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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JULY 29, 1995
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-16394
INMAC CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2358985
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification)
2465 AUGUSTINE DRIVE, SANTA CLARA, CA 95052
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 727-1970
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01
PAR VALUE
-----------------------------------
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
---
The aggregate market value of voting stock held by non-affiliates of the Company
on July 29, 1995 was $54,217,303. For purposes of this disclosure, shares of
Common Stock held by persons who hold more than 5% of the outstanding shares of
Common Stock and shares held by officers and directors of the Registrant have
been excluded because such persons may be deemed to be affiliates. This
determination is not necessarily conclusive.
The number of shares outstanding of the Registrant's Common Stock, par value
$.01 per share, on July 29, 1995, was 10,451,084.
DOCUMENTS INCORPORATED BY REFERENCE
None
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INMAC CORP.
FORM 10-K
YEAR ENDED JULY 29, 1995
INDEX
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Item
Number Page
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PART I
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1. Business............................................................................................ 3
2. Properties.......................................................................................... 7
3. Legal Proceedings................................................................................... 7
4. Submission of Matters to a Vote of Security Holders................................................. 7
PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters.................................................................................... 7
6. Selected Consolidated Financial Data................................................................... 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................................... 8
8. Financial Statements and Supplementary Data............................................................ 14
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 26
PART III
10. Directors and Executive Officers of the Registrant..................................................... 26
11. Executive Compensation................................................................................. 27
12. Security Ownership of Certain Beneficial Owners and
Management............................................................................................. 31
13. Certain Relationships and Related Transactions......................................................... 32
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................................................................ 33
Signatures............................................................................................. 38
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Inmac Corp., founded in 1975, is a leading international direct-response
marketer of multi-vendor products for the computer desktop and networking
industries. The Company pioneered the computer direct response marketing channel
when it introduced the first computer supplies and accessories catalog. The
Company markets its products directly to personal computer, workstation, and
minicomputer users in business, professional, educational and government
organizations, mainly through targeted mailings of platform-specific and
industry-specific full-color catalogs, but also through its direct sales force,
and its telemarketing organization.
SIGNIFICANT BUSINESS DEVELOPMENTS DURING THE LAST FISCAL YEAR
Net income increased $2.7 million or 150% on revenue growth of $13.1 million or
4% over the prior fiscal year. The U.S. operations improved significantly in the
last fiscal year, as reflected in the increase in net income over the prior
fiscal year. Worldwide revenues, although impacted by the downsizing of the U.S.
operations, have continued to improve every year since inception.
On June 29, 1995, the Company received $20 million in a private placement of
term debt with the Prudential Insurance Company. The proceeds were used to
refinance existing debt and for working capital needs. Following the private
placement, the Company established a $30 million syndicated multi-currency
revolving credit facility led by ABN-AMRO Bank N.V. The term debt and revolving
credit facility will provide the Company with the flexibility to pursue
strategic expansion opportunities.
In November 1994, the Company appointed Jeffrey A. Heimbuck to the position of
President and Chief Executive Officer, succeeding Kenneth A. Eldred, who remains
Chairman of the Board. Mr. Heimbuck was formerly President and Chief Operating
Officer of the Company.
In July 1995, the Company appointed Raymond E. Nystrom Vice President of Finance
and Chief Financial Officer. Mr. Nystrom, who will continue as Vice President,
General Manager of North America, formerly held various senior level finance and
accounting positions with the Company.
In July 1995, the Company appointed Brian J. Shane Vice President, Corporate
Development. Mr. Shane was most recently Vice President, Business Development
for Video Stream, Inc. Prior to that, he was Vice President, Marketing at Smith
& Hawken, a catalog and specialty retailer of gardening accessories and
supplies.
The Company made significant improvements in its asset management during the
last fiscal year. Bank and long term debt, net of cash, was $10 million at July
29, 1995, down from $27 million at the end of the prior year. Inventory turns
improved to 8.4 from 8.1.
PERSONAL COMPUTER PRODUCTS MARKET AND COMPUTER AFTERMARKET OVERVIEW
The personal computer products market and the computer aftermarket are highly
fragmented and consist of many channels of distribution. The Company
participates mainly in the direct-response segment of this market. Direct
response is a method of distribution that relies on the mass mailing of
catalogs, periodical advertising and other mailers or communications directly to
targeted prospective customers. In addition to direct response,
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other distribution channels include local office products suppliers, local and
national retail computer stores that carry computer supplies, and computer
superstores. Distribution channels also include manufacturers of computer
systems and aftermarket products, and computer supply and office product
distributors. For a discussion of the competition that the Company faces in the
marketplace, see "Competition" below.
The decentralization of computers throughout factory, business, engineering and
office environments has made it increasingly difficult and expensive for many
suppliers to use traditional direct sales methods to locate users, initiate
sales contacts and effectively provide service to customers. Quantities ordered
tend to be smaller, reflecting individual requirements rather than the volume
needs traditionally associated with centralized data processing departments. In
addition, the growing number of non-technical users has increased the need for a
knowledgeable source for quality products. Inmac addresses these needs through
its direct-response marketing strategy and a commitment to customer service and
support, including a qualified customer technical support staff.
MARKETING, SALES AND CUSTOMER SERVICE
The Company markets and sells directly to business, professional, educational
and government end-users of personal computers and minicomputers. Inmac was
among the first to adapt consumer direct response sales techniques to these
business markets. The Company's primary selling vehicle is an array of
full-color catalogs, but Inmac supplements its catalogs with promotional direct
mail pieces, direct sales personnel, customer service representatives, fax
catalogs, and targeted telephone marketing. Additionally, the Company's product
specialists provide pre-sales and post-sales technical support.
