing Lender or any Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and as of the Effective Date, and such information is not,
or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 8.17 Environmental Warranties. Except as set forth in
Schedule V and, except to the extent that the failure of the following to be
true would not be reasonably likely to have a Material Adverse Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by the
Borrower and its Subsidiaries in compliance with all Environmental
Laws;
(b) there have been no past, and there are no pending or
threatened in writing (i) claims, complaints, notices or requests for
information received by the Borrower or any of its Subsidiaries with
respect to any alleged violation of any Environmental Law, or (ii)
complaints, notices or inquiries as to the Borrower or any of its
Subsidiaries
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regarding potential liability under any Environmental Law;
(c) there have been no releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued and
are in compliance with all permits, certificates, approvals, licenses
and other authorizations relating to environmental matters and
necessary or desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any of its
Subsidiaries;
(g) neither the Borrower nor any Subsidiary of the Borrower
has directly transported or directly arranged for the transportation
of any Hazardous Material to any location which is listed or proposed
for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources
or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary of the Borrower; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower or any Subsidiary which,
with the passage of time, or the giving of notice or both, would give
rise to liability under any Environmental Law.
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SECTION 8.18 Proceeds. The proceeds of the Revolving Loans will be
used for working capital purposes and for other general corporate purposes to
the extent permitted hereunder, provided, however, that no proceeds of the
Revolving Loans shall be used to acquire Class Two Cash Equivalents.
SECTION 8.19 Insurance. The Borrower and its Subsidiaries are
adequately insured for their benefit under policies issued by insurers of
recognized responsibility against such casualties and contingencies and of such
types and in such amounts as is customary in the case of similar businesses.
SECTION 8.20 Securities Laws. Neither the Borrower nor any of its
Subsidiaries, nor anyone acting on behalf of any such Person, has directly or
indirectly offered any interest in the Loans or any other Liabilities for sale
to, or solicited any offer to acquire any such interest from, or has sold any
such interest to, any Person that would subject the issuance or sale of the
Loans or any other Liabilities to registration under the Securities Act of
1933, as amended.
SECTION 8.21 Governmental Authorizations. The Borrower and each of
its Subsidiaries have all licenses, franchises, permits and other governmental
authorizations necessary for all businesses presently carried on by them
(including ownership and leasing the real and personal property owned and
leased by them), except where failure to obtain such licenses, franchises,
permits and other governmental authorizations is not reasonably likely to have
a Material Adverse Effect.
SECTION 9. AFFIRMATIVE COVENANTS
The Borrower agrees that, on and after the Effective Date and for so
long thereafter as the Issuing Lender or any Lender has any Commitment
hereunder or any of the Liabilities remain unpaid or outstanding, the Borrower
will:
SECTION 9.1 Reports, Certificates and Other Information. Furnish or
cause to be furnished to the Agent, the Issuing Lender and each Lender:
9.1.1 Audit Report. Promptly after delivery to the SEC or in
any event, within ninety-five (95) days after the end of each Fiscal
Year of the Borrower:
(a) copies of the consolidated balance sheet of the Borrower
as at the end of such Fiscal Year and the related statements of
earnings, stockholders' equity and cash flows
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for such Fiscal Year, in each case setting forth the figures for the
previous year, prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein,
certified without qualification as to going concern or scope by Ernst
& Young (or such other independent certified public accountants of
recognized standing acceptable to the Required Lenders); and
(b) a certificate from such accountants to the effect that, in
making the examination necessary for the signing of the annual audit
report of the Borrower by such accountants, they have not become aware
of any non-compliance by the Borrower or any Subsidiary, or any
Default or Event of Default, under this Agreement or the other Loan
Documents.
9.1.2 Quarterly Reports. Promptly after delivery to the SEC
or in any event, within fifty (50) days after the end of each of the
first three Fiscal Quarters of each Fiscal Year of the Borrower,
copies of the Borrower's 10-Q for such Fiscal Quarter, as filed with
the SEC, certified by the chief financial officer of the Borrower as
presenting fairly the financial condition and results of operations of
the Borrower and its Subsidiaries (subject to normal year-end audit
adjustments);
9.1.3 Compliance Certificate. Contemporaneously with the
furnishing of a copy of each set of the statements and reports
provided for inSections 9.1.1 and 9.1.2, a duly completed certificate,
substantially in the form of Exhibit D (the "Compliance Certificate"),
signed by the chief financial officer of the Borrower, containing,
among other things, a computation of, and showing compliance with,
each of the applicable financial ratios and restrictions contained
inSection 11 as of the dates specified in the Compliance Certificate
and to the effect that no Default or Event of Default has occurred and
is continuing;
9.1.4 Auditors' Materials. Promptly upon receipt thereof,
copies of all detailed financial and management reports regarding the
Borrower or any of its Subsidiaries submitted to the Borrower by
independent public accountants in connection with each annual or
interim audit report made by such accountants of the books of the
Borrower or any of its Subsidiaries;
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9.1.5 Business Plan. Promptly upon the preparation thereof
for each Fiscal Year of the Borrower a copy of the annual business
plan of the Borrower and its Subsidiaries for such Fiscal Year
including a copy of the financial projections of the Borrower and its
Subsidiaries.
9.1.6 Notice of Default and Litigation. Promptly upon
learning of the occurrence of any of the following, written notice
thereof, describing the same and the steps being taken by the Borrower
with respect thereto: (a) the occurrence of a Default or Event of
Default, (b) the institution of any Material Litigation or the
occurrence of any Material Litigation Development, (c) the
commencement of any dispute which might lead to the material
modification, transfer, revocation, suspension or termination of any
of the Loan Documents, or (d) any Material Adverse Change;
9.1.7 ERISA Liability. Promptly upon learning of the
occurrence of the following, written notice thereof describing the
same and the steps being taken by Borrower with respect thereto:
(a) the failure of any member of the Controlled Group to make
a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f)(1) or
accumulated funding deficiency under section 302 of ERISA;
(b) the institution of any steps by any member of the
Controlled Group to withdraw from, or the institution of any steps by
the Borrower to terminate, any Pension Plan;
(c) the taking of any action with respect to a Pension Plan
which could result in the requirement that the Borrower or any of its
Subsidiaries furnish a bond or other security to the Pension Benefit
Guaranty Corporation or such Pension Plan; or
(d) the occurrence of any event with respect to any Pension
Plan which could result in the incurrence by the Borrower or any of
its Subsidiaries of any liability, fine, Tax or penalty in excess of
$200,000 or any increase in excess of $200,000 in the vested or
contingent liability of the Borrower or any of its Subsidiaries with
respect to any post-retirement Welfare Plan benefit;
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9.1.8 Pension Plan Withdrawals. With respect to each Pension
Plan which is a "multi-employer plan," as defined in section 4001 of
ERISA as to which any member of the Controlled Group may incur any
liability, (a) no less frequently than annually, a written estimate
(which shall be based on information received from each such plan, it
being expressly understood that the Borrower shall take all reasonable
steps to obtain such information) of the withdrawal liability that
would be incurred by the Controlled Group in the event that all
members of the Controlled Group were to completely withdraw from such
plan, and (b) written notice thereof, as soon as it has reason to
believe (on the basis of the most recent information available to it)
that the sum of (i) the withdrawal liability that would be incurred by
the Controlled Group if all members of the Controlled Group completely
withdrew from all multi-employer plans as to which any member of the
Controlled Group has an obligation to contribute, and (ii) the
aggregate amount of the outstanding withdrawal liability (without
unaccrued interest) incurred by the Controlled Group to multi-employer
plans, would exceed $200,000;
9.1.9 Environmental Liabilities. Promptly upon learning
thereof, written notice (together with copies, if available) of all
written claims, complaints, notices or inquiries relating to the
Borrower's or any Subsidiary's (a) properties or facilities, or (b)
compliance with Environmental Laws to the extent such claim,
complaint, notice or inquiry is reasonably likely to have a Material
Adverse Effect, together with a description of the steps being taken
by the Borrower or such Subsidiary with respect thereto;
9.1.10 List of Officers and Directors. As soon as available,
but in any event within fifteen (15) Business Days of any change in
the Chief Executive Officer, the President, the Chief Financial
Officer or the Treasurer of the Borrower, written notice of such
change;
9.1.11 Reports to Security Holders. Promptly after the
sending or filing thereof, copies of all reports which the Borrower
sends to any of its security holders and copies of all reports and
registration statements which the Borrower files with the SEC or any
national securities exchange; and
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9.1.12 Other Information. From time to time such other
information and certifications concerning the Borrower and any
Subsidiary as the Agent, the Issuing Lender or any Lender may
reasonably request.
SECTION 9.2 Corporate Existence; Foreign Qualification. Do and cause
to be done at all times all things necessary to (a) maintain and preserve the
corporate or partnership, as the case may be, existence of the Borrower and
each Subsidiary except as permitted under Section 10.3, (b) be, and ensure that
the Borrower and each Subsidiary of the Borrower are, duly qualified to do
business and in good standing (or in the case of a Foreign Subsidiary, the
foreign equivalent, if any, thereof) as foreign corporations or partnerships,
as the case may be, in each jurisdiction where failure to so qualify is
reasonably likely to have a Material Adverse Effect, and (c) comply, and cause
its Subsidiaries to comply, with all contractual obligations and requirements
of law binding upon such entity, except to the extent that the failure to
comply therewith is not reasonably likely, in the aggregate, to have a Material
Adverse Effect.
SECTION 9.3 Books, Records and Inspections. (a) Maintain, and cause
each of its Subsidiaries to maintain, complete and accurate books and records;
(b) permit, and cause each of its Subsidiaries to permit, access at reasonable
times by the Agent and each Lender to its books and records; (c) permit, and
cause each of its Subsidiaries to permit, the Agent, the Issuing Lender and
each Lender to inspect at reasonable times its properties and operations; and
(d) permit, and cause each of its Subsidiaries to permit at reasonable times,
the Agent, the Issuing Lender and each Lender to discuss its business,
operations and financial condition with its officers.
SECTION 9.4 Maintenance of Properties and Insurance.
(a) Maintain, keep, and preserve, and cause each Subsidiary to
maintain, keep, and preserve, all of its material properties (tangible and
intangible) necessary or useful in the proper conduct of its business in good
working order and condition to the extent customary in the case of similar
businesses, ordinary wear and tear excepted.
(b) Maintain, and cause each of its Subsidiaries to maintain, with
responsible insurance companies, insurance with respect to its properties and
business (including business interruption insurance) against such casualties
and contingencies and of such types and in such amounts as is customary in the
case of similar businesses; provided, however, that the Borrower and any
Subsidiary may maintain workers compensation insurance or
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other similar coverage with respect to operations in any state or other
jurisdiction through an insurance fund operated by such state or jurisdiction.
SECTION 9.5 Taxes. Pay, and cause each of its Subsidiaries to pay,
when due all Taxes, except as contested in good faith and by appropriate
proceedings with respect to which reserves have been established, and are being
maintained, in accordance with GAAP.
SECTION 9.6 Pension Plans and Welfare Plans. Maintain, and cause
each of its Subsidiaries to maintain, each Pension Plan and Welfare Plan as to
which it may have any liability, in compliance in all material respects with
all applicable requirements of law.
SECTION 9.7 Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, with all federal, state and local laws, rules and
regulations related to its businesses (including, without limitation, all such
laws, rules and regulations relating to Hazardous Materials or the disposal
thereof) if the failure so to comply is reasonably likely to have a Material
Adverse Effect.
SECTION 9.8 Maintenance of Permits. Maintain, and cause each of its
Subsidiaries to maintain, all permits, licenses and consents as may be required
for the conduct of its business by any state, federal or local government
agency or instrumentality (including, without limitation, any such license,
consent or permit relating to Hazardous Materials or the disposal thereof) if
the failure to maintain such licenses, permits and consents is reasonably
likely to have a Material Adverse Effect.
SECTION 9.9 Environmental Compliance. Maintain, and cause each of
its Subsidiaries to maintain, in all material respects (a) all material
permits, approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and use and operate all of its facilities and
properties in material compliance with all material Environmental Laws, and (b)
appropriate procedures for the handling of all Hazardous Materials in material
compliance with all applicable Environmental Laws, and comply with such
procedures at all times.
SECTION 10. NEGATIVE COVENANTS
The Borrower agrees that, on and after the Effective Date and for so
long thereafter as the Issuing Lender or any Lender has any Commitment
hereunder or any of the Liabilities remains unpaid or outstanding, the Borrower
will:
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SECTION 10.1 Limitation on Indebtedness. Not, and not permit any
Subsidiary to, incur or at any time be liable with respect to any Indebtedness
except:
(a) Indebtedness outstanding under this Agreement in respect
of the Revolving Loans and other Liabilities;
(b) Subordinated debt outstanding on the Effective Date
described in Item B of Schedule VI;
(c) Secured Indebtedness outstanding on the Effective Date
described in Item A of Schedule VI, together with any refinancings or
substitutions thereof, provided such Indebtedness does not exceed the
amount outstanding on the Effective Date;
(d) Indebtedness secured by a Permitted Lien;
(e) Subordinated Debt of the Borrower which is subordinated
to the Liabilities pursuant to subordination terms acceptable to the
Required Lenders and having payment terms acceptable to the Required
Lenders;
(f) unsecured Indebtedness of Foreign Subsidiaries not
otherwise permitted by this Section 10.1 in an aggregate principal
amount at any time outstanding not in excess of [ ];
(g) Indebtedness which constitutes Investments permitted
under Sections 10.6(d) and 10.6(e);
(h) Indebtedness in respect of Capitalized Leases, provided,
that, if such Capitalized Leases were to constitute Liens, such Liens
would be permitted pursuant to Section 10.2(c); and
(i) Other unsecured Indebtedness in an aggregate principal
amount outstanding at any time not to exceed [ ];
provided, however, that no Indebtedness otherwise permitted by clauses (d),
(e), (f), (h) and (i) shall be permitted to be incurred if, after giving effect
to the incurrence thereof, any Default or Event of Default shall exist.
SECTION 10.2 Liens. Not, and not permit any Subsidiary to, create,
assume or suffer to exist any Lien on any asset now owned
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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or hereafter acquired by it, except for the following (collectively called
"Permitted Liens"):
(a) Liens in favor of the Agent for the benefit of the
Issuing Lender and the Lenders;
(b) Liens for current Taxes not delinquent or for Taxes being
contested in good faith and by appropriate proceedings and with
respect to which adequate reserves are being maintained in accordance
with GAAP;
(c) Liens (including Liens arising in connection with
Capitalized Leases under which either the Borrower or any Subsidiary
is lessee) in connection with the acquisition of fixed assets
(including, without limitation, real property) after the date hereof
so long as (i) any such Lien attaches to such fixed assets
concurrently or within two (2) years after the acquisition thereof,
(ii) such Lien attaches only to the property being acquired, other
related assets having a value which is immaterial in relation to the
value of the property so acquired, and the proceeds (including
insurance proceeds and proceeds derived from use by Persons other than
the Borrower or its Subsidiaries) of the property so acquired and of
such other related assets, provided that such Lien may also attach to
other fixed assets of the Borrower (and to other related assets having
a value which is immaterial in relation to the value of such other
fixed assets) so long as the aggregate market value of such other
fixed assets (plus the market value of all such other related assets)
to which such Liens attach during any one Fiscal Year do not exceed
[ ], and (iii) the Indebtedness secured thereby does not
exceed [ ] of the cost of such fixed asset at
the time of acquisition thereof;provided, however, that no Liens
otherwise permitted by this clause (c) shall be permitted if, after
giving effect to the creation thereof, any Default or Event of Default
shall exist;
(d) Liens shown on Schedule VII, together with any
refinancings or substitutions thereof, provided the Indebtedness
secured by such Liens does not exceed the amount outstanding on the
Effective Date;
(e) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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insurance or benefits or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(f) Liens of mechanics, carriers, materialmen and other like
Liens arising in the ordinary course of business in respect of
obligations which are not delinquent or which are being contested in
good faith and by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP;
(g) Liens arising in the ordinary course of business (i) for
sums which (upon Borrower's actual knowledge of such Liens) are
contested in good faith and by appropriate proceedings and with
respect to which adequate reserves are being maintained in accordance
with GAAP or which would be discharged in the ordinary course of
business, or (ii) for sums not due; and in either case not involving
any deposits or advances for borrowed money or the deferred purchase
price of property or services;
(h) Easements, rights of way, restrictions, minor defects or
irregularities on title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the
Borrower and its Subsidiaries taken as a whole;
(i) Liens on intellectual property and related rights arising
in connection with agreements between the Borrower or any Subsidiary
and any other Person relating to the joint development of such, or
related, intellectual property or related rights;
(j) Liens of depository banks or other financial
institutions, limited to amounts on deposit with such depository bank
or other financial institution, incurred in the ordinary course of
business and securing obligations to such depository bank or other
financial institution or its affiliates; and
(k) Liens securing real estate owned by the Borrower on the
date hereof; [
]; provided, further, that no Liens otherwise
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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permitted by this clause (k) shall be permitted if, after giving
effect to the creation thereof, any Default or Event of Default shall
exist.
SECTION 10.3 Consolidation, Merger, etc. Not, and not permit any of
its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or
with, any other Person, or purchase or otherwise acquire all or substantially
all of the assets of any Person (or of any division thereof) except:
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower or any other
Subsidiary; and
(b) so long as no Default or Event of Default has occurred
and is continuing or would occur after giving effect thereto, the
Borrower or its Subsidiaries may purchase all or substantially all of
the assets of any Person, or acquire such Person by merger, if (i)
with respect to any acquisition consummated after the Effective Date
for which the aggregate consideration (on a current market basis)
[ ], the Borrower shall provide to the Lenders as soon
as possible, but in any event within [ ] after
consummation of such acquisition, written notice thereof and a summary
of the principal terms of such acquisition, (ii) with respect to all
such acquisitions and all acquisitions permitted byclause (f) of
Section 10.6 consummated after the Effective Date, the aggregate
value, on [
], of the consideration therefor paid by the Borrower and
its Subsidiaries [
] as of the end of the immediately preceding Fiscal Quarter, (iii)
after giving effect to such acquisition, the Borrower shall remain
primarily engaged on a consolidated basis in the general line of
business in which it currently operates, (iv) no such acquisition
shall be reasonably likely to have a Material Adverse Effect, and (v)
in respect of such acquisition or merger, the Borrower or one of its
Subsidiaries, as the case may be, is the surviving or continuing
entity.
SECTION 10.4 Asset Disposition, etc. Not, and not permit any of its
Subsidiaries to, sell, assign, lease, transfer, contribute, convey or otherwise
dispose of any of its assets to any Person, except:
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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(a) the disposition of assets of the Borrower and its
Subsidiaries (other than accounts receivable of the Borrower) in the
ordinary course of their business for fair consideration;
(b) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of replacement
equipment, or the proceeds of such sales are reasonably applied to the
purchase price of such replacement equipment;
(c) dispositions not otherwise permitted hereunder which are
made for fair market value provided that: (i) such dispositions will
not include [
] for the term of this Agreement (other than Class One Cash
Equivalent Investments and Class Two Cash Equivalent Investments),
(ii) at the time of any disposition, no Default or Event of Default
shall exist or shall result from such disposition, (iii) the aggregate
sales price from any disposition pursuant to a sale-leaseback
transaction shall be paid in cash, (iv) sale-leaseback transactions
shall only be permitted with respect to real property and equipment,
and (v) the aggregate fair market value of all assets (excluding real
property and equipment subject to sale- leaseback transactions) sold
by the Borrower since the Effective Date and not otherwise permitted
by Section 10.4(a), (b) or (d) shall not exceed in the aggregate [
] as of the end of the
immediately preceding Fiscal Quarter; and
(d)[
].
SECTION 10.5 Restricted Payments. Not declare, pay or make any
dividend or distribution (in cash, assets, property, rights, obligations or
securities) on any shares of capital stock (now or hereafter outstanding) of
the Borrower or any warrants, options or other rights with respect to any
shares of capital stock (now or hereafter outstanding) of the Borrower or
apply, or permit any of its Subsidiaries to apply, any of its funds, property
or assets to the purchase, redemption or other retirement of any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower or any
option, warrant or other right to acquire shares of the Borrower's capital
stock; provided
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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that so long as both before and after giving effect thereto no Default or Event
of Default would exist, Borrower may (i) make payments or other distributions
payable solely in the Borrowers common stock, (ii) purchase, redeem or
otherwise acquire shares of its common stock or preferred stock (including
shares of stock purchased from employees upon termination of employment
status), or warrants or options to acquire any such shares, (iii) make
scheduled dividend payments on preferred stock, and (iv) make distributions of
the stock of COMPASS, provided, further, that for purposes of determining
whether a Default or Event of Default exists with respect to the financial
covenants set forth in Section 11 (both immediately prior and after giving
effect to the foregoing actions), compliance with such covenants shall be
calculated as of the end of the most recently ended Fiscal Quarter for which a
Compliance Certificate has been furnished to each Lender, as if, without
double-counting, all such actions occurring since the end of such Fiscal
Quarter had occurred as of the last day of such Fiscal Quarter.
SECTION 10.6 Investments. Not, and not permit any of its Subsidiaries
to, make, incur, assume or suffer to exist any Investment in any other Person,
except:
(a) Investments existing on the Effective Date and identified
in Schedule VIII;
(b) Investments in Class One Cash Equivalents and Class Two
Cash Equivalents, provided, however, that so long as the Borrower or
any Subsidiary has any Class Two Cash Equivalents, the Borrower shall
maintain at all times Class One Cash Equivalents in an amount equal to
or greater than [
];
(c) Investments permitted as Indebtedness pursuant to Section
10.1;
(d) in the ordinary course of business, Investments by the
Borrower in any Restricted Subsidiary, or by any such Restricted
Subsidiary in any other Restricted Subsidiary, by way of contributions
to capital or loans or advances;
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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(e) Investments in Foreign Subsidiaries (which are not also
Restricted Subsidiaries), in an aggregate amount at any time
outstanding [
]. Solely for purposes of this clauses (e),
Investments [
];
(f) so long as no Default or Event of Default has occurred
and is continuing or would occur after giving effect thereto, the
Borrower and its Subsidiaries may acquire the capital stock,
partnership units or other equity interest of any Person, or otherwise
make capital contributions to joint ventures in which the Borrower or
any of its Subsidiaries is a party if (i) with respect to any
acquisition for which the aggregate consideration (on a current market
basis) exceeds [ ], the Borrower shall provide to the Lenders
as soon as possible, but in any event within [ ] after
consummation of such acquisition, written notice thereof and a summary
of the principal terms of such acquisition, (ii) with respect to all
such acquisitions and all acquisitions permitted byclause (b) of
Section 10.3 the aggregate value, and in each case consummated after
the Effective Date on a current market basis (determined at the time
of each such acquisition), of the consideration therefor paid by the
Borrower and its Subsidiaries shall not exceed [
] as of the end of the immediately preceding Fiscal
Quarter, (iii) after giving effect to such acquisition, [
], (iv) no such
acquisition shall have a Material Adverse Effect, and (v) after giving
effect to such acquisition such Person, [ ],
shall become a Subsidiary [
];
(g) Investment by Foreign Subsidiaries in other Foreign
Subsidiaries; and
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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(h) other Investments in an aggregate Dollar amount at any
time outstanding not in excess of [ ].
SECTION 10.7 Change of Control. Not permit a change of [ ] or more of
the Borrower's Board of Directors resulting from [
].
SECTION 10.8 Subordinated Debt. Not, and not permit any of its
Subsidiaries to:
(a) subject to clause (c) below make any payment (whether of
principal, interest or otherwise) on any Subordinated Debt on any day
other than the stated, scheduled date for such payment set forth in
the documents and instruments evidencing such Subordinated Debt; or
(b) make any payment on any Subordinated Debt in
contravention or violation of the subordination provisions thereof; or
(c) prepay, redeem, purchase or defease any Subordinated
Debt, or make any deposit for any of the foregoing purposes except
regularly scheduled sinking fund payments which are scheduled to begin
on May 1, 1998;provided that, with respect to the Convertible
Subordinated Debt the Borrower may call such Convertible Subordinated
Debt in accordance with the terms of its existing indenture if (i) at
the time such call is announced the market price of the Borrower's
common stock has exceeded for [
] and (ii) both before and after giving effect thereto
no Default or Event of Default shall exist; or
(d) enter into any amendment or modification of any
Subordinated Debt.
SECTION 10.9 Take or Pay Contracts. Not, and not permit any of its
Subsidiaries to, enter into or be a party to any arrangement for the purchase
of materials, supplies, other property or services if such arrangement by its
express terms requires that payment be made by the Borrower or such Subsidiary
regardless of whether such materials, supplies, other property or services are
delivered or furnished to it and if such arrangement is reasonably likely to
have a Material Adverse Effect.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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SECTION 10.10 Regulations G and U. Not, and not permit any of its
Subsidiaries to, use or permit any proceeds of the Revolving Loans or LC
Obligations to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or carrying margin stock"
within the meaning of Regulations G and U of the Board of Governors of the
Federal Reserve System, as amended from time to time.
SECTION 10.11 Subsidiaries. Notwithstanding any provision of this
Agreement to the contrary, not, and not permit any of its Subsidiaries to,
create or permit to exist any Domestic Subsidiary [
].
SECTION 10.12 Other Agreements. Not, and not permit any of its
Subsidiaries to, enter into any agreement containing any provision which (a)
would be violated or breached by the performance of its obligations hereunder
or under any instrument or document delivered or to be delivered by it
hereunder or in connection herewith, (b) prohibits or restricts the creation or
assumption of any Lien upon its properties, revenues or assets (whether now
owned or hereafter acquired) as security for the Liabilities hereunder (other
than provisions set forth in agreements relating to Permitted Liens, joint
venture agreements, lease agreements and intellectual property license
agreements, provided that such provisions only prohibit or restrict Liens upon
the assets specifically the subject of such agreements), (c) prohibits or
restricts the ability of any Subsidiary to make dividends or advances or
payments to the Borrower, or (d) prohibits or restricts the ability of the
Borrower or any Subsidiary to amend or otherwise modify this Agreement or any
other document executed in connection herewith.
SECTION 10.13 Business Activities. Not, and not permit any of its
Subsidiaries to, (a) engage in any type of business except the businesses which
any of the Borrower or its Subsidiaries are respectively presently engaged in,
or (b) substantially alter the methods by which the Borrower or its
Subsidiaries conduct such business.
SECTION 10.14 Transactions with Affiliates. Not, and not permit
any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of its Affiliates unless such arrangement (i)
is fair and equitable to the Borrower or such Subsidiary, (ii) is of a sort
which would be entered into by a prudent Person in the position of the Borrower
or such Subsidiary with a Person which is not one of its Affiliates, and (iii)
is on terms which are not less favorable to
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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the Borrower or such Subsidiary than are obtainable from a Person which is not
one of its Affiliates.
SECTION 10.15 Contingent Obligations. Not, and not permit any
Subsidiary to, incur or at any time be liable with respect to Contingent
Obligations except:
(a) Contingent Obligations outstanding under this
Agreement in respect of the Letters of Credit;
(b) Contingent Obligations in respect of Indebtedness
permitted by Section 10.1(f);
(c) Hedging Obligations of the Borrower or any Subsidiary;
and
(d) Contingent Obligations in respect of undrawn letters of
credit (other than letters of credit which if issued by the Issuing
Lender would constitute Financial Letters of Credit) in an aggregate
amount at any time not to exceed [ ];
(e) Contingent Obligations in respect of obligations of
any Restricted Subsidiary;
(f) Contingent Obligations of the Borrower or its
Subsidiaries in respect of obligations (other than of the types set
forth in clauses (i) through (v) of the definition of the
"Indebtedness") of Foreign Subsidiaries; and
(g) Contingent Obligations set forth on Schedule II.
SECTION 11. FINANCIAL COVENANTS
The Borrower agrees that, on and after the Effective Date and for so
long thereafter as the Issuing Lender or any Lender has any Commitment
hereunder or any of the Liabilities remain unpaid or outstanding, it will:
SECTION 11.1 Quick Ratio. Not permit at any time its Consolidated
Quick Ratio to be less than [ ]. For purposes hereof, "Consolidated
Quick Ratio" shall mean the ratio of (i) the sum of cash, Class One Cash
Equivalents, Class Two Cash Equivalents and accounts receivable (net of
applicable reserves therefor) of the Borrower and its Subsidiaries to (ii)
consolidated current liabilities of the Borrower and its
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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Subsidiaries. This ratio is only required to be calculated by the Borrower as
of the last day of each fiscal month.
SECTION 11.2 Leverage Ratio. Not permit at any time the Leverage
Ratio to be greater than [ ]. This ratio is only required to be
calculated by the Borrower as of the last day of each fiscal month.
SECTION 11.3 Minimum Profitability. Not permit the consolidated net
loss of the Borrower and its Subsidiaries to be greater than [ ] (a)
for any Fiscal Quarter; (b) in the aggregate for any [ ] Fiscal
Quarters; or (c) in the aggregate for any [ ] Fiscal Quarters.
SECTION 11.4 Fixed Charge Coverage Ratio. Not permit for any period
of [ ] Fiscal Quarters, beginning with the period of [
] Fiscal Quarters ending July 1, 1994, the ratio of (i) consolidated
net income of the Borrower and its Subsidiaries, plus consolidated depreciation
and amortization expense, plus consolidated interest expense, minus
consolidated interest income, plus consolidated provision for taxes on income
(collectively, "EBITDA") to (ii) consolidated interest expense, plus
consolidated income taxes paid, plus preferred stock cash dividends paid, plus
the average of consolidated current portion of long-term debt (other than the
Revolving Loans) as of the end of each of such [ ] Fiscal Quarters, plus the
average of consolidated current capital lease obligations as of the end of each
of such [ ] Fiscal Quarters, to be less than [ ].
SECTION 11.5 Capital Expenditures. Not permit Consolidated Capital
Expenditures to exceed during any [ ] Fiscal Quarters the sum of
(i) EBITDA for such [ ] Fiscal Quarter period plus (ii) consolidated cash,
Class One Cash Equivalents and Class Two Cash Equivalents of the Borrower and
its Subsidiaries as of the last day of such [ ] Fiscal Quarter period to the
extent such cash, Class One Cash Equivalents and Class Two Cash Equivalents
exceed [ ].
SECTION 11.6 Consolidated Tangible Net Worth. Not permit at any time
Consolidated Tangible Net Worth to be less than the sum of (i) Consolidated
Tangible Net Worth as of April 1, 1994 [
] of cumulative consolidated net income of the Borrower and its
Subsidiaries (but without any offset for net losses) from and after April 1,
1994, [
] from
and after April 1, 1994. This ratio is
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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only required to be calculated by the Borrower as of the last day of each
fiscal month.
SECTION 11.7 Cash and Cash Equivalents. Maintain as of the last day
of each Fiscal Quarter on a consolidated basis for the Borrower and its
Subsidiaries an aggregate Dollar amount of cash plus Class One Cash Equivalents
plus Class Two Cash Equivalents of not less than [ ].
SECTION 12. CONDITIONS
The obligation of each of the Lenders to make Revolving Loans and of
the Issuing Lender to issue Letters of Credit is subject to the performance by
the Borrower of all of its obligations under this Agreement and to the
satisfaction of the following conditions precedent:
SECTION 12.1 Conditions to Effectiveness. The Commitments set forth
herein shall become effective upon receipt by the Agent of each of the
following, each, except to the extent otherwise specified below, duly executed
by an Authorized Officer, dated the date hereof (or such earlier date as shall
be satisfactory to the Agent), in form and substance satisfactory to the Agent
and each in sufficient number of signed counterparts to provide one for each
Lender:
12.1.1 For each Lender, an appropriately completed Revolving
Note, payable to the order of such Lender;
12.1.2 [
];
12.1.3 A favorable opinion of Heller, Ehrman, White &
McAuliffe, counsel to the Borrower and the Domestic Subsidiaries,
substantially in the form of Exhibit F-1 hereto, and a favorable
opinion of Thomas F. Mulvaney, General Counsel to the Borrower and the
Subsidiaries, substantially in the form ofExhibit F-2 hereto;
12.1.4 An officer's certificate of the Borrower, [
], each substantially in the form of Exhibit G-1
and G-2, respectively, hereto and dated as of the date hereof, signed
by an Authorized Officer of the Borrower, [ ]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[ ], as the case may be, and attested to by a secretary or
assistant secretary, together with certified copies of the Borrower's,
[ ], articles of incorporation, by-laws,
resolutions and any other document pursuant to the terms thereof;
12.1.5 Evidence of the good standing of the Borrower, [
], in the jurisdiction in which such Person
is incorporated;
12.1.6 Evidence that the Borrower shall have paid to the
Agent the fees and expenses provided for herein which are required to
be paid on or before the Effective Date; and
12.1.7 Such other information and documents as may reasonably
be required by the Agent and the Agent's counsel.
SECTION 12.2 All Loans and Letters of Credit. The obligation of each
Lender to make each Revolving Loan of any Type and of the Issuing Lender to
issue each Letter of Credit is subject to the following further conditions
precedent that:
12.2.1 The Agent, the Issuing Lender and each Lender shall
have received a Borrowing Request or an LC Application, as required;
12.2.2 No Default or Event of Default exists or will result
from the making of such Revolving Loan or issuance of such Letter of
Credit;
12.2.3 The representations and warranties of the Borrower
contained in Section 8 (except, with respect to Revolving Loans made
or Letters of Credit issued after the Effective Date,Sections 8.6,
8.7, 8.8 and 8.10) are true and correct with the same effect as though
made on the date of the making of such Loan or issuance of such Letter
of Credit;
12.2.4 No Material Litigation exists except as disclosed on
Schedule II, and since the Effective Date of this Agreement no
Material Litigation Development has occurred with respect to any
Litigation so disclosed on Schedule II; and
12.2.5 No Material Adverse Change has occurred since the date
of the most recent financial statements
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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delivered or required to be delivered pursuant to Section 9.1.