The Company has developed a proprietary customer and prospect list of computer
users, which Inmac believes represents a major resource to the Company. The
Company obtains selective lists of prospective customers from suppliers,
manufacturers, and computer-related magazine publishers. Inmac intends to
continue to develop focused catalog mailings based on analyses of buying
patterns.
As a part of the Company's commitment to service and support, Inmac provides a
30-day satisfaction guarantee for almost all products except for opened software
and consumables. In addition, substantially all products sold by the Company are
guaranteed against defects in materials and workmanship for at least one year. A
number of products have longer warranties offered by manufacturers, and a few
have lifetime guarantees. Inmac tracks returns at the stock-keeping-unit (SKU)
level to monitor product performance and customer satisfaction, and to reduce
overall returns.
CUSTOMERS
The Company conducts full-service operations in seven countries including the
U.S., Canada, the U.K., France, Germany, the Netherlands, and Sweden. Inmac
offers local language catalogs in each of these markets. Inmac's products are
sold to organizations in such diverse industries as aerospace, banking,
communications, education, electronics, food, government, consumer products, and
pharmaceuticals. No single customer has accounted for more than 1% of the
Company's sales in any of the past three fiscal years. Because of the Company's
prompt shipment policy, Inmac has no significant order backlog.
DISTRIBUTION AND OPERATIONAL LOCATIONS
Inmac's strategy is to provide "just-in-time" delivery to its customers. The
Company delivers approximately 95% of its orders to customers within two
business days after orders are accepted for available products. Inmac's prompt
delivery standards are the result of strategically placed distribution centers
in the U.S., Canada, and Europe, including agreements with freight-logistics
providers. The Company maintains sales, service, and distribution operations in
Dallas, Texas; Toronto, Canada; Manchester/Liverpool and Bracknell,
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United Kingdom; Frankfurt, Germany; Paris, France; Amsterdam, the Netherlands;
and Smedjebacken, Sweden.
The Company's operations in fiscal 1995 were located in the U.S., Canada,
France, Germany, the Netherlands, Sweden, and the U.K. European sales were 73%
of consolidated sales in fiscal 1995, 68% in fiscal 1994, and 69% in fiscal
1993.
Material risks attendant to the foreign operations include foreign currency
exposure, postal strikes, transportation and tariff restrictions, product
sourcing, and regulatory approval issues. The investment in foreign countries
includes the risks of impacting operating results because of mailing list
development costs, and the potentially increased effective income tax rate
caused by unutilized foreign operating losses and higher marginal tax rates in
certain foreign tax jurisdictions.
PRODUCTS
Inmac believes that its ability to offer a broad, innovative product line has
been an important factor in its success. The Company's marketing staff
continuously evaluates new products and selects products for catalogs based on
customer demand, quality, features, price, margins, and sales trends. Inmac also
develops or improves products to address end-user requests. Inmac currently
sells over 6,000 catalog items. The Company offers products customized for
personal computers, workstations and minicomputers, from a large number of
manufacturers, including 3Com, 3M, Novell, Canon, IBM, Hewlett-Packard, Digital
Equipment, Sony, American Power Conversion and others. Inmac offers items in
three broad product groups:
NETWORKING AND SYSTEMS:
INTERCONNECT: Inmac offers a broad range of products to facilitate the transfer
of data within and between computer systems. These products include cable
products, connectors, and switching systems. In addition to standard cable
products, Inmac provides a custom cable service which allows end-users to order
cables tailored to their individual requirements. These cables are generally
produced within two to three days.
NET CONNECT/UNIX: The Company sells a broad range of connectivity and networking
product solutions including Unix workstation support products, servers, bridges,
B/Routers, networking software, test equipment, peripheral sharing devices,
modems and extenders, and power protection devices.
DATACOM/POWER: The Company offers data line drivers and data communications
products including modems and buffering systems that facilitate data exchange
and carry digital signals from point to point. The Company also offers power
conditioning systems to protect systems from power surges and losses.
DESKTOP HARDWARE AND SOFTWARE:
PERSONAL COMPUTERS: Inmac sells a complete line of PC's including desktops and
notebooks from such industry leaders as Compaq, IBM, NEC, Packard Bell, and
Toshiba.
PERIPHERALS: This group includes monitors, printers, CD-ROM drives, disk drives,
memory, accelerators, keyboards and other items. Monitors are available from
NEC, Sony, Philips and Magnavox. Printers offered include Hewlett-Packard
Laserjets and Deskjets, Canon Bubble-Jets and lasers, IBM by Lexmark lasers,
plus Epson, Brother, Okidata, and Panasonic printers. The Company also offers
rewritable optical disks, CD-ROM's, and other storage devices.
SOFTWARE: The Company offers a broad selection of major software titles from
vendors including Microsoft, Lotus Development, Corel, Symantec, and Adobe. The
offering includes software for graphics and design, desktop publishing,
multi-media, business applications, programming tools, and utilities.
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CONSUMABLE AND COMPLEMENTARY PRODUCTS:
ACCESSORIES: Inmac provides tabletop space management products, data entry
devices, cleaning aids, glare control products and other products designed to
enhance the use of computer systems.
FURNITURE: Inmac offers mobile and stationary workstations and peripheral space
management products, security cabinets, storage for computer media and
printouts, and tabletop and freestanding sound control enclosures for printers
and plotters. These products are designed to the ergonomic and functional needs
of computer users.
DATA STORAGE MEDIA: The Company sells a broad line of Inmac-branded flexible and
rigid media, data cartridges and reel-to-reel tape products for data storage.
Inmac also offers the most frequently requested national brand media products
ranging from flexible media to recordable CDs, to accommodate customers with
strong brand loyalties.
SUPPLIES: The Company provides a wide range of supplies for laser, ink jet, and
impact printers and plotters. Inmac markets these products under the Company's
Good Impressions and Black Pearl labels, as well as popular name brands
including Hewlett-Packard.