Each Borrowing Request and LC Application delivered to the Agent and the
Lenders hereunder shall automatically constitute a warranty by the Borrower to
the Agent, the Issuing Lender and each Lender to the effect that on the
requested date of such Borrowing or issuance of such Letter of Credit, as the
case may be, (a) the representations and warranties of the Borrower contained
in Section 8 of this Agreement (except with respect to Revolving Loans or
Letters of Credit made or issued after the Effective Date, Sections 8.6, 8.7,
8.8 and 8.10) shall be true and correct as of such requested date as though
made, and (b) no Default or Event of Default shall have then occurred and be
continuing or will result therefrom.
SECTION 13. EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 13.1 Events of Default. An "Event of Default" shall exist if
any one or more of the following events (herein collectively called "Events of
Default") shall occur and be continuing:
13.1.1 Non-Payment of Loans, etc. (a) Default in the payment
or prepayment when due of any principal of or interest on any
Revolving Loan; or (b) default in the payment or prepayment when due
of any reimbursement obligation, interest or fee (other than fees
payable pursuant to Section 5.7(d)) with respect to any LC Obligation;
or (c) default and continuance for 3 days in the payment when due of
any other amount owing by the Borrower pursuant to this Agreement.
13.1.2 Non-Payment of Other Indebtedness or Contingent
Obligations. Default in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness or Contingent Obligations of the Borrower or any
Subsidiary (other than Indebtedness or Contingent Obligations in
respect of this Agreement) in an amount in excess of $1,000,000 or
default in the performance or observance by the Borrower or any of its
Subsidiaries of any obligation or condition with respect to any such
Indebtedness or Contingent Obligations if the effect of such default
is to accelerate the maturity of any such Indebtedness or Contingent
Obligations or to permit the holder or holders thereof, or any trustee
or agent for such
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holders, to cause such Indebtedness or Contingent Obligations to
become due and payable prior to its expressed maturity.
13.1.3 Bankruptcy, Insolvency, etc. The Borrower or any
Significant Subsidiary becomes insolvent or generally fails to pay, or
admits in writing its inability to pay, debts as they become due; or
the Borrower or any Significant Subsidiary applies for, consents to,
or acquiesces in the appointment of, a trustee, receiver or other
custodian for the Borrower or such Significant Subsidiary or any
property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
the Borrower or any Significant Subsidiary or for a substantial part
of the property of any thereof and is not discharged within sixty (60)
days; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding (except the voluntary
dissolution, not under any bankruptcy or insolvency law, of a
Significant Subsidiary), is commenced in respect of the Borrower or
any Significant Subsidiary and if such case or proceeding is not
commenced by the Borrower or such Significant Subsidiary, it is
consented to or acquiesced in by the Borrower or such Significant
Subsidiary or remains for sixty (60) days undismissed; or the Borrower
or any Significant Subsidiary takes any corporate action to authorize,
or in furtherance of, any of the foregoing.
13.1.4 Defaults Under this Agreement. (a) Failure by the
Borrower to comply with or perform any of the covenants or agreements
of the Borrower set forth inSections 9.3(b), 9.3(c), and 10, (except
Sections 10.6(a) - (e)) and Section 10.7); and
(b) Failure by the Borrower, and actual knowledge by the
Chief Financial Officer or Treasurer of the Borrower of such failure,
to comply with any of the covenants or agreements of the Borrower set
forth inSection 11.
13.1.5 Other Noncompliance with this Agreement. Failure by
the Borrower or any Restricted Subsidiary to comply with or perform
any other provision of this Agreement or the other Loan Documents
applicable to it (other than those covered by Section 13.1.4 or those
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constituting an Event of Default under any of the other provisions of
this Section 13) and continuance of such failure for thirty (30) days
after notice thereof to the Borrower from the Agent or any Lender.
13.1.6 Representations and Warranties. Any representation or
warranty made by the Borrower or any Subsidiary herein or in any of
the other Loan Documents is false or misleading in any material
respect as of the date hereof or as of the date hereafter certified,
or any schedule, certificate, financial statement, report, notice, or
other writing furnished by the Borrower or any Subsidiary to the Agent
or any Lender is false or misleading in any material respect on the
date as of which the facts therein set forth are stated or certified.
13.1.7 Pension Plans and Welfare Plans. With respect to any
Pension Plan as to which the Borrower or any Subsidiary may have any
liability, there shall exist a deficiency of more than $250,000 in the
Pension Plan assets available to satisfy the benefits guaranteeable
under ERISA with respect to such Pension Plan, and steps are
undertaken to terminate such Pension Plan or such Pension Plan is
terminated or the Borrower or such Subsidiary withdraws from or
institutes steps to withdraw from such Pension Plan or any material
Reportable Event with respect to such Pension Plan shall occur. With
respect to any Welfare Plans as to which the Borrower may have any
liability, there shall occur any event which could result in the
incurrence by the Borrower of any increase in excess of $250,000 in
the vested or contingent liability of the Borrower with respect to any
post-retirement Welfare Plan benefit.
13.1.8 Adverse Judgment. One or more final judgments or
decrees shall be entered against the Borrower or any of its
Subsidiaries involving, in the aggregate, a liability (not covered by
collectible insurance) of $250,000 or more and all such judgments or
decrees shall not have been vacated, satisfied, discharged or stayed
or bonded pending appeal within thirty (30) consecutive days from the
entry thereof.
13.1.9 Other Loan Documents. The Borrower or any Subsidiary
shall fail to comply with any of the provisions of any other Loan
Documents applicable to it within any applicable grace period or, if
no grace
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period is specified, within thirty (30) days after notice of such
failure has been given to the Borrower or any Subsidiary, as the case
may be, by the Agent; or any of the other Loan Documents shall fail to
remain in full force and effect in any material respect (other than
Section 18 of any Subsidiary Guaranty) and such failure shall continue
for thirty (30) days; or any action shall be taken by the Borrower or
any Subsidiary to discontinue any of the other Loan Documents or to
assert the invalidity of any thereof.
SECTION 13.2 Effect of Event of Default. If any Event of Default
described in Section 13.1.3 shall occur, the Commitments (if they have not
theretofore terminated) shall immediately terminate and all Liabilities shall
become immediately due and payable, all without notice of any kind; and, in the
case of any other Event of Default, the Agent may (or shall, upon the written
request of the Required Lenders) declare the Commitments (if they have not
theretofore terminated) to be terminated and the Agent may (or upon written
request of the Required Lenders shall) declare all Liabilities to be due and
payable, whereupon the Commitments (if they have not theretofore terminated)
shall immediately terminate and all Liabilities shall become immediately due
and payable, all without presentment, demand, protest or further notice of any
kind. The Agent shall promptly advise the Borrower and each Lender of any such
declaration, but failure to do so shall not impair the effect of such
declaration. Notwithstanding the foregoing or any provision of Section 16.1,
the effect as an Event of Default of any event described in Section 13.1.3 may
be waived by the written concurrence of all of the Lenders and the effect as an
Event of Default of any other event described in this Section 13 may be waived
as provided in Section 16.1.
SECTION 14. THE AGENT
SECTION 14.1 Authorization and Action. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers to the extent provided herein or in any document or
instrument delivered hereunder or in connection herewith, together with such
other action as may be reasonably incidental thereto. As to matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of this Agreement or any other Loan Documents) the
Agent shall not be required to exercise any discretion, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders and
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such instructions shall be binding upon all Lenders. Under no circumstances
shall the Agent be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or to the other Loan
Documents or applicable law.
SECTION 14.2 Liability of the Agent. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
and any other Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limiting the generality of the foregoing, the
Agent (a) may treat the payee of any Revolving Note as the holder thereof until
the Agent receives an executed Assignment Agreement entered into between a
Lender and an Eligible Assignee pursuant to Section 15.1 hereof; (b) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts or consultants selected by it; (c) shall
not be liable for any action taken or omitted to be taken in good faith by the
Agent in accordance with the advice of counsel, accountants, consultants or
experts; (d) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any recitals, statements, warranties or
representations, whether written or oral, made in or in connection with this
Agreement or any other Loan Documents; (e) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
obligations, covenants or conditions of this Agreement on the part of the
Borrower or to inspect the property (including, without limitation, any books
and records) of the Borrower; (f) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, any other Loan Document or other support or
security, or any other document furnished in connection with any of the
foregoing; and (g) shall incur no liability under or in respect of this
Agreement or any other Loan Document by action upon any written notice,
statement, certificate, order, telephone message, facsimile or other document
which the Agent believes in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person.
SECTION 14.3 Continental and Affiliates. With respect to the
Revolving Loans made by it and Letters of Credit issued by it, Continental
shall have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Continental in its individual capacity. Continental and its
Affiliates may accept deposits from, lend
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money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower and any of its Subsidiaries and any Person who
may do business with or own securities of the Borrower or any such Subsidiary,
all as if Continental were not the Agent or the Issuing Lender and without any
duty to account therefor to the Lenders.
SECTION 14.4 Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 8.6 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 14.5 Indemnification. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by the Borrower), ratably according to
their Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or assessed against the Agent in any way relating to or arising
out of this Agreement or the other Loan Documents, or any action taken or
omitted by the Agent under this Agreement or the Related Documents, provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limiting any of the foregoing, each Lender agrees
to reimburse the Agent promptly upon demand for its Percentage of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment, waiver or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under this Agreement or the other Loan Documents to the extent
that the Agent is not reimbursed for such expenses by the Borrower. All
obligations provided for in this Section 14.5 shall survive termination of this
Agreement.
SECTION 14.6 Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent which shall be a
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commercial bank having a combined capital and surplus of at least $500,000,000
and shall meet the requirements to be an Eligible Assignee. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a commercial bank having a
combined capital and surplus of at least $500,000,000 and shall meet the
requirements to be an Eligible Assignee. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations in its capacity as Agent under this Agreement.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 14 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 15. ASSIGNMENTS AND PARTICIPATIONS
SECTION 15.1 Assignments. (a) With the prior written consent of the
Agent and the Borrower (which consent shall not be unreasonably delayed or
withheld), each Lender shall have the right at any time to assign, to any
Eligible Assignee, all or any part of such Lender's rights and obligations
under this Agreement and each other Loan Document including its rights in
respect of Loans, Revolving Notes, Letters of Credit and LC Obligations and its
obligations in respect of Commitments to make Loans or participate in Letters
of Credit. Any such assignment shall be pursuant to an assignment agreement,
substantially in the form of Exhibit I (an "Assignment Agreement"), duly
executed by such Lender and the Eligible Assignee, and acknowledged by the
Agent. Although its failure to do so will not affect any of the rights or
obligations provided for therein or herein, the Borrower agrees to duly
acknowledge any Assignment Agreement executed by any assigning Lender promptly
after its receipt of the same. No assignment by the Issuing Lender shall
relieve it from its obligations in respect of the Letters of Credit, it being
understood that any assignment by the Issuing Lender as to Letters of Credit
shall be deemed to automatically constitute an assignment by the Issuing Lender
and the purchase by the Eligible Assignee of a participating interest in such
Letters of Credit.
(b) Each assignment shall be pro rata with respect to all rights and
obligations of the assigning Lender including the Revolving Loans, Revolving
Notes, LC Obligations and Commitments
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of the assigning Lender. Each assignment, if to a Person other than a Lender,
shall be in an amount equal to or in excess of $5,000,000. In the case of any
such assignment, upon the execution and delivery of such Assignment Agreement
by such Lender and the Borrower, and the making of any payment by the Eligible
Assignee required by the assigning Lender, this Agreement shall be deemed to be
amended to the extent, and only to the extent, necessary to reflect the
addition of such Eligible Assignee, and the Eligible Assignee shall for all
purposes be a Lender party hereto and shall have, to the extent of such
assignment, the same rights and obligations as a Lender hereunder.
(c) Upon the consummation of any assignment, the assigning Lender
shall be relieved from its obligations hereunder to the extent of the
obligations so assigned (except, (i) obligations of the Issuing Lender in
respect of the Letters of Credit issued by it, and (ii) to the extent, if any,
that the Borrower, any other Lender or the Agent has rights against such
assigning Lender as a result of any default by such Lender under this
Agreement) and appropriate arrangements shall be made so that, if required,
replacement Revolving Notes are issued to such assigning Lender and new
Revolving Notes or, as appropriate, replacement Revolving Notes are issued to
the Eligible Assignee, in each case in principal amounts reflecting their
outstanding Loans as adjusted pursuant to such Assignment Agreement. Promptly
following the consummation of each assignment, the Agent shall furnish to the
Borrower and each Lender, revised Schedule I, revised to reflect such
assignment.
SECTION 15.2 Participations. With the prior written consent of the
Agent and the Borrower (which consent shall not be unreasonably delayed or
withheld), each Lender may grant participations in all or any part of its
Loans, Revolving Notes, Letters of Credit and LC Obligations to any commercial
bank, insurance company or other financial institution; provided, however, that
the Lenders may grant participations to their respective Affiliates without the
prior written consent of the Agent or the Borrower. A participant shall not
have any rights under this Agreement or any other document delivered in
connection herewith (the participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto, which agreement with
respect to such participation shall not restrict such Lender's ability to make
any modification, amendment or waiver to this Agreement without the consent of
the participant except that the consent of such participant may be required in
connection with matters requiring the consent of all of the Lenders under
Section 16.1). All
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amounts payable by the Borrower under this Agreement shall be determined as if
the Lender had not sold such participation. In the event of any such sale by a
Lender of participating interests to a participant, such Lender's obligations
under this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any obligation for all purposes under this Agreement, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement; provided,
however, that either the Borrower or the Agent may choose to communicate with
such participant in their sole discretion.
SECTION 15.3 Confidentiality. The Agent and each Lender shall hold
all non-public information obtained pursuant to the requirements of this
Agreement, which has been identified as such by the Borrower, in accordance
with their customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices and, in any
event, may make disclosure on the same confidential basis as provided for
herein that is reasonably required by any actual or bona fide potential
transferee or participant in connection with the contemplated transfer of any
Note or participation therein or in any Letter of Credit or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process; provided that, unless specifically prohibited by applicable law
or court order, each of the Agent and each Lender shall promptly notify the
Borrower of any request by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of the Agent or such Lender by such governmental agency) for
disclosure of any such non-public information promptly upon learning of such
request and in any event prior to disclosure of such information.
SECTION 15.4 Foreign Transferees. If, pursuant to this Section 15,
any interest in this Agreement or any Loan, Letter of Credit, Revolving Note or
LC Obligation is transferred to any participant or Eligible Assignee (each a
"Transferee") which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause such
Transferee (other than any participant), and may cause any participant,
concurrently with the effectiveness of such transfer, (a) to represent to the
transferor Lender (for the benefit of the transferor Lender, the Agent, and the
Borrower) that under applicable law and treaties no Taxes will be required to
be withheld by the Agent, and the Borrower or the transferor Lender with
respect to any payments to be made to such Transferee in respect of the Loans,
Revolving Notes or Letters of Credit,
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(b) to furnish to the transferor Lender, the Agent and the Borrower either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein such Transferee claims entitlement to complete exemption from U.S.
federal withholding tax on all interest payments hereunder), and (c) to agree
(for the benefit of the transferor Lender, the Agent and the Borrower) to
provide the transferor Lender, the Agent and the Borrower a new Form 4224 or
Form 1001 upon the obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and regulations and
amendments duly executed and completed by such Transferee, and to comply from
time to time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
SECTION 16. MISCELLANEOUS
SECTION 16.1 Waivers and Amendments. The provisions of this Agreement
and of the other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented
to by the Borrower and the Required Lenders; provided that no such amendment,
modification or waiver:
(a) which would modify any requirement hereunder that any
particular action be taken by all Lenders or by the Required Lenders,
shall be effective without the consent of each Lender;
(b) which would modify this Section 16.1, change the
definition of "Required Lenders," change any Percentage for any Lender
(except pursuant to an Assignment Agreement), reduce any fees, extend
the Termination Date, or subject any Lender to any additional
obligations, shall be effective without the consent of each Lender;
(c) which would release any [
] in connection with the sale of assets or
merger permitted under Sections 10.3 and 10.4, shall be effective
without the consent of each Lender;
(d) which would extend the due date for, or reduce the amount
of, any payment or prepayment of principal of, accrued interest on or
the interest rate on any Revolving Loan or any reimbursement
obligation, accrued interest on or the interest rate or fees with
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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respect to any LC Obligation, or any fees pursuant to Section 5.7(a),
shall be effective without the consent of the holder of such Loan or
LC Obligation; or
(e) which would affect adversely the interests, rights or
obligations of the Agent (in its capacity as the Agent), shall be
effective without consent of the Agent.
SECTION 16.2 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile or
similar writing) and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof or such other address or
facsimile number as such party may hereafter specify to the Agent, the Issuing
Lender and the Borrower for purposes of notice. Each such notice, request or
other communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section, (b)
if given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (c) if given by any
other means, when delivered at the address specified in this Section, provided
that notices to the Agent under Sections 3, 4 and 14 shall not be effective
until received by the Agent.
SECTION 16.3 Payment of Costs and Expenses. The Borrower agrees to
pay on demand all reasonable expenses of the Agent (including the reasonable
fees and out-of-pocket expenses of counsel to the Agent) in connection with:
(a) the negotiation, preparation, execution and delivery of
this Agreement (including any preceding term sheets and commitment
letters relating thereto) and of the 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 or thereby are consummated;
and
(b) the preparation and/or review of the form of any document
or instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other Taxes which may be payable
in connection with the execution or delivery of this Agreement, the Borrowings
hereunder, or the issuance of
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the Revolving Notes or any other Loan Documents, other than Taxes imposed on or
measured by any Lender's net income or receipts. The Borrower also agrees to
reimburse the Agent and the Issuing Lender upon demand for all reasonable and
customary out-of-pocket expenses (including reasonable attorneys' fees and
legal expenses) incurred by the Agent or the Issuing Lender in connection with
the enforcement of any Liabilities and the consideration of legal issues
relevant hereto and thereto. All obligations of the Borrower provided for in
this Section 16.3 shall survive termination of this Agreement.
SECTION 16.4 General Indemnity. In addition to the payment of
expenses pursuant to Section 16.3, Borrower agrees to indemnify, pay and hold
the Agent, the Issuing Lender and each Lender, and the officers, directors,
employees, agents, and affiliates of the Agent, the Issuing Lender and each
Lender (collectively, the "Indemnitees"), harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto)
that may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement, any other Loan Document or
any other agreements executed and delivered by the Borrower in connection
herewith, the Lenders' agreement to make the Revolving Loans hereunder, the
Issuing Lender's agreement to issue Letters of Credit, or the use or intended
use of the proceeds of any of the Revolving Loans or the LC Obligations (the
"indemnified liabilities"); provided, that Borrower shall have no obligation to
an Indemnitee hereunder with respect to indemnified liabilities arising from
the gross negligence or willful misconduct of such Indemnitee or from any
action between the Agent, the Issuing Lender or any Lender against an officer,
director or employee of the Agent, the Issuing Lender or such Lender. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it violates any law or
public policy, the Borrower shall contribute the maximum portion that it is
permitted to pay under applicable law to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them. The
provisions of the undertakings and indemnification set out in this Section 16.4
shall survive satisfaction and payment of Borrower's obligations hereunder and
termination of this Agreement.
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SECTION 16.5 Subsidiary References. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Borrower has
one or more Subsidiaries.
SECTION 16.6 Captions. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
SECTION 16.7 Governing Law. This Agreement, the Revolving Notes and
each Revolving Loan shall be a contract made under and governed by the laws of
the State of Illinois, without regard to conflict of laws principles. All
obligations of the Borrower and rights of the Agent, the Issuing Lender and the
Lenders expressed herein or in the other Loan Documents shall be in addition to
and not in limitation of those provided by applicable law.
SECTION 16.8 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. When
counterparts executed by all the parties shall have been lodged with the Agent
(or, in the case of any Lender as to which an executed counterpart shall not
have been so lodged, the Agent shall have received telegraphic, facsimile,
telex or other written confirmation from such Lender of execution of a
counterpart hereof by such Lender), this Agreement shall become effective as of
the Effective Date hereof, and at such time the Agent shall notify the
Borrower, the Issuing Lender and each Lender.
SECTION 16.9 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE
BORROWER, ON BEHALF OF ITSELF AND EACH SUBSIDIARY (A) HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN
CHICAGO, ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND THE BORROWER HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT, AND (B) AGREES NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE AGENT, THE ISSUING LENDER
OR ANY LENDER OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY
THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN
AS HEREINABOVE SPECIFIED IN THIS SECTION 16.9. THE BORROWER, ON BEHALF OF
ITSELF AND EACH SUBSIDIARY, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY THE BORROWER, ANY
SUBSIDIARY, THE AGENT, THE ISSUING LENDER, ANY LENDER, OR OTHERWISE) IN ANY
COURT HEREINABOVE SPECIFIED IN THIS SECTION
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16.9 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH
ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM
NON CONVENIENS OR OTHERWISE. THE BORROWER ON BEHALF OF ITSELF AND EACH
SUBSIDIARY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 16.10 WAIVER OF JURY TRIAL. THE BORROWER, THE ISSUING LENDER,
THE AGENT AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR UNDER
ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY
SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 16.11 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that: (a) the Borrower may not
assign or transfer its rights or obligations hereunder without the prior
written consent of the Agent and all Lenders; and (b) the rights of the Lenders
to make assignments or grant participations are subject to the provisions of
Section 15.
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<PAGE> 80
Delivered at Chicago, Illinois, as of the day and year first above written.
VLSI TECHNOLOGY, INC.
By: /s/ JOHN C. BATTY
______________________________
Name: John C. Batty
____________________________
Title: Vice President & Treasurer
___________________________
Address: 1109 McKay Drive, M/S 25
San Jose, California 95131
Attention: JOHN C. BATTY
_______________________
Telephone: (408) 434-7861
_______________________
Facsimile: (408) 434-3181
_______________________
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CONTINENTAL BANK N.A., in its individual corporate capacity and as Agent
By: /s/ BARRY A. PETERSON
______________________________
Name: Barry A. Peterson
Title: Vice President
Lending Office (Base Rate Loans)
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Title: Vice President
Telephone: (312) 828-1379
Facsimile: (312) 828-1754
Lending Office (Eurodollar Rate
Loans)
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Title: Vice President
Telephone: (312) 828-1379
Facsimile: (312) 828-1754
Lending Office (CD Rate Loans)
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Title: Vice President
Telephone: (312) 828-1379
Facsimile: (312) 828-1754
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<PAGE> 82
COMERICA BANK - CALIFORNIA
By: /s/ LORI S. EDWARDS
______________________________
Name: Lori S. Edwards
Title: First Vice President
Lending Office (Base Rate Loans)
Address: 55 Almaden Boulevard
San Jose, CA 95113
Attention: Lori S. Edwards
Telephone: (408) 291-6609
Facsimile: (408) 271-4120
Lending Office (Eurodollar Rate
Loans)
Address: 55 Almaden Boulevard
San Jose, CA 95113
Attention: Lori S. Edwards
Telephone: (408) 291-6609
Facsimile: (408) 271-4120
Lending Office (CD Rate Loans)
Address: 55 Almaden Boulevard
San Jose, CA 95113
Attention: Lori S. Edwards
Telephone: (408) 291-6609
Facsimile: (408) 271-4120
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THE BANK OF CALIFORNIA, N.A.
By: /s/ DEAN CHU
______________________________
Name: Dean J. Chu
____________________________
Title: Vice President
Lending Office (Base Rate Loans)
Address: 400 California Street
San Francisco, CA 94104
Attention: Magdalene Chan
Telephone: (415) 765-3641
Facsimile: (415) 765-3146
Lending Office (Eurodollar Rate
Loans)
Address: 400 California Street
San Francisco, CA 94104
Attention: Magdalene Chan
Telephone: (415) 765-3641
Facsimile: (415) 765-3146
Lending Office (CD Rate Loans)
Address: 400 California Street
San Francisco, CA 94104
Attention: Magdalene Chan
Telephone: (415) 765-3641
Facsimile: (415) 765-3146
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<PAGE> 84
CHEMICAL BANK
By: /s/ JOHN J. HUBER
______________________________
Name: John J. Huber III
Title: Managing Director
Lending Office (Base Rate Loans)
Address: 270 Park Avenue
New York, New 10017-2070
Attention: Miranda Chin
Telephone: (212) 270-4994
Facsimile: (212) 270-2112
Lending Office (Eurodollar Rate
Loans)
Address: 270 Park Avenue
New York, New 10017-2070
Attention: Miranda Chin
Telephone: (212) 270-4994
Facsimile: (212) 270-2112
Lending Office (CD Rate Loans)
Address: 270 Park Avenue
New York, New 10017-2070
Attention: Miranda Chin
Telephone: (212) 270-4994
Facsimile: (212) 270-2112
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<PAGE> 85
SCHEDULE I
Lenders (Section 1.1)
<TABLE>
<CAPTION>
Revolving Loan Lender's
Lender Commitment Percentage
------ ---------- ----------
<S> <C> <C>
Continental Bank, N.A. $15,000,000 28.5714286%
Comerica Bank - $12,500,000 23.8095238%
California
The Bank of $10,000,000 19.0476190%
California, N.A.
Chemical Bank $15,000,000 28.5714286%
</TABLE>
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<PAGE> 86
SCHEDULE II
Contingent Obligations
<TABLE>
<CAPTION>
Estimated
Obligor Description Amount
------- ----------- ---------
<S> <C> <C>
[ ]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 87
SUBSIDIARIES
SCHEDULE III
Subsidiaries
<TABLE>
<CAPTION>
Percentage
Jurisdiction of Equity
Restricted/ of Form of Held by the
Name Unrestricted Organization Organization Borrower
- - ---- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
VLSI Technology, GmbH Unrestricted Germany GmbH 100.0%
VLSI Technology Ltd. Unrestricted United Kingdom Limited 100.0%
VLSI Technology France, SARL Unrestricted France SARL 100.0%
VLSI Technology K.K. Unrestricted Japan K.K. 100.0%
VLSI Technology Asia Limited Unrestricted Hong Kong Limited 100.0%
VLSI India, Inc. Restricted State of Delaware Corporation 100.0%
VLSI Technology Italia SRL Unrestricted Italy SRL 100.0%
COMPASS Design Automation, Inc. Restricted State of Delaware Corporation 99.8%
COMPASS Design Automation EURL Unrestricted France EURL 100.0%
COMPASS Design Automation, GmbH Unrestricted Germany GmbH 100.0%
COMPASS Design Automation International B.V. Unrestricted The Netherlands B.V. 100.0%
COMPASS Design Automation Italia SRL Unrestricted Italy SRL 100.0%
COMPASS Japan K.K. Unrestricted Japan K.K. 100.0%
</TABLE>
<PAGE> 88
SCHEDULE IV
ERISA
Vested or Contingent Liabilities
NONE
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SCHEDULE V
Environmental Matters
<TABLE>
<CAPTION>
Storage Tanks Approximate Tank
Location Capacity Age Construction
------------- -------- ----------- ------------
<S> <C> <C> <C>
[
]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 90
SCHEDULE VI
SECURED AND SUBORDINATED INDEBTEDNESS
<TABLE>
<CAPTION>
Balance Outs.
27-May-94 Plus Remaining
Borrower Lender/Trustee Maturity Balance Outs. Commitment
- - -------------------------------------------------------------------------------------------------------------------------------
A. SECURED INDEBTEDNESS
<S> <C> <C> <C> <C>
VLSI TECHNOLOGY, INC. FLEET CREDIT CORP 4/10/95 666,874
VLSI TECHNOLOGY, INC. BARCLAYS BUSINESS CREDIT, INC. 7/10/95 514,811
VLSI TECHNOLOGY, INC. BARCLAYS BUSINESS CREDIT, INC. 10/12/95 606,032
VLSI TECHNOLOGY, INC. NEW ENGLAND CAPITAL CORP 7/31/96 1,100,517
VLSI TECHNOLOGY, INC. THE CIT GROUP/EQUIP. FINANCING 9/20/94 390,053
VLSI TECHNOLOGY, INC. THE CIT GROUP/EQUIP. FINANCING 9/27/96 1,162,747
VLSI TECHNOLOGY, INC. THE CIT GROUP 12/23/00 3,915,012 9,764,375
VLSI TECHNOLOGY, INC. HOUSEHOLD BANK-BUSINESS EQUIP. 1/27/97 2,952,227
VLSI TECHNOLOGY, INC. HOUSEHOLD BANK-BUSINESS EQUIP. 4/26/97 1,397,026
VLSI TECHNOLOGY, INC. HOUSEHOLD BANK-BUSINESS EQUIP. 4/15/96 620,111
VLSI TECHNOLOGY, INC. HOUSEHOLD BANK-BUSINESS EQUIP. 4/27/96 446,616
VLSI TECHNOLOGY, INC. FINANCING FOR SCIENCE INT'L 9/14/00 2,367,385
VLSI TECHNOLOGY, INC. USL CREDIT CORP 9/14/00 2,367,385
VLSI TECHNOLOGY, INC. SAFECO CREDIT COMPANY 9/24/00 2,367,665
VLSI TECHNOLOGY, INC. TOKAI FINANCIAL 3/31/01 821,932
VLSI TECHNOLOGY, INC. TOKAI FINANCIAL 12/22/98 493,508 2,985,542
VLSI TECHNOLOGY, INC. BALTIMORE BANCORP LEASING & FIN 8/12/95 206,314
VLSI TECHNOLOGY, INC. BANC ONE ARIZONA LEASING CORP 4/1/95 19,560
VLSI TECHNOLOGY, INC. BANC ONE ARIZONA LEASING CORP 6/1/95 192,369
VLSI TECHNOLOGY, INC. BANC ONE ARIZONA LEASING CORP 6/30/94 269,366
VLSI TECHNOLOGY, INC. BANC ONE ARIZONA LEASING CORP 1/31/95 382,100
VLSI TECHNOLOGY, INC. BANC ONE ARIZONA LEASING CORP 1/31/95 481,785
VLSI TECHNOLOGY, INC. GE CAPITAL CORP 12/31/95 820,087
VLSI TECHNOLOGY, INC. GE CAPITAL CORP 12/31/95 2,315,861
VLSI TECHNOLOGY, INC. GE CAPITAL CORP 12/31/95 731,004
VLSI TECHNOLOGY, INC. SENTRY FINANCIAL CORPORATION 1/31/96 1,198,930
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 7/25/95 822,653
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 7/25/95 226,554
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 10/14/95 363,162
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 12/27/95 49,823
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 12/27/95 80,289
VLSI TECHNOLOGY, INC. METLIFE CAPITAL CORPORATION 12/30/95 328,845
VLSI TECHNOLOGY, INC. BA EQUIPMENT LEASING 11/30/94 102,737
VLSI TECHNOLOGY, INC. BA EQUIPMENT LEASING 11/30/94 83,794
VLSI TECHNOLOGY, INC. BA EQUIPMENT LEASING 11/30/94 25,802
VLSI TECHNOLOGY, INC. BA EQUIPMENT LEASING 11/30/94 14,283
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 3/25/95 235,140
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 3/25/95 241,338
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 3/25/95 990,037
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 4/3/95 421,411
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 5/24/95 1,081,507
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 6/7/95 278,701
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 9/14/94 34,765
VLSI TECHNOLOGY, INC. BANKAMERICA LEASING & CAPITAL 9/13/94 37,831
VLSI TECHNOLOGY, INC. AT&T COMMERCIAL FINANCE CORP 11/17/98 1,884,616
VLSI TECHNOLOGY, INC. AT&T COMMERCIAL FINANCE CORP 11/18/98 615,713
VLSI TECHNOLOGY, INC. AT&T COMMERCIAL FINANCE CORP 12/22/98 724,022
B. SUBORDINATED INDEBTEDNESS
VLSI TECHNOLOGY, INC. CITIBANK, N.A. 5/1/12 57,500,000
</TABLE>
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SCHEDULE VII
Liens (Section 10.2)
<TABLE>
<CAPTION>
Secured File File
Debtor Party Collateral Date Number
------ ------- ---------- ---- ------
<S> <C> <C> <C> <C>
[ ]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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SCHEDULE VIII
Investments
<TABLE>
<CAPTION>
Investment Amount
---------- ------
<S> <C> <C>
[ ]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 93
EXHIBIT A
REVOLVING NOTE
Chicago, Illinois
$__________ June 6, 1994
On or before May __, 1996 the undersigned, FOR VALUE RECEIVED, promises to
pay to the order of ________________ (the "Lender") at the principal office of
Continental Bank N.A. (the "Agent") in Chicago, Illinois, __________________
DOLLARS ($_________) or, if less, the aggregate unpaid principal amount of all
Revolving Loans (as defined in the Credit Agreement hereinafter referred to)
made by the Lender to the undersigned pursuant to the Credit Agreement, as
shown in the schedule attached hereto (and any continuation thereof).
The undersigned also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds.
This Note is a Revolving Note described in, and is subject to the terms and
provisions of, that certain Credit Agreement, dated as of June 6, 1994 (as the
same may at any time be amended or modified and in effect, the "Credit
Agreement"), among the undersigned, certain financial institutions (including
the Lender) and the Agent. Reference is hereby made to the Credit Agreement
for a statement of the prepayment rights and obligations of the undersigned and
for a statement of the terms and conditions under which the due date of this
Note may be accelerated. Upon the occurrence of any Event of Default as
specified in the Credit Agreement, the principal balance hereof and the
interest accrued hereon may be declared to be forthwith due and payable, and,
subject to the provisions of the Credit Agreement, any indebtedness of the
holder hereof to the undersigned may be appropriated and applied hereon.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all reasonable and customary
out-of-pocket
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<PAGE> 94
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the Agent in endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN CHICAGO, ILLINOIS AND SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
VLSI TECHNOLOGY, INC.
By:_________________________
Name:_______________________
Title:______________________
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<PAGE> 95
Schedule attached to Revolving Note dated June 6, 1994 of VLSI TECHNOLOGY,
INC., payable to the order of ____________________.
<TABLE>
<CAPTION>
Date of Loan, Interest
Continuation or Interest Amount of Rate Per Amount of Notation
Conversion Period Loan Annum Repayment Made By
- - --------------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
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EXHIBIT B
FORM OF BORROWING REQUEST
CONTINENTAL BANK N.A.,
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Vice President
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to
Sections 3.2 and 12.2.1 of the Credit Agreement, dated as of June 6, 1994 (as
amended or modified, the "Credit Agreement"), among VLSI Technology, Inc., a
Delaware corporation (the "Borrower"), the lenders that are or from time to
time become party thereto (the "Lenders") and Continental Bank N.A., as agent
for the Lenders (in such capacity, the "Agent"). Unless otherwise defined
herein, capitalized terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that a Revolving Loan be made in
the aggregate principal amount of $______ on ___________, 19__ as a [Base Rate
Loan] [CD Rate Loan having an Interest Period of [ ]]
[Eurodollar Rate Loan having an Interest Period of [ ]].
The Borrower hereby certifies and warrants that on the date
the Borrowing requested hereby is made, after giving effect to the making of
such Revolving Loan:
(a) No Default or Event of Default has occurred and is
continuing or will result from the making of such Revolving Loan;
(b) The representations and warranties of the Borrower
contained in Section 8 of the Credit Agreement [,(except Sections 8.6,
8.7, 8.8 and 8.10]* are true
__________________________________
* To be inserted in any request following the initial Revolving Loans or
initial issuance of any Letter of Credit.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 97
and correct with the same effect as though made on the date hereof;
(c) No Material Litigation exists, except as disclosed on
Schedule II to the Credit Agreement and since the Effective Date of
the Credit Agreement, no Material Litigation Development has occurred
with respect to any Litigation so disclosed on Schedule II; and
(d) No Material Adverse Change has occurred since the date of
the most recent financial statements delivered or required to be
delivered pursuant to Section 9.1 of the Credit Agreement.
The Borrower agrees that if prior to the time of the Borrowing
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the Borrowing requested
hereby the Agent shall receive written notice to the contrary from the
Borrower, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such Borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the
accounts of the Persons set forth on Annex I attached hereto.
The Borrower has caused this Borrowing Request to be executed
and delivered, and the certification and warranties contained herein to be
made, by an Authorized Officer this ____ day of _____________, 19__.
VLSI TECHNOLOGY, INC.
By:___________________________
Name:_________________________
Title:________________________
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<PAGE> 98
ANNEX I
<TABLE>
<CAPTION>
Amount to be Person to be Paid Name, Address, etc.
---------------------------
Transferred Name Account No. of Transferee Lender
- - ----------- ---- ----------- --------------------
<S> <C> <C> <C>
$
----------- ------------- ----------- --------------------
--------------------
Attention:
----------
$
----------- ------------- ----------- --------------------
--------------------
Attention:
----------
Balance of The Borrower
----------- --------------------
such proceeds
--------------------
Attention:
----------
</TABLE>
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EXHIBIT C
FORM OF CONTINUATION/CONVERSION NOTICE
Continental Bank N.A.,
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Vice President
Ladies and Gentlemen:
This Continuation/Conversion Notice is delivered to you
pursuant to Section 3.5 of the Credit Agreement, dated as of June 6, 1994 (as
amended or modified, the "Credit Agreement"), among VLSI Technology, Inc., a
Delaware corporation (the "Borrower"), the lenders that are or from time to
time become party thereto (the "Lenders") and Continental Bank N.A., as agent
for the Lenders (in such capacity, the "Agent"). Unless otherwise defined
herein, capitalized terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that on ___________, 19__:
(1) $_________ of the presently outstanding principal amount
of the Revolving Loans.
(2) and all presently being maintained as [Base Rate Loans]
[CD Rate Loans] [Eurodollar Rate Loans],
(3) be [converted into] [continued as],
(4) [Base Rate Loans] [CD Rate Loans having an Interest
Period of [ ]] [Eurodollar Rate Loans having an
Interest Period of [ ]].
The Borrower hereby certifies and warrants that on the date of
such continuation or conversion, after giving effect thereto no Default has
occurred and is continuing or will result from the conversion or continuation
herein requested.
Except to the extent, if any, that prior to the time of the
continuation or conversion requested hereby the Agent shall receive written
notice to the contrary from the Borrower, each
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 100
matter certified to herein shall be deemed to be certified at the date of such
continuation or conversion as if then made.
The Borrower has caused this Continuation/Conversion Notice to
be executed and delivered, and the certification and warranties contained
herein to be made, by an Authorized Officer this ___ day of _________, 19__.
VLSI TECHNOLOGY, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
\25605\059\10EXHMMV.005
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<PAGE> 101
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
Continental Bank N.A.,
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Vice President
Ladies and Gentlemen:
This certificate (the "Certificate") is delivered to you
pursuant to Section 9.1.3 of the Credit Agreement, dated as of June 6, 1994 (as
amended or modified, the "Credit Agreement"), among VLSI Technology, Inc., a
Delaware corporation (the "Borrower"), the lenders who are or from time to time
become party thereto (the "Lenders") and Continental Bank N.A., as agent for
the Lenders (in such capacity, the "Agent"). Unless otherwise defined herein,
capitalized terms used herein have the meanings provided in the Credit
Agreement.
The undersigned hereby certifies and warrants to the Agent and
the Lenders that he is the chief financial officer of the Borrower (in such
capacity, the "CFO") and that, as such, he is authorized to execute this
Certificate on behalf of the Borrower and further certifies and warrants to the
Agent and the Lenders on behalf of the Borrower that as at ____________, 19__
[insert last day of the most recent Fiscal Quarter] (the "Computation Date")
the following is a true and correct computation of the ratios and financial
tests contained in the Credit Agreement:
1. Section 11.1 - Quick Ratio.
<TABLE>
<S> <C> <C>
(a) The sum of cash, Class One Cash
Equivalents, Class Two Cash
Equivalents and accounts receivable
of the Borrower and its Subsidiaries: $
----------
(b) Consolidated current liabilities of
the Borrower and its Subsidiaries: $
----------
(c) Ratio of Item 1(a) to Item 1(b): ___:1.00
</TABLE>
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<PAGE> 102
<TABLE>
<S> <C> <C>
(d) Ratio in Item 1(c) may not be less than: [ ]
2. Section 11.2 - Leverage Ratio
-----------------------------
(a) Total consolidated liabilities of
the Borrower and its Subsidiaries plus
the undrawn face amount of all
outstanding letters of credit issued
for the account of the Borrower
or any of its Subsidiaries: $
----------
(b) Consolidated Tangible Net Worth: $
----------
(c) Ratio of Item 2(a) to Item 2(b): ____:1.00
(d) Ratio in Item 2(c) may not be greater
than: [ ]
3. Section 11.3 - Minimum Profitability.
------------------------------------
(a) Consolidated net loss of the Borrower
and its Subsidiaries for the Fiscal
Quarter ending on the Computation
Date: $
----------
(b) Aggregate consolidated net loss of
the Borrower and its Subsidiaries
for the [ ] Fiscal
Quarters ending on the Computation
Date: $
----------
(c) Aggregate consolidated net loss of
the Borrower and its Subsidiaries for
the [ ] Fiscal Quarters
ending on the Computation Date: $
----------
(d) No amount set forth in Items 3(a),
3(b) or 3(c) may be greater than: [ ]
4. Section 11.4 - Fixed Charge Coverage Ratio.
------------------------------------------
(a) EBITDA for the [ ] Fiscal
Quarters ending on the Computation
Date: $
----------
</TABLE>
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<TABLE>
<S> <C> <C>
(b) The sum of (i) consolidated interest
expense, (ii) consolidated income
taxes paid, (iii) preferred stock
cash dividends paid, (iv) the average
of the consolidated current portion of
long-term debt (other than Revolving
Loans) as of the end of each such [ ]
Fiscal Quarters, and (v) the average of
consolidated current capital lease
obligations as of the end of each of
such [ ] Fiscal Quarters: $
----------
(c) Ratio of Item 4(a) to Item 4(b): __________
(d) Ratio in Item 4(c) may not be less
than: [ ]
5. Section 11.5 - Capital Expenditures.
-----------------------------------
(a) Consolidated Capital Expenditures
for the [ ]
Fiscal Quarters ending on the
Computation Date: $
----------
(b) EBITDA for such [ ] Fiscal Quarter
period: $
----------
(c) Consolidated cash, Class One Cash
Equivalents and Class Two Cash
Equivalents of the Borrower and its
Subsidiaries as of the Computation
Date: $
----------
(d) If Item 5(c) exceeds [ ],
the amount of such excess;
otherwise, $0: $
----------
(e) Item 5(b), plus Item 5(d): $
----------
(f) The amount in Item 5(a) may not
exceed the amount in Item 5(e).
6. Section 11.6 - Consolidated Tangible Net Worth.
----------------------------------------------
(a) Consolidated Tangible Net Worth as
of April 1, 1994 [ ] $
----------
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 104
<TABLE>
<S> <C> <C>
(b) [
] $
----------
(c) [
] $
----------
(d) Item 6(a), plus Item 6(b), plus
Item 6(c): $
----------
(e) Consolidated Tangible Net Worth as
of the Computation Date: $
----------
(f) The amount in Item 6(e) may not
be less than the amount in Item 6(d).
7. Section 11.7 - Cash and Cash Equivalents.
----------------------------------------
(a) The aggregate Dollar amount of
consolidated cash, Class One Cash
Equivalents and Class Two Cash
Equivalents of the Borrower and
its Subsidiaries: $
----------
(b) The amount in Item 7(a) may not be
less than: [ ]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 105
IN WITNESS WHEREOF, the Borrower has caused this Certificate
to be executed and delivered and the certifications and warranties contained
herein to be made, by its Chief Financial Officer this ___ day of ________,
19__.
VLSI TECHNOLOGY, INC.
By:_______________________________
Name:_____________________________
Title: Chief Financial Officer
\25605\059\10EXHMMV.005
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<PAGE> 106
EXHIBIT E
[ ]
[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[
]
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[
]
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[
]
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[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[
]
[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 115
EXHIBIT F-1
May __, 1994
19840-0007
The Agent and each of the Lenders party
to the Credit Agreement referred to below
c/o Continental Bank N.A., as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Re: VLSI Technology, Inc.
Ladies and Gentlemen:
We have acted as counsel to VLSI Technology, Inc., a Delaware corporation
(the "Borrower"), in connection with the Credit Agreement (the "Agreement") of
even date herewith, among the Borrower, the lenders party thereto (the
"Lenders"), and Continental Bank N.A., as agent for the Lenders (in such
capacity, the "Agent"). This opinion is rendered to you pursuant to Section
12.1.3 of the Agreement. Capitalized terms used without definition in this
opinion have the meanings given to them in the Agreement.
I.
We have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all records,
documents and instruments submitted to us as copies. We have based our opinion
upon our review of the following records, documents, instruments and
certificates and such additional certificates relating to factual matters as we
have deemed necessary or appropriate for our opinion:
(a) The Agreement;
(b) The Revolving Notes of the Borrower, each of even date herewith,
delivered pursuant to the Agreement and payable by the Borrower to the
various Lenders (the "Notes");
<PAGE> 116
Continental Bank N.A., as Agent
May __, 1994 Page 2
(c) [
]
(d) [
]
The Agreement and the Notes are collectively referred to in this opinion as
the "Loan Documents."
II.
We have also assumed the following:
A. Each Lender (i) is not a foreign lending institution, (ii) is not
transacting intrastate business within the meaning of Section 191 of the
California Corporations Code or (iii) is duly qualified to do business in
the State of California.
B. Each Lender (i) has duly authorized, executed and delivered the Agreement
and (ii) has all requisite power and authority under laws, rules and
regulations applicable to it, as a financial institution engaged in the
business of making loans of the type provided for under the Agreement, to
execute, deliver and enforce the Agreement.
C. Each Lender qualifies for the exemption from the otherwise applicable
interest rate limitations of California law for loans or forbearances (i)
by national banks provided by article XV, Section 1 of the California
Constitution or (ii) by banks chartered under the laws of a State other
than the State of California provided by California Financial Code Section
1716; all loans under the Agreement will be made by each Lender for its
own account or for the account of another person or entity that qualifies
for an exemption from the interest rate limitations of California law; and
there is no present agreement or plan, express or implied, on the part of
any Lender to sell participations or any other interest in the loans to be
made under the Agreement to any person or entity other than a person or
entity that also qualifies for an exemption from the interest rate
limitations of California law.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 117
Continental Bank N.A., as Agent
May __, 1994 Page 3
III.
We express no opinion as to:
A. The applicable choice of law rules that may affect the interpretation or
enforcement of any of the Loan Documents, [
], including, without limitation, any opinion as to
whether the laws of the State of Illinois or the laws of the State of
California, or the laws of any other jurisdiction, would be held to
govern the interpretation and enforcement of the Loan Documents, [
].
B. Any securities, anti-trust, tax, land use, safety, environmental,
hazardous materials, insurance company or banking laws, rules or
regulations (except to the extent expressly set forth in Paragraph 3 of
Part IV below) or laws, rules or regulations applicable to the Lenders
by virtue of their status as financial institutions engaged in the
business of making loans of the type contemplated by the Agreement.
C. The effect on [ ] obligations, and the Agent's
and the Lenders' rights, under the [
], respectively, of laws relating to fraudulent transfers and
fraudulent obligations set forth in Sections 544 and 548 of the federal
Bankruptcy Code and Sections 3439 et seq. of the California Civil Code.
D. The enforceability of Section 16.10 of the Agreement or Section 18 of the
[ ].
This opinion is limited to the federal laws of the United States of America
and the laws of the State of California. We disclaim any opinion as to the
laws of any other jurisdiction. We further disclaim any opinion as to any
statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental body or as to any related judicial or
administrative decision.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 118
Continental Bank N.A., as Agent
MAY __, 1994 Page 4
Our opinions set forth in Paragraphs 1, 2 and 3 of Part IV below are given
as if the laws of the State of California governed the interpretation and
enforcement of the Loan Documents, rather than the laws of the State of
Illinois as stated in the Loan Documents.
We have relied upon the opinion of even date herewith being delivered to you
by Thomas F. Mulvaney, Esq., General Counsel of VLSI Technology, Inc., with
respect to all matters addressed therein that may have a bearing on this
opinion. We have not made an independent investigation of the matters covered
in that opinion.
IV.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for our opinion, and subject to the
limitations and qualifications expressed below, it is our opinion that:
1. Each of the Loan Documents is a valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms,
subject, as to enforcement, (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability relating
to or affecting creditors' rights and (ii) to general principles of
equity, whether such enforceability is considered in a proceeding in
equity or at law.
2. [
].
3. [
].
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 119
Continental Bank N.A., as Agent
MAY __, 1994 Page 5
4. The making of the Loans, and the application of the proceeds thereof, if
effected in compliance with the terms of the Agreement, will not violate
Regulation U of the Board of Governors of the Federal Reserve System as
presently in effect.
5. Neither the execution and delivery of the Loan Documents on behalf of the
Company nor the payment of the Company's obligations under the Loan
Documents violates any law applicable to the Company. [
].
V.
We further advise you that:
A. As noted, the enforceability of the Loan Documents, [
] is subject to the effect of general principles
of equity. These principles include, without limitation, concepts of
commercial reasonableness, materiality and good faith and fair dealing.
As applied to the Loan Documents, [
], these principles will require the Lender to act reasonably, in
good faith and in a manner that is not arbitrary or capricious in the
administration and enforcement of the Loan Documents, [
] and will preclude the Lender from invoking
penalties for defaults that bear no reasonable relation to the damage
suffered or that would otherwise work a forfeiture.
B. The enforceability of the Loan Documents, [
] is subject to the effect of Section 1670.5 of the
California Civil Code, which provides that a court may refuse to enforce,
or may limit the enforcement of, a contract or any clause of a contract
that a court finds as a matter of law to have been unconscionable at the
time it was made.
C. The effectiveness of indemnities, rights of contribution, exculpatory
provisions and waivers of the benefits of statutory provisions may be
limited on public policy grounds.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 120
Continental Bank N.A., as Agent
MAY __, 1994 Page 6
D. Section 1717 of the California Civil Code provides that, in any action on
a contract where the contract specifically provides that attorneys' fees
and costs incurred to enforce that contract shall be awarded either to one
of the parties or to the prevailing party, then the party who is
determined to be the party prevailing in the action, whether that party is
the party specified in the contract or not, shall be entitled to
reasonable attorneys' fees in addition to other costs.
E. Provisions of the Loan Documents, [
] requiring that waivers must be in writing may not be binding or
enforceable if a non-executory oral agreement has been created modifying
any such provision or an implied agreement by trade practice or course of
conduct has given rise to a waiver.
F. The enforceability of [ ] may
be subject to California statutory provisions and case law to the effect
that a [
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 121
Continental Bank N.A., as Agent
May __, 1994 Page 7
[
].
VI.
This opinion is rendered to you in connection with the
Agreement and is solely for your benefit. This opinion may not be relied upon
by any other person, firm, corporation or other entity without our prior
written consent. We disclaim any obligation to advise you of any change of
law that occurs, or any facts of which we become aware, after the date of this
opinion.
Very truly yours,
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 122
EXHIBIT F-2
May _________, 1994
The Agent and each of the Lenders party
to the Credit Agreement referred to below
c/o Continental Bank N.A., as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Re: VLSI Technology, Inc.
Ladies and Gentlemen:
I am general counsel to VLSI Technology, Inc., a Delaware corporation
(the "Company"), [
], and have acted in such capacity in connection with the Credit
Agreement (the "Agreement") of even date herewith, among the Company, the
lenders party thereto (the "Lenders"), and Continental Bank N.A., as agent for
the Lenders (in such capacity, the "Agent"). This opinion is rendered to you
pursuant to Section 12.1.3 of the Agreement. Capitalized terms used without
definition in this opinion have the meanings given to them in the Agreement.
I.
In connection with this opinion, I have assumed the authenticity of
all records, documents and instruments submitted to me as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents and instruments submitted
to me as copies. I have based my opinion upon my review of the following
records, documents, instruments and certificates and such additional
certificates relating to factual matters as I have deemed necessary or
appropriate for my opinion:
(a) The Agreement;
(b) The Revolving Notes of the Company, each of even date
herewith, delivered pursuant to the Agreement and payable by
the Company to the various Lenders (the "Notes");
(c) [
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 123
Continental Bank N.A., as Agent
May __, 1994
Page 2
(d) The Restated Certificate of Incorporation of the Company,
together with all amendments, certified by the Delaware
Secretary of State as of May 25, 1994, which is complete and
in full force and effect as of the date of this opinion;
(e) The Bylaws of the Company which are in full force and effect
as of the date of this opinion;
(f) All records of proceedings and actions of the board of
directors of the Company relating to the transactions
contemplated by the Agreement;
(g) A Certificate of Good Standing relating to the Company issued
by the Secretary of State of the State of Delaware, dated May
25, 1994;
(h) A letter from the Franchise Tax Board of the State of
California stating that the Company is in good standing with
that agency, dated May 26, 1994;
(i) A Certificate of Status relating to the Company issued by the
Secretary of State of the State of California, dated May 26,
1994;
(j) A Certificate from the Corporation Commission relating to the
Company issued by the Secretary of State of the State of
Arizona, dated May 26, 1994;
(k) A Certificate relating to the Company issued by the Secretary
of the State of Texas, dated May 26, 1994;
(l) The Certificate of Incorporation of COMPASS certified by the
Delaware Secretary of State as of May 25, 1994, which is
complete and in full force and effect as of the date of this
opinion;
(m) The Bylaws of COMPASS which are in full force and effect as of
the date of this opinion;
(n) All records of proceedings and actions of the board of
directors of COMPASS relating to the transactions contemplated
by the Agreement;
(o) A Certificate of Good Standing relating to COMPASS issued by
the Secretary of State of the State of Delaware, dated May 25,
1994;
<PAGE> 124
Continental Bank N.A., as Agent
May __, 1994
Page 3
(p) A letter from the Franchise Tax Board of the State of
California stating that COMPASS is in good standing with that
agency, dated May 26, 1994;
(q) A Certificate of Status relating to COMPASS issued by the
Secretary of State of the State of California, dated May 26,
1994;
(r) A Certificate from the Department of State relating to COMPASS
issued by the Secretary of State of the State of Florida,
dated May 26, 1994;
(s) A Certificate of Existence relating to COMPASS issued by the
Secretary of State of the State of Georgia, dated May 26,
1994;
(t) A Certificate from the Department of Assessments and Taxation
relating to COMPASS issued by the Administrative Officer of
the State of Maryland, dated May 26, 1994;
(u) A Certificate relating to COMPASS issued by the Secretary of
State of the State of Massachusetts, dated May 26, 1994;
(v) A Certificate of Good Standing relating to COMPASS issued by
the Secretary of State of the State of Minnesota, dated May
25, 1994;
(w) A Certificate from the Department of State relating to COMPASS
issued by the Secretary of State of New Jersey, dated May 26,
1994;
(x) A Certificate from the Department of State relating to COMPASS
issued by the Acting Secretary of the Commonwealth of
Pennsylvania, dated May 26, 1994;
(y) A Certificate relating to COMPASS issued by the Secretary of
the State of Texas, dated May 26,1994;
(z) The Certificate of Incorporation of VLSI India certified by
the Delaware Secretary of State as of May 27, 1994, which are
complete and in full force and effect as of the date of this
opinion;
(aa) The Bylaws of VLSI India which are in full force and effect as
of the date of this opinion;
(ab) All records of proceedings and actions of the board of
directors of VLSI India relating to the transactions
contemplated by the Agreement;
<PAGE> 125
Continental Bank N.A., as Agent
May __, 1994
Page 4
(ac) A Certificate of Good Standing relating to VLSI India issued
by the Secretary of State of the State of Delaware, dated May
27, 1994; and
(ad) Those agreements identified as Exhibits 4.3 through 4.7 and
10.1 through 10.60 in Item 14(b) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 25,
1993 (the "Material Agreements").
The Agreement and the Notes are collectively referred to in this opinion as the
"Loan Documents."
I have based my opinion expressed in Paragraph 1 of Part IV as to the
good standing of the Company under the laws of the States of Delaware,
California, Arizona and Texas; in Paragraph 7 of Part IV as to the good
standing of COMPASS under the laws of the States of Delaware, California,
Florida, Georgia, Maryland, Massachusetts, Minnesota, New Jersey, Pennsylvania
and Texas; and in Paragraph 7 of Part IV as to the good standing of VLSI India
under the laws of the State of Delaware, solely upon the Certificates of Good
Standing enumerated above. I have made no additional investigation after the
respective dates of those Certificates in rendering my opinions expressed in
Paragraphs 1 and 7 of Part IV.
In connection with my opinion relating to the Material Agreements, I
have not reviewed, and express no opinion on, (i) provisions relating to the
occurrence of a "material adverse event" or words of similar import or (ii)
parol evidence bearing on interpretation or construction. Moreover, to the
extent that any of the Material Agreements is governed by the laws of any
jurisdiction other than the State of California, my opinion relating to those
Material Agreements is based solely upon the plain meaning of their language
without regard to interpretation or construction that might be indicated by the
laws governing those Material Agreements.
Where the opinion relates to my "knowledge," such knowledge is based
upon my examination of the records, documents, instruments and certificates
enumerated or described above and my actual contemporaneous knowledge. I have
not examined any records of any court, administrative tribunal or other similar
entity in connection with my opinion.
II.
I have also assumed the following:
A. Each Lender (i) is not a foreign lending institution, (ii) is
not transacting intrastate business within the meaning of
Section 191 of the California Corporations Code or (iii) is
duly qualified to do business in the State of California.
<PAGE> 126
Continental Bank N.A., as Agent
May __, 1994
Page 5
B. Each Lender (i) has duly authorized, executed and delivered
the Agreement and (ii) has all requisite power and authority
under laws, rules and regulations applicable to it, as a
financial institution engaged in the business of making loans
of the type provided for under the Agreement, to execute,
deliver and enforce the Agreement.
III.
This opinion is limited to the federal laws of the United States of
America, the laws of the State of California and the General Corporation Law of
the State of Delaware. I disclaim any opinion as to the laws of any other
jurisdiction. This opinion expressly excludes all matters of Illinois law,
which is the law specified in the Agreement, the Notes [ ] as
governing the construction and interpretation of the Agreement, the Notes [
].
I further disclaim any opinion as to:
A. Compliance with any securities laws, rules or regulations
(except to the extent expressly set forth in Paragraphs 14 and
15 of Part IV below) or any antitrust, tax, land use, safety,
environmental, hazardous materials, insurance company or
banking laws, rules or regulations or laws, rules or
regulations applicable to any Lender by virtue of its status
as a financial institution engaged in the business of making
loans of the type contemplated by the Agreement.
B. Any statute, rule, regulation, ordinance, order or other
promulgation of any regional or local governmental body or as
to any related judicial or administrative decision.
IV.
Based upon the foregoing and my examination of such questions of law as I have
deemed necessary or appropriate for my opinion, and subject to the limitations
and qualifications expressed below, it is my opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware.
The Company is duly qualified to do business and is in good
standing in the States of California, Arizona and Texas.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 127
Continental Bank N.A., as Agent
May __, 1994
Page 6
2. The Company has all requisite corporate power and corporate
authority (i) to execute the Loan Documents, (ii) to deliver
the Loan Documents, (iii) to perform the Loan Documents, (iv)
to own its properties, and (v) to carry on its business as it
is now conducted to my knowledge.
3. The execution of the Loan Documents, the delivery of the Loan
Documents and the performance of the Loan Documents have been
duly authorized by all necessary corporate action on the part
of the Company, and the Loan Documents have been duly executed
and delivered on behalf of the Company.
4. To my knowledge, no governmental consents, approvals,
authorizations, registrations, declarations or filings are
required for the execution and delivery of the Loan Documents
on behalf of the Company or the payment of the Company's
obligations under the Loan Documents.
5. Neither the execution and delivery of the Loan Documents on
behalf of the Company nor the payment of the Company's
obligations under the Loan Documents (i) conflicts with any
provision of the Certificate of Incorporation or the Bylaws of
the Company, (ii) to my knowledge, violates any law applicable
to the Company or any judgment or order of any court or
governmental authority by which the Company or the assets of
the Company is bound, or (iii) results in a breach or
violation of, or constitutes a default under, any Material
Agreement, or in the creation or imposition of (or the
obligation to create or impose) any Lien on any assets of the
Company pursuant to any Material Agreement.
6. Since the date of the Company's report on Form 10-Q for the
quarterly period ending April 1, 1994 (filed with the
Securities and Exchange Commission on May 9, 1994), to my
knowledge, no action, suit or proceeding has been initiated or
threatened in writing against the Company.
7. Each of COMPASS and VLSI India has been duly incorporated and
is validly existing and in good standing under the laws of the
State of Delaware. COMPASS is duly qualified to do business
and is in good standing in the States of California, Florida,
Georgia, Maryland, Massachusetts, Minnesota, New Jersey,
Pennsylvania and Texas.
<PAGE> 128
Continental Bank N.A., as Agent
May __, 1994
Page 7
8. [
]
9. [
]
10. [
]
11. [
]
12. [
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 129
Continental Bank N.A., as Agent
May __, 1994
Page 8
13. Since the date of the Company's report on Form 10-Q for the
quarterly period ending April 1, 1994 (filed with the
Securities and Exchange Commission on May 9, 1994), to my
knowledge, no action, suit or proceeding has been initiated or
threatened in writing against COMPASS or VLSI India.
14. Neither the Company, COMPASS nor VLSI India is an "investment
company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940.
15. Neither the Company, COMPASS nor VLSI India is 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 Holding Company Act of 1935, as amended.
This opinion is rendered to you in connection with the Agreement, the
Notes [ ] and is solely for your benefit and the benefit of
Heller, Ehrman, White & McAuliffe. This opinion may not be relied upon by you
or Heller, Ehrman, White & McAuliffe for any other purpose, nor relied upon by
any other person, firm, corporation or other entity for any purpose without my
prior written consent. I disclaim any obligation to advise you or Heller,
Ehrman, White & McAuliffe of any change of developments in areas covered by
this opinion that occur after the date of this opinion.
Very truly yours,
Thomas F. Mulvaney
Vice President, General Counsel and Secretary
TFM/mlm
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 130
EXHIBIT G-1
FORM OF OFFICER'S CERTIFICATE
Continental Bank N.A.,
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry A. Peterson
Vice President
Ladies and Gentlemen:
This certificate (the "Certificate") is delivered to you
pursuant to Section 12.1.4 of the Credit Agreement, dated as of June 6, 1994
(as amended or modified, the "Credit Agreement"), among VLSI Technology, Inc.,
a Delaware corporation (the "Borrower"), the lenders who are or from time to
time become party thereto (the "Lenders") and Continental Bank N.A., as agent
for the lenders (in such capacity, the "Agent"). Unless otherwise defined
herein, capitalized terms used herein have the meanings provided in the Credit
Agreement.
The undersigned hereby certifies and warrants to the Agent and
the Lenders that he is the [President/Vice President] of the Borrower, and
that, as such, he is authorized to execute this Certificate on behalf of the
Borrower and further certifies and warrants to the Agent and the Lenders on
behalf of the Borrower that:
1. The following named individuals are, and have been since
__________ __, 19__, elected officers of the Borrower, and each holds the
office of the Borrower set forth opposite his name. The signature written
opposite the name and title of each such officer is his correct signature.
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
- - ---------------------- ---------------- ----------------------
- - ---------------------- ---------------- ----------------------
- - ---------------------- ---------------- ----------------------
</TABLE>
\25605\059\10EXHMMV.005
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<PAGE> 131
2. Attached hereto as Annex A is a certified copy of the
Articles of Incorporation of the Borrower as filed in the Office of the
Secretary of State of the State of Delaware on __________, 19__, together with
all amendments thereto adopted through the date hereof.
3. Attached hereto as Annex B is a true and correct copy of
the By-Laws of the Borrower which were duly adopted, and are in full force and
effect of the date hereof.
4. Attached hereto as Annex C is a true and correct copy of
resolutions which were duly adopted on __________, 19__ at a meeting of the
Board of Directors of the Borrower duly called and held, at which meeting a
quorum of such Board was at all times present in person and acting, and such
resolutions have not been rescinded, amended or modified.
5. On the date hereof, the representations and warranties of
the Borrower contained in the Credit Agreement or any other Loan Document are
true and correct in all material respects, both before and after giving effect
to the Credit Agreement, the Loan Documents and the transactions contemplated
pursuant to any of the foregoing.
6. On the date hereof, no Default or Event of Default has
occurred and is continuing both before and after giving effect to the Credit
Agreement, the Loan Documents and the transactions contemplated pursuant to any
of the foregoing.
7. To the best of my knowledge after due inquiry, there is no
pending or threatened proceeding for the dissolution or liquidation of the
Borrower or threatening its existence.
IN WITNESS WHEREOF, the Borrower has caused this certificate
to be executed by the [President/Vice President] this ____ day of _________,
1994.
VLSI TECHNOLOGY, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
The undersigned hereby certifies and warrants to the Agent and
the Lenders that he is the [Secretary/Assistant Secretary] of the Borrower, and
that, as such, he is authorized to execute this Certificate on behalf of the
Borrower and further
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<PAGE> 132
certifies and warrants to the Agent and the Lenders on behalf of the Borrower
that:
1. [Name of Person making above certifications] is the duly
elected and qualified [President/Vice President] of the Borrower and the
signature above is his genuine signature.
2. The certifications made by [name of Person making above
certifications] in items 1, 2, 3 and 4 above are true and
correct.
IN WITNESS WHEREOF, the Borrower has caused this certificate
to be executed by the [Secretary/Assistant Secretary] this ____ day of
__________, 1994.
VLSI TECHNOLOGY, INC.
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE> 133
EXHIBIT G-2
[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 134
[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
\25605\059\10EXHMMV.005
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<PAGE> 135
[
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
\25605\059\10EXHMMV.005
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<PAGE> 136
EXHIBIT H
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AND ACCEPTANCE dated ______________, 19__ between
___________________________ (the "Assignor") and ____________________________
(the "Assignee").
PRELIMINARY STATEMENTS
A. Reference is made to the Credit Agreement dated as of June
6, 1994 (the "Credit Agreement") among VLSI Technology, Inc., a Delaware
corporation (the "Borrower"), the lenders who are or from time to time become
party thereto (the "Lenders") and Continental Bank N.A., as agent for the
lenders (in such capacity, the "Agent"). Terms defined in the Credit Agreement
and not otherwise defined herein are used herein with the meanings ascribed
thereto in the Credit Agreement.
B. The Assignor is a Lender under and as defined in the
Credit Agreement and, as such, presently holds a percentage of the rights and
obligations of the Lenders under the Credit Agreement. On the terms and
conditions set forth below, the Assignor desires to sell and assign to the
Assignee, and the Assignee desires to purchase and assume from the Assignor, a
_________%*** interest (the "Assigned Percentage") in and to all of the
Assignor's rights and obligations under the Credit Agreement as of the
Effective Date (as defined below).
NOW, THEREFORE, the Assignor and the Assignee hereby agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, the
Assigned Percentage of the Assignor's rights and obligations under the
Credit Agreement as of the Effective Date (including, without
limitation, the Assigned Percentage of (i) the Assignor's Revolving
Loan Commitment as in effect on the Effective Date, (ii) each of the
Revolving Loans owing to the Assignor on the Effective Date and (iii)
the Notes held by the Assignor on the Effective Date).
__________________________________
*** Specify percentage in no more than 4 decimal points.
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<PAGE> 137
2. The Assignor (i) represents and warrants that as of the
date hereof its Commitment (without giving effect to assignments
thereof which have not yet become effective) is $_____________; (ii)
represents and warrants that it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (iii) makes no representations or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
Loan Document furnished pursuant thereto; (iv) makes no representation
or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or guarantor or the performance or
observance by any Borrower or guarantor of any of their obligations
under the Credit Agreement or any other Loan Document furnished
pursuant thereto, and (v) attaches the Notes referred to in paragraph
1 above and requests that the Agent exchange such Notes for [a new
Revolving Loan Note, dated __________, 19__, in the principal amounts
of $___________, payable to the order of the Assignee] [new Notes as
follows: Revolving Loan Notes, each dated ______________, 19__, in the
principal amount of $_________ and $___________, respectively, payable
to the order of the Assignee and the Assignor respectively].****
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon any
Agent, the Assignor or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Credit Agreement; (iii) appoints and authorizes the Agents to take
such action as agents on its behalf and to exercise such powers under
the Credit Agreement as are delegated to the Agents by the terms
thereof, together with such powers as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; (v)
specifies as its CD Lending
__________________________________
**** Use alternative provisions depending on whether the Assignor
is retaining an interest in the Facility.