MANUFACTURING AND SUPPLIERS
Inmac manufactures and assembles certain of its products in order to expedite
product introduction, ensure a steady supply of quality products, and reduce
cost of goods sold. The Company manufactures and assembles cable and data
communications products in East Kilbride, Scotland, an ISO 9000 certified
facility. In addition, some cable assembly is performed at its facility in
Sunnyvale, California. The various countries into which Inmac sells in volume
have established specifications and regulations for data communication products.
Inmac tests its data communications products to assure they meet or exceed the
applicable Federal Communications Commission Class A and Class B emissions
regulations, and also designs and tests to international specifications as
required. Approximately 5% of the Company's sales are attributable to products
manufactured by the Company.
Independent manufacturers produce and package substantially all of the catalog
items other than data communications products. At the end of fiscal 1995, the
Company had over 800 suppliers worldwide. The Company believes its relationships
with its suppliers are good.
COMPETITION
The computer products market and the computer aftermarket in which Inmac
participates are highly competitive. The major competitive factors in the
Company's market include the quality and reliability of the products, overall
company image, service, speed of delivery, product performance, quality and
price. The Company faces competition from other direct-response marketers, as
well as from competitors in other channels of distribution. These competitors
include office products suppliers, local and national retail computer stores,
manufacturers of computers and aftermarket products, computer supply and office
products distributors, and computer superstores. Certain hardware and software
vendors also sell their products directly through their own catalogs.
While many companies compete aggressively for part of the marketplace, no single
company is dominant. Certain of the Company's competitors, particularly computer
manufacturers and competitors in the other channels of distribution, have
substantially greater financial and technical resources and greater sales volume
than the Company. The Company faces significant price competition across all
product lines and markets. Price competition on widely distributed products can
be particularly intense. Pricing is becoming an
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increasingly important factor on a country by country basis. The Company is
unable to predict the impact of increased competition, but it is possible that
such competition could adversely affect sales, gross profit, and net income.
EMPLOYEES
On July 29, 1995, the Company had a total of approximately 925 employees (265 in
North America and 660 in Europe), down almost 29% from approximately 1,300
employees in February 1993, when the Company initiated its restructuring. None
of these employees are represented by a union and the Company has never
experienced a work stoppage. Inmac considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company currently leases executive offices in Santa Clara, California, in a
46,625 square foot building under a lease that expires in April 1999. The
Company leases a 26,000 square foot facility in East Kilbride, Scotland, for use
in manufacturing data communications products. This lease expires in March 1997.
In North America, the Company leases three facilities in addition to its
executive offices. These facilities have a total of 122,532 square feet under
leases which expire between September and November 1998. In Europe, the Company
has executive offices in Bracknell, England totaling 21,330 square feet under
leases which expire in 2011. In Europe, the Company also leases nine facilities
with a total of 282,649 square feet under leases which expire between April 1996
and October 2015. The Company believes that current properties are suitable for
its business as presently conducted. Certain of the facilities in the U.S. and
Europe which are noted above are not fully occupied by Inmac and have been
subleased. A reserve for the estimated costs associated with some of these
sublease activities was provided for as part of the fiscal 1993 business
restructuring.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which it believes are
material to its financial results. Legal issues which are outstanding include an
action in the U.S. relating to freight charges, a product documentation language
issue in France, and a value-added tax filing format matter in Italy.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's security holders during the
fourth quarter of fiscal 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
PRINCIPAL MARKET
Inmac Corp.'s Common Stock is traded on the Nasdaq National Market (symbol
INMC). Based on security position listings, the approximate number of holders of
Inmac Common Stock at July 29, 1995 was 2,500.
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STOCK PRICE AND DIVIDEND INFORMATION
Information contained under the caption "Quarterly Data (Unaudited)" of Notes To
Consolidated Financial Statements--Footnote 12 is incorporated herein by
reference in partial response to this item.
DIVIDEND POLICY
No dividends were declared in the last five fiscal years. The payment and rate
of any future dividends will depend upon the earnings and financial requirements
of the Company and other factors deemed relevant by the Board of Directors.
Provisions of certain of the Company's debt agreements place a limitation on the
maximum dividend payment.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
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July 29, July 30, July 31, July 25, July 27,
1995 1994 1993 1992 1991
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Sales ................................ $ 362,511 $ 349,449 $ 342,027 $ 312,887 $ 302,821
Gross profit (1)...................... $ 120,525 $ 119,807 $ 140,689 $ 144,846 $ 152,700
Operating income (loss)(2)............ $ 11,058 $ 5,762 $ (9,350) $ 6,300 $ 12,663
Net income (loss)(2).................. $ 4,531 $ 1,816 $ (13,877) $ 971 $ 6,775
Net income (loss) per share(2)........ $ 0.42 $ 0.17 $ (1.47) $ 0.10 $ 0.72
Weighted average common and common
equivalent shares outstanding........ 10,750 10,831 9,464 9,453 9,458
Total assets.......................... $ 116,349 $ 100,871 $ 94,131 $ 128,980 $ 107,385
Bank debt and other liabilities....... $ 11,643 $ 29,988 $ 20,977 $ 34,390 $ 22,487
Long term debt and other liabilities.. $ 20,883 $ 1,127 $ 1,803 $ 1,011 $ 852
Working capital....................... $ 53,262 $ 23,003 $ 20,662 $ 37,281 $ 34,763
Stockholders' equity.................. $ 42,839 $ 33,553 $ 27,721 $ 49,250 $ 45,351
</TABLE>
(1) In conjunction with the Company's organizational restructuring which was
announced in fiscal 1993, certain field operations related expenses have been
reclassified from cost of sales to selling, general and administrative expenses
to more accurately reflect the nature of such expenses. This reclassification
does not affect earnings. Appropriate reclassifications were made to the fiscal
1991 through fiscal 1993 consolidated financial statements to conform to the
fiscal 1994 and fiscal 1995 presentation.