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<PAGE> 138
Office, Domestic Lending Office (and address for notices) and
Eurodollar Lending Office the offices set forth beneath its name on
the signature page hereof; and (vi) represents and warrants that it is
an Eligible Assignee as such term is defined in the Credit Agreement.
4. The effective date for this Assignment and Acceptance
shall be _______________ (the "Effective Date").***** Following the
execution of this Assignment and Acceptance, it will be delivered to
the Administrative Agent for acceptance and recording by the
Administrative Agent.
5. Upon such acceptance and recording, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the
Credit Agreement.
6. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement and the Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal,
interest and commitment fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the Notes for periods prior to
the Effective Date directly between themselves.
__________________________________
***** Such date shall be at least two (2) Business Days after the
execution of this Assignment and Acceptance.
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<PAGE> 139
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the internal laws of the State of
Illinois.
[NAME OF ASSIGNOR]
By: ______________________________
Name:_________________________
Title:________________________
[NAME OF ASSIGNEE]
By: ______________________________
Name:_________________________
Title:________________________
Lending Office (Base Rate Loans)
[Address]
Lending Office (Eurodollar Rate Loans)
(and address for notices):
[Address]
Lending Office (CD Rate Loans):
[Address]
Accepted this _____ day
of ______________, 19__
CONTINENTAL BANK, N.A., as Agent
By: _____________________
Title:
\25605\059\10EXHMMV.005
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<PAGE> 1
EXHIBIT 10.2
TERM LOAN AND SECURITY AGREEMENT
BETWEEN
VLSI TECHNOLOGY, INC.
AS BORROWER
AND
HELLER FINANCIAL, INC.,
AS LENDER
CLOSING DATE: June 17, 1994
PRINCIPAL AMOUNT: $20,000,000
<PAGE> 2
TABLE OF CONTENTS
<PAGE> 3
<TABLE>
<S> <C>
1. Definitions, Terms and References 1
1.1 Certain Definitions 1
1.2 Use of Defined Terms 5
1.3 Accounting Terms. 5
1.4 UCC Terms 5
1.5 Terminology 5
1.6 Exhibits 6
2. The Financing 6
2.1 Term Loan Facility 6
2.2 Application for Term Loan 6
2.3 Amortization 6
2.4 Interest 7
2.5 Term Notes 7
2.6 Security/Deposit Fees 7
2.7 Late Charge 8
2.8 Prepayment 8
2.9 Nature of Charges Imposed 9
2.10 Savings Clause 10
3. Security Interest -- Collateral 11
3.1 Good Title; No Existing Encumbrances 11
3.2 Right to Grant Security Interest;
No Further Encumbrances 12
3.3 Condition of Collateral; Casualty 12
3.4 Collateral Free and Clear 12
3.5 Waivers 12
3.6 Further Assurances 12
3.7 Right to Inspect 13
3.8 Change of Name 13
3.9 Change of Location 13
4. General Representations and Warranties 13
4.1 Existence 13
4.2 Authority 13
4.3 No Material Litigation 14
4.4 Payment of Taxes 14
4.5 No Violations Generally 14
4.6 Financial Statements; Liabilities 14
4.7 Pollution and Environmental Control 15
5. Affirmative Covenants 15
5.1 Books and Records 15
5.2 Periodic Financial Statements 15
5.3 Annual Financial Statements 15
5.4 Maintenance of Insurance 15
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
5.5 Preservation of Existence 16
5.6 Compliance with Laws 16
5.7 Environmental Compliance Indemnity 17
5.8 Events of Default, Etc. 17
6. [Reserved] 17
7. Events of Default 17
7.1 Term Notes 17
7.2 Other Obligations 17
7.3 Misrepresentations 17
7.4 Covenants 18
7.5 Other Defaults 18
7.6 Voluntary Bankruptcy 18
7.7 Involuntary Bankruptcy 18
7.8 Loss of Collateral 18
8. Remedies 19
8.1 Acceleration of the Obligations 19
8.2 Remedies of a Secured Party 19
8.3 Repossession of the Collateral 20
8.4 Other Remedies 20
9. Miscellaneous 20
9.1 Waiver 20
9.2 Governing Law 20
9.3 Survival 20
9.4 No Assignment by Borrower;
Lender may Assign/Participate 21
9.5 Counterparts 21
9.6 Reimbursement 21
9.7 Successors and Assigns 22
9.8 Severability 22
9.9 Notices 22
9.10 Entire Agreement - Amendment 23
9.11 Time of the Essence 23
9.12 Interpretation 23
9.13 Lender Not a Joint Venturer 23
9.14 Jurisdiction 23
9.15 Payment on Non-Business Days 24
9.16 Waiver of Rights 24
9.17 Cure of Defaults by Lender 24
9.18 Recitals 24
9.19 Attorney-in-Fact 24
9.20 Sole Benefit 24
9.21 Remedies 24
9.22 Indemnity 25
9.23 Acceptance 25
10. Conditions Precedent 25
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
10.1 Conditions Precedent to Lender's
Initial Term Loan 25
10.2 Conditions Precedent to Each
Term Loan 26
EXHIBITS
EXHIBIT A - Schedule of Equipment Collateral.....29
EXHIBIT B - Form of Term Loan Addendum...........30
EXHIBIT C - Form of Term Note....................32
EXHIBIT D - Form of Opinion of Counsel...........34
EXHIBIT E - Form of Secretary's Certificate......35
EXHIBIT F - Form of Compliance Certificate.......36
EXHIBIT G - Form of Pay Proceeds
Instructions Letter..................37
</TABLE>
<PAGE> 6
TERM LOAN AND SECURITY AGREEMENT
THIS TERM LOAN AND SECURITY AGREEMENT ("Agreement"), made,
entered into and effective as of the 17th day of June, 1994, by and
between VLSI TECHNOLOGY, INC., a Delaware corporation ("Borrower"),
and HELLER FINANCIAL, INC., a Delaware corporation ("Lender");
W I T N E S S E T H :
WHEREAS, Borrower has applied to Lender for a term loan fa-
cility in the aggregate principal amount of up to Twenty Million
Dollars ($20,000,000), the proceeds from which, when obtained, will
be used by Borrower to finance the acquisition of new semiconductor
manufacturing and testing equipment by Borrower in the State of
Texas, California, or Arizona, all as more particularly described
below; and
WHEREAS, Lender has considered Borrower's request for such
financing and is willing to extend such financing to Borrower for
such purpose in accordance with the terms of this Agreement upon
the execution of this Agreement by Borrower, compliance by Borrower
with all of the terms and provisions of this Agreement and
fulfillment by Borrower of all conditions precedent to Lender's
obligations herein contained;
NOW, THEREFORE, in consideration of the foregoing premises,
to induce Lender to extend the financing provided for herein, and
for other good and valuable consideration, the sufficiency and
<PAGE> 7
receipt of all of which are acknowledged by Borrower, Lender and
Borrower agree as follows:
1. DEFINITIONS, TERMS AND REFERENCES.
1.1. Certain Definitions. In addition to such other terms
as are elsewhere defined herein, as used in this Agreement and in
any Exhibits, the following terms shall have the following
meanings, unless the context requires otherwise:
"Agreement" shall mean this Term Loan and Security
Agreement, as amended or supplemented from time to time.
"Applicable Rate" shall mean the Fixed Rate or the Default
Rate, as made applicable to any Term Loan, pursuant to Section 2.4
hereof.
"Assignee" shall mean any Person to whom, now or hereafter,
Lender assigns all its right, title, or interest in one or more
Term Loans hereunder and in certain of the Obligations to the
extent they relate to the Term Loan(s) so assigned.
"Bankruptcy Code" shall mean Title 11 of the United States
Code, as amended from time to time.
"Borrower" shall have the meaning ascribed thereto in the
initial recitals to this Agreement.
"Business Day" shall mean a day on which Lender is open for
the conduct of business at its office in San Francisco, California
and Chicago, Illinois.
"Closing Date" shall mean the date of this Agreement, as
specified hereinabove.
"Collateral" shall mean, collectively, the Equipment Col-
lateral and any and all other property of Borrower described in
Article 3, or any part thereof, or elsewhere herein or in any Loan
Document, all as the context shall require, in which Lender has, or
is to have, or hereafter may obtain, a security interest, lien or
encumbrance pursuant thereto, as security for payment of the
Obligations.
"Commitment Period" shall mean that period commencing on
the Closing Date and concluding on the Commitment Termination Date.
<PAGE> 8
"Commitment Termination Date" shall mean December 31, 1994,
or any earlier date on which either (i) this Agreement is terminated
pursuant to its terms; or (ii) the maximum amount of the Term Loan
Facility is fully disbursed to Borrower.
"Compliance Certificate" shall mean a certificate of
Borrower executed by the chief financial officer or treasurer of
Borrower, on Borrower's behalf, stating that no Event of Default or
Default Condition has occurred or exists, or if an Event of Default
or Default Condition has occurred or exists, specifying the nature
and period of existence thereof and what action Borrower has taken
or proposes to take with respect thereto.
"Default Condition" shall mean the occurrence of any event
which, after satisfaction of any requirement for the giving of
notice or the lapse of time, or both, would become an Event of
Default.
"Default Rate" shall mean that simple interest rate equal
to two percent (2%) per annum in excess of the Fixed Rate.
"Deposit" shall have the meaning given to such term in
Section 2.6.
"Environmental Laws" shall mean all laws relating to the
environment, public safety and health, and the regulation of
contaminants, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9601 et seq.), the Superfund Amendments and Reauthorization Act
of 1986, Public Law No. 99-499, 100 Stat. 163, the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.),
the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act, as
amended (15 U.S.C. Section 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as
such laws have been and hereafter may be amended or supplemented,
and any analogous future federal, or present or future state or
local laws and all rules and regulations promulgated pursuant
thereto.
"Equipment" shall mean that portion of the Equipment
Collateral that is described on any Term Loan Addendum and any
amendment thereto.
<PAGE> 9
"Equipment Collateral" shall mean the new semiconductor
manufacturing and testing equipment machinery similar to that
described on Exhibit A attached hereto and used or useful in
Borrower's business, and specifically described on Exhibit A
attached to any Term Loan Addendum and any amendments thereto, and
made a part hereof, together with any and all extensions, addi-
tions, improvements, betterments, replacements and substitutions
acquired with proceeds, or proceeds from a voluntary or involuntary
sale, liquidation or conversion of any of the foregoing; and all
attachments, additions and accessions thereto; all whether now or
hereafter existing.
"Equipment Loan" shall mean any Term Loan, the proceeds of
which are used by Borrower to finance, or carry the financing of
all, or portions of, the Equipment Collateral.
"Event of Default" shall mean any of the events or condi-
tions described in Article 7, provided that any requirement for the
giving of notice or the lapse of time, or both, has been satisfied.
"Fixed Rate" shall mean, with respect to a particular Term
Loan, a simple interest rate equal to the sum of: (i) the current
yield-to-maturity on U.S. Treasury Notes having a maturity
equivalent to the original maturity of the Term Loan, as disclosed
in the Wall Street Journal three (3) working days before the
relevant Loan Disbursement Date; plus (ii) 230 basis points (fixed
three (3) days prior to the relevant Loan Disbursement Date).
"GAAP" shall mean generally accepted accounting principles
which are (a) consistent with the principles promulgated or adopted
by the Financial Accounting Standards Board and its predecessors as
in effect from time to time, and (b) such that a certified public
accountant would, insofar as the use of accounting principles is
pertinent, be in a position to deliver an unqualified opinion as to
financial statements in which such principles have been properly
applied.
"Headquarters" shall mean the address of Borrower located
at 1109 McKay Drive, San Jose, California 95131.
"Independent Accountants" shall mean a firm of independent
public accountants selected on behalf of Borrower by the Board of
Directors of Borrower.
<PAGE> 10
"Lender" shall have the meaning ascribed thereto in the
initial recitals to this Agreement. The term "Lender" shall also
include any Assignee.
"Loan Disbursement Date" shall mean that date occurring on
or after the Closing Date but prior to the Commitment Termination
Date on which any Term Loan to Borrower is made pursuant to Section
2.1.
"Loan Documents" shall mean this Agreement, each Term Note,
each financing statement, and each and every other document, in-
strument, certificate and agreement executed and/or delivered by
Borrower in connection herewith, or any one, more, or all of the
foregoing, all as the context shall require.
"Material Adverse Change" shall mean any change occurring
in the business, operations, properties or condition (financial or
otherwise) of Borrower, which materially and adversely affects
(i) the ability of Borrower and its subsidiaries, on a consolidated
basis, to own or operate their assets generally or conduct
Borrower's business as a going concern, (ii) the ability of
Borrower to pay the Obligations as and when due and payable or
otherwise perform its obligations hereunder or under the other Loan
Documents; or (iii) the Borrower's ability to pay or perform its
obligations to its creditors generally.
"Material Adverse Effect" shall mean an effect that has re-
sulted in, will result in, or is reasonably likely to result in, a
Material Adverse Change.
"Obligations" shall mean and include any and all indebted-
ness, liabilities and obligations of Borrower to Lender arising
hereunder or as a result hereof, whether evidenced by the Term
Notes or otherwise, and any and all extensions or renewals thereof
in whole or in part
"Participant" shall mean any Person to whom, now or hereaf-
ter, Lender sells a participation interest in the Term Loan
Facility hereunder and in the Obligations (whether in whole or in
part).
"Permitted Encumbrances" shall mean: (i)liens for taxes,
assessments, or similar charges, or liens of mechanics or
materialmen or similar liens, in each case, incurred in the
ordinary course of Borrower's business, if such liens are not yet
<PAGE> 11
due and payable or are being contested by appropriate proceedings
(if they are being contested) provided that adequate reserves have
been established in accordance with GAAP; and (ii) judgment liens,
if the underlying judgment is being contested by appropriate
proceedings, adequate reserves have been established, and levy and
execution are stayed within thirty (30) days after entry of the
judgment and continue to be stayed during the pendency of appeal.
"Person" shall mean any individual, partnership,
corporation, trust, unincorporated association, business trust,
sole proprietorship, or joint venture, a government or any
department, agency, political subdivision or instrumentality
thereof, or any other entity or organization.
"Term Loan" shall mean each term loan made by Lender to
Borrower pursuant to Section 2.1 below. Each Term Loan will be an
Equipment Loan. "Term Loans" shall refer, collectively, to all
such loans from time to time outstanding.
"Term Loan Addendum" shall mean and refer to each Term Loan
Addendum, to be substantially in the form of Exhibit "B" attached
hereto, to be executed by Borrower on or subsequent to the Closing
Date in conjunction with its application for the making of a Term
Loan in accordance with Section 2.2.
"Term Loan Facility" shall mean the term loan facility in
the maximum amount of Twenty Million Dollars ($20,000,000)
established by Lender in favor of Borrower pursuant to Section 2.1.
"Term Note" shall mean each Term Promissory Note issued by
Borrower to Lender to evidence the repayment obligation associated
with a Term Loan, together with any extensions or renewals thereof,
in whole or in part. Each Term Note shall be substantially in the
form of Exhibit "C" attached hereto.
"UCC" shall mean the Uniform Commercial Code of California,
as in effect on the Closing Date.
1.2. Use of Defined Terms. All terms defined in this
Agreement and the Exhibits shall have the same defined meanings
when used in any other Loan Documents, unless the context shall
require otherwise.
<PAGE> 12
1.3. Accounting Terms. All accounting terms not specifi-
cally defined herein shall have the meanings generally attributed
to such terms under GAAP.
1.4. UCC Terms. The terms "equipment", "proceeds" and
"products", as and when used in the Loan Documents, together with
any other or similar terms not specifically defined herein but
which are defined in the UCC, shall have the same meanings as given
to such terms therein, unless the context shall otherwise require.
1.5. Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include
the plural, and the plural shall include the singular. Titles of
Articles and Sections in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement, and
all references in this Agreement to Articles, Sections, Sub-
sections, paragraphs, clauses, subclauses or Exhibits shall refer
to the corresponding Article, Section, Subsection, paragraph,
clause, subclause of, or Exhibit attached to this Agreement, unless
specific reference is made to the articles, sections or other
subdivisions divisions of, or Exhibit to, another document or in-
strument.
1.6. Exhibits. All Exhibits attached hereto are by refer-
ence made a part hereof as fully as if the contents thereof were
set forth expressly herein.
2. THE FINANCING.
2.1. Term Loan Facility. Lender hereby creates the Term
Loan Facility in favor of Borrower so that during the period from
the Closing Date to the Commitment Termination Date Borrower may
obtain one or a series of Term Loans, at Borrower's option, not
exceeding, however, in aggregate principal amount, the sum of
Twenty Million Dollars ($20,000,000). Subject to Section 9.4 with
respect to assignments, all Term Loans so obtained shall be
cross-collateralized and cross-defaulted, each to and with the
other, until all Term Loans are fully paid and satisfied and this
Agreement is terminated. Proceeds from Term Loans will be used
either to purchase the Equipment to be financed by a particular
Term Loan or to reimburse Borrower (upon proper verification of
payment) its costs of acquiring such Equipment. The Term Loans in
the aggregate principal amount of Twenty Million Dollars
($20,000,000) shall be based upon a 100% advance rate against the
original purchase prices for the Equipment, including applicable
<PAGE> 13
sales tax. Each Term Loan shall be in an amount equal to the
aggregate purchase price of the Equipment listed on the relevant
Term Loan Addendum, provided that no Term Loan shall be less than
Two Million Dollars ($2,000,000) nor more than Ten Million Dollars
($10,000,000). Reimbursement will be only for Equipment installed
and accepted no more than nine (9) months prior to the relevant
Loan Disbursement Date. The Term Loan Facility may be funded in
multiple draw downs, provided that there will be no more than four
(4) draw downs, with a minimum of a $2,000,000 advance under any
one (1) draw down. Any Term Loan so obtained shall reduce,
dollar-for-dollar, the remaining amount which may be borrowed under
the Term Loan Facility. No amount of any Term Loan may be
reborrowed once disbursed, notwithstanding its repayment.
2.2. Application for Term Loan. Borrower may apply for
each Term Loan at any time during the Commitment Period by
submitting a Term Loan Addendum to Lender not later than ten (10)
days prior to the intended Loan Disbursement Date (except for any
Term Loans which are intended to be disbursed on the initial Loan
Disbursement Date, as to which such advance notice period is
waived) and by complying with all conditions precedent applicable
to such Term Loan, as specified in Sections 10.1 and 10.2.
2.3. Amortization. Each Equipment Loan shall have a
principal amortization and be repaid in twenty-eight (28)
consecutive equal quarterly installments of principal and interest,
based on an eighty-four (84) month amortization, payable in arrears
on each respective October 1, January 1, April 1, and July 1,
commencing on the first day after the expiration of the calendar
quarter following the Loan Disbursement Date of the related Term
Loan (provided, however, if the Loan Disbursement Date of a Term
Loan is other than the first day of a calendar quarter, each Term
Note shall provide for an interest only initial payment for accrued
interest from the Loan Disbursement Date through the end of the
then current calendar quarter), with a final payment, being equal
in amount to the then unpaid principal balance of such Term Loan,
due and payable eighty-four (84) months after the first day of the
calendar quarter following the Loan Disbursement Date. The Term
Loan shall bear interest at the Fixed Rate, and the foregoing in-
stallments of principal, together with accrued interest at such
Fixed Rate, shall be payable in both principal and interest, with
each payment to be applied, first, to accrued interest and, then,
to principal.
2.4. Interest. Each Term Note shall bear interest
initially at the Fixed Rate. Interest on each Term Loan shall be
<PAGE> 14
payable quarterly in arrears, as specified in Section 2.3 above.
Notwithstanding the foregoing, however, from and after the
occurrence of any Event of Default, and continuing for so long
thereafter as such Event of Default shall be continuing, Lender
shall have the right to increase the interest rate payable on each
Term Note to the Default Rate applicable thereto upon giving Bor-
rower five (5) calendar days' advance written notice thereof, and
Borrower shall be responsible for the payment of the additional
interest resulting therefrom in addition to the regularly scheduled
principal amortization of each Term Note.
2.5. Term Notes. The indebtedness represented by each
Term Loan shall be evidenced by a Term Note. Each Term Note shall
be executed by Borrower and delivered to Lender coincident with the
disbursement of the Term Loan on the Loan Disbursement Date.
2.6. Security Deposit/Fee. Heretofore, Borrower made a
security deposit of [ ] with
Lender in connection with its initial application for the Term Loan
Facility (the "Deposit"), which Lender continues to hold in escrow
as of the Closing Date. Lender and Borrower have agreed as follows
concerning the ultimate disposition of the Deposit: [
]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
Complete document separately filed with the Securities and Exchange Commission.
<PAGE> 15
2.7. Late Charge. If payment of any principal of, or
interest on, any Term Note or any other sum payable hereunder or
under any other Loan Document is not received within ten (10)
calendar days after its due date, Lender shall have the right to
impose a late charge relative to such payment in an amount equal to
up to five percent (5%) of the amount of such past due payment,
which charge, if imposed by Lender, shall be due and payable by
Borrower immediately upon receipt of notice thereof.
2.8. PREPAYMENT
2.8.1 Voluntary Prepayment. Provided that no Default
Condition or Event of Default has occurred which is then
continuing, any Term Note may be prepaid, in whole or in part by
Borrower at any time; provided, however, that (i) any such prepay-
ment may be made only on a date [
] and (ii) any such prepayment
must be preceded by at least [ ] prior writ-
ten notice thereof to Lender; and provided, further, that any
partial prepayment of principal shall be in an amount [
] and that following any such partial prepayment, the
remaining regularly scheduled quarterly payments then due under the
applicable Term Note shall be recalculated so as to provide for
consecutive, equal, quarterly payments of principal and interest
over the then remaining term of the applicable Term Loan so as to
fully re-amortize said Term Loan. Any prepayment of principal must
be accompanied by the payment of all then accrued, but unpaid,
interest and other amounts due under the applicable Term Loan,
together with a prepayment premium, [
] equal to
the amount, if any, by which (a) the aggregate present values of
each of the remaining installments of principal and interest due
under such Term Note corresponding to the percentage of the
principal of such Term Note being so prepaid, discounted at a rate
equal to (i) the current yield to maturity on active traded United
States Treasury securities with a maturity approximately equal to
the remaining term of such Term Note, plus (ii) fifty (50) basis
points (0.50%), exceeds (b) the amount of principal being so
prepaid. In addition, for any prepayment occurring prior to June
30, 1996, [
]. In the event that at any time
hereafter, as a result of the occurrence and continuation of any
Event of Default, payment of the Term Notes is accelerated by
Lender, [ ]
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
[
]
2.8.2 Mandatory Prepayment. In the event of loss or
destruction of any item or items of Equipment having an aggregate
original invoice cost of $50,000 or more, or of any item or items
of Equipment Collateral that has or have replaced such Equipment or
been substituted for such Equipment, Borrower shall prepay that
portion of the then outstanding principal balance of the related
Term Loan originally financing such Equipment which shall be equal
to (a) the aggregate original invoice cost of such Equipment
divided by the aggregate original cost of all of the Equipment
initially financed by such Term Loan with respect to which no
prepayment has been previously made, multiplied by (b) the
outstanding principal balance of such Term Loan at the time of the
prepayment. In the event of an insured loss or destruction, such
prepayment shall be made within one hundred and twenty (120) days
after such loss or destruction, and any insurance proceeds actually
paid to Lender in respect of such loss or destruction shall be
applied by Lender to the payment of such amounts. In the event of
an uninsured loss or destruction, such prepayment shall be made
within thirty (30) days of such loss or destruction. No prepayment
premium shall be payable in connection with any prepayment under
this Section 2.8.2.
2.8.3 Prepayment in Event of Collateral Disposition. In the
event of any sale of any item or items of Equipment, with the prior
written consent of Lender, having an aggregate original invoice
cost of $50,000 or more, Borrower shall prepay in accordance with
the provisions of Section 2.8.2 hereinabove; provided, however, a
prepayment premium shall be payable in connection with any
prepayment under this Section 2.8.3 in accordance with the
prepayment premium and administrative fee provisions contained in
Section 2.8.1 hereinabove.
2.8.4 Release of Security Interest. Upon any prepayment
under either Section 2.8.2 or 2.8.3, provided that no Default
Condition or Event of Default has occurred which is then
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 17
continuing, Lender shall release the security interest in the
Equipment and related Equipment Collateral in respect of which such
prepayment has been made. In the event of the voluntary prepayment
of any Term Loan in full, provided that no Default Condition or
Event of Default has occurred which is then continuing, Lender
shall release the security interest in the Equipment identified on
the Term Loan Addendum relating to such Term Loan and in the
related Equipment Collateral.
2.9. Nature of Charges Imposed. Lender and Borrower hereby
agree that (i) the only charges imposed by Lender upon Borrower for
the use of money in connection with the Term Loan Facility are and
shall be interest at the rates per annum expressed in Section 2.4
hereinabove and in each Term Note and (ii) all other charges im-
posed by Lender upon Borrower in connection with the Term Loan
Facility, including, without limitation, the Deposit heretofore
made by Borrower, as described in Section 2.6, and any prepayment
premium hereafter paid by Borrower pursuant to Section 2.8, are and
shall be deemed to be charges made to compensate Lender for under-
writing and administrative services and costs, and other services
and costs performed and incurred, and to be performed and incurred,
by Lender in connection with the creation and administration of the
Term Loan Facility.
2.10. Savings Clause. Notwithstanding the foregoing or any
provision contained in this Agreement, any Term Note or any other
Loan Document to the contrary, if at any time the amount of inter-
est computed with respect to any Term Note on the basis of the
Applicable Rate would exceed the amount of such interest computed
upon the basis of the maximum rate of interest permitted by ap-
plicable state or federal law in effect from time to time hereaf-
ter, after taking into account, to the extent required by ap-
plicable law, any and all fees, payments, charges and calculations
provided for in this Agreement or in any other agreement between
Borrower and Lender (the "Maximum Legal Rate"), the interest pay-
able under this Agreement shall be computed upon the basis of the
Maximum Legal Rate, but any subsequent reduction in the Applicable
Rate shall not reduce such interest thereafter payable hereunder
below the amount computed on the basis of the Maximum Legal Rate
until the aggregate amount of such interest accrued and payable
under this Agreement equals the total amount of interest which
would have accrued if such interest had been at all times
<PAGE> 18
computed solely on the basis of the interest rate. No agreements,
conditions, provisions or stipulations contained in this Agreement,
any Term Note or any other Loan Document or default of Borrower, or
the exercise by a Lender of the right to accelerate the payment of
the maturity of principal and interest, or to exercise any option
whatsoever contained in this Agreement or any other Loan Document,
or arising of any contingency whatsoever, shall entitle Lender to
collect, in any event, interest exceeding the Maximum Legal Rate
and in no event shall Borrower be obligated to pay interest
exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without
binding force or effect, at law or in equity, to the extent only of
the excess of interest over such Maximum Legal Rate. In the event
any interest is charged in excess of the Maximum Legal Rate ("Ex-
cess Interest"), Borrower acknowledges and stipulates that any such
charge shall be the result of an accidental and bona fide error,
and such Excess Interest shall be, first, applied to reduce the
principal then unpaid hereunder; second, applied to reduce any
other Obligations to the extent permitted under applicable law,
until paid in full; and third, returned to Borrower, it being the
intention of the parties hereto not to enter at any time into a
usurious or otherwise illegal relationship. Borrower recognizes
that, with fluctuations in the interest rate and the Maximum Legal
Rate, such an unintentional result could inadvertently occur. By
the execution of this Agreement, Borrower covenants that (i) the
credit or return of any Excess Interest shall constitute the
acceptance by Borrower of such Excess Interest, and (ii) Borrower
shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon the charging or
receiving of any interest in excess of the maximum authorized by
applicable law. For the purpose of determining whether or not any
Excess Interest has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or re-
ceived by the Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the
entire term of this Agreement. The provisions of this Section
shall be deemed to be incorporated into each and every Term Note
and other Loan Document or communication relating to the Obliga-
tions which sets forth or prescribes any account, right or claim or
<PAGE> 19
alleged account, right or claim of the Lender with respect to the
Borrower (or any other obligor in respect of Obligations), whether
or not any provision of this Section is referred to therein. All
such documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the
liabilities and obligations of Borrower (or other obligor) asserted
by Lender thereunder, be automatically recomputed by Borrower or
any obligor, and by any court considering the same, to give effect
to the adjustments or credits required by this Section. If the
applicable state or federal law is amended in the future to allow a
greater rate of interest to be charged under this Agreement or any
other Loan Documents than is presently allowed by applicable state
or federal law, then the limitation of interest under this Section
shall be increased to the maximum rate of interest allowed by
applicable state or federal law as amended, which increase shall be
effective hereunder on the effective date of such amendment, and
all interest charges owing to the Lender by reason thereof shall be
payable upon demand.
3. SECURITY INTEREST -- COLLATERAL. As security for the
payment of the Term Notes and all other Obligations, Borrower
hereby grants to Lender a continuing, general lien upon, and a
security interest in the Equipment Collateral, together with any
and all products (but not inventory) and proceeds of the foregoing,
including, without limitation, insurance proceeds. With respect to
the Equipment Collateral, Borrower hereby, represents, warrants and
covenants to Lender as set forth in Sections 3.1 through 3.9,
inclusive.
3.1. Good Title; No Existing Encumbrances. As of each Loan
Disbursement Date, Borrower will own the Equipment to be financed
thereon free and clear of any prior security interest, lien or
encumbrance thereon other than in favor of Lender, and no financing
statements, registration statements, certificates of title or other
evidences of the grant of a security interest respecting the Col-
lateral exist on any public records as of the date hereof, other
than any in favor of Lender.
<PAGE> 20
3.2. Right to Grant Security Interest; No Further Encum-
brances. Borrower has the right to grant the security interest in
the Equipment Collateral prescribed in Section 3.1; Borrower will
pay all sales, use, franchise and other taxes and other charges
against the Equipment Collateral; Borrower will not allow the
Equipment Collateral to be encumbered except for the security in-
terest in favor of Lender granted herein and for Permitted
Encumbrances.
3.3. Condition of Collateral; Casualty. All Equipment Col-
lateral will be in good working order and repair as of the
applicable Loan Disbursement Date. Borrower will maintain the
Equipment Collateral in good working order and repair subsequent to
the Closing Date. Borrower further will take all commercially
reasonable actions subsequent to the Closing Date as may be neces-
sary to keep any manufacturer's warranty in effect with respect to
the Equipment Collateral. Borrower further will promptly report to
Lender any material loss, damage, theft or other casualty to any
item of Equipment Collateral, and whether Borrower has repaired (or
caused to be repaired) or replaced, or intends to repair (or caused
to be repaired) or replace, such Equipment Collateral.
3.4. Collateral Free and Clear. Borrower will not sell,
assign, lease, license, exchange, mortgage, encumber, hypothecate,
grant a security interest in, or otherwise dispose of its right,
title or interest in any of the Equipment Collateral, without in
each case first obtaining the prior written consent of Lender
thereto, except for Permitted Encumbrances.
3.5. Waivers. Borrower agrees to obtain, on Lender's behalf,
such waivers or consents from third parties, including, without
limitation, licensor, operator, servicer or vendor, as Lender may
reasonably request at any time, in order to assure Lender in regard
to the perfection and priority of its security interest in, and
ability to realize on, the Equipment Collateral; provided, however,
Borrower shall not be required to provide Lender with any landlord
or mortgagee waivers for Borrower's locations existing as of the
Closing Date.
3.6. Further Assurances. Borrower further shall duly execute
and/or deliver (or cause to be duly executed and/or delivered) to
Lender any instrument, invoice, registration certificate,
certificate of title, application, document, document of title,
<PAGE> 21
dock warrant, dock receipt, warehouse receipt, bill of lading, or-
der, financing statement, assignment, waiver, consent or other
writing which may be necessary for Lender to carry out the terms of
this Agreement and any of the other Loan Documents and to perfect
its security interest in and facilitate its realization on the
Equipment Collateral. Borrower shall perform or cause to be
performed such acts as Lender may reasonably request to establish
and maintain for Lender a valid and perfected first priority secu-
rity interest in the Equipment Collateral, free and clear of any
liens, encumbrances or security interests other than in favor of
Lender and other than Permitted Encumbrances; provided, however,
Borrower shall not be required to provide Lender with any landlord
or mortgagee waivers for Borrower's locations existing as of the
Closing Date.
3.7. Right to Inspect. Lender or any Assignee shall have the
right to call at the Headquarters or at any other Equipment
Collateral location at any reasonable time and, upon reasonable
notice (at least 24 hours), during normal business hours, and,
without undue hindrance or delay, inspect, audit and check the Col-
lateral and make extracts from Borrower's books, records, journals,
orders, receipts and any correspondence and other data relating to
the transactions contemplated herein and to the Equipment Col-
lateral.
3.8. Change of Name. Borrower hereby acknowledges and agrees
that if, at any time hereafter, Borrower elects to move its chief
executive office and principal place of business from the
Headquarters, to a location out of the State of California or if
Borrower elects to change its name, identity or its structure to
other than a corporate structure, Borrower will notify Lender in
writing at least thirty (30) days prior thereto (and promptly after
a move within the State of California) and execute (or cause to be
executed) such financing statements, or amendments thereto, or
other documents as Lender then may require in response to such
changed condition in accordance with Sections 3.5 and 3.6.
3.9. Change of Location. Upon prior notice to Lender and
with Lender's consent, and after Borrower executes such new
financing statements in favor of Lender as Lender may request
pursuant to Sections 3.5 and 3.6,, Borrower may move the Equipment
Collateral and relocate it to any location in the United States.
<PAGE> 22
4. GENERAL REPRESENTATIONS AND WARRANTIES. In order to in-
duce Lender to enter into this Agreement, Borrower hereby, repre-
sents and warrants to Lender as set forth in Sections 4.1 through
4.7, inclusive.
4.1. Existence. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware operating in accordance with its Certificate of Incor-
poration and By-Laws. Borrower is qualified to transact business
as a foreign corporation in California, Arizona and Texas. Bor-
rower is (or, upon its entry, will become) duly qualified to
transact business as a foreign corporation in each other
jurisdiction where qualification is needed and where failure to so
qualify would have a Material Adverse Effect. The principal place
of business and chief executive office of Borrower is located at
the Headquarters. Borrower keeps its books and records concerning
the Collateral at the Headquarters.
4.2. Authority. Borrower has the corporate power to make,
deliver and perform under this Agreement, the Term Notes and the
other Loan Documents, and to borrow hereunder, and has taken all
necessary and appropriate corporate action to authorize the
execution, delivery and performance of the Loan Documents. This
Agreement constitutes, and the Term Notes and the remainder of the
Loan Documents, when executed and delivered for value received,
will constitute, the valid obligations of Borrower, legally binding
upon it and enforceable against it in accordance with their respec-
tive terms. The officers of Borrower whose names are inscribed
below are duly authorized and empowered to execute, attest and
deliver this Agreement, the Term Notes and the remainder of the
Loan Documents for and on behalf of Borrower, and to bind Borrower
accordingly thereby.
4.3. No Material Litigation. Other than as described in the
Borrower's 10-K for fiscal year 1993, there are no material
proceedings pending or, so far as Borrower knows, threatened in
writing, before any court, arbitration panel or administrative
agency, no material disputes with any contract party and no pending
or threatened labor action which, in each case, if decided
adversely to Borrower, would have a Material Adverse Effect.
4.4. Payment of Taxes. Borrower and each of its
subsidiaries have filed all tax returns and reports required by law
to have been filed by them and have paid or provided adequate
<PAGE> 23
reserves for all taxes thereby shown to be owing, except for (i)
any taxes which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves have been
established and are being maintained in accordance with GAAP, and
(ii) reports and returns if the failure to file such reports and
returns is not reasonably likely to have a Material Adverse Effect.
Borrower has not participated in any "prohibited transaction" (as
defined in Section 4975 of the Internal Revenue Code of 1986) that
could subject Borrower to any tax or penalty.
4.5. No Violations, Generally. The execution, delivery and
performance by Borrower of this Agreement, the Term Notes and the
other Loan Documents do not and will not require any consent or ap-
proval of any Person, except to the extent obtained by Borrower on
or prior to the Closing Date; or violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, de-
termination or award presently in effect having applicability to
Borrower; or result in a breach of or constitute a default under
any other agreement that is material to Borrower's business, the
breach or default of which would have a Material Adverse Effect;
and, to the best of Borrower's knowledge following diligent
inquiry, Borrower is not in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, de-
termination or other material agreement, the breach or default of
which would have a Material Adverse Effect.
4.6. Financial Statements; Liabilities. The audited finan-
cial statements of Borrower for its fiscal year ending December 25,
1993 and the unaudited financial statements of Borrower for its
fiscal quarter ending on April 1, 1994, fairly present the
consolidated financial condition of Borrower and its subsidiaries
as of the dates referred to therein, and have been prepared in ac-
cordance with GAAP. There are no liabilities, direct or indirect,
fixed or contingent, of Borrower as of the date hereof which are
not reflected in such financial statements or in the notes thereto,
the existence of which would result in a Material Adverse Effect.
4.7. Pollution and Environmental Control. The business
operations of Borrower comply in all respects with all applicable
Environmental Laws, except to the extent that the failure to comply
would not have a Material Adverse Effect.
5. AFFIRMATIVE COVENANTS. Borrower agrees that, so long as
any Obligations are outstanding , Borrower will comply with the
<PAGE> 24
covenants set forth in the following Sections 5.1 through 5.8.
5.1. Books and Records. Borrower shall maintain, at all
times, true and complete books, records and accounts with respect
to the Equipment Collateral in which true and correct entries are
made of its transactions in accordance with GAAP.
5.2. Periodic Financial Statements. Borrower shall, as soon
as practicable, and in any event within sixty (60) days after the
end of each of the first three (3) fiscal quarters of each fiscal
year, furnish to Lender and each Assignee all 10-Q or other reports
filed with the Securities and Exchange Commission.
5.3. Annual Financial Statements. Borrower shall, as soon as
practicable, and in any event within one hundred (100) days after
the end of each fiscal year of Borrower, commencing with its fiscal
year ending December 30, 1994, furnish to Lender and each Assignee
annual audited financial statements of Borrower and its 10-K report
filed with the Securities and Exchange Commission.
5.4. Maintenance of Insurance. Borrower shall insure the
Equipment Collateral against fire, theft and such other risks in
such amounts, and with such deductibles, as it currently carries
with respect to its manufacturing equipment generally in the
ordinary course of its business. Such deductibles, however, shall
not exceed $1,000,000. Lender, and any Assignee, shall be named as
loss payee with responsible insurance companies rated "A-" or
better by A.M. Best Company. As to other properties and risks,
including, without limitation, liability coverage, Borrower shall
maintain such insurance, with such insurers (having the minimum
qualifications described above) on such properties, in such amounts
and against such risks as is customarily maintained by similar
businesses operating in the same vicinity; provided that such
insurance shall not be materially and adversely different than the
insurance being maintained by Borrower on the Closing Date; and,
provided, further, that such insurance shall include, in any event,
at all times, comprehensive general liability (inclusive of
products liability coverage) of at least Five Million Dollars
($5,000,000), in aggregate combined single limit coverage and
business interruption insurance; and, provided, further, that
Lender, and any Assignee, shall be shown by endorsement as "ad-
ditional insured" thereon and with breach of warranty endorsement
favoring Lender and any Assignee. All such insurance in
<PAGE> 25
existence
on the Closing Date shall not be cancelable (unless being replaced
by insurance coverage satisfying the requirements of this Section
5.4) by Borrower, thereafter, unless with the prior written consent
of Lender, or by Borrower's insurer, unless with at least thirty
(30) days advance written notice to Lender and any Assignee thereof
(except as may be necessary to bring such insurance into compliance
herewith from time to time). Borrower shall file with Lender on
the Closing Date and thereafter, upon Lender's request, a detailed
list of such insurance then in effect stating the names of the
insurance companies, the amounts and rates of insurance, the dates
of expiration thereof, the properties and risks covered thereby and
the insured with respect thereto, together with copies of all such
policies (as are in Borrower's possession on the Closing Date or,
otherwise, within a reasonable period of time after issuance of
such policies) and the insurer's certificate in regard thereto. In
the event of loss or destruction of any Equipment Collateral, the
casualty insurance proceeds paid with respect to such loss or
destruction shall be applied in accordance with Section 2.8.2. All
other casualty insurance proceeds paid with respect to the
Equipment Collateral shall, after deduction of reasonable expenses
of Lender actually incurred in collecting such proceeds, at
Borrower's option, and provided that no Default Condition or Event
of Default has occurred which is then continuing, in the reasonable
exercise of Borrower's judgment, be (a) applied (upon compliance
with such terms and conditions as may be reasonably required by
Lender) to repair or restoration, either partly or entirely, of the
Equipment Collateral or (b) applied to the payment of the
Obligations. In the event that Borrower receives any such
insurance proceeds directly or that a check for such proceeds is
made payable to Borrower and Lender jointly, Borrower shall take
all actions necessary to convey such proceeds to Lender.
5.5. Preservation of Existence. Borrower shall preserve and
maintain its corporate existence, rights, franchises and privileges
in the States of Texas, California and Arizona with respect to any
such State for so long as either (a) any Equipment Collateral is
<PAGE> 26
located therein , or (b) the failure to do so would have a Material
Adverse Effect. Borrower shall obtain and maintain for itself all
permits, licenses, certificates of convenience and necessity,
operating rights, authorizations and consents as shall be necessary
or advisable to permit it to continue to operate its business in
the manner contemplated to be conducted by it on the Closing Date,
except to the extent the failure to do so would not have a Material
Adverse Effect.
5.6. Compliance With Laws. Borrower shall comply in all
material respects with the requirements of all applicable laws,
rules, regulations, permits, hearings, approvals and clearances
and orders of any governmental authority, including particularly,
but without limitation, in respect of Environmental Laws, except to
the extent that failure to comply with them would not result in a
Material Adverse Effect.
5.7. Environmental Compliance Indemnity. Except for gross
negligence or willful misconduct of an Indemnified Party (as
defined hereinafter), Borrower shall indemnify and hold Lender,
each Assignee and each Participant, if any, and the officers,
directors, agents, employees, affiliates and representatives of
Lender, each Assignee and each Participant, if any (individually an
"Indemnified Party" and collectively the "Indemnified Parties")
harmless from and against any and all damages, penalties, fines,
claims, liens, suits, liabilities, costs (including necessary and
actual clean-up and response costs), judgments, and expenses
(including reasonable attorneys' fees and any consultants' or other
experts' fees and expenses) of every kind and nature suffered by or
asserted against any Indemnified Party under or on account of the
Environmental Laws relating to the Equipment Collateral or this
Agreement, including, without limitation, as a result of the past,
present or future institution of any suits, claims, actions, or
proceedings by any Person in respect of any alleged violation of
the Environmental Laws. Any payments required to be made hereunder
shall be due and payable on demand. The agreements contained in
this Section 5.7 shall survive the termination of this Agreement
and shall continue in full force and effect for so long as the
prospect exists of any loss or liability covered by the indemnity
contained herein.
5.8. Events of Default, Etc. Promptly, after receipt of
notice or knowledge thereof, but not later than ten (10) days
<PAGE> 27
thereafter, Borrower will report to Lender the existence and nature
of any Default Condition or Event of Default hereunder.
6. [Reserved]
7. EVENTS OF DEFAULT. The occurrence of any events or con-
ditions described in Sections 7.1 through 7.8 shall constitute an
Event of Default hereunder, provided that any requirement for the
giving of notice or the lapse of time, or both, has been satisfied.
7.1. Term Notes. Borrower shall fail to make any payments of
principal of, or interest on, any Term Note, within ten (10) cal-
endar days after the same shall become due and payable.
7.2. Other Obligations. Borrower shall fail to pay any Ob-
ligations (other than as evidenced by the Term Notes) to Lender,
within ten (10) calendar days after the same shall become due and
payable (unless a longer or shorter grace period is provided
therefor in any document, instrument or agreement evidencing, per-
taining to or securing the repayment of such other Obligations, in
which event such other grace period shall apply).
7.3. Misrepresentations. Borrower shall make any represen-
tation or warranty, respectively, in this Agreement or any of the
Loan Documents or in any certificate or statement furnished at any
time hereunder or in connection with this Agreement or any of the
Loan Documents which proves to have been untrue or misleading in
any material respect when made or furnished.
7.4. Covenants. (a) Borrower shall default in the observance
or performance of any covenant or agreement contained in Section 5,
or Borrower shall default in the observance or performance of any
other covenant or agreement contained in this Agreement or any of
the Loan Documents, to the extent each is a party thereto, except
for any default of the types described in Sections 7.1, 7.2 or 7.3
above; and (b) such default shall continue for a period of ten (10)
calendar days from the date of receipt by Borrower of written no-
tice from Lender specifying such default (unless a longer or
shorter cure period is provided therefor in any such Loan Document,
in which case such other grace period shall apply), without such
default being waived or cured.
<PAGE> 28
7.5. Other Defaults. (a) An event of default under any
other single obligation of Borrower having at the time an
outstanding principal balance equal to or greater than
$5,000,000.00 shall occur and, (b)(i) that obligation is
accelerated or (ii) if the obligation is secured, any proceeding is
commenced by the holder(s) of the obligation to realize upon its
(their) collateral.
7.6. Voluntary Bankruptcy. Borrower shall file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking
liquidation, reorganization, arrangement, readjustment of its
debts, or for any other relief under the Bankruptcy Code, or under
any other act or law pertaining to insolvency or debtor relief,
whether state, federal, or foreign, now or hereafter existing;
Borrower shall enter into any agreement indicating its consent to,
approval of, or acquiescence in, any such petition or proceeding;
Borrower shall apply for or permit the appointment by consent or
acquiescence of a receiver, custodian or trustee for all or a
substantial part of its property; or Borrower shall make an
assignment for the benefit of creditors.
7.7. Involuntary Bankruptcy. There shall have been filed
against Borrower an involuntary petition in bankruptcy or seeking
liquidation, reorganization, arrangement, readjustment of its
debts or for any other relief under the Bankruptcy Code, or under
any other act or law pertaining to insolvency or debtor relief,
whether state, federal or foreign, now or hereafter existing; or
Borrower shall suffer or permit the involuntary appointment of a
receiver, custodian or trustee or for all or a substantial part of
its property; or Borrower shall suffer or permit the issuance of a
warrant of attachment, execution or similar process against all or
any substantial part of its property; unless, in each such case,
such petition, appointment or process is fully bonded against, va-
cated or dismissed within ninety (90) days from its effective date.
7.8. Loss of Collateral. If all or any material portion of
the Equipment Collateral: (i) becomes subject to any lien, claim or
encumbrance, other than a Permitted Encumbrance, which claim, lien
or encumbrance is not cured in thirty (30) days, or (ii) is made
the subject of any proceeding in which the existence, scope,
coverage, or priority of the security interest of Lender therein is
disputed.
<PAGE> 29
8. REMEDIES. Upon the occurrence or existence of any Event
of Default, or at any time thereafter, without prejudice to the
rights of Lender to enforce its claims against Borrower for damages
for failure by Borrower to fulfill any of its obligations
hereunder, subject only to prior receipt by Lender of payment in
full of all Obligations then outstanding in a form acceptable to
Lender, Lender shall have all of the rights and remedies described
in Sections 8.1 through 8.4, inclusive, and it may exercise any
one, more, or all of such remedies, in its sole discretion, without
thereby waiving any of the others.
8.1. Acceleration of the Obligations. Lender, at its option,
may declare all of the Obligations (including, but not limited to,
that portion thereof evidenced by the Term Notes) to be immediately
due and payable, whereupon the same shall become immediately due
and payable without presentment, demand, protest, notice of non-
payment or any other notice required by law relative thereto, all
of which are hereby expressly waived by Borrower, anything con-
tained herein to the contrary notwithstanding and, in connection
therewith, if Lender so elects, by further written notice to Bor-
rower, Lender may increase the rate of interest charged on each
Term Note then outstanding for so long thereafter as Lender further
shall elect to the Default Rate, while such condition continues.
Thereafter, Lender, at its option, may, but shall not be obligated
to, accept less than the entire amount of Obligations due, if ten-
dered, provided, however, that unless then agreed to in writing by
Lender, no such acceptance shall or shall be deemed to constitute a
waiver of any Event of Default or a reinstatement of any commit-
ments of Lender hereunder.
8.2. Remedies of a Secured Party. Lender shall thereupon
have the rights and remedies of a secured party under the UCC in
effect on the date thereof (regardless of whether the same has been
enacted in the jurisdiction where the rights or remedies are as-
serted), including, without limitation, the right to take posses-
sion of any of the Equipment Collateral or the proceeds thereof, to
sell or otherwise dispose of the same, to apply the proceeds
therefrom to any of the Obligations in such order as Lender, in its
sole discretion, may elect. Lender shall give Borrower written no-
<PAGE> 30
tice of the time and place of any public sale of the Equipment
Collateral or the time after which any other intended disposition
thereof is to be made. The requirement of sending reasonable
notice shall be met if such notice is given to Borrower pursuant to
Section 9.9 at least ten (10) days before such disposition.
Expenses of retaking, holding, insuring, preserving, protecting,
preparing for sale or selling or the like with respect to the
Equipment Collateral shall include, in any event, reasonable at-
torneys' fees and other legally recoverable collection expenses,
all of which shall constitute Obligations.
8.3. Repossession of the Collateral. Lender may take the
Equipment Collateral or any portion thereof into its possession, by
such means (without breach of the peace) and through agents or
otherwise as it may elect (and, in connection therewith, demand
that Borrower assemble the Equipment Collateral at a place or
places reasonably convenient to both parties and in such manner as
Lender shall prescribe), and sell, lease or otherwise dispose of
the Equipment Collateral or any portion thereof in its then con-
dition or following any commercially reasonable preparation or
processing, which disposition may be by public or private proceed-
ings, by one or more contracts, as a unit or in parcels, at any
time and place and on any terms, so long as the same are com-
mercially reasonable. To facilitate the foregoing, Borrower agrees
to make available to Lender the premises then owned or leased by
Borrower on which Equipment Collateral then may be situated for
such purposes, without charge or undue delay, and on such terms as
Lender then may reasonably request.
8.4. Other Remedies. Unless and except to the extent ex-
pressly provided for to the contrary herein, the rights of Lender
specified herein shall be in addition to, and not in limitation of,
Lender's rights under the UCC, as amended from time to time, or
any other statute or rule of law or equity, or under any other
provision of any of the Loan Documents, or under the provisions of
any other document, instrument or other writing executed by Bor-
rower or any third party in favor of Lender which is consistent
with the terms of the Loan Documents, all of which may be exercised
successively or concurrently.
9. MISCELLANEOUS.
9.1. Waiver. Each and every right granted to Lender under
this Agreement, or any of the other Loan Documents, or any other
document delivered hereunder or in connection herewith or allowed
<PAGE> 31
it by law or in equity, shall be cumulative and may be exercised
from time to time. No failure on the part of Lender to exercise,
and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any
right preclude any other or future exercise thereof or the exercise
of any other right. No waiver by Lender of any Default Condition
or Event of Default shall constitute a waiver of any subsequent
Default Condition or Event of Default.
9.2. GOVERNING LAW. THIS AGREEMENT AND, UNLESS OTHERWISE
EXPRESSLY PROVIDED THEREIN, THE TERM NOTES AND THE OTHER LOAN
DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
9.3. Survival. All representations, warranties and covenants
made herein and in the other Loan Documents shall survive the
execution and delivery of this Agreement and such other Loan
Documents. On the Closing Date and each succeeding Loan
Disbursement Date, Borrower shall be deemed to have restated,
renewed and reaffirmed as of each such date all of such
representations, warranties and covenants. The terms and provi-
sions of this Agreement shall continue in full force and effect,
notwithstanding the payment of the Term Notes, until all of the
Obligations have been paid in full.
9.4. No Assignment by Borrower; Lender May Assign/Participate. No
assignment hereof shall be made by Borrower without the prior written consent
of Lender. Lender may assign, or sell participations in, its right, title and
interest herein and in the Loan Documents at any time after notice to Borrower
and receipt of Borrower's written consent, which consent shall not be
unreasonably withheld, provided that at no time shall more than three (3)
persons or entities hold an interest in the Term Loan Facility (whether as
originating Lender, Assignee or Participant). Assignments must be of the
entire interest in one or more of the Term Note(s). Following any assignment,
the Equipment Collateral shall secure only (i) the Term Note that initially
financed such Equipment Collateral and (ii) any other Term Loan held by the
same lender. Upon any assignment by Lender, the Assignee shall be entitled to
all the rights, powers, privileges and remedies of Lender to the extent
assigned (subject to the limitations contained in this Section 9.4), and the
Obligations of Borrower shall not be subject, as against any such Assignee, to
any
<PAGE> 32
defense, set-off or counterclaim available to Borrower against
Lender and any such defense, set-off or counterclaim may be as-
serted only against Lender.
9.5. Counterparts. This Agreement may be executed in two or
more counterparts, each of which when fully executed shall be an
original, and all of said counterparts taken together shall be
deemed to constitute one and the same agreement.
9.6. Reimbursement. Borrower agrees to reimburse Lender for
its out-of-pocket expenses, actually incurred, including, without
limitation, the reasonable fees and disbursements of its legal
counsel (including a reasonable allocation of the costs, compen-
sation and expenses of internal counsel not to exceed $5,000),
incurred in connection with the preparation of the Loan Documents
and any and all other documents, notes, and agreements pursuant
hereto, including the furnishing of any opinions which may be
requested of such counsel by Lender on questions incident to this
transaction. Borrower will pay all expenses incurred by Borrower
in this transaction. If any taxes, fees or other costs shall be
payable on account of the execution, issuance, delivery or record-
ing of any of the Loan Documents, by reason of any existing or
hereafter enacted federal or state statute, Borrower agrees to pay
all such taxes, fees or other costs, including any applicable
interest and penalty, and to indemnify and hold Lender harmless
from and against liability in connection therewith. In any event,
should all or any portion of the Obligations be collected by or
through an attorney-at-law, Lender shall be entitled to collect
from Borrower reasonable attorneys' fees and all costs of
collection.
9.7. Successors and Assigns. This Agreement and every Loan
Document shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto and thereto.
The foregoing shall expressly include, without limitation, in the
case of Lender, any Assignee of Lender.
9.8. Severability. If any provision of this Agreement or of
the Loan Documents or the application thereof to any party thereto
or circumstances shall be invalid or unenforceable to any extent,
the remainder of such Loan Documents and the application of such
provisions to any other party thereto or circumstance shall not be
affected thereby and shall be enforced to the greatest extent per-
mitted by law.
<PAGE> 33
9.9. Notices. All notices, requests and demands to or upon
the respective parties hereto shall be deemed to have been given or
made when personally delivered or three (3) days after being
deposited in the mail, by registered or certified mail, postage
prepaid, or delivered by overnight courier, addressed as follows or
to such other address as may be designated hereafter in writing by
the respective parties hereto (which, in the case of Lender, may
include the name and address of each Assignee):
Borrower:
VLSI Technology, Inc.
1109 McKay Drive, M/S 25
San Jose, California 95131
Attn: John C. Batty, Vice President & Treasurer
with a copy to:
Thomas F. Mulvaney
Vice President, General Counsel & Secretary
1109 McKay Drive, M/S 45
San Jose, California 95131
with a further copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street, 30th Floor
San Francisco, California 94104
Attn: David A. Rosinus
Lender:
Heller Financial, Inc.
Commercial Equipment Finance Division
One Montgomery Street
Suite 2250
San Francisco, California 94104
Attn: Clifford A. Lehman
with a copy to:
Thomas G. Hirsh, Group General Counsel
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
except in cases where it is expressly provided herein or by ap-
plicable law that such notice, demand to request is not effective
until received by the party to whom it is addressed.
<PAGE> 34
9.10. Entire Agreement - Amendment. This Agreement,
together with the Term Notes and the other Loan Documents, constitutes
the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof and supersedes any agreement or
understanding, oral or written, heretofore made in regard thereto.
Neither this Agreement, the Term Notes nor any other Loan Document
may be changed, waived, discharged, modified or terminated orally,
but only by an instrument in writing signed by the party against
whom enforcement is sought.
9.11. Time of the Essence. Time is of the essence in this
Agreement, the Term Notes and the other Loan Documents.
9.12. Interpretation. No provision of this Agreement or any
Loan Document shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental
or judicial authority by reason of such party having or being
deemed to have structured or dictated such provision.
9.13. Lender Not a Joint Venturer. Neither this Agreement
nor any agreements, instruments, documents or transactions contem-
plated hereby (including the Loan Documents) shall in any respect
be interpreted, deemed or construed as making Lender a partner or
joint venturer with Borrower or as creating any similar relation-
ship or entity, and Borrower agrees that it will not make any con-
trary assertion, contention, claim or counterclaim in any action,
suit or other legal proceeding involving Lender and Borrower.
9.14. JURISDICTION. BORROWER AGREES THAT ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE TERM NOTES OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
ILLINOIS OR THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT
OF ILLINOIS, COOK COUNTY DIVISION, ALL AS LENDER MAY ELECT. BY
EXECUTION OF THIS AGREEMENT, BORROWER HEREBY SUBMITS TO EACH SUCH
JURISDICTION, HEREBY EXPRESSLY WAIVING WHATEVER RIGHTS MAY COR-
RESPOND TO IT BY REASON OF ITS PRESENT OR FUTURE DOMICILE AND CON-
SENTS TO SERVICE OF PROCESS BY WRITTEN NOTICE GIVEN IN THE MANNER
SPECIFIED FOR THE GIVING OF NOTICES IN SECTION 9.9 ABOVE; PRO-
VIDED, HOWEVER, THAT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MAN-
NER PERMITTED OR REQUIRED BY LAW. EACH OF LENDER AND BORROWER
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH PROCEEDING. EACH
<PAGE> 35
OF LENDER AND BORROWER FURTHER AGREES THAT NEITHER SHALL BE LIABLE
TO THE OTHER FOR CONSEQUENTIAL OR SPECIAL DAMAGES ARISING FROM
BREACH OF CONTRACT, TORT OR OTHER WRONG OR CLAIM RELATING TO THE
ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF ANY OBLIGATIONS OR
ANY LOAN DOCUMENT OR ANY ACTION (OR INACTION) BY EITHER PARTY
THEREUNDER.
9.15. Payment on Non-Business Days. Whenever any payment to
be made hereunder or under the Term Notes shall be stated to be due
on a Saturday, Sunday or a public holiday under the laws of the
State of Illinois or California, such payment may be made on the
next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest
hereunder or under the Term Notes.
9.16. WAIVER OF RIGHTS. BORROWER HEREBY WAIVES ANY AND ALL
RIGHTS, IF ANY, WHICH BORROWER OTHERWISE HAS OR MAY HAVE UNDER AND
BY VIRTUE OF ANY LAW, WITH RESPECT TO THE RIGHT OF BORROWER TO
NOTICE AND TO A JUDICIAL OR ADMINISTRATIVE HEARING PRIOR TO SEIZURE
OF ANY COLLATERAL BY LENDER.
9.17. Cure of Defaults by Lender. If, hereafter, Borrower
defaults in the performance of any duty or obligation to Lender
hereunder, Lender may, at its option, but without obligation, cure
such default and any costs, fees and expenses incurred by Lender in
connection therewith including, without limitation, for the
purchase of insurance, the payment of taxes and the removal or
settlement of liens and claims, shall constitute Obligations, be
payable on demand and bear interest until paid at the Default Rate
applicable to the Term Note with the then highest contract rate.
9.18. Recitals. All recitals contained herein are hereby
incorporated by reference into this Agreement and made part
thereof.
9.19. Attorney-in-Fact. Borrower hereby designates, appoints
and empowers Lender irrevocably to act as its attorney-in-fact, at
Borrower's cost and expense, to do in the name of Borrower any and
all actions which Lender may deem necessary or advisable to carry
out the terms hereof, upon the failure, refusal or inability of
Borrower to do so, and, except for Lender's gross negligence or
willful misconduct, Borrower hereby agrees to indemnify and hold
Lender harmless from any costs, damages, expenses or
<PAGE> 36
liabilities arising against or incurred by Lender in connection
therewith.
9.20. Sole Benefit. The rights and benefits set forth in
this Agreement and in all the other Loan Documents are for the sole
and exclusive benefit of Lender, its Assignees (if any) and, with
respect to Section 5.7, Participants, if any, and Borrower and may
be relied upon only by them.
9.21. REMEDIES. UNLESS EXPRESSLY PROVIDED TO THE CONTRARY,
LENDER MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT AND ALL OTHER
LOAN DOCUMENTS WITHOUT RESORT TO PRIOR JUDICIAL PROCESS OR JUDICIAL
HEARING, AND BORROWER EXPRESSLY WAIVES, RENOUNCES AND KNOWINGLY
RELINQUISHES ANY LEGAL RIGHT WHICH MIGHT OTHERWISE REQUIRE LENDER
TO ENFORCE ITS RIGHTS BY JUDICIAL PROCESS. IN SO PROVIDING FOR A
NON-JUDICIAL REMEDY, BORROWER RECOGNIZES AND CONCEDES THAT SUCH A
REMEDY IS CONSISTENT WITH THE USAGE OF THE TRADE, IS RESPONSIVE TO
COMMERCIAL NECESSITY AND IS THE RESULT OF BARGAINING AT ARM'S
LENGTH. NOTHING IN THIS AGREEMENT IS INTENDED TO PREVENT BORROWER
OR LENDER FROM RESORTING TO JUDICIAL PROCESS AT EITHER PARTY'S
OPTION.
9.22. Indemnity. Except for Lender's and each Assignee's
gross negligence or willful misconduct, and without limiting any
provisions of Sections 5.7 or 9.6, Borrower agrees to save,
indemnify and hold harmless Lender and each Assignee, if any, from
and against any and all debts, liabilities, obligations, damages,
costs, expenses or other claims incurred by Lender as a result of
its entry into, and performance under, this Agreement or any other
Loan Documents, including, without limitation, with respect to the
claims of any broker or other intermediary.
9.23. ACCEPTANCE. THIS AGREEMENT SHALL NOT BECOME EFFECTIVE
UNLESS AND UNTIL (i) DULY EXECUTED BY BORROWER, (II) DELIVERED TO
LENDER FOR ACCEPTANCE, (III) ACCEPTED BY LENDER AS EVIDENCED BY
LENDER'S EXECUTION HEREOF AND (IV) DULY EXECUTED AND DELIVERED BY
LENDER.
10. CONDITIONS PRECEDENT.
10.1. Conditions Precedent to Lender's Initial Term Loan.
Unless waived in writing by Lender at or prior to the execution and
delivery of this Agreement, the conditions set forth below shall
constitute express conditions precedent to any obligation of
<PAGE> 37
Lender to fund the initial Term Loan:
(a) No Default. No Default Condition or Event of Default
shall have occurred and be continuing.
(b) Documentation. Lender shall have received the fol-
lowing documents of general application to the Term Loan Facility,
each to be in form and substance satisfactory to Lender and its
counsel, and duly executed and delivered by the party or parties
thereto:
(1) Loan Documents. This Agreement and all other Loan
Documents to be executed and delivered by Borrower hereunder and
under the Loan Documents on the Closing Date, to the extent not
otherwise specified below;
(2) Insurance Certificates. Receipt by Lender of a cer-
tificate from Borrower's insurer (or an authorized agent thereof)
respecting all insurance required hereunder, together with copies
of all summaries evidencing such insurance in each case in form and
substance acceptable to Lender;
(3) Opinion of Borrower's Counsel. Receipt by Lender of a
satisfactory opinion of counsel from Borrower's legal counsel, in
substantially the form of Exhibit "D" attached hereto; and
(4) Secretarys' Certificates. Receipt by Lender of the
secretarys' certificates from Borrower in substantially the form of
Exhibit "E" attached hereto.
10.2. Conditions Precedent to Each Term Loan. Unless waived
in writing by Lender at or prior to its disbursement of a Term
Loan, the conditions set forth shall constitute express conditions
precedent to any obligation of Lender to make and disburse such
Term Loan to Borrower:
(a) No Default. No Default Condition or Event of Default
shall have occurred and be continuing, and Borrower shall have so
certified to Lender coincident with the disbursement of each Term
Loan.
(b) Documentation. Lender shall have received the following
documents relative to such Term Loan, each to be in form and sub-
stance satisfactory to Lender:
(1) Term Loan Addendum. A Term Loan Addendum relative to such
<PAGE> 38
requested Term Loan, together with all attachments thereto;
(2) Term Note. A Term Note in a principal amount equal to
such requested Term Loan;
(3) Financing Statements. Copies of all filing receipts or
acknowledgments issued by any governmental authority to evidence
any filing or recordation necessary to perfect the security
interests of Lender in all Equipment Collateral relating to such
Term Loan. (Subsequent to disbursement, Lender will require
delivery of UCC searches and reports evidencing to Lender that such
security interests constitute valid and perfected first priority
security interests in Lender's favor.);
(4) Material Adverse Effect. There has been no Material
Adverse Effect prior to funding of the Term Loan;
(5) Evidence of Insurance. Evidence that the financed
Equipment Collateral is covered by insurance;
(6) Opinion of Borrower's Counsel. Receipt by Lender of a
satisfactory opinion of counsel from Borrower's legal counsel, in
substantially the form of Exhibit "D" attached hereto;
(7) Compliance Certificate. Receipt by Lender of a Compliance
Certificate, in substantially the form of Exhibit "F" attached
hereto and
(8) Pay Proceeds Instructions Letter. Receipt by Lender of a
pay proceeds instructions letter, in substantially the form of
Exhibit "G" attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and Borrower has caused its seal to be
affixed hereto, all as of the day and year first above written.
"BORROWER"
VLSI TECHNOLOGY, INC.
(SEAL)
By: /s/ JOHN C. BATTY
______________________________
Its: Vice President & Treasurer
____________________________
Attest: /s/ T. F. MULVANEY
__________________________
Its: Vice President & Secretary
__________________________
"LENDER"
HELLER FINANCIAL, INC.
By: /s/ KEVIN DONOVAN
_____________________________
Its: Vice President
_____________________________
<PAGE> 39
EXHIBIT "A"
LARGE CAPITAL ITEMS, 1994
<TABLE>
<CAPTION>
Estimated
Vendor Description Cost
------ ----------- ---------
<S> <C> <C>
[
]
</TABLE>
This list is representative of the type of equipment expected
to be financed during 1994.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 40
EXHIBIT "B"
TERM LOAN ADDENDUM
Date: June ____, 1994
This Addendum shall be deemed incorporated into, and made
part of, the Term Loan and Security Agreement, dated as of June
____, 1994, between Heller Financial, Inc. ("Lender") and VLSI
Technology, Inc. ("Borrower"), as it may be amended or modified
to date (the "Loan Agreement"). Capitalized terms used below,
but not expressly defined below, shall have the meanings given to
such terms in the Loan Agreement. This Addendum shall constitute
a Loan Document.
A. APPLICATION. Borrower herewith applies for a Term Loan on
the following terms:
1. Equipment Collateral Location: ______________________,
as more particularly described on Exhibit "A".
2. Amount of Term Loan: $________________
3. Loan Disbursement Date: June ____, 1994
4. Interest Rate Election for:
____X____ Fixed at ______% as of _____________
5. Attachments (as applicable):
Copy of related Ground or Realty Lease
Certificate of Insurance
List of Equipment with Serial Numbers and Complete
Description
Copies of Invoices and Purchase Orders for Equipment
Proof of Payment and/or vendor instructions
B. CERTIFICATIONS. To induce Lender to process the application
for the Term Loan described in this Addendum, Borrower
hereby certifies to Lender that: (i) as of the date of this
Addendum, no Event of Default or Default Condition exists
and is continuing; and none will exist on the Loan
Disbursement Date for the Term Loan; (ii) all
representations and warranties set forth in the Loan
Agreement and in the Loan Documents remain true and correct
in all material respects as of the date of this Addendum and
will be true and correct in all material respects on the
Loan Disbursement Date for the Term Loan; and (iii) the
<PAGE> 41
Equipment Collateral is in working order and has been paid
for in full by Borrower or will be paid for in full on the
Loan Disbursement Date with the proceeds of the Term Loan in
accordance with the Pay Proceeds Instructions Letter.