(2) The year ended July 31, 1993, includes a charge for business restructuring
of $16,546,000 ($14,900,000 after taxes).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
This discussion summarizes the significant factors affecting the consolidated
operating results, financial condition and liquidity/cash flows of Inmac Corp.
during the three-year period ended July 29, 1995. This discussion should be read
in conjunction with the financial statements and financial statement footnotes
included in this annual report.
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OPERATIONS
The CONSOLIDATED STATEMENTS OF INCOME (LOSS) included in Item 8, FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA, show sales, cost of sales, expenses and
earnings for each of the last three years.
Sales
Inmac Corp. has recorded sales increases each year since its inception in 1975.
Fiscal 1995's record sales totaled $362.5 million, an increase of $13.1 million
or 3.7% over fiscal 1994 sales of $349.4 million. Sales for fiscal 1994 were
2.2% higher than fiscal 1993.
The increase in revenues in fiscal 1995 resulted from favorable currency
exchange rates and the strong sales performance of the Desktop Hardware/Software
Division with sales up 19% unadjusted for currency or 10% on a currency adjusted
basis. Due primarily to the U.S. downsizing, fiscal 1995 worldwide sales on a
comparable currency basis decreased by $11.9 million or 3% compared to fiscal
1994. As a result of a slowing of the Canadian economy and the strategic
downsizing of the Company's U.S. business, a program which had been undertaken
to improve profitability, sales from North America for fiscal 1995 decreased $14
million or 13%. Inmac continued to see a favorable customer response to the
Company's divisional catalogs and competitive pricing strategy.
The fiscal 1994 sales increase over 1993 was attributable to strong customer
response to the three newly designed catalogs focused around the Company's
product divisions and to a new lower pricing strategy. The increase in revenues
in fiscal 1994 especially resulted from the strong sales performance in the
Desktop Hardware/Software Division with sales up 95% on a currency adjusted
basis. This reflected the impact of the Company's North America desktop products
program which was introduced late in the first quarter and continued desktop
product sales growth in Europe of 62% on a comparable currency basis.
Fiscal 1993 sales included revenues from the two-store operation, The Business
Superstore (TBS) in the United Kingdom, and the Company's Japanese subsidiary.
Inmac sold the retail stores and closed the Japanese subsidiary in April 1993.
Sales for the 1994 fiscal year were negatively affected by 5% because of
currency fluctuation, which had a negative effect on sales in fiscal 1993 of 2%.
In addition, sales in fiscal 1994 (52 weeks) compared to fiscal 1993 (53 weeks)
were adversely impacted by 2% due to the effect of the 53rd week in 1993.
The Company's sales success in the direct response marketing of computer-related
products is primarily attributable to its ability to meet customer demands for
convenience, reliability and value when purchasing information technology. Inmac
Corp. offers a very efficient source that can provide multi-national access to
top quality brands at competitive prices.
Cost of Sales
Cost of sales for fiscal 1995 was $242.0 million, a 5.4% increase over the
$229.6 million for fiscal 1994. This increase followed 14.1% and 19.8% increases
in fiscal 1994 and fiscal 1993, respectively. As a percent of net sales, the
gross profit margin was 33.2% in fiscal 1995 compared to 34.3% in fiscal 1994
and 41.1% in fiscal 1993. The decline in gross margin percentages over the last
three years reflected competitive pressures on pricing, the Company's lower
pricing strategy and the rapid sales growth in the Desktop Hardware/Software
Division which has lower margins. The competitive pressures on gross profit
margin percentages have been partially offset by the Company's ongoing cost
reduction programs which have resulted in lower purchase costs for many
products.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses decreased each year for the last
three years, both as a percent of sales and in absolute dollars. These expenses
were 30.2% of sales in 1995, compared to 32.6% in 1994, and 39.0% in 1993. These
expenses totaled $109.5 million in fiscal 1995, a decrease of 4.0% from fiscal
1994. This compares to the year-on-year decreases of 14.6% in fiscal 1994 and
3.6% in fiscal 1993.
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The reductions in selling, general and administrative expenses included savings
in facility costs, savings from headcount reduction, and increased operational
and catalog efficiencies. The fiscal 1993 reduction included elimination of the
selling, general and administrative expenses from TBS and the Company's Japanese
subsidiary which were sold and closed respectively in the third quarter of
fiscal 1993. The Company continues to realize improved operating efficiencies
from its restructuring program initiated in fiscal 1993. In addition, the
current year reduction in selling general and administrative expenses is
partially offset by expenses incurred in the pursuit of debt and/or equity
financing opportunities. Investment banker, attorney and accountant fees
expensed in fiscal 1995, for debt and/or equity financing opportunities,
exceeded three quarters of a million dollars.
Fiscal 1994 expenses included a non-recurring credit of $0.9 million for
reversal of remaining reserves related to the vacant facilities in the U.K. for
which the leases were successfully terminated early. The landlord negotiated
leases with new tenants with no ongoing obligation by Inmac. Fiscal 1994 also
included credits totaling $0.6 million for reduction of reserves related to the
closed Italy operations and related to redundant leased computer equipment. The
ongoing costs of these obligations will be less than originally estimated.
Fiscal 1993 expenses included a net non-recurring credit of $1.8 million
resulting from a one-time gain due to the settlement of legal activities, offset
by charges related to the consolidation of facilities in Germany and accruals
for vacant facilities in the U.K.
Provision For Business Restructuring
The Company recorded restructuring charges of $14.9 million net after taxes in
the second quarter of fiscal 1993 to close unprofitable operations, to dispose
of unproductive assets, and to strategically reorganize the business. The
Company's Japan operation was closed, and the retail operation in the UK was
sold in the third quarter of fiscal 1993. The organization was restructured,
eliminating certain layers of management, to improve the pace of decision-making
and to reduce expense.
In fiscal 1994, the remaining steps were completed as related to the
restructuring actions announced in fiscal 1993. These steps included further
consolidation of the U.S. operations and moves of the French and Swedish
operations to lower cost facilities. See Note 13 of NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS for further explanation of the steps completed in fiscal
1994.
Interest Expense, Net
Interest expense, net, in fiscal 1995, fiscal 1994, and fiscal 1993 was $1.4
million, $1.6 million, and $1.3 million or 0.4%, 0.5%, and 0.4% of sales,
respectively. The lower net interest expense in fiscal 1995 compared to fiscal
1994 reflects lower average monthly bank borrowings.
The Company decreased its bank and long term debt net of cash to $10.3 million
at July 29, 1995 from $26.7 million at July 30, 1994, as a result of increased
profits and better asset management. The inventory balance at July 29, 1995 was
$2.1 million lower than prior year-end, and annual inventory turns improved from
8.1 to 8.4 turns. This was accomplished through better inventory management,
elimination of poorly performing SKUs, and drop-shipping to customers.
Income Taxes
In August 1993, the Company adopted Statement of Financial Accounting Standards
No. 109 (SFAS 109), Accounting for Income Taxes. Adoption of SFAS 109 did not
have a significant effect on the determination of income tax expense for fiscal
1994. Income tax expense for fiscal 1995, 1994, and 1993 was $5.1 million, $2.3
million, and $3.2 million, respectively. Income tax expense in fiscal 1995
varied from expected tax expense (pre-tax income (loss) multiplied by the U.S.
statutory rate) primarily due to unutilized U.S. losses, foreign tax rates in
excess of the U.S. statutory rate, and a new French surtax applied retroactively
to the beginning of the fiscal year.
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Loss carryforward provisions exist under the tax laws of all countries in which
Inmac currently does business. As of July 29, 1995, the Company had
approximately $4.5 million in unutilized foreign operating loss carryovers and
approximately $34 million in unutilized U.S. operating loss carryovers. The
accumulated operating losses will be deductible in the future when and if the
Company and its subsidiaries that have incurred those losses become profitable.
The timing and amount of tax benefit associated with these losses is dependent
upon future operating results in particular countries and is difficult to
predict. The consolidated income tax rate also depends upon the mix of
international and domestic pretax income. Accordingly, the Company's income tax
rate for fiscal 1996 cannot be accurately predicted. (See Note 8 of NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.)
Net Income (Loss)
The Company recorded net income of $4.5 million or $0.42 per share and $1.8
million or $0.17 per share for fiscal 1995 and 1994, respectively, and a loss of
$13.9 million or $1.47 per share in fiscal year 1993. The 1993 loss reflects the
net after-tax restructuring charge of $14.9 million or $1.57 per share.
Considered without the effect of the restructuring charge, fiscal 1993 would
have reflected net income of $1.0 million. The lower gross profit percentage in
1995 was more than offset by savings in selling, general and administrative
expenses, and a lower effective income tax rate.
FINANCIAL POSITION
Liquidity and Capital Resources
The CONSOLIDATED BALANCE SHEETS under Item 8 reflect Inmac's assets and
liabilities at the end of the last two fiscal years and the amount of
stockholders' equity in the Company.
The Company's financial condition and liquidity improved substantially from
fiscal 1994. Bank and long term debt net of cash decreased by more than $16
million in fiscal 1995 reflecting an increase in cash and cash equivalents to
$21.2 million at July 29, 1995 compared to $3.0 million at July 30, 1994 and an
increase in bank and long term debt to $31.5 million from $29.7 million at the
prior year-end.
Net receivables increased by $1.4 million in fiscal 1995, while inventories
decreased by $2.1 million. The related asset performance ratios remained strong,
and average annual inventory turns increased to 8.4 in fiscal 1995 from 8.1 in
fiscal 1994, reflecting improvements in inventory management, elimination of
poorly performing SKUs, and drop-shipping. Average annual accounts receivable
days of sales outstanding were 47.7 days in 1995 compared to 46.5 days in fiscal
1994.
Prepaid expenses and other current assets decreased a total of $0.8 million in
fiscal 1995 resulting from a decrease in tax receivable balances.
Property, plant and equipment, net of depreciation, decreased by $2.0 million in
fiscal 1995, due primarily to a $4.0 million reduction in fixed asset purchases
as compared to fiscal 1994.
Accounts payable and accrued liabilities increased by $2.6 million in fiscal
1995.
The CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY under Item 8 analyze the
balances and change in equity over the last three years.
Total stockholders' equity increased in fiscal 1995 by $9.3 million to $42.8
million. This increase included $4.5 million of net income; $1.2 million from
stock option exercises; $0.1 million from the tax effects arising from option
exercises; and a favorable reduction in the balance sheet translation adjustment
of $3.4 million. Cumulative translation adjustments are excluded from the
measurement of income, but are recorded as a separate component of stockholders'
equity and depend on the net asset or liability balance on the various foreign
subsidiary balance sheets and the respective currencies as compared to the U.S.
dollar at the fiscal
Page 11
<PAGE> 12
period-end dates. The change in cumulative translation adjustments resulted in a
$1.9 million increase in equity in fiscal 1994 and a $7.9 million decrease in
equity in fiscal 1993.
The CONSOLIDATED STATEMENTS OF CASH FLOWS under Item 8 classify the Company's
cash inflows and outflows from operating, investing and financing activities for
the last three fiscal years.