VLSI TECHNOLOGY, INC.
By:________________________________
Its: ______________________________
<PAGE> 42
EXHIBIT "C"
TERM PROMISSORY NOTE
$________ ______________, 1994
FOR VALUE RECEIVED, the undersigned, VLSI TECHNOLOGY, INC.,
a Delaware corporation organized and existing under the laws of
the State of Delaware (hereinafter called "Borrower"), promises
to pay to the order of HELLER FINANCIAL, INC., a Delaware
corporation (hereinafter called "Lender"), at its office located
at 1 Montgomery Street, Suite 2250, San Francisco, California
94104, or at such other place as Lender or any holder hereof may
from time to time designate, the principal sum of
_________________ Dollars ($______________), constituting the
proceeds of a "Term Loan" made this date to Borrower pursuant to
that certain Term Loan and Security Agreement, dated as of June
___, 1994, between Borrower and Lender, as it may have been
amended heretofore and may be amended from time to time hereafter
(herein, the "Loan Agreement"; capitalized terms used herein and
not defined herein have the meanings assigned to them in the Loan
Agreement), together with accrued interest thereon, at the Fixed
Rate of __________% per annum (or at the Default Rate, as
applicable), computed on the basis of a 360-day year and actual
days elapsed. This Note shall be paid in twenty-eight (28)
consecutive equal quarterly payments of principal and interest in
arrears in the amount of $______________ each, payable on the
first day of each of July, October, January, and April commencing
on ___________, 1994, and continuing on each January 1, April 1,
July 1, and October 1 thereafter (provided, however, Borrower
shall make an interest only initial payment on __________, 1994
of accrued interest from the initial Loan Disbursement Date
through __________, 1994), including a final payment, due and
payable on __________, 2001, in that amount equal to the sum of
the remaining principal balance hereof plus all then accrued, but
unpaid, interest thereon. This Note is one of the "Term Notes"
defined and described in the Loan Agreement and is made subject
to all terms and conditions thereof, which terms and conditions
are incorporated herein by reference and made a part hereof.
Without limiting the generality of the foregoing, this Note is
subject to acceleration and mandatory prepayment, and may be vol-
untarily prepaid, only in accordance with, and subject to the
terms of, the Loan Agreement.
The acceptance by Lender or any holder hereof of any payment
which is less than the full amount then due and owing shall not
constitute a waiver of Lender's or any holder's right to receive
payment in full at such time or at any prior or subsequent time.
<PAGE> 43
Unless and except as otherwise may be expressly provided in
the Loan Agreement, Borrower waives presentment, demand for pay-
ment, notice of nonpayment, protest, notice of protest, notice of
dishonor, and all other notices in connection with this Note,
filing of suit and diligence in collecting this Note or enforcing
any of the security herefor, and agrees to pay, if permitted by
law, all expenses incurred in collection of this Note, including,
without limitation, reasonable attorney's fees if placed with an
attorney for collection, and hereby waives all benefits of
valuation, appraisement and exemption laws.
THIS NOTE SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
LAWS OF CONFLICTS THEREOF.
IN WITNESS WHEREOF, Borrower has signed this Note under seal
as of the day and year first above written.
"BORROWER"
VLSI TECHNOLOGY, INC.
(SEAL)
By:___________________________
Its: _________________________
Attest:_______________________
Its: _________________________
<PAGE> 44
EXHIBIT D
June , 1994
Heller Financial, Inc.
1 Montgomery Street, Suite 2250
San Francisco, CA 94104
Attention: General Counsel
Ladies and Gentlemen:
I am general counsel to VLSI Technology, Inc., a Delaware corporation (the
"Company" ), and have acted in such capacity in connection with the Loan and
Security Agreement (the "Agreement" ), dated as of date hereof, between the
Company and Heller Financial, Inc. (the "Lender"). This opinion is rendered to
you pursuant to Section 10.1(b)(3) of the Agreement. Capitalized terms used
without definition in this opinion have the meanings given to them in the
Agreement.
I.
I have assumed the authenticity of all records, documents and instruments
submitted to me as originals, the genuineness of all signatures other than
those of the officers of the Company, the legal capacity of natural persons and
the conformity to the originals of all records, documents and instruments
submitted to me as copies. I have based my opinion upon my review of the
following records, documents and instruments:
A. The Agreement;
B. A Term Loan Addendum, dated as of the date hereof (the "Addendum");
C. Two Promissory Notes, dated as of the date hereof and in the principal
amounts of $ and $, respectively, (the "Notes"), made by the Company in favor
of the Lender;
D. The Certificate of Incorporation of the Company, certified by the Secretary
of State of the State of Delaware as of ;
E. The Bylaws of the Company;
<PAGE> 45
Heller Financial, Inc.
Page 2
June __, 1994
F. All records of proceedings and actions of the Board of Directors of the
Company relating to the transactions contemplated by the Agreement;
G. Certificates of Good Standing relating to the Company issued by the
Secretaries of State of the States of Delaware, California, Texas, and Arizona,
each dated ; and
H. Those agreements identified as Exhibits 4.3 through 4.7 and 10.1 through
10.60 in Item 14(b) of the Company's Annual Report on Form 10-K for the fiscal
year ended December 25, 1993 (the "Material Agreements").
The Agreement, the Addendum and the Note are sometimes referred to collectively
in this opinion as the "Loan Documents".
The opinions expressed in Paragraph 1 of Part IV as to the good standing of the
Company under the laws of the States of Delaware, California, Texas, and
Arizona are based solely upon the Certificates of Good Standing described in
paragraph G. I have made no additional investigation after the respective
dates of those Certificates in expressing my opinions in Paragraph 1 of Part
IV.
In connection with my opinion relating to the Material Agreements, I have not
reviewed, and express no opinion on, (i) financial covenants or similar
provisions requiring financial calculations or determinations to ascertain
compliance, (ii) provisions relating to the occurrence of a "material adverse
event" or words of similar import or (iii) parol evidence bearing on
interpretation or construction. Moreover, to the extent that any of the
Material Agreements is governed by the laws of any jurisdiction other than the
State of California, my opinion relating to those Material Agreements is based
solely upon the plain meaning of their language without regard to
interpretation or construction that might be indicated by the laws governing
those Material Agreements.
Where the opinion relates to my "knowledge", such knowledge is based upon my
examination of the records, documents, instruments and certificates enumerated
or described above and my actual contemporaneous knowledge. I have not
examined any records of any court, administrative tribunal or other similar
entity in connection with my opinion. With your consent, I have not reviewed
in connection with this opinion any other agreements to which the Company is a
party or any statutory or regulatory materials, and, except for my review of
the Material Agreements as described above, have based my opinions in
Paragraphs 3 and 4 of Part IV solely on my actual contemporaneous knowledge.
<PAGE> 46
Heller Financial, Inc.
Page 3
June __, 1994
II.
I have also assumed the following:
A. The Lender is duly qualified to do business in the State of California.
B. The Company is the legal, beneficial and record owner of the Equipment
Collateral.
C. The Lender (i) has duly authorized, executed and delivered each Loan
Document to which it is a party, and (ii) has all requisite power and authority
under laws, rules and regulations applicable to it, as an institution engaged
in the business of making loans of the type provided for under the Agreement,
to execute, deliver and enforce the Loan Documents to which it is a party.
D. The Lender qualifies for the exemption from the otherwise applicable
interest rate limitations of California law for loans or forbearances by
licensed personal property brokers in connection with loans in a principal
amount exceeding $2,500 and licensed commercial finance lenders provided by
California Financial Code sections 22451 and 22451.1 and California Financial
Code section 26000.2, respectively; all loans under the Agreement will be made
by the Lender for its own account or for the account of another person or
entity that qualifies for an exemption from the interest rate limitations of
California law; and there is no present agreement or plan, express or implied,
on the part of the Lender to sell participations or any other interest in the
loans to be made under the Agreement to any person or entity other than a
person or entity that also qualifies for an exemption from the interest rate
limitations of California law.
III.
I express no opinion as to:
A. Title to or ownership of any personal property covered or encumbered, or to
be covered or encumbered, by the Agreement, or the accuracy of the property
descriptions contained therein.
B. The perfection or priority of any lien or security interest created, or to
be created, by the Agreement.
C. The applicable choice of law rules that may affect the interpretation or
enforcement of any of the Loan Documents.
<PAGE> 47
Heller Financial, Inc.
Page 4
June __, 1994
D. Compliance with any securities, tax, land use, safety, environmental,
hazardous materials, insurance company or banking laws, rules or regulations.
E. Any statute, rule, regulation, ordinance, order or other promulgation of
any regional or local governmental body.
F. The enforceability of any of Sections 2.9, 2.10, 9.14 and 9.16 of the
Agreement.
This opinion is limited to the federal law of the United States of America and
the laws of the State of California and, with respect to Paragraphs 1 and 2 in
Part IV, the State of Delaware.
IV.
Based upon and subject to the foregoing and (subject to the limitations
described in Part I) my examination of such questions of law as I have deemed
necessary or appropriate for the purpose of this opinion, and subject to the
limitations and qualifications expressed below, it is my opinion that:
1. The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware. The Company has all
requisite corporate power and corporate authority to enter into and perform
each of the Loan Documents. The Company is authorized to transact business and
is in good standing in the States of California, Texas and Arizona.
2. Each of the Loan Documents (i) has been duly authorized by all necessary
corporate action on the part of the Company and (ii) has been duly executed and
delivered on behalf of the Company. Assuming that a court holds that the laws
of the State of California govern the interpretation and enforcement of the
Loan Documents, rather than the laws of the State of Illinois, as provided in
the Agreement and the Notes, each of the Loan Documents is a valid and binding
obligation and agreement of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforcement, (i) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other laws of general
applicability relating to or affecting creditors' rights and (ii) to general
principles of equity, whether such enforceability is considered in a proceeding
in equity or at law. I express no opinion as to whether the laws of the State
of California, or the laws of any other jurisdiction, would be held to govern
the interpretation and enforcement of the Loan Documents.
<PAGE> 48
Heller Financial, Inc.
Page 5
June __, 1994
3. No governmental consents, approvals, authorizations, registrations,
declarations or filings are required for the execution and delivery on behalf
of the Company of the Loan Documents, the payment of the Company's obligations
under the Loan Documents or the creation of the liens and security interests to
be created by the Loan Documents.
4. Neither the execution and delivery of the Loan Documents on behalf of the
Company, the payment of the Company's obligations under the Loan Documents nor
the creation of the liens and security interests to be created by the Loan
Documents (i) conflicts with any provision of the Certificate of Incorporation
or Bylaws of the Company, (ii) conflicts with any judgment or order of any
court or governmental authority by which the Company or any of its assets is
bound, or (iii) to my knowledge, results in a breach, or the creation of any
lien, charge, security interest or other encumbrance upon the Collateral under
any Material Agreement.
5. Attached hereto as Schedule A is a list of all actions, suits or
proceedings outstanding against the Company as of the date hereof. Except as
disclosed in the Company's report on Form 10-K for the fiscal year ended
December 25, 1993 filed with the Securities and Exchange Commission on March
25, 1994, no material action, suit or proceeding has been initiated or, to my
knowledge, threatened in writing against the Company.
6. None of the equipment identified on the list of equipment attached to the
Addendum is currently subject to any security interest granted by the Company
to any third party pursuant to any Material Agreement or to any lease to the
Company by a third party.
V.
I further advise you that:
A. As noted, the enforceability of the Loan Documents is subject to the effect
of general principles of equity. These principles include, without limitation,
concepts of commercial reasonableness (in certain circumstances) and good faith
and fair dealing. As applied to the Loan Documents, these principles will
require the Lender to act, in good faith and in a manner that is not arbitrary
or capricious in the administration and enforcement of the Loan Documents and
will preclude the Lender from invoking penalties for defaults that bear no
reasonable relation to the damage suffered or that would otherwise work a
forfeiture.
<PAGE> 49
Heller Financial, Inc.
Page 6
June __, 1994
B. The enforceability of the Loan Documents, to the extent that it is governed
by the law of the State of California, is subject to the effects of (i) Section
1102 of the California Uniform Commercial Code (the "Code"), which provides
that obligations of good faith, diligence, reasonableness and care prescribed
by the Code may not be disclaimed by agreement although the parties may by
agreement determine the standards by which the performance of such obligations
is to be measured if such standards are not manifestly unreasonable and (ii)
Section 1203 of the Code, which imposes an obligation of good faith in the
performance or enforcement of a contract.
C. The effectiveness of indemnities, exculpatory provisions and waivers of the
benefits of statutory provisions may be limited and indeed unenforceable on
public policy grounds.
D. Section 1717 of the California Civil Code provides that, in any action on a
contract where the contract specifically provides that attorneys' fees and
costs incurred to enforce that contract shall be awarded either to one of the
parties or to the prevailing party, then the party who is determined to be the
party prevailing in the action, whether that party is the party specified in
the contract or not, shall be entitled to reasonable attorneys' fees in
addition to other costs.
E. Provisions of the Loan Documents requiring that waivers must be in writing
may not be binding or enforceable if a non-executory oral agreement has been
created modifying any such provision or an implied agreement by trade practice
or course of conduct has given rise to a waiver.
F. The enforceability of the Loan Documents will be subject to statutory and
other legal requirements generally applicable to a lender exercising remedies
relating to its collateral; I do believe, however, that the remedies available
to the Lender under the Loan Documents are adequate for the practical
realization of the rights and benefits intended to be provided thereby.
G. Provisions of the Loan Documents regarding the Lender's right to apply
proceeds of fire or other casualty insurance policies or awards of damages in
condemnation proceedings against the Company's secured obligations may not be
enforceable unless the Lender's application of such proceeds or damages is
reasonably necessary to protect the Lender's security.
<PAGE> 50
Heller Financial, Inc.
Page 7
June __, 1994
This opinion is rendered to you in connection with the Agreement and is solely
for your benefit and that of your assignees and participants, if any. This
opinion may not be relied upon by any other person, firm, corporation or other
entity without my prior written consent. I disclaim any obligation to advise
you of any change of law that occurs, or any facts of which I become aware,
after the date of this opinion.
Very truly yours,
Thomas F. Mulvaney
Vice President and General Counsel
TFM/mlm
<PAGE> 51
SCHEDULE A
[ ]
Texas Instruments vs. Analog Devices, et al.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 52
EXHIBIT E
VLSI TECHNOLOGY, INC.
CERTIFICATE OF SECRETARY
I, Thomas F. Mulvaney, Secretary of VLSI Technology, Inc., a Corporation
incorporated under the laws of the State of Delaware, do hereby certify that
the foregoing is a full, true and correct copy of resolutions of the Board of
Directors of the said corporation duly and regularly passed or adopted by the
Board of Directors of said corporation in all respects as required by law, and
by the by-laws of the said corporation at the regular meeting of the Board of
Directors on March 11, 1994.
RESOLVED: That VLSI Technology, Inc. (the "Corporation") wishes, at its
discretion, to establish equipment/property acquisition facility(ies) [
], and give certain officers of the
Corporation the authority to negotiate and enter into one or more lease or loan
lines to acquire said equipment/property on behalf of the Corporation;
RESOLVED FURTHER: That any one of the following officers of this Corporation:
Gregory K. Hinckley, its Vice President, Finance and Chief Financial Officer;
or
John C. Batty, its Vice President and Treasurer
be and they hereby are authorized to enter into one or more
additional equipment/property acquisition facility(ies) not to exceed [
[ ] under terms and conditions and with companies
acceptable to its officers;
RESOLVED FURTHER: That said equipment/property acquisition facility(ies)
entered into by [ ]
provided that the total equipment/property acquired under said facility(ies)
does not exceed [ ]; and
RESOLVED FURTHER: That the proper officers of this Corporation are authorized
and directed to execute all documents and to take any and all action as they
may deem necessary or advisable in order to carry out and perform the purposes
of these resolutions and all such prior actions taken by the officers in
connection herewith are ratified and approved.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and the
seal of the Corporation as of this 16th day of June, 1994.
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 53
/s/ Thomas F. Mulvaney
Secretary
(CORPORATE SEAL)
CERTIFICATE OF INCUMBENCY AND AUTHORITY
I, Thomas F. Mulvaney, Secretary of VLSI Technology, Inc., a corporation
incorporated under the laws of the State of Delaware (the "Corporation"), do
hereby certify that on August 28, 1992 the Board of Directors of the
Corporation (the "Board") elected Gregory K. Hinckley as its Chief Financial
Officer and Vice President, and on February 10, 1993 the Board elected John C.
Batty as its Vice President and Treasurer; and that (i) both individuals
continue to serve in their respective capacities; and (ii) the signatures
appearing below are their genuine signatures.
<TABLE>
<CAPTION>
Name Office or Position Signature
---- ------------------ ---------
<S> <C> <C>
Gregory K. Hinckley Chief Financial Officer /s/ Gregory K. Hinckley
and Vice President
John C. Batty Vice President /s/ John C. Batty
and Treasurer
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and the
seal of the Corporation as of this 16th day of June, 1994.
/s/ Thomas F. Mulvaney
Secretary
(CORPORATE SEAL)
<PAGE> 54
EXHIBIT"F"
FORM OF COMPLIANCE CERTIFICATE
June __, 1994
Heller Financial, Inc.
Attn: Cliff Lehman, Commercial Equipment Finance Division
Suite 2250
One Montgomery Street
San Francisco, CA 94104
Re: Compliance Certificate
Ladies and Gentlemen:
This certificate is given in accordance with of that certain Term Loan and
Security Agreement dated June __, 1994 by and between VLSI Technology, Inc.
("Borrower") and Heller Financial, Inc. (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security
Agreement"). Capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Security Agreement. The undersigned
hereby certifies, on behalf of Borrower, that:
(a) I am the ______________________ of Borrower;
(b) I have reviewed the terms of the Security Agreement and have made,
or caused to be made under my supervision, a review in reasonable
detail of the transactions and financial condition of Borrower;
(c) The examination for the above did not disclose and I have no
knowledge of the existence of any condition or event that
constitutes a Default Condition or an Event of Default as of the
date of this certificate except as set forth below.
Described below (or in a separate attachment hereto) are the
exceptions, if any, to paragraph (c), listing in detail, the
nature of the conditions or event, the period during which it has
existed and the action which Borrower has taken, is taking or
<PAGE> 55
proposes to take with respect to each such condition or event:
______________________________________________________
______________________________________________________
______________________________________________________
The foregoing certifications are made and delivered this ____ day of June,
1994.
VLSI Technology, Inc.
By:__________________________
Name: ______________________
Title: __________________________
<PAGE> 56
TERM PROMISSORY NOTE
$ 5,870,853.00 June 17, 1994
FOR VALUE RECEIVED, the undersigned, VLSI TECHNOLOGY, INC., a Delaware
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Borrower"), promises to pay to the order of HELLER
FINANCIAL, INC., a Delaware corporation (hereinafter called "Lender"), at its
office located at 1 Montgomery Street, Suite 2250, San Francisco, California
94104, or at such other place as Lender or any holder hereof may from time to
time designate, the principal sum of Five Million Eight Hundred Seventy
Thousand Eight Hundred Fifty Three Dollars ($5,870,853.00), constituting the
proceeds of a "Term Loan" made this date to Borrower pursuant to that certain
Term Loan and Security Agreement, dated as of June 17, 1994, between Borrower
and Lender, as it may have been amended heretofore and may be amended from time
to time hereafter (herein, the "Loan Agreement"; capitalized terms used herein
and not defined herein have the meanings assigned to them in the Loan
Agreement), together with accrued interest thereon, at the [ ]
per annum (or at the Default Rate, as applicable), computed on the basis of a
360-day year comprised of 30 day months. This Note shall be paid in
twenty-eight (28) consecutive equal quarterly payments of principal and
interest in arrears in the amount of [ ] each, payable on the first day
of each of July, October, January, and April commencing on October 1, 1994, and
continuing on each January 1, April 1, July 1, and October 1 thereafter
(provided, however, Borrower shall make an interest only initial payment on
July 1, 1994 of accrued interest from the initial Loan Disbursement Date
through June 30, 1994), including a final payment, due and payable on July 1,
2001, in that amount equal to the sum of the remaining principal balance hereof
plus all then accrued, but unpaid, interest thereon. This Note is one of the
"Term Notes" defined and described in the Loan Agreement and is made subject to
all terms and conditions thereof, which terms and conditions are incorporated
herein by reference and made a part hereof. Without limiting the generality of
the foregoing, this Note is subject to acceleration and mandatory prepayment,
and may be voluntarily prepaid, only in accordance with, and subject to the
terms of, the Loan Agreement.
The acceptance by Lender or any holder hereof of any payment which is
less than the full amount then due and owing shall not constitute a waiver of
Lender's or any holder's right to receive payment in full at such time or at
any prior or subsequent time.
Unless and except as otherwise may be expressly provided in the Loan
Agreement, Borrower waives presentment, demand for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, and all other
notices in connection with this Note, filing of suit and diligence in
collecting this Note or enforcing
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 57
any of the security herefor, and agrees to pay, if permitted by law, all
expenses incurred in collection of this Note, including, without limitation,
reasonable attorney's fees if placed with an attorney for collection, and
hereby waives all benefits of valuation, appraisement and exemption laws.
THIS NOTE SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICTS
THEREOF.
IN WITNESS WHEREOF, Borrower has signed this Note under seal as of the
day and year first above written.
"BORROWER"
VLSI TECHNOLOGY, INC.
(SEAL)
By: /s/ JOHN C. BATTY
___________________________
Its: Vice President & Treasurer
___________________________
Attest: /s/ THOMAS F. MULVANEY
_________________________
Its: Vice President & Secretary
_________________________
<PAGE> 58
1910047-0002
TERM LOAN ADDENDUM
Date: June 17, 1994
This Addendum shall be deemed incorporated into, and made part of, the
Term Loan and Security Agreement, dated as of June 17, 1994, between Heller
Financial, Inc. ("Lender") and VLSI Technology, Inc. ("Borrower"), as it may be
amended or modified to date (the "Loan Agreement"). Capitalized terms used
below, but not expressly defined below, shall have the meanings given to such
terms in the Loan Agreement. This Addendum shall constitute a Loan Document.
A. APPLICATION. Borrower herewith applies for a Term Loan on the
following terms:
1. Equipment Collateral Location: San Jose, CA, and Tempe, AZ, as
more particularly described on Exhibit "A".
2. Amount of Term Loan: $5,870,853.00
3. Loan Disbursement Date: June 17, 1994
4. Interest Rate Election for:
X [ ] as of June 14, 1994
5. Attachments (as applicable):
_________Copy of related Ground or Realty Lease
X Certificate of Insurance
X List of Equipment with Serial Numbers and Complete
Description
PROVIDED
UNDER
SEPARATE
COVER Copies of Invoices and Purchase Orders for Equipment
PROVIDED
UNDER
SEPARATE
COVER Proof of Payment and/or vendor instructions
B. CERTIFICATIONS. To induce Lender to process the application for the
Term Loan described in this Addendum, Borrower hereby certifies to
Lender that: (i) as of the date of this Addendum, no Event of Default
or Default Condition exists and is continuing; and none will exist on
the Loan Disbursement Date for the Term Loan; (ii) all representations
and warranties set forth in the Loan Agreement and in the Loan
Documents remain true and correct
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE> 59
in all material respects as of the date of this Addendum and will be true and
correct in all material respects on the Loan Disbursement Date for the Term
Loan; and (iii) the Equipment Collateral is in working order and has been paid
for in full by Borrower or will be paid for in full on the Loan Disbursement
Date with the proceeds of the Term Loan in accordance with the Pay Proceeds
Instructions Letter.
VLSI TECHNOLOGY, INC.
By: /s/ JOHN C. BATTY
________________________________
Its: Vice President & Treasurer
______________________________
<PAGE> 60
EXHIBIT A
Exhibit annexed to and made a part of a certain Term Loan Addendum dated the
17th day of June, 1994 or UCC Financing Statement, by and
between the undersigned.
Description of Collateral (Quantity; New/Used; Model; General Description; and
if applicable, Engine and/or Serial Number):
LOCATION: 1109 MCKAY DRIVE, SAN JOSE, CALIFORNIA 95131
<TABLE>
<CAPTION>
Qty. Vendor/Model# General Description Serial Number
---- ------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
Location: 6375 SO. RIVER PARKWAY, TEMPE, ARIZONA 85284 AND/OR
1109 MCKAY DRIVE, SAN JOSE, CALIFORNIA 95131
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- ----------
<S> <C> <C> <C>
[
]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
18
<PAGE> 61
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
In addition, all extensions, additions, improvements, betterments, replacements
and substitutions acquired with proceeds, or proceeds from a voluntary or
involuntary sale, liquidation or conversion of any of the foregoing; and all
attachments, additions and accessions thereto; and all proceeds (including
insurance proceeds) thereof.
<TABLE>
<S> <C>
HELLER FINANCIAL, INC. VLSI TECHNOLOGY, INC.
Lender Borrower
By: /S/ KEVIN DONOVAN By: /S/ JOHN C. BATTY
-------------------------------------- ----------------------------------
Title: Vice President Title: Vice President & Treasurer
----------------------------------- ----------------------------------
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
2 of 2
<PAGE> 62
TERM PROMISSORY NOTE
$ 8,142,210.00 June 17, 1994
FOR VALUE RECEIVED, the undersigned, VLSI TECHNOLOGY, INC., a Delaware
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Borrower"), promises to pay to the order of HELLER
FINANCIAL, INC., a Delaware corporation (hereinafter called "Lender"), at its
office located at 1 Montgomery Street, Suite 2250, San Francisco, California
94104, or at such other place as Lender or any holder hereof may from time to
time designate, the principal sum of Eight Million One Hundred Forty-two
Thousand Two Hundred Ten Dollars($8,142,210.00), constituting the proceeds of a
"Term Loan" made this date to Borrower pursuant to that certain Term Loan and
Security Agreement, dated as of June 17, 1994, between Borrower and Lender, as
it may have been amended heretofore and may be amended from time to time
hereafter (herein, the "Loan Agreement"; capitalized terms used herein and not
defined herein have the meanings assigned to them in the Loan Agreement),
together with accrued interest thereon, at the [ ] per annum
(or at the Default Rate, as applicable), computed on the basis of a 360-day
year comprised of 30 day months. This Note shall be paid in twenty-eight (28)
consecutive equal quarterly payments of principal and interest in arrears in
the amount of [ ] each, payable on the first day of each of July,
October, January, and April commencing on October 1, 1994, and continuing on
each January 1, April 1, July 1, and October 1 thereafter (provided, however,
Borrower shall make an interest only initial payment on July 1, 1994 of accrued
interest from the initial Loan Disbursement Date through June 30, 1994),
including a final payment, due and payable on July 1, 2001, in that amount
equal to the sum of the remaining principal balance hereof plus all then
accrued, but unpaid, interest thereon. This Note is one of the "Term Notes"
defined and described in the Loan Agreement and is made subject to all terms
and conditions thereof, which terms and conditions are incorporated herein by
reference and made a part hereof. Without limiting the generality of the
foregoing, this Note is subject to acceleration and mandatory prepayment, and
may be voluntarily prepaid, only in accordance with, and subject to the terms
of, the Loan Agreement.
The acceptance by Lender or any holder hereof of any payment which is
less than the full amount then due and owing shall not constitute a waiver of
Lender's or any holder's right to receive payment in full at such time or at
any prior or subsequent time.
Unless and except as otherwise may be expressly provided in the Loan
Agreement, Borrower waives presentment, demand for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, and all other
notices in connection with this Note,
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 63
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, and agrees to pay, if permitted by law, all expenses incurred
in collection of this Note, including, without limitation, reasonable
attorney's fees if placed with an attorney for collection, and hereby waives
all benefits of valuation, appraisement and exemption laws.
THIS NOTE SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICTS
THEREOF.
IN WITNESS WHEREOF, Borrower has signed this Note under seal as of the
day and year first above written.
"BORROWER"
VLSI TECHNOLOGY, INC.
(SEAL)
By: /s/ JOHN C. BATTY
_____________________________
Its: Vice President & Treasurer
____________________________
Attest: /s/ T. F. MULVANEY
___________________________
Its: Vice President & Secretary
___________________________
2
<PAGE> 64
1910047-0001
TERM LOAN ADDENDUM
Date: June 17, 1994
This Addendum shall be deemed incorporated into, and made part of, the
Term Loan and Security Agreement, dated as of June 17, 1994, between Heller
Financial, Inc. ("Lender") and VLSI Technology, Inc. ("Borrower"), as it may be
amended or modified to date (the "Loan Agreement"). Capitalized terms used
below, but not expressly defined below, shall have the meanings given to such
terms in the Loan Agreement. This Addendum shall constitute a Loan Document.
A. APPLICATION. Borrower herewith applies for a Term Loan on the
following terms:
1. Equipment Collateral Location: San Antonio, TX and San Jose,
CA, as more particularly described on Exhibit "A".
2. Amount of Term Loan: $8,142,210.00
3. Loan Disbursement Date: June 17, 1994
4. Interest Rate Election for:
X [ ] as of June 14, 1994
5. Attachments (as applicable):
_________Copy of related Ground or Realty Lease
X Certificate of Insurance
X List of Equipment with Serial Numbers and Complete
Description
Delivered under
separate cover Copies of Invoices and Purchase Orders for Equipment
Delivered under
separate cover Proof of Payment and/or vendor instructions
B. CERTIFICATIONS. To induce Lender to process the application for the
Term Loan described in this Addendum, Borrower hereby certifies to
Lender that: (i) as of the date of this Addendum, no Event of Default
or Default Condition exists and is continuing; and none will exist on
the Loan Disbursement Date for the Term Loan; (ii) all representations
and warranties set forth in the Loan
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE> 65
Agreement and in the Loan Documents remain true and correct in all material
respects as of the date of this Addendum and will be true and correct in all
material respects on the Loan Disbursement Date for the Term Loan; and (iii)
the Equipment Collateral is in working order and has been paid for in full by
Borrower or will be paid for in full on the Loan Disbursement Date with the
proceeds of the Term Loan in accordance with the Pay Proceeds Instructions
Letter.
VLSI TECHNOLOGY, INC.
/s/ JOHN C. BATTY
By:______________________________
Vice President & Treasurer
Its: ____________________________
<PAGE> 66
EXHIBIT A
Exhibit annexed to and made a part of a certain Term Loan Addendum dated
the 17th day of June, 1994 or UCC Financing Statement, by and between the
undersigned.
Description of Collateral (Quantity; New/Used; Model; General Description; and
if applicable, Engine and/or Serial Number):
LOCATION: 9651 WESTOVER HILLS BLVD., SAN ANTONIO, TEXAS 78251
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
1 of 3
<PAGE> 67
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
LOCATION: 1109 MCKAY DRIVE, SAN JOSE, CALIFORNIA 95131
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
2 of 3
<PAGE> 68
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
In addition, all extensions, additions, improvements, betterments, replacements
and substitutions acquired with proceeds, or proceeds from a voluntary or
involuntary sale, liquidation or conversion of any of the foregoing; and all
attachments, additions and accessions thereto; and all proceeds (including
insurance proceeds) thereof.
<TABLE>
<S> <C>
HELLER FINANCIAL, INC. VLSI TECHNOLOGY, INC.
Lender/Secured Party Borrower/Debtor
By: /s/ KEVIN DONOVAN By: /s/ JOHN C. BATTY
-------------------------------- -------------------------------------
Title: Vice President Title: Vice President & Treasurer
----------------------------- ---------------------------------
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
3 of 3
<PAGE> 69
TERM PROMISSORY NOTE
$ 3,111,250.51 June 30, 1994
FOR VALUE RECEIVED, the undersigned, VLSI TECHNOLOGY, INC., a Delaware
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Borrower"), promises to pay to the order of HELLER
FINANCIAL, INC., a Delaware corporation (hereinafter called "Lender"), at its
office located at 1 Montgomery Street, Suite 2250, San Francisco, California
94104, or at such other place as Lender or any holder hereof may from time to
time designate, the principal sum of Three Million One Hundred Eleven Thousand
Two Hundred Fifty and 51/100 Dollars ($3,111,250.51), constituting the proceeds
of a "Term Loan" made this date to Borrower pursuant to that certain Term Loan
and Security Agreement, dated as of June 17, 1994, between Borrower and Lender,
as it may have been amended heretofore and may be amended from time to time
hereafter (herein, the "Loan Agreement"; capitalized terms used herein and not
defined herein have the meanings assigned to them in the Loan Agreement),
together with accrued interest thereon, at the [ ] per annum
(or at the Default Rate, as applicable), computed on the basis of a 360-day
year comprised of 30 day months. This Note shall be paid in twenty-eight (28)
consecutive equal quarterly payments of principal and interest in arrears in
the amount of [ ] each, payable on the first day of each of July,
October, January, and April commencing on October 1, 1994, and continuing on
each January 1, April 1, July 1, and October 1 thereafter (provided, however,
Borrower shall make an interest only initial payment on July 1, 1994 of accrued
interest from the initial Loan Disbursement Date through June 30, 1994),
including a final payment, due and payable on July 1, 2001, in that amount
equal to the sum of the remaining principal balance hereof plus all then
accrued, but unpaid, interest thereon. This Note is one of the "Term Notes"
defined and described in the Loan Agreement and is made subject to all terms
and conditions thereof, which terms and conditions are incorporated herein by
reference and made a part hereof. Without limiting the generality of the
foregoing, this Note is subject to acceleration and mandatory prepayment, and
may be voluntarily prepaid, only in accordance with, and subject to the terms
of, the Loan Agreement.
The acceptance by Lender or any holder hereof of any payment which is
less than the full amount then due and owing shall not constitute a waiver of
Lender's or any holder's right to receive payment in full at such time or at
any prior or subsequent time.