In fiscal 1995, operating activities provided $18.1 million in cash. Fixed asset
purchases (net of sales proceeds) used $2.4 million of cash. Short-term bank
borrowings, net of repayments, coupled with the proceeds from the private
placement, provided $1.7 million; repayment of capital lease obligations used
$0.5 million; financing costs used $0.7 million and exercises of common stock
options provided $1.2 million.
Capital spending totaled $2.7 million in fiscal 1995, $6.7 million in 1994, and
$5.0 million in 1993. Spending in fiscal 1994 and fiscal 1993 was mainly for
more efficient distribution facilities and computer systems.
Short-term bank borrowings decreased by $18.3 million, while long term bank debt
increased to $20.1 million at fiscal 1995 year-end compared to fiscal 1994
year-end. Average bank debt during fiscal 1995 decreased by $1.3 million from
fiscal 1994. During fiscal 1995, fiscal 1994, and fiscal 1993, average bank
borrowings under the bank lines were approximately $26.2 million, $27.5 million,
and $25.1 million, respectively. As of July 29, 1995, $31.5 million in bank and
long term borrowings were outstanding, and unused credit facilities amounted to
$35 million. The Company was in compliance with all covenants in its bank
agreements as of July 29, 1995.
The Company believes that its existing cash balances, cash generated from future
operations, borrowings under existing lines of credit and its ability to obtain
additional credit will be sufficient to meet its working capital needs through
the end of fiscal 1996.
INFLATION
Although the Company's operations are influenced by general economic trends, the
Company does not believe inflation has had a material impact on its results of
operations for the past three fiscal years.
FUTURE RESULTS
The Company's new catalogs, new products, and ongoing low price strategy have
generated increased sales for Inmac; however, the Company expects downward
pressure on prices to continue to gradually erode gross margin percentages over
time. The Company expects sales to continue to grow faster in the lower margin
desktop hardware and software products than in its other product categories. The
restructuring efforts have resulted in more cost efficient operations, and Inmac
will continue to seek ways to reduce costs to improve its operating performance
and return on assets.
The Company's operating results for fiscal 1996 will also be affected by
worldwide economic conditions including the economic conditions in its markets.
Operating results will also be affected by fluctuations in exchange rates among
the countries in which Inmac operates. International sales accounted for 75% of
the Company's sales in fiscal 1995. Accordingly, as currency fluctuations are
unpredictable, and even though the Company seeks to protect itself from
excessive fluctuations, the Company's results may be affected from quarter to
quarter. Other factors which impact sales and operating results from quarter to
quarter include ongoing competitive pressures, sales seasonality, the timing of
catalog mailings, postage, paper costs, and the effectiveness of the Company's
low price strategy. Operating results in fiscal 1996 may not be comparable to
the same quarters in fiscal 1995. See Note 12 of NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS for the Company's quarterly results for fiscal years 1995 and 1994.
Page 12
<PAGE> 13
Inmac believes that its more aggressive pricing policy, more efficient
cataloging strategy, lower operating costs, and its participation in high growth
markets form the basis of a solid strategy for fiscal 1996. A continuing
improvement in U.S. business, which has a substantial net operating loss
carryover, should lead to a stronger financial picture.
The Company also plans to continue to improve and upgrade its information
systems during fiscal 1996 to further enhance operating efficiencies. The
Company has identified an order entry/operations/distribution/ financial system
which the Company expects to begin installing worldwide in the third quarter of
fiscal 1996.
Page 13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
INMAC CORP. AND SUBSIDIARIES
JULY 29, 1995 AND JULY 30, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 21,165 $ 2,992
Receivables, less allowance for returns and doubtful
receivables of $1,927 in 1995 and $2,497 in 1994.............................. 48,745 47,395
Inventories .................................................................... 27,924 29,979
Prepaid expenses................................................................ 3,620 3,661
Taxes receivable and other current assets....................................... 4,435 5,167
- ------------------------------------------------------------------------------------------------------------------
Total current assets.......................................................... 105,889 89,194
Property, plant and equipment ...................................................... 8,402 10,412
Other assets........................................................................ 2.058 1,265
- ------------------------------------------------------------------------------------------------------------------
$ 116,349 $ 100,871
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 19,528 $ 20,472
Accrued liabilities ............................................................ 17,554 14,018
Bank debt and other liabilities ................................................ 11,643 29,988
Income taxes ................................................................... 3,902 1,713
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities..................................................... 52,627 66,191
Long-term debt and other liabilities................................................ 20,883 1,127
Stockholders' equity :
Preferred stock, par value $.01 per share. Authorized 2,000
shares; none outstanding..................................................... --- ---
Common stock, par value $.01 per share. Authorized 30,000
shares; outstanding 10,451 in 1995 and 10,088 in 1994........................ 16,292 14,978
Retained earnings............................................................... 27,184 22,653
Cumulative translation adjustments.............................................. (637) (4,078)
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity.................................................... 42,839 33,553
Commitments
- ------------------------------------------------------------------------------------------------------------------
$ 116,349 $ 100,871
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 14
<PAGE> 15
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
INMAC CORP. AND SUBSIDIARIES
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993 (In thousands, except
per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 362,511 $ 349,449 $ 342,027
Cost of sales 241,986 229,642 201,338
- -------------------------------------------------------------------------------------------------------------------------
Gross profit 120,525 119,807 140,689
Selling, general and administrative expenses 109,467 114,045 133,493
Provision for business restructuring --- --- 16,546
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 11,058 5,762 (9,350)
Interest expense, net 1,442 1,635 1,348
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 9,616 4,127 (10,698)
Income taxes 5,085 2,311 3,179
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,531 $ 1,816 $ (13,877)