Unless and except as otherwise may be expressly provided in the Loan
Agreement, Borrower waives presentment, demand for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, and all other
notices in connection with this Note,
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
1
<PAGE> 70
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, and agrees to pay, if permitted by law, all expenses incurred
in collection of this Note, including, without limitation, reasonable
attorney's fees if placed with an attorney for collection, and hereby waives
all benefits of valuation, appraisement and exemption laws.
THIS NOTE SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICTS
THEREOF.
IN WITNESS WHEREOF, Borrower has signed this Note under seal as of the
day and year first above written.
"BORROWER"
VLSI TECHNOLOGY, INC.
(SEAL)
By: /s/ JOHN C. BATTY
____________________________
Its: Vice President & Treasurer
____________________________
Attest: /s/ THOMAS F. MULVANEY
_________________________
Its: Vice President & Secretary
____________________________
2
<PAGE> 71
1910047-0003
TERM LOAN ADDENDUM
Date: June 30, 1994
This Addendum shall be deemed incorporated into, and made part of, the
Term Loan and Security Agreement, dated as of June 17, 1994, between Heller
Financial, Inc. ("Lender") and VLSI Technology, Inc. ("Borrower"), as it may be
amended or modified to date (the "Loan Agreement"). Capitalized terms used
below, but not expressly defined below, shall have the meanings given to such
terms in the Loan Agreement. This Addendum shall constitute a Loan Document.
A. APPLICATION. Borrower herewith applies for a Term Loan on the
following terms:
1. Equipment Collateral Location: San Jose, CA, and Tempe, AZ, as
more particularly described on Exhibit "A".
2. Amount of Term Loan: $3,111,250.51
3. Loan Disbursement Date: June 30, 1994
4. Interest Rate Election for:
X [ ] as of June 29, 1994
5. Attachments (as applicable):
N/A Copy of related Ground or Realty Lease
X Certificate of Insurance
X List of Equipment with Serial Numbers and Complete
Description
RECEIVED
UNDER
SEPARATE
COVER Copies of Invoices and Purchase Orders for Equipment
X Proof of Payment and/or vendor instructions
B. CERTIFICATIONS. To induce Lender to process the application for the
Term Loan described in this Addendum, Borrower hereby certifies to
Lender that: (i) as of the date of this Addendum, no Event of Default
or Default Condition exists and is continuing; and none will exist on
the Loan Disbursement Date for the Term Loan; (ii) all representations
and warranties set forth in the Loan Agreement and in the Loan
Documents remain true and correct
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE> 72
in all material respects as of the date of this Addendum and will be true and
correct in all material respects on the Loan Disbursement Date for the Term
Loan; and (iii) the Equipment Collateral is in working order and has been paid
for in full by Borrower or will be paid for in full on the Loan Disbursement
Date with the proceeds of the Term Loan in accordance with the Pay Proceeds
Instructions Letter.
VLSI TECHNOLOGY, INC.
By: /s/ JOHN C. BATTY
____________________________
Its: Vice President & Treasurer
__________________________
-2-
<PAGE> 73
EXHIBIT A
Exhibit annexed to and made a part of a certain Term Loan Addendum dated
the 30th day ofJune, 1994 or UCC Financing Statement, by andbetween the
undersigned.
Description of Collateral (Quantity; New/Used; Model; General Description; and
if applicable, Engine and/or Serial Number):
LOCATION: 9651 WESTOVER HILLS BLVD., SAN ANTONIO, TEXAS 78251
<TABLE>
<CAPTION>
Qty. Vendor/Model # General Description Serial Number
---- -------------- ------------------- -------------
<S> <C> <C> <C>
[
]
</TABLE>
In addition, all extensions, additions, improvements, betterments, replacements
and substitutions acquired with proceeds, or proceeds from a voluntary or
involuntary sale, liquidation or conversion of any of the foregoing; and all
attachments, additions and accessions thereto; and all proceeds (including
insurance proceeds) thereof.
<TABLE>
<S> <C>
HELLER FINANCIAL, INC. VLSI TECHNOLOGY, INC.
Lender/Secured Party Borrower/Debtor
By: /s/ GRANT S. YOUNG By: /s/ JOHN C. BATTY
-------------------------------------- -------------------------------------
Title: Assistant Vice President Title: Vice President & Treasurer
----------------------------------- ----------------------------------
</TABLE>
[ ] Text omitted - CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
EXHIBIT 10.3
ACQUISITION AND
PARTICIPATION AGREEMENT
AND ESCROW INSTRUCTIONS
THIS ACQUISITION AND PARTICIPATION AGREEMENT AND ESCROW INSTRUCTIONS
("Agreement") is made as of the 22nd day of April, 1994, by and between BRAZOS
PARTNERS, L.P., a Delaware limited partnership ("Seller"), and VLSI TECHNOLOGY,
INC., a Delaware corporation ("Buyer"), and shall constitute escrow
instructions to the Escrow Holder (defined below).
R E C I T A L S
A. Buyer is the sole tenant of two buildings located at 1101 McKay Drive
and 1109 McKay Drive, respectively, in the City of San Jose, State of
California.
B. The property located at 1101 McKay Drive is currently subject to the fee
interest of GOCO Realty Fund I, a California limited partnership ("GOCO"), and
the possessory interest of Griffin Investments, a California limited
partnership ("Griffin"), pursuant to an installment sales contract and is
further subject to a lien now held by Seller securing a promissory note in the
original face principal amount of $295,617,449. As a result of a default under
such promissory note, Seller and Griffin have entered into an agreement,
entitled "Agreement (Phase I)" dated as of December 28, 1993, for the
disposition of such property.
C. The property located at 1109 McKay Drive is currently owned by Mariani
Financial Co., a California limited partnership ("MFCO"), and is subject to a
lien now held by Seller securing a promissory note in the original face
principal amount of $6,607,913. As a result of a default under such promissory
note, Seller and MFCO have entered into an agreement, entitled "Agreement (1109
McKay)" dated as of February 1, 1994, for the disposition of such property.
LA-REL-R34461.6
<PAGE> 2
D. Buyer desires: (i) to acquire Seller's right to acquire a deed-in-lieu
of foreclosure of 1101 McKay Drive and (ii) to acquire Seller's right to
acquire a deed-in-lieu of foreclosure of 1109 McKay Drive and obtain the
property free of the Junior Liens (as defined below). In addition, in the
event Griffin and/or MFCO fail to deliver the deeds-in-lieu of foreclosure as
contemplated by their respective agreements, Buyer desires to obtain title to
such property at a trustee's sale of the property.
E. Seller is willing: (i) to sell Seller's right to acquire a deed-in-lieu
of foreclosure of 1101 McKay Drive and (ii) to sell Seller's right to acquire a
deed-in-lieu of foreclosure of 1109 McKay Drive and cause the property to be
vested in Buyer's name free of the Junior Liens. Furthermore, Seller is
willing to cause Buyer to obtain title to such property at a trustee's sale in
the event Griffin and/or MFCO fail to deliver the deeds-in-lieu of foreclosure
as contemplated by their respective agreements.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as
follows:
A G R E E M E N T
1. Definitions
"1101 McKay" shall mean that certain real property located at 1101 McKay
Drive, San Jose, California and more particularly described on Exhibit "A-1".
"1101 McKay Closing" shall mean the date that title to 1101 McKay becomes
vested in Buyer either through a deed-in-lieu of foreclosure or through a
foreclosure as contemplated by this Agreement.
"1101 McKay Deed-in-Lieu Escrow" shall mean an escrow to be established by
and among Seller, Buyer, GOCO, Griffin and Escrow Holder for the conveyance of
GOCO's and Griffin's interests in 1101 McKay to Buyer pursuant to a
deed-in-lieu of foreclosure as contemplated by the Plan and the Griffin
Agreement with Buyer's name as Seller's nominee in the documents effecting such
deed-in-lieu of foreclosure.
"1109 McKay" shall mean that certain real property owned by MFCO located at
1109 McKay Drive, San Jose, California and more particularly described on
Exhibit "A-2".
"1109 McKay Closing" shall mean the date that title to 1109 McKay becomes
vested in Buyer either through a deed-in-lieu of foreclosure or through a
foreclosure as contemplated by this Agreement.
LA-REL-R34461.6 -2-
<PAGE> 3
"1109 McKay Deed-in-Lieu Escrow" shall mean an escrow to be established by
and among Seller, Buyer, MFCO and Escrow Holder for the conveyance of MFCO's
interests in 1109 McKay to Buyer pursuant to a deed-in-lieu of foreclosure as
contemplated by the MFCO Agreement with Buyer's name as Seller's nominee in the
documents effecting such deed-in-lieu of foreclosure.
"Agreement" shall be as defined in the preamble to this Agreement.
"Assignment of Deed-in-Lieu Contract Rights" shall mean the instrument
conveying to Buyer the Deed-in-Lieu Contract Rights in the form of Exhibit "F".
"Buyer" shall be as defined in the preamble to this Agreement.
"Closing" shall mean the date on which the later of the 1101 McKay Closing
and the 1109 McKay Closing have occurred.
"Closing Date" shall be the date the Closing occurs.
"Confidentiality Agreement" shall mean that certain confidentiality agreement
by and between Seller and Buyer dated March 10, 1994.
"Deed-in-Lieu Closing Date" shall be April 27, 1994.
"Deed-in-Lieu Contract Rights" shall mean the following rights of Seller
under the Griffin Agreement and the Plan: (i) the right to be designated as
Brazos' nominee and receive a deed-in-lieu of foreclosure of 1101 McKay from
Griffin and GOCO; (ii) the benefit of the representations and warranties of
Griffin under the Griffin Agreement as such representations and warranties
relate to Griffin and to 1101 McKay only; (iii) the right to be designated as
Brazos' nominee and receive a deed-in-lieu of foreclosure of 1109 McKay from
MFCO; and (iv) the benefit of the representations and warranties of MFCO under
the MFCO Agreement as such representations and warranties relate to MFCO and to
1109 McKay only. The Deed-in-Lieu Contract Rights shall not include any right,
title or interest in or to the GOCO Loan or the MFCO Loan except as described
above.
"Deposit" shall be as defined in Paragraph 2.2.
"Escrow" shall mean the escrow to be established by and among Buyer, Seller
and Escrow Holder to consummate the
LA-REL-R34461.6 -3-
<PAGE> 4
Closing under this Agreement to hold and deliver the Deposit and certain other
documents and funds as provided hereunder.
"Escrow Holder" shall mean Commonwealth Land Title Company.
"GOCO" shall be as defined in Recital A.
"GOCO Loan" shall mean that certain loan originally made by American Savings
and Loan Association to GOCO (formerly Glenborough Operating Co., Ltd., a
California limited partnership) in the original face principal amount of
$295,617,449 secured, in part, by 1101 McKay and forty- one (41) other
properties.
"GOCO Participation Agreement" shall mean that certain participation
agreement by and between Seller as lead lender and servicer and Buyer as
participant which relates to the GOCO Loan and shall be in the form of Exhibit
"B-1".
"Griffin" shall be as defined in Recital B.
"Griffin Agreement" shall mean that certain agreement entitled "Agreement
(Phase I)" dated as of December 28, 1993, by and between Seller and Griffin
regarding the disposition of 1101 McKay and eight (8) other properties which
are security for the GOCO Loan.
"Junior Liens" shall mean that certain deed of trust encumbering 1109 McKay
in favor of GATX dated August, 1986, recorded August 8, 1986, as Book J 799
Page 1005 as Instrument No. 8896136 in the Official Records of Santa Clara
County, California, and any other liens securing monetary indebtedness
encumbering 1109 McKay recorded as of the date hereof or at 1109 McKay Closing.
"MFCO" shall be as defined in Recital C.
"MFCO Agreement" shall mean that certain agreement entitled "Agreement (1109
McKay)" dated as of February 1, 1994, by and between Seller and MFCO regarding
the disposition of 1101 McKay.
"MFCO Loan" shall mean that certain loan originally made by American Savings
and Loan Association to MFCO in the amount of $6,607,913 evidenced by a
promissory note dated August 30, 1985, and secured by a deed of trust
encumbering 1109 McKay.
LA-REL-R34461.6 -4-
<PAGE> 5
"MFCO Participation Agreement" shall mean that certain participation
agreement by and between Seller as lead lender and servicer and Buyer as
participant which relates to the MFCO Loan and shall be in the form of Exhibit
"B-2".
"MFCO Participation Interest" shall mean a one hundred percent (100%)
participation interest in the MFCO Loan to be granted to Buyer pursuant to the
terms and conditions of this Agreement and governed by the MFCO Participation
Agreement.
"Plan" shall mean that certain Second Amended Plan of Reorganization of GOCO
in the matter, In re GOCO Realty Fund, Case No. 92-53651, U.S. Bankr. C.D.
Cal.
"Property" shall mean, collectively, 1101 McKay and 1109 McKay.
"Purchase Price" shall mean the sum of the following:
(a) $2,165,542 less an amount equal to $1,483 per diem for the number of
days from and including the date of execution of this Agreement to (but
exclusive of) the earlier of the date thirty (30) days thereafter or the date
of the 1101 McKay Closing ("1101 McKay Portion"); plus
(b) $2,852,000 less an amount equal to $2,612 per diem for the number of
days from and including the date of execution of this Agreement to (but
exclusive of) the earlier of the date thirty (30) days thereafter or the date
of the 1109 McKay Closing ("1109 McKay Portion"); plus
(c) the amount of funds in the receivership estate for 1109 McKay as of
March 31, 1994, less any normal operating costs and expenses of the
receivership estate through March 31, 1994, which have not been paid as of
such date (exclusive of real estate taxes) ("March 31 Receivership Funds").
Net Receivership Funds arising subsequent to March 31, 1994, with respect
to 1109 McKay until the termination of such receivership shall be delivered
to Seller upon wind-up of such receivership. "Net Receivership Funds" shall
mean the funds held by the receivership estate for 1109 McKay to be
distributed pursuant to the final accounting and the court order for
distribution, less the March 31 Receivership Funds
LA-REL-R34461.6 -5-
<PAGE> 6
and less any rent credit due Buyer for rent paid in excess of rent required
for the period April 15, 1994, through April 30, 1994.
"Seller" shall be as defined in the preamble to this Agreement.
2. Acquisition and Participation
2.1 Purchase and Sale of Deed-in-Lieu Contract Rights. Subject to the terms
and conditions of this Agreement, Seller agrees to convey to Buyer and Buyer
agrees to accept all of Seller's right, title and interest in and to the
Deed-in-Lieu Contract Rights.
2.2 Participation Agreements and Foreclosure.
(a) In the event Griffin fails to deposit the items required by the
Griffin Agreement into the 1101 McKay Deed-in-Lieu Escrow by the date prior to
the Deed-in-Lieu Closing Date, then, subject to the terms and conditions of
this Agreement:
(i) Seller agrees to convey to Buyer and Buyer agrees to accept from
Seller on the Deed-in-Lieu Closing Date, the GOCO Participation Interest in the
GOCO Loan, the terms of which shall be governed by the GOCO Participation
Agreement; and
(ii) Seller agrees, subject to the terms and conditions of this Agreement
and the GOCO Participation Agreement, as lead lender of the GOCO Loan to
foreclose upon 1101 McKay and cause title in the Trustee's Deed to be vested in
the name of Buyer.
(b) In the event MFCO fails to deposit the items required by the MFCO
Agreement into the 1109 McKay Deed-in-Lieu Escrow by the date prior to the
Deed-in-Lieu Closing Date, then, subject to the terms and conditions of this
Agreement:
(i) Seller agrees to convey to Buyer and Buyer agrees to accept from
Seller on the Deed-in-Lieu Closing Date, the MFCO Participation Interest in the
MFCO Loan, the terms of which shall be governed by the MFCO Participation
Agreement; and
(ii) Seller agrees, subject to the terms and conditions of this Agreement
and the MFCO Participation
LA-REL-R34461.6 -6-
<PAGE> 7
Agreement, as lead lender of the MFCO Loan to foreclose upon 1109 McKay and
cause title in the Trustee's Deed to be vested in the name of Buyer; and
(iii) Buyer and Seller agree that the rental rate for the renewal term of
1109 McKay under its existing lease, including any unexercised options for
renewal, extension or purchase, shall be $0.43 per net rentable square foot
commencing April 15, 1994. The rental rate prior to such date shall be the
previously existing rate.
2.3 Purchase Price. As consideration for Seller's conveyance of the
Deed-in-Lieu Contract Rights, the MFCO Participation Interest and the GOCO
Participation Interest, Buyer shall pay to Seller the Purchase Price at the
following times:
(a) Within one (1) business day after the date of this Agreement, Buyer
shall deposit with Escrow Holder the sum of $550,000 (which together with any
interest earned thereon is referred to as the "Deposit"). Escrow Holder shall
deposit the Deposit into an interest bearing account or instrument. If Escrow
Holder does not receive the Deposit by 2:00 P.M. Pacific Standard Time on such
date, this Agreement and the Escrow shall be terminated and be of no force or
effect (except for the obligations of Buyer contained in the Confidentiality
Agreement, which shall survive such termination).
(b) The Deposit shall be applied in full towards the payment of the
Purchase Price upon the 1101 McKay Closing and the 1109 McKay Closing as
provided herein or if the 1101 McKay Closing or 1109 McKay Closing does not
occur for any reason other than due to the failure of a condition set forth in
Paragraph 4, then Two Hundred Fifty Thousand Dollars ($250,000) of the Deposit
shall be paid to and retained by Seller as nonrefundable liquidated damages
pursuant to Paragraph 6.1 and the remainder of the Deposit shall be returned to
Buyer.
(c) On the business day prior to the Deed-in-Lieu Closing Date, Buyer
shall deposit with Escrow Holder by wire transfer an amount equal to the
Purchase Price less the Deposit plus an amount sufficient to satisfy the
closing costs for which Buyer is responsible under this Agreement.
(d) If the 1101 McKay Deed-in-Lieu Escrow and the 1109 McKay Deed-in-Lieu
Escrow do not close by the Deed-in-Lieu Closing Date, then Escrow Holder shall
immediately
LA-REL-R34461.6 -7-
<PAGE> 8
return all funds deposited by Buyer under paragraph 2.3(c) above to Buyer and
retain the Deposit in Escrow.
(e) On the business day prior to the 1109 McKay foreclosure, Buyer shall
deposit with Escrow Holder by wire transfer an amount equal to the 1109 McKay
Portion and the March 31 Receivership Funds plus an amount sufficient to
satisfy the closing costs in the 1109 McKay Closing for which Buyer is
responsible under this Agreement.
(f) On the business day prior to the 1101 McKay foreclosure, Buyer shall
deposit with Escrow Holder by wire transfer an amount equal to the 1101 McKay
Portion less the Deposit plus an amount sufficient to satisfy the closing costs
in the 1101 McKay Closing for which Buyer is responsible under this Agreement.
All wire transfers under this Agreement to Escrow Holder shall be wired as
specified in the wiring instructions provided by Escrow Holder ("Escrow
Holder's Wiring Instructions"). All wire transfers under this Agreement to
Seller shall be wired as specified in the wiring instructions provided by
Seller ("Seller's Wiring Instructions").
There shall be no adjustment to the Purchase Price in the event the MFCO
Participation Agreement and/or the GOCO Participation Agreement are not
required to be delivered under this Agreement due to the closing of the 1101
McKay Deed-in-Lieu Escrow and/or the 1109 McKay Deed-in-Lieu Escrow.
2.4 Disposition of Junior Liens. Seller shall use its commercially
reasonable best efforts by the Deed-in-Lieu Closing Date to cause the Junior
Liens to be reconveyed.
2.5 Costs and Expenses.
(a) Seller shall pay for any trustee's fees and the premium for the
trustee's sale guarantee incurred in any foreclosure of 1101 McKay and/or 1109
McKay and the costs and expenses of the wind-up and termination of the
receivership estate of 1109 McKay and the special master estate of 1101 McKay.
(b) Upon Closing, Buyer shall pay for any recording fees and the fees of
Escrow Holder. Buyer shall also pay any costs and expenses for which Seller
would otherwise be responsible under the 1101 McKay Deed-in-Lieu
LA-REL-R34461.6 -8-
<PAGE> 9
Escrow and the 1109 McKay Deed-in-Lieu Escrow. Buyer shall also pay for the
premiums for any owner's title insurance which Buyer may elect to obtain upon
Closing.
(c) Buyer and Seller shall each pay their respective attorneys' fees and
costs incurred in the preparation and negotiation of this Agreement and the
Closing.
2.6 Lease Covenants. Buyer hereby covenants with Seller to perform fully
its obligations, including, without limitation, rental obligations, under the
lease of 1101 McKay to the 1101 McKay Closing and its obligations, including,
without limitation, rental obligations, under the lease of 1109 McKay to the
1109 McKay Closing.
3. Representations and Warranties.
3.1 Buyer's Representations and Warranties. In consideration of Seller
entering into this Agreement and to consummate the transactions contemplated
hereby Buyer hereby makes the following representations and warranties to
Seller as of the date of this Agreement. Such representations and warranties
shall also be true and correct as of the 1101 McKay Closing and the 1109 McKay
Closing.
(a) Due Organization. Buyer is and as of the Closing will be a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware.
(b) Power and Authority. Buyer has and as of the Closing will have the
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby.
(c) Due Authorization, Execution, Delivery and Binding Nature. This
Agreement and all agreements, instruments and documents herein provided to be
executed by Buyer are and as of the Closing will be duly authorized, executed
and delivered by and are and will be binding upon Buyer.
(d) No Affiliation or Contact with Borrowers. Buyer is neither affiliated
with nor is Buyer owned by, beneficially or otherwise, Griffin or MFCO or any
of their respective partners, affiliates or representatives.
LA-REL-R34461.6 -9-
<PAGE> 10
(e) Advice of Counsel. Buyer has consulted extensively with, and has been
represented by, legal counsel and accountants of its own choice in connection
with the meaning, interpretation, negotiation, drafting and effect of this
Agreement, and Buyer is fully satisfied with its legal counsel and accountants
and the advice which it has received from each of them as to the contents and
legal effect of this Agreement.
3.2 Seller's Representations and Warranties. In consideration of Buyer
entering into this Agreement and to consummate the transactions contemplated
hereby Seller hereby makes the following representations and warranties to
Buyer as of the date of this Agreement. Such representations and warranties
shall also be true and correct as of the 1101 McKay Closing and the 1109 McKay
Closing. It is expressly understood and agreed that all liability of Seller
for breach of the following representations and warranties shall terminate if
no written claim or breach, specifying the representation or warranty allegedly
breached and the supporting evidence for the alleged breach, shall be delivered
to Seller on or prior to the date which is six (6) months following the
Closing:
(a) Due Organization. Seller is and as of the Closing will be a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is qualified to conduct business in the
State of California. Brazos Asset Management, Inc. is the sole general partner
of Seller, and is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Power and Authority. Seller has and as of the Closing will have the
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby.
(c) Due Authorization, Execution, Delivery and Binding Nature. This
Agreement and all agreements, instruments and documents herein provided to be
executed by Seller are and as of the Closing will be duly authorized, executed
and delivered by and are and will be binding upon Seller.
(d) Ownership. As of the date hereof, Seller and its affiliates are, and
at the Closing Seller will be, the sole owners of all right, title and interest
in the GOCO Loan, the MFCO Loan and Deed-in-Lieu Contract Rights.
LA-REL-R34461.6 -10-
<PAGE> 11
Seller has not assigned or pledged any interest in the GOCO Loan, the MFCO Loan
or the Deed-in-Lieu Contract Rights to anyone other than affiliates of Seller.
(e) Agreements. Attached hereto as Exhibit "C" is a true, accurate and
complete copy of the Griffin Agreement. Attached hereto as Exhibit "D" is a
true, accurate and complete copy of the MFCO Agreement. The Griffin Agreement
and the MFCO Agreement have not been amended, supplemented, terminated or
otherwise amended by Seller except by those certain letter agreements, true,
accurate and complete copies of which are attached as Exhibit "E".
3.3 "AS-IS" Provision. THE DEED-IN-LIEU CONTRACT RIGHTS, THE MFCO
PARTICIPATION INTEREST AND THE GOCO PARTICIPATION INTEREST ARE PURCHASED AND
SOLD "AS IS". THE PURCHASE PRICE AND THE TERMS AND CONDITIONS SET FORTH HEREIN
ARE THE RESULT OF ARM'S-LENGTH BARGAINING BETWEEN ENTITIES FAMILIAR WITH
SOPHISTICATED REAL ESTATE TRANSACTIONS. ADDITIONALLY, BUYER ACKNOWLEDGES THAT
IT HAS BEEN THE MAJOR TENANT OF THE PROPERTY FOR A SUBSTANTIAL PERIOD OF TIME
AND THAT IT IS THEREFORE VERY FAMILIAR WITH THE PROPERTY. CONSEQUENTLY, THE
PRICE TERMS AND CONDITIONS IN THIS AGREEMENT TAKE INTO ACCOUNT THAT BUYER IS
NOT ENTITLED TO RELY ON ANY INFORMATION PROVIDED BY SELLER. FURTHERMORE,
EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO STATEMENTS,
REPRESENTATIONS OR WARRANTIES (WHETHER EXPRESS OR IMPLIED), INCLUDING, WITHOUT
LIMITATION, ANY RELATING TO (A) THE FINANCIAL CONDITION OF GRIFFIN OR MFCO, (B)
GRIFFIN'S OR MFCO'S ABILITY TO PERFORM PURSUANT TO THE TERMS AND CONDITIONS OF
THE GRIFFIN AGREEMENT OR THE MFCO AGREEMENT, (C) THE LIEN POSITION OR LIEN
PRIORITY OF THE MFCO LOAN OR THE GOCO LOAN, (D) THE COMPLIANCE OR CONFORMITY OF
THE MFCO LOAN OR THE GOCO LOAN WITH ANY LENDING OR UNDERWRITING CRITERIA OR
PRACTICES, (E) THE COLLECTIBILITY OF THE MFCO LOAN OR THE GOCO LOAN, (F) THE
VALUE OF THE PROPERTY, (G) THE CONDITION OF TITLE TO THE PROPERTY, (H) THE
PHYSICAL OR ENVIRONMENTAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT
LIMITATION, ANY DEFERRED MAINTENANCE AT THE PROPERTY), (I) THE SUITABILITY,
COMPLIANCE OR LACK OF COMPLIANCE OF THE PROPERTY WITH ANY STATE, FEDERAL,
COUNTY OR LOCAL LAW, ORDINANCE, ORDER, PERMIT OR REGULATION, OR (J) ANY OTHER
ATTRIBUTE OR MATTER OF OR RELATING TO MFCO, GRIFFIN, THE MFCO LOAN, THE GOCO
LOAN OR THE PROPERTY. BUYER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED AND
CONDUCTED SUCH INDEPENDENT ANALYSES, STUDIES, REPORTS, INVESTIGATIONS AND
INSPECTIONS AS IT DEEMS APPROPRIATE IN CONNECTION WITH THE BORROWER, THE MFCO
LOAN, THE GOCO LOAN,
LA-REL-R34461.6 -11-
<PAGE> 12
THE RELATED LOAN DOCUMENTS AND THE PROPERTY. BUYER ACKNOWLEDGES THAT ANY
INFORMATION ("INFORMATION") THAT SELLER PROVIDES OR MAKES AVAILABLE TO BUYER,
WHETHER WRITTEN OR ORAL, OR IN THE FORM OF APPRAISALS, MAPS, SURVEYS, PLATS,
SOIL REPORTS, ENGINEERING STUDIES, ENVIRONMENTAL STUDIES, INSPECTION REPORTS,
PLANS, SPECIFICATIONS, DUE DILIGENCE REPORTS, OR ANY OTHER INFORMATION
PERTAINING TO THE MFCO LOAN, THE GOCO LOAN, THE DEED-IN-LIEU CONTRACT RIGHTS,
MFCO, GOCO, GRIFFIN OR THE PROPERTY, OR ANY AND ALL RECORDS, RENT ROLLS, LEASES
AND OTHER DOCUMENTS PERTAINING TO THE USE AND OCCUPANCY OF THE PROPERTY, INCOME
OF THE PROPERTY, THE COST AND EXPENSES OF MAINTAINING THE PROPERTY, AND ANY AND
ALL OTHER MATTERS CONCERNING THE CONDITION, SUITABILITY, INTEGRITY,
MARKETABILITY, COMPLIANCE WITH LAW OR OTHER ATTRIBUTE OR ASPECT OF THEREOF IS
FURNISHED TO BUYER SOLELY AS A COURTESY. BUYER ACKNOWLEDGES THAT SELLER HAS
NEITHER VERIFIED THE ACCURACY OF ANY STATEMENTS OR OTHER MATTERS CONTAINED IN
THE INFORMATION NOR ANY METHOD USED TO COMPILE THE INFORMATION OR THE
QUALIFICATIONS OF THE PERSON PREPARING THE INFORMATION. SELLER GIVES NO
REPRESENTATION OR WARRANTY ABOUT, AND ASSUMES NO RESPONSIBILITY FOR, THE
ACCURACY OR COMPLETENESS OF THE INFORMATION, AND BUYER IS NOT ENTITLED TO RELY
ON ANY OF THE INFORMATION. LIKEWISE, NO PARTNER, OFFICER, EMPLOYEE OR AGENT OF
SELLER HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS REGARDING THE
INFORMATION, THE MFCO LOAN, THE GOCO LOAN, THE DEED-IN-LIEU CONTRACT RIGHTS,
MFCO, GRIFFIN, GOCO OR THE PROPERTY, AND IF GIVEN, THESE REPRESENTATIONS MAY
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SELLER. THE RELIANCE BY BUYER
UPON ANY INFORMATION SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
AGAINST SELLER, SELLER'S PARTNERS OR AFFILIATES OR ANY OF THEIR RESPECTIVE
PARTNERS, OFFICERS, DIRECTORS, PARTICIPANTS, EMPLOYEES, CONTRACTORS,
CONSULTANTS, REPRESENTATIVES OR AGENTS. BUYER AGREES TO BEAR THE RISKS OF ALL
MATTERS RELATING TO THE DEED-IN-LIEU CONTRACT RIGHTS, THE PARTICIPATION,
GRIFFIN, MFCO, GOCO AND THE PROPERTY, INCLUDING, WITHOUT LIMITATION: (A)
COLLECTIBILITY OF THE MFCO LOAN AND THE GOCO LOAN; (B) MFCO'S AND GRIFFIN'S
FINANCIAL CONDITION; (C) FRAUD OR FORGERY NOT KNOWN TO SELLER; (D) THE VALUE OR
CONDITION OF THE PROPERTY; AND (E) CLAIMS OF ANY MECHANICS' LIENORS, BONDED
STOP NOTICE HOLDERS OR ISSUERS OF SURETY BONDS IN RESPECT OF THE PROPERTY.
BUYER'S PAYMENT OF THE PURCHASE PRICE AT THE CLOSING SHALL CONSTITUTE BUYER'S
ACKNOWLEDGEMENT AND APPROVAL, BOTH AS TO FORM AND CONTENT, OF THE GRIFFIN
AGREEMENT, THE MFCO AGREEMENT, THE MFCO LOAN DOCUMENTS, THE GOCO LOAN DOCUMENTS
AND BUYER'S ACKNOWLEDGEMENT THAT BUYER HAS HAD THE OPPORTUNITY TO REQUEST FROM
SELLER AND REVIEW
LA-REL-R34461.6 -12-
<PAGE> 13
SUCH DOCUMENTS AND MATERIALS AS BUYER DEEMED APPROPRIATE.
_____________________ __________________________
Buyer's Initials Seller's Initials
4. Conditions to Closings.
4.1 Conditions to Close the 1101 McKay Deed-in-Lieu Escrow.
(a) Seller's Conditions to Close the 1101 McKay Deed-in-Lieu Escrow. The
obligation of Seller to close the 1101 McKay Deed-in-Lieu Escrow shall be
subject to the satisfaction of, or Seller's waiver of, the following conditions
precedent:
(i) Buyer's Deliveries to Escrow Holder and Seller. That Buyer shall
have delivered or caused to be delivered to Escrow Holder, the funds and
documents described in Paragraph 5.2 no later than one (1) business day prior
to the Deed-in-Lieu Closing Date.
(ii) Buyer's Representations and Warranties. That Buyer's representations
and warranties set forth in Paragraph 3.1 hereof shall be true and correct as
of the date of this Agreement and as of the Deed-in-Lieu Closing Date as if
made on and as of the Deed-in-Lieu Closing Date.
(iii) Buyer's Performance. That Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Buyer on or before the
Deed-in-Lieu Closing Date.
(b) Buyer's Conditions to Close the 1101 McKay Deed-in-Lieu Escrow. The
obligation of Buyer to close the 1101 McKay Deed-in-Lieu Escrow shall be
subject to the satisfaction of, or Buyer's waiver of, the following conditions
precedent:
(i) Seller's Delivery to Escrow Holder. That Seller shall have
delivered to Escrow Holder not later than one (1) business day prior to the
Deed-in-Lieu Closing Date the items described in Paragraph 5.3 below.
(ii) Seller's Performance. That Seller shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
LA-REL-R34461.6 -13-
<PAGE> 14
Agreement to be performed or complied with by Seller on or before the
Deed-in-Lieu Closing Date.
(iii) Seller's Representations and Warranties. That Seller's
representations and warranties set forth in Paragraph 3.2 hereof shall be true
and correct as of the date of this Agreement and as of the Deed-in-Lieu Closing
Date as if made on and as of the Deed-in-Lieu Closing Date.
(iv) Lien Priority. The continued first lien priority of the GOCO Loan.
(c) Mutual Conditions to Close the 1101 McKay Deed-in-Lieu Escrow. Both
Seller's and Buyer's obligations to close the 1101 McKay Deed-in- Lieu Escrow
are subject to the satisfaction or waiver of the following conditions:
(i) Griffin and GOCO Performance. That Griffin and GOCO shall have
deposited all documents to be deposited by such entities into the 1101 McKay
Deed-in-Lieu Escrow by the date prior to the Deed-in-Lieu Closing Date as
required by the Plan and the Griffin Agreement.
(ii) Agreements in Full Force and Effect. That the Griffin Agreement (as
it relates to 1101 McKay only) and the Plan (as it relates to 1101 McKay only)
remain in full force and effect and have not been terminated, amended,
supplemented or otherwise modified in any manner except with Buyer's consent.