=========================================================================================================================
Net income (loss) per common and common equivalent share $ 0.42 $ 0.17 $ (1.47)
=========================================================================================================================
Weighted average common and common equivalent shares
outstanding 10,750 10,831 9,464
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
INMAC CORP. AND SUBSIDIARIES
YEARS ENDED JULY 29, 1995, JULY 30, 1994, AND JULY 31, 1993
(In thousands)
<TABLE>
<CAPTION>
Common Stock
---------------- Cumulative
No. of Translation Retained Treasury
Shares Amount Adjustments Earnings Stock Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 25, 1992 9,453 $ 14,565 $ 1,983 $ 34,714 $ (2,012) $ 49,250
Net loss --- --- --- (13,877) --- (13,877)
Exercises of common stock options 83 270 --- --- --- 270
Translation adjustments --- --- (7,922) --- --- (7,922)
- -------------------------------------------------------------------------------------------------------------------------
Balances at July 31, 1993 9,536 14,835 (5,939) 20,837 (2,012) 27,721
Net income --- --- --- 1,816 --- 1,816
Exercises of common stock options 552 1,800 --- --- --- 1,800
Tax effects arising from shares issued
under stock option plans --- 355 --- --- --- 355
Translation adjustments --- --- 1,861 --- --- 1,861
- -------------------------------------------------------------------------------------------------------------------------
Balances at July 30, 1994 10,088 16,990 (4,078) 22,653 (2,012) 33,553
Net income --- --- --- 4,531 --- 4,531
Exercises of common stock options 363 1,220 --- --- --- 1,220
Tax effects arising from shares issued
under stock option plans --- 94 --- --- --- 94
Translation adjustments --- --- 3,441 --- --- 3,441
- -------------------------------------------------------------------------------------------------------------------------
Balances at July 29, 1995 10,451 $ 18,304 $ (637) $ 27,184 $ (2,012) $ 42,839
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 15
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
INMAC CORP. AND SUBSIDIARIES
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,531 $ 1,816 $ (13,877)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Allowance for returns and doubtful receivables (570) (939) 8
Depreciation and amortization 4,289 3,628 2,714
Loss on disposal of fixed assets 128 721 4,484
Writedown of assets as part of restructuring --- --- 4,809
Deferred income taxes (155) 565 (942)
Tax effects arising from shares issued under
stock option plans 94 355 ---
Translation adjustment 2,914 1,862 (6,200)
Change in operating assets and liabilities:
Receivables (780) (3,508) 352
Inventories 2,055 (3,276) 15,622
Prepaid expenses & other current assets 773 (4,057) 8,389
Accounts payable and accrued liabilities 2,592 (9,012) 2,087
Income taxes 2,343 361 (1,182)
Other assets (107) (218) 427
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 18,107 (11,702) 16,691
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (2,706) (6,745) (5,001)
Proceeds from sales of equipment 342 234 122
- ---------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (2,364) (6,511) (4,879)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long term debt 20,000 --- ---
Short-term bank borrowings and repayments (18,277) 8,929 (13,475)
Repayment of capital lease obligations (452) (309) (245)
Deferred financing cost (686) --- ---
Proceeds from exercise of stock options 1,220 1,800 270
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 1,805 10,420 (13,450)
- ----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 625 (1) (1,722)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 18,173 (7,794) (3,360)
Cash and cash equivalents at beginning of year 2,992 10,786 14,146
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 21,165 $ 2,992 $ 10,786
=====================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,498 $ 2,112 $ 1,834
=====================================================================================================================
Income taxes, net $ 2,330 $ 2,895 $ 4,677
=====================================================================================================================
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations totaling $42,000 in fiscal 1995, $436,000 in fiscal
1994, and $978,000 in fiscal 1993 were incurred when the Company entered into
leases for new equipment.
See accompanying notes to consolidated financial statements.
Page 16
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INMAC CORP. AND SUBSIDIARIES
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting principles and policies of Inmac Corp.
and its subsidiaries is presented to assist the reader in evaluating the
Company's financial statements included in this report. These principles and
policies conform to generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The financial statements reflect the consolidated balances of Inmac Corp. and
its wholly owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
SEGMENT REPORTING
The Company is a direct response marketer of computer accessories, data
communications products, and computer hardware and software products. The
Company operates in one industry segment.
REVENUE RECOGNITION
Revenue on product sales is recognized upon shipment. Allowances are provided
for returns and warranties.
COST OF SALES
Cost of sales includes costs of purchased and manufactured products and freight
charges from suppliers. In fiscal 1994, certain field operations related
expenses were reclassified from cost of sales to selling, general and
administrative expenses to more accurately reflect the nature of such expenses.
This reclassification does not affect earnings. Appropriate reclassifications
were made to the fiscal 1993 consolidated financial statements to conform to the
fiscal 1994 and fiscal 1995 presentation.
WARRANTIES
The Company's products are generally under warranty against defects in material
and workmanship for a period ranging from one year for most products to a
lifetime for certain other products. The Company also has a thirty-day
satisfaction guarantee. The Company has established reserves for these
anticipated future warranty costs which is periodically adjusted to reflect
actual experience.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and amortization
are provided on the straight-line method over the estimated useful lives of the
assets which range principally from three to seven years. Leasehold improvements
are amortized over the shorter of the useful life of the asset or the related
lease term.
CATALOG COSTS
Catalog costs are deferred and amortized over the expected revenue stream to
match costs with revenues. The amortization period is thirteen weeks.
Page 17
<PAGE> 18
DEFERRED FINANCING COST
Debt financing costs are deferred and amortized as interest expense, using the
straight line method, over the term of the related debt.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at year-end rates
of exchange and revenues and expenses are translated at the average rates of
exchange for the year. Translation gains and losses are excluded from the
measurement of net income (loss) and are recorded as a separate component of
stockholders' equity. Gains and losses resulting from foreign currency
transactions are included in net income.