4.2 Conditions to Close the 1109 McKay Deed-in-Lieu Escrow.
(a) Seller's Conditions to Close the 1109 McKay Deed-in-Lieu Escrow. The
obligation of Seller to close the 1109 McKay Deed-in-Lieu Escrow shall be
subject to the satisfaction of, or Seller's waiver of, the following conditions
precedent:
(i) Buyer's Deliveries to Escrow Holder and Seller. That Buyer shall
have delivered or caused to be delivered to Escrow Holder, the funds and
documents described in Paragraph 5.2 no later than one (1) business day prior
to the Deed-in-Lieu Closing Date.
(ii) Buyer's Representations and Warranties. That Buyer's representations
and warranties set forth in Paragraph 3.1 hereof shall be true and correct as
of the
LA-REL-R34461.6 -14-
<PAGE> 15
date of this Agreement and as of the Deed-in-Lieu Closing Date as if made on
and as of the Deed-in-Lieu Closing Date.
(iii) Buyer's Performance. That Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Buyer on or before the
Deed-in-Lieu Closing Date.
(b) Buyer's Conditions to Close the 1109 McKay Deed-in-Lieu Escrow. The
obligation of Buyer to close the 1109 McKay Deed-in-Lieu Escrow shall be
subject to the satisfaction of, or Buyer's waiver of, the following conditions
precedent:
(i) Seller's Delivery to Escrow Holder. That Seller shall have
delivered to Escrow Holder not later than one (1) business day prior to the
Deed-in-Lieu Closing Date the items described in Paragraph 5.3 below.
(ii) Seller's Performance. That Seller shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller on or before the
Deed-in-Lieu Closing Date.
(iii) Seller's Representations and Warranties. That Seller's
representations and warranties set forth in Paragraph 3.2 hereof shall be true
and correct as of the date of this Agreement and as of the Deed-in-Lieu Closing
Date as if made on and as of the Deed-in-Lieu Closing Date.
(iv) Lien Priority. The continued first lien priority of the MFCO Loan.
(v) Reconveyance of the Junior Liens. That Seller shall have caused a
reconveyance of any and all Junior Liens to be deposited into the 1109
Deed-in-Lieu Escrow.
(c) Mutual Conditions to Close the 1109 McKay Deed-in-Lieu Escrow. Both
Seller's and Buyer's obligations to close the 1109 McKay Deed-in- Lieu Escrow
are subject to the satisfaction or waiver of the following conditions:
(i) MFCO Performance. That MFCO shall have deposited all documents to be
deposited by MFCO into the
LA-REL-R34461.6 -15-
<PAGE> 16
1109 McKay Deed-in-Lieu Escrow by the date prior to the Deed-in-Lieu Escrow
Date as required by the MFCO Agreement.
(ii) Agreements in Full Force and Effect. That the MFCO Agreement remains
in full force and effect and have not been terminated, amended, supplemented or
otherwise modified in any manner except with Buyer's consent.
4.3 Conditions to Foreclosure of 1101 McKay.
(a) Seller's Conditions to Foreclosure of 1101 McKay. The obligation of
Seller to foreclose on 1101 McKay and cause the Trustee's Deed to be vested in
the name of Buyer shall be subject to the satisfaction of, or Seller's waiver
of, the following conditions precedent:
(i) Failure of 1101 McKay Deed-in-Lieu Escrow to Close. That the 1101
McKay Deed-in-Lieu Escrow has failed to close by the Deed-in-Lieu Closing Date
or at any time prior to the foreclosure date due to the failure of Griffin to
deposit the documents required to be deposited therein under the Griffin
Agreement.
(ii) Foreclosure Permissible. That Seller shall continue to have the right
to foreclose on 1101 McKay under the GOCO Loan and under applicable California
law.
(iii) Buyer's Deliveries to Escrow Holder and Seller. That Buyer shall
have delivered or caused to be delivered to Escrow Holder, the funds and
documents described in Paragraph 5.5.
(iv) Buyer's Representations and Warranties. That Buyer's representations
and warranties set forth in Paragraph 3.1 hereof shall be true and correct as
of the date of this Agreement and as of the foreclosure date as if made on and
as of the foreclosure date.
(v) Buyer's Performance. That Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Buyer on or before the
foreclosure date.
(b) Buyer's Conditions to Accept Trustee's Deed. The obligation of Buyer
to accept a Trustee's Deed of 1101 McKay shall be subject to the satisfaction
of, or Buyer's waiver of, the following conditions precedent:
LA-REL-R34461.6 -16-
<PAGE> 17
(i) Seller's Performance. That Seller shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller on or before the
foreclosure date.
(ii) Seller's Representations and Warranties. That Seller's
representations and warranties set forth in Paragraph 3.2 hereof shall be true
and correct as of the date of this Agreement and as of the foreclosure date as
if made on and as of the foreclosure date.
4.4 Conditions to Foreclosure of 1109 McKay.
(a) Seller's Conditions to Foreclosure of 1109 McKay. The obligation of
Seller to foreclose on 1109 McKay and cause the Trustee's Deed to be vested in
the name of Buyer shall be subject to the satisfaction of, or Seller's waiver
of, the following conditions precedent:
(i) Failure of 1109 McKay Deed-in-Lieu Escrow to Close. That the 1109
McKay Deed-in-Lieu Escrow has failed to close by the Deed-in-Lieu Closing Date
or at any time prior to the foreclosure date due to the failure of MFCO to
deposit the documents required to be deposited therein under the MFCO
Agreement.
(ii) Foreclosure Permissible. That Seller shall continue to have the right
to foreclose on 1109 McKay under the MFCO Loan and under applicable California
law.
(iii) Buyer's Deliveries to Escrow Holder and Seller. That Buyer shall
have delivered or caused to be delivered to Escrow Holder, the funds and
documents described in Paragraph 5.6.
(iv) Buyer's Representations and Warranties. That Buyer's representations
and warranties set forth in Paragraph 3.1 hereof shall be true and correct as
of the date of this Agreement and as of the foreclosure date as if made on and
as of the foreclosure date.
(v) Buyer's Performance. That Buyer shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Buyer on or before the
foreclosure date.
LA-REL-R34461.6 -17-
<PAGE> 18
(b) Buyer's Conditions to Accept Trustee's Deed. The obligation of Buyer
to accept a Trustee's Deed of 1109 McKay shall be subject to the satisfaction
of, or Buyer's waiver of, the following conditions precedent:
(i) Seller's Performance. That Seller shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller on or before the
foreclosure date.
(ii) Seller's Representations and Warranties. That Seller's
representations and warranties set forth in Paragraph 3.2 hereof shall be true
and correct as of the date of this Agreement and as of the foreclosure date as
if made on and as of the foreclosure date.
5. Closing and Escrow
5.1 Establishment of Escrow.
(a) This Agreement shall constitute both an agreement between Seller and
Buyer and escrow instructions. By 12:00 noon on the date which is one (1)
business day after the parties have fully executed this Agreement, the Escrow
be opened with Escrow Holder, by delivery of a fully-executed copy of this
Agreement. The parties agree to execute such supplemental escrow instructions
as Escrow Holder may reasonably require; provided, however, that in the event
of any conflict between the terms of this Agreement and the terms of such
supplemental escrow instructions, the terms of this Agreement shall govern.
(b) The Closing shall occur at the earliest reasonably possible time but
in no event later than December 31, 1994. Both Seller and Buyer covenant to
use their commercially reasonable best efforts to cause the Closing to occur as
soon as reasonably practicable.
(c) In the event the Closing has not occurred by December 31, 1994, due to
no fault of Buyer or Seller, then Buyer and Seller shall have the option
exercisable at any time thereafter to terminate this Agreement with respect to
any property which has not then closed. In such event, Buyer shall have the
option exercisable within ten (10) days after notice of such termination
either: (i) to keep any property to which it has obtained title and to
terminate its rights hereunder to the remaining property, in which event
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<PAGE> 19
Escrow Holder shall return to Buyer the Deposit and Buyer and Seller shall have
no further rights, duties or obligations hereunder; or (ii) to keep any
property to which it has obtained title and to acquire Seller's position with
respect to any remaining property in accordance with the following terms:
(A) Buyer shall purchase such position for the remaining amount of the
Purchase Price not received by Seller.
(B) Buyer shall close such purchase within fifteen (15) days of Buyer's
election to purchase such position. If Buyer fails to close within such
fifteen (15) day period then Buyer's rights to purchase such position shall
terminate.
(C) If the position to be purchased is with respect to 1109 McKay then,
the transaction shall be a whole loan sale of the MFCO Loan to Buyer. If the
position to be purchased is with respect to 1101 McKay, then the transaction
shall be a partial sale of the GOCO Loan or a participation therein which shall
grant to Buyer the right to foreclose on 1101 McKay.
(D) Seller shall be liable for any foreclosure costs incurred prior to
the closing date and Buyer shall be liable for any foreclosure costs incurred
subsequent to closing date.
(E) If the position to be acquired by Buyer is with respect to 1109
McKay, then Buyer shall prosecute the foreclosure of 1109 McKay to completion
and shall cause the receivership estate to be terminated and liquidated as soon
as reasonably practicable after foreclosure of 1109 McKay. Upon termination of
the receivership estate, Net Receivership Funds shall be disbursed to Seller
and Buyer as follows:
(I) Seller shall receive an amount equal to the Net Receivership Funds
multiplied by a fraction, the numerator of which is the number of days from
the date of appointment of the receiver to the closing date and the
denominator of which is the total number of days from the date of appointment
of the receiver to the termination of the receivership.
(II) Buyer shall receive the remainder of the Net Receivership Funds.
LA-REL-R34461.6 -19-
<PAGE> 20
(F) If the position to be acquired by Buyer is with respect to 1101 McKay
then the proceeds disbursed by the special master for such property for the
month in which such closing occurs shall be prorated outside of escrow as of
the date of such closing. Buyer shall be entitled to all disbursements in
subsequent months.
(G) Buyer and Seller shall each share one-half the escrow fees incurred
in such closing. Seller shall pay any recording fees and Buyer and Seller
shall each share one-half the escrow fees incurred in such closing.
5.2 Buyer's Deposits into Escrow. Buyer shall deliver or cause to be
delivered to Escrow Holder one (1) business day before the Deed-in- Lieu
Closing Date:
(a) The Purchase Price, less the Deposit.
(b) An amount equal to all closing costs and other expenses incurred in the
Escrow to be paid by Buyer hereunder.
(c) The MFCO Participation Agreement.
(d) The GOCO Participation Agreement.
5.3 Seller's Deposits into Escrow. Seller shall deliver or cause to be
delivered to Escrow Holder one (1) business day before the Deed-in- Lieu
Closing Date:
(a) The MFCO Participation Agreement.
(b) The GOCO Participation Agreement.
(c) The Assignment of Deed-in-Lieu Contract Rights.
(d) A reconveyance of the deed of trust securing the MFCO Loan ("MFCO
Reconveyance").
(e) A reconveyance of the deed of trust securing the GOCO Loan which
encumbers 1101 McKay ("GOCO Reconveyance").
(f) An instruction to Chicago Title Company as successor-in-interest to
Safeco Title Insurance Company to release or reconvey the installment sales
contract affecting 1101 McKay ("Chicago Title Instructions").
LA-REL-R34461.6 -20-
<PAGE> 21
(g) A reconveyance for any Junior Liens which have not been reconveyed by
such date.
5.4 Escrow Holder's Acts Upon Deed-in-Lieu Closing Date.
(a) On the Deed-in-Lieu Closing Date, if the 1101 McKay Closing and the
1109 McKay Closing have occurred, Escrow Holder shall promptly undertake all of
the following in the order set forth below:
(i) Disburse the funds deposited with Escrow Holder by Buyer pursuant to
Paragraph 5.2 as follows:
(A) Pay all closing costs and other amounts chargeable to the account
of Seller and Buyer hereunder.
(B) Deliver the remainder of the funds in Escrow to Seller by Federal
Funds wire transfer no later than 2:00 p.m. Pacific Standard Time on the
Closing Date in accordance with Seller's Wiring Instructions.
(ii) Return the counterpart of the GOCO Participation Agreement and the
MFCO Participation Agreement executed by Seller to Seller.
(iii) Deliver to Buyer the counterpart of the GOCO Participation Agreement
and the MFCO Participation Agreement executed by Buyer and the Assignment of
Deed-in-Lieu Contract Rights.
(iv) Record the MFCO Reconveyance and the GOCO Reconveyance in the
Official Records of the County of Santa Clara, California.
(v) Deliver the Chicago Title Instructions to the office of Chicago Title
Company to be designated by Buyer.
(b) On the Deed-in-Lieu Closing Date, if the 1101 McKay Closing and the
1109 McKay Closing have not occurred, Escrow Holder shall promptly undertake
all of the following in the order set forth below:
(i) Return all funds deposited with Escrow Holder by Buyer less the
Deposit to Buyer pursuant to Paragraph 2.3(c) above and retain the Deposit
under this Agreement.
LA-REL-R34461.6 -21-
<PAGE> 22
(ii) Deliver to Seller the counterpart of the GOCO Participation
Agreement and the MFCO Participation Agreement executed by Buyer to Seller and
the Assignment of Deed-in-Lieu Contract Rights.
(iii) Deliver the counterpart of the GOCO Participation Agreement and the
GOCO Participation Agreement executed by Seller to Buyer.
5.5 Buyer's Deposits into Escrow Prior to 1109 McKay Foreclosure. If the
foreclosure of 1109 McKay is to occur under this Agreement, then one (1)
business day prior to the foreclosure of 1109 McKay, Buyer shall deposit into
Escrow, the 1109 McKay Portion, plus an amount equal to all closing costs and
other expenses incurred in the Escrow to be paid by Buyer hereunder.
5.6 Buyer's Deposits into Escrow Prior to 1101 McKay Foreclosure. If the
foreclosure of 1101 McKay is to occur under this Agreement, then one (1)
business day prior to the foreclosure of 1101 McKay, Buyer shall deposit into
Escrow, the 1101 McKay Portion, less the Deposit, plus an amount equal to all
closing costs and other expenses incurred in the Escrow to be paid by Buyer
hereunder.
5.7 Escrow Holder's Acts Upon Foreclosures.
(a) On the 1109 McKay Closing by reason of foreclosure, Escrow Holder
shall promptly undertake all of the following in the order set forth below:
(i) Disburse the funds deposited with Escrow Holder by Buyer pursuant to
Paragraph 5.5 as follows:
(A) Pay all closing costs and other amounts chargeable to the account
of Seller and Buyer hereunder.
(B) Deliver an amount of funds equal to the 1109 McKay Portion plus
the March 31 Receivership Funds to Seller by Federal Funds wire transfer no
later than 2:00 p.m. Pacific Standard Time on the foreclosure date in
accordance with Seller's Wiring Instructions.
(ii) Cause the Trustee's Deed showing Buyer's name as vestee upon such
foreclosure to be recorded in the Official Records of Santa Clara County,
California.
LA-REL-R34461.6 -22-
<PAGE> 23
(b) On the 1101 McKay Closing by reason of foreclosure, Escrow Holder
shall promptly undertake all of the following in the order set forth below:
(i) Disburse the funds deposited with Escrow Holder by Buyer pursuant to
Paragraph 5.6 as follows:
(A) Pay all closing costs and other amounts chargeable to the account
of Seller and Buyer hereunder.
(B) Deliver an amount of funds equal to the 1101 McKay Portion to
Seller by Federal Funds wire transfer no later than 2:00 p.m. Pacific Standard
Time on the foreclosure date in accordance with Seller's Wiring Instructions.
(ii) Cause the Trustee's Deed showing Buyer's name as vestee upon such
foreclosure to be recorded in the Official Records of Santa Clara County,
California.
(c) On the day following the date scheduled for the foreclosure of 1101
McKay and/or 1109 McKay, as applicable, if the foreclosure has not occurred due
to injunction, bankruptcy or other reason, Escrow Holder shall promptly return
all funds deposited with Escrow Holder by Buyer less the Deposit to Buyer
pursuant to Paragraph 2.3(c) above, retain the Deposit under this Agreement and
await further instructions regarding the Escrow.
6. Default and Remedies.
6.1 Liquidated Damages. IN THE EVENT BUYER FAILS TO COMPLETE EITHER THE
1101 MCKAY CLOSING OR 1109 MCKAY CLOSING (UNLESS SUCH FAILURE IS DUE TO FAILURE
OF A CONDITION SET FORTH IN PARAGRAPH 4) (A "BUYER'S FAILURE"), SELLER AND
BUYER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE
THE DAMAGES WHICH SELLER MAY SUFFER. THEREFORE, SELLER AND BUYER HEREBY AGREE
THAT A REASONABLE ESTIMATE OF THE TOTAL DAMAGES THAT SELLER WOULD SUFFER IN THE
EVENT OF BUYER'S FAILURE IS AND SHALL BE, AS SELLER'S SOLE AND EXCLUSIVE REMEDY
(WHETHER AT LAW OR IN EQUITY) THE RIGHT TO RECEIVE AND RETAIN TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000) OF THE DEPOSIT. THEREFORE, IN THE EVENT OF BUYER'S
FAILURE, SELLER MAY RECEIVE AND RETAIN TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000) FROM THE DEPOSIT, AND SELLER SHALL BE RELIEVED FROM ALL OBLIGATIONS
AND LIABILITIES HEREUNDER, AND, PROMPTLY FOLLOWING ESCROW HOLDER'S RECEIPT OF
SUCH INSTRUCTION FROM SELLER, ESCROW
LA-REL-R34461.6 -23-
<PAGE> 24
HOLDER SHALL CANCEL THE ESCROW. THE PAYMENT AND PERFORMANCE OF THE ABOVE AS
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE
MEANING OF APPLICABLE LAW. IN THE EVENT OF BUYER'S FAILURE, THIS AGREEMENT
SHALL BE TERMINATED, AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR
OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT FOR THE RIGHT OF SELLER TO
RECEIVE AND RETAIN SUCH LIQUIDATED DAMAGES; PROVIDED, HOWEVER, THAT THIS
PARAGRAPH SHALL NOT PROHIBIT SELLER FROM BRINGING AN ACTION AGAINST BUYER FOR
BREACH OF THE CONFIDENTIALITY AGREEMENT. NOTWITHSTANDING THE FOREGOING, IF
AFTER BUYER'S FAILURE BUYER INTERFERES WITH OR MAKES ANY ATTEMPT TO INTERFERE
WITH SELLER RECEIVING OR RETAINING, AS THE CASE MAY BE, THE LIQUIDATED DAMAGES
PROVIDED FOR IN THIS PARAGRAPH, INCLUDING, WITHOUT LIMITATION, GIVING ANY
NOTICE OR INSTRUCTIONS TO ESCROW HOLDER NOT TO DELIVER TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000) OF THE DEPOSIT TO SELLER, SELLER SHALL ALSO HAVE
THE RIGHT TO RECOVER ANY ATTORNEYS' FEES AND COSTS WHICH SELLER INCURS IN
OBTAINING OR RETAINING SUCH LIQUIDATED DAMAGES.
<TABLE>
<S> <C>
_____________________ __________________________
Buyer's Initials Seller's Initials
</TABLE>
7. Post-Closing Covenants.
7.1 Receivership and Litigation.
(a) Within ten (10) days after the 1101 McKay Closing Seller shall move to
terminate the responsibility of the special master, Clayton Cook, over 1101
McKay. Seller shall be entitled to retain any funds held or delivered to
Seller by such special master with respect to 1101 McKay.
(b) Within ten (10) days after the 1109 McKay Closing, Seller shall move to
terminate the receivership estate with respect to 1109 McKay causing the
receiver to deliver: (i) to Buyer funds in the receivership estate equal to the
March 31 Receivership Funds and (ii) to Seller the remaining amount of funds in
the receivership estate. In the event the receivership estate does not contain
sufficient funds to pay to Buyer the March 31 Receivership Funds, then Buyer
shall have a rental credit on 1101 McKay in an amount sufficient to satisfy
such deficiency. Seller shall then promptly dismiss the foreclosure and
receivership proceedings, New West Federal Savings and Loan Association v.
Mariani Financial Company, Case No. 73285, California Superior Court, Santa
Clara County.
LA-REL-R34461.6 -24-
<PAGE> 25
7.2 Access to Information. For a period of two years after the Closing,
Buyer hereby agrees to make any information and materials in Buyer's possession
relating to the Property available for inspection by Seller during normal
business hours upon reasonable notice and upon a showing of good cause by
Seller for its need for such information; provided Seller shall not have the
right to enter upon the Property after the Closing without the prior written
consent of Buyer.
7.3 No Use of Certain Names. Buyer shall not, without the express written
consent of Seller, use or refer to the name "FDIC," "Federal Deposit Insurance
Corporation," "RTC," "Resolution Trust Corporation" or "Brazos", or any name
derived therefrom or confusingly similar therewith to promote Buyer's
marketing, advertising, sale, collection or management of the Property. Buyer
acknowledges that there is no adequate remedy at law for violation of this
provision and consents to the entry of an order by a court of competent
jurisdiction enjoining any violation or threatened violation of this provision.
8. Miscellaneous.
8.1 Survival. The only warranties, representations, covenants, obligations
and agreements contained in this Agreement that shall survive the Closing are
those contained in Paragraphs 2.3, 2.4, 2.5, 3.1, 3.2 (subject to the
limitations on survival set forth therein), 7 and 8.
8.2 Further Instruments. Each party will, whenever and as often as it shall
be requested to do so by the others, cause to be executed, acknowledged or
delivered any and all such further instruments and documents as may be
necessary or proper, in the reasonable opinion of the requesting party, in
order to carry out the intent and purpose of this Agreement.
8.3 Brokers. Seller represents and warrants to Buyer, and Buyer represents
and warrants to Seller, that no broker or finder has been engaged by it,
respectively, in connection with any of the transactions contemplated by this
Agreement or to its knowledge is in any way connected with any of such
transactions except that Buyer has engaged Grubb & Ellis Company as its broker
("Buyer's Broker"), the fees and commissions of which Buyer shall be
responsible. Buyer shall indemnify, protect, defend and hold Seller harmless
from and against any claim for a broker's or finder's fee or
LA-REL-R34461.6 -25-
<PAGE> 26
commission in connection with this transaction if such claim shall be based
upon any statement or agreement alleged to have been made by Buyer. Seller
shall indemnify, protect, defend and hold Buyer harmless from and against any
claim for a broker's or finder's fee or commission in connection with this
transaction if such claim shall be based upon any statement or agreement
alleged to have been made by Seller.
8.4 Limitation of Liability. No present or future attorney, officer,
director, agent, servant, contractor, employee, partner, parent or subsidiary
corporation or predecessor-in-interest of Seller, Brazos Asset Management,
Inc., the Resolution Trust Corporation, the Federal Deposit Insurance
Corporation, New West Federal Savings and Loan Association or the American Real
Estate Group, Inc. shall have any personal liability, directly or indirectly,
under or in connection with this Agreement or any agreement made or entered
into under or pursuant to the provisions of this Agreement, or any amendment or
amendments to any of the foregoing made at any time or times, heretofore or
hereafter, and Buyer and its successors and assigns hereby waive any and all
such personal liability.
8.5 Indemnification. Subject to Paragraph 6.1 and the time limitations set
forth in Paragraph 3.2, Buyer and Seller at their sole cost and expense hereby
agree to indemnify, defend (with counsel acceptable to the other), protect and
forever hold harmless the other and the other's partners, directors, officers,
employees and agents from and against any and all claims, demands, losses,
damages, liabilities, fines, penalties, charges, administrative and judicial
proceedings and orders, judgements and all costs and expenses incurred in
connection therewith, including, without limitation, actual attorneys' fees and
costs of defense arising directly or indirectly, out of their own breach or
alleged breach of any representation, warranty or covenant contained in this
Agreement.
8.6 No Waiver. The waiver or failure to enforce any provision of this
Agreement shall not operate as a waiver of any future breach of any such
provision or any other provision hereof.
8.7 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California (without regard to
conflicts of law).
8.8 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer any
LA-REL-R34461.6 -26-
<PAGE> 27
rights or remedies upon any person, other than the parties hereto and, subject
to any restrictions on assignment herein contained, their respective successors
and assigns.
8.9 Amendments. This Agreement may be amended by written agreement of
amendment executed by all parties, but not otherwise.
8.10 Attorneys' Fees. If any lawsuit is commenced to enforce any of the
terms of this Agreement, the prevailing party will have the right to recover
its reasonable attorneys' fees and costs of suit from the other party
(including, without limitation, the reasonable value of the in-house counsel
services), including, without limitation, attorneys' fees and disbursements for
trial, appellate proceedings, out-of-court workouts and settlements or for
enforcement of rights under any state or federal statute, including, without
limitation, attorneys' fees incurred in bankruptcy and insolvency proceedings
such as in connection with seeking relief from stay in a bankruptcy proceeding.
8.11 Entire Agreement. This Agreement and the Confidentiality Agreement
contain the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior agreements between the parties hereto
respecting such matters.
8.12 Time of the Essence. Time is of the essence of this Agreement.
8.13 Notices. Any notice which a party is required or may desire to give
the other shall be in writing and may be sent by (i) facsimile transmission,
(ii) personal delivery, (iii) by United States registered or certified mail,
return receipt requested, postage prepaid, or (iv) by Federal Express or
similar generally recognized overnight carrier regularly providing proof of
delivery, addressed as follows (subject to the right of a party to designate a
different address for itself by notice similarly given):
To Buyer: VLSI Technology, Inc.
1109 McKay Drive
San Jose, California 95131
Attention: Thomas F. Mulvaney, Esq.
Phone: 408-434-3063
Fax: 408-434-7744
LA-REL-R34461.6 -27-
<PAGE> 28
with a copy to:
Garth E. Pickett, Esq.
Hopkins & Carley
150 Almaden Boulevard
15th Floor
San Jose, California 95113
To Seller: Brazos Partners, L.P.
c/o Brazos Asset Management, Inc.
600 East Las Colinas Boulevard
Suite 400
Irving, Texas 75039
Attention: John Tivald
Phone: (214) 831-2000
Fax: (214) 831-2100
and
Paul R. Walker, Esq.
Paul, Hastings, Janofsky & Walker
555 So. Flower Street
Suite 2300
Los Angeles, California 90071
Phone: (213) 683-6000
Fax: (213) 627-0705
To Escrow Holder: Commonwealth Land Title Company
525 Market Street
Suite 1560
San Francisco, California 94105
Attention: Ms. Carol Carozza
Phone: (800) 628-9059
Fax: (415) 442-0199
Such notice shall be deemed received upon the earlier of (i) if personally
delivered, the date of delivery to the address of the person to receive such
notice, (ii) if mailed, three (3) business days after the date of posting by
the United States post office, (iii) if given by Federal Express or other
overnight courier, twenty-four (24) hours after deposit thereof with such
overnight courier, or (iv) if given by fax or electronic transmission, one (1)
business day following receipt at addressee's location.
8.14 Assignment. Buyer will not assign any of its rights or obligations
under this Agreement without Seller's prior written consent, which consent
Seller may withhold in
LA-REL-R34461.6 -28-
<PAGE> 29
its sole discretion. No assignment by Buyer shall release Buyer from any of
its obligations under this Agreement.
8.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.16 WAIVER OF TRIAL BY JURY. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ON
ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. THE
PARTIES ACKNOWLEDGE THAT THEY HAVE RETAINED COUNSEL OF THEIR OWN CHOOSING AND
SUCH COUNSEL HAS FULLY EXPLAINED THE CONTENT AND LEGAL EFFECT OF THIS
PARAGRAPH.
<TABLE>
<S> <C>
TFM RSH
________________ _________________
Buyer's Initials Seller's Initials
</TABLE>
8.17 Restrictions on Commissions and Resale. The parties represent,
warrant, covenant and agree that (i) no fees, including broker's fees, or
commissions from the sale of the Loan and the Loan Documents will be shared
with any officer or employee of Brazos Asset Management, Inc. and (ii) Buyer
does not intend to resell any of the Loan and the Loan Documents or the
Property to, any of the following persons or entities or such persons' or
entities' affiliates, officers, directors, employees, parent(s), spouse,
siblings or natural descendants or to any trust created for the benefit of any
of the foregoing:
<TABLE>
<S> <C>
Mario J. Antoci John P. Grayken
Glenn R. August Steven B. Gruber
Robert M. Bass William S. Janes
David Bonderman David G. Offensend
Bernard J. Carl David M. Schwarz
J. Taylor Crandall Robert H. Gidel
Thomas R. Delatour, Jr. Brazos Asset Management, Inc.
Daniel L. Doctoroff Brazos Fort Associates, L.P.
Billie J. Ellis, Jr. Brazos Worth Associates, L.P.
Shannon A. Fairbanks Group 31, Inc.
Andrew E. Furer
</TABLE>
8.18 Exhibit and Paragraph References. Unless the context requires
otherwise, any references in this Agreement to Exhibits or Paragraphs shall be
deemed to refer to the exhibits and paragraphs to this Agreement. All Exhibits
attached to this Agreement are hereby incorporated herein by this reference.
LA-REL-R34461.6 -29-
<PAGE> 30
8.19 Singular, Plural, etc.. Any masculine, feminine, or neuter gender and
the singular and the plural number, shall each be considered to include the
other whenever the context so requires.
IN WITNESS WHEREOF, Seller and Buyer do hereby execute this Agreement as of
the date first written above.
BUYER:
VLSI TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ T.F. MULVANEY
_________________________
Thomas F. Mulvaney
Vice President and General Counsel
SELLER:
BRAZOS PARTNERS, L.P.,
a Delaware limited partnership
By: Brazos Asset Management, Inc.,
a Delaware corporation,
general partner
By: /s/ R.S. HARRIS
________________________
Name: R.S. Harris
___________________
Title: EVP
__________________
LA-REL-R34461.6 -30-
<PAGE> 31
LIST OF EXHIBITS
<TABLE>
<S> <C>
A-1: Legal Description of 1101 McKay
A-2: Legal Description of 1109 McKay
B-1: GOCO Participation Agreement
B-2: MFCO Participation Agreement
C: Griffin Agreement
D: MFCO Agreement
E: Extension Letters
F: Assignment of Deed-in-Lieu Contract Rights
</TABLE>
LA-REL-R34461.6 -31-
<PAGE> 32
EXHIBIT "A-1"
LEGAL DESCRIPTION OF 1101 McKAY
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE CITY OF SAN JOSE, COUNTY OF SANTA
CLARA, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCEL 1, AS SHOWN ON PARCEL MAP FILED JULY 28, 1983 IN BOOK 515 OF MAPS, AT
PAGE 25, SANTA CLARA COUNTY RECORDS.
LA-REL-R34461.6 -32-
<PAGE> 33
EXHIBIT "A-2"
LEGAL DESCRIPTION OF 1109 MCKAY
ALL THAT CERTAIN REAL PROPERTY LOCATED IN THE CITY OF SAN JOSE, COUNTY OF SANTA
CLARA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS:
PARCEL 2, AS SHOWN ON THAT CERTAIN PARCEL MAP RECORDED JULY 28, 1983, IN BOOK
515, PAGE 25 IN THE OFFICE OF THE RECORDER OF SAID COUNTY
APN: 244-19-026
LA-REL-R34461.6 -33-
<PAGE> 34
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-REL:R34461.7 Type: AGR
<PAGE> 1
EXHIBIT 10.4
Intel Corporation
2200 Mission College Blvd.
P.O. Box 58119
Santa Clara, CA 95052-8119
(408) 765-8080
July 18, 1994
Mr. Tom Mulvaney
General Counsel
VLSI CORPORATION
1109 McKay Drive
San Jose, CA 95131
VIA FACSIMILE AND COURIER
Re: Right to Maintain Interest
Dear Tom:
Pursuant to Section 6(b)(4) of the Intel/VLSI Stock and Warrant Purchase
Agreement dated as of July 8, 1992, Intel hereby unilaterally waives its
right to maintain its ownership interest in VLSI.
Intel has informed VLSI of its intent to reduce its ownership in VLSI,
as permitted per the restrictions of the Agreement and per SEC
regulations. We would also like to inform you that Intel will no longer
send a representative to act as an observer at VLSI board meetings.
Therefore, please ensure that both Intel and Steve Nachtsheim's names
are removed from all appropriate distribution lists.
We look forward to working with you over the coming months.
Sincerely,
/s/ Arvind Sodhani
Arvind Sodhani
Vice President and Treasurer
cc: Steve Nachtsheim, Vice President & General Manager of Mobil and
Home Products Group
Les Vadasz, Sr. Vice President
An Equal Opportunity Employer
<PAGE> 1
Exhibit 11.1
VLSI TECHNOLOGY, INC.
CALCULATION OF EARNINGS PER SHARE - unaudited
(thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
July 1, June 26, July 1, June 26,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Earnings per Share
- - -------------------------
Net income $ 9,337 $ 2,955 $ 14,698 $ 805
======== ======== ======== ========
Average number of common and
common equivalent shares:
Average common shares outstanding 35,786 33,405 35,529 33,278
Dilutive options 1,814 902 1,672 814
-------- -------- -------- --------
Average number of common and
common equivalent shares 37,600 34,307 37,201 34,092
======== ======== ======== ========
Earnings per common and common
equivalent share $ .25 $ .09 $ .40 $ .02
======== ======== ======== ========
Fully Diluted Earnings per Share
- - --------------------------------
Net income $ 9,337 $ 2,955 $ 14,698 $ 805
Add interest expense on convertible
subordinated debentures, net of tax
effect 755 942 1,509 1,722
-------- -------- -------- --------
Adjusted net income $ 10,092 $ 3,897 $ 16,207 $ 2,527
======== ======== ======== ========
Average number of common and
common equivalent shares on a fully
diluted basis:
Average common shares outstanding 35,786 33,405 35,529 33,278
Dilutive options 1,815 1,207 1,855 966
Conversion of convertible debentures 2,614 2,614 2,614 2,614
-------- -------- -------- --------
Average number of common and
common equivalent shares on a fully
diluted basis 40,216 37,226 39,998 36,858
======== ======== ======== ========
Fully diluted earnings per common
and common equivalent share $ .25 $ .10 $ .41 $ .07
======== ======== ======== ========
</TABLE>