INCOME TAXES
In August 1993, the Company adopted Statement of Financial Accounting Standards
No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 changed the Company's
method of accounting for income taxes from the deferred method to the asset and
liability method. The asset and liability method requires the recognition of
deferred tax assets and liabilities for the expected tax consequences of
temporary differences between the tax bases of assets and liabilities and the
financial statement carrying amounts. To the extent a deferred tax asset does
not meet the more likely than not criterion of SFAS 109, a valuation allowance
has been established.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share has been computed using the weighted average number
of common and common equivalent shares outstanding. Net income (loss) per share
includes the effect of dilutive common stock options for all periods except when
inclusion would have been antidilutive. The difference between primary and fully
diluted earnings per share is not material for any of the periods presented, and
has therefore been excluded.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and manufacturing supplies...................... $ 1,621 $ 2,868
Finished goods................................................ 26,303 27,111
- --------------------------------------------------------------------------------------------------------
$ 27,924 $ 29,979
========================================================================================================
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings............................................ $ --- $ 324
Machinery and equipment....................................... 13,722 13,901
Furniture and fixtures........................................ 4,614 4,937
Leasehold improvements........................................ 3,540 3,351
- --------------------------------------------------------------------------------------------------------
21,876 22,513
Accumulated depreciation and amortization..................... (13,474) (12,101)
- --------------------------------------------------------------------------------------------------------
$ 8,402 $ 10,412
========================================================================================================
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll and related items..................................... $ 6,624 $ 4,183
Accrued restructuring costs................................... 233 754
Other......................................................... 10,697 9,081
- --------------------------------------------------------------------------------------------------------
$ 17,554 $ 14,018
========================================================================================================
</TABLE>
Page 18
<PAGE> 19
5. BANK DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
9.87% unsecured senior notes.................................. $ 13,000 $ ---
10.24% unsecured senior notes
payable in Netherlands Guilders (NLG)....................... 7,057 ---
Other long-term borrowings.................................... 1,195 1,435
----------------------------
21,252 1,435
Less current maturities....................................... (369) (308)
- -------------------------------------------------------------------------------------------------------
Total long-term debt $ 20,883 $ 1,127
=======================================================================================================
</TABLE>
Aggregate maturities of long-term debt for the next five years are as follows
(in thousands): 1996 - $369; 1997 - $2,353; 1998 - $4,338; 1999 - $4,162; 2000 -
$4,011; and thereafter - $6,019.
On June 29, 1995, the Company issued notes for $13,000,000 and NLG 10,918,600
(US $7,057,000 at July 29, 1995 currency exchange rate) of unsecured senior debt
in a private placement (the "Notes"). The Notes mature beginning in fiscal 1997
through fiscal 2002. The Notes are subject to covenants that restrict the
Company's ability to pay dividends, incur indebtedness, and repurchase Company
stock. Further, to the extent a lien is placed on a current asset of the
Company, the Company covenants that it will secure the Notes equally and
ratably.
On June 30, 1995, the Company entered into a currency swap agreement to hedge
currency risk on interest and principal payments on $7,000,000 of the Notes. The
swap agreement effectively converted $7,000,000 of the Notes into Deutsche Mark
debt with a fixed interest rate of 10.02%. The counterparty on the swap
agreement is a major international financial institution.
On July 27, 1995, the Company entered into a $30,000,000 unsecured
multi-currency revolving credit facility with a syndicate of banks (the
"Facility"). The Facility is intended to replace various revolving credit
facilities with banks in various countries in which the Company does business.
In general, borrowings under the Facility carry interest at the London Interbank
Offered Rate (LIBOR) plus 1.15%. As of fiscal year end, no borrowings under the
Facility were outstanding. The Company pays an annual commitment fee of 0.3% on
the unused portion of the Facility.
Short-term bank debt at fiscal year end consisted of borrowings under six
revolving credit facilities most of which expired on or before September 13,
1995, replaced by the Facility discussed above. Borrowings under these lines
bear interest at Inmac's option of the prime rate or LIBOR.
6. COMMITMENTS
The Company leases its offices, warehouses and manufacturing facilities under
lease agreements which expire at various dates through 2015.
Future minimum lease payments under noncancellable capital and operating leases
as of July 29, 1995, are (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
1996...................................................................................................... $ 7,062
1997...................................................................................................... 6,238
1998...................................................................................................... 4,869
1999...................................................................................................... 3,070
2000...................................................................................................... 1,794
Thereafter................................................................................................ 12,064
- -------------------------------------------------------------------------------------------------------------------------
Total minimum lease payments $ 35,097
=========================================================================================================================
</TABLE>
Page 19
<PAGE> 20
Rent expense under operating leases was $7.2 million in 1995, $8.8 million in
1994, and $9.2 million in 1993.
7. STOCKHOLDERS' EQUITY
A summary of the activity under the Company's stock option plans for the three
years ended July 29, 1995, is as follows:
<TABLE>
<CAPTION>
Shares Prices
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at July 25, 1992........................................... 971,100 $ 3.500 - 13.500
Granted.............................................................. 2,326,485 3.125 - 6.125
Exercised............................................................ (83,098) 3.125 - 3.250
Canceled or expired ................................................. (1,228,014) 3.125 - 6.625
-------------
Outstanding at July 31, 1993 .......................................... 1,986,473 3.125 - 13.500
Granted.............................................................. 420,050 3.375 - 8.000
Exercised............................................................ (552,467) 3.125 - 4.500
Canceled or expired.................................................. (113,403) 3.125 - 13.500
------------
Outstanding at July 30, 1994........................................... 1,740,653 3.125 - 8.000
Granted.............................................................. 339,550 3.250 - 6.375
Exercised............................................................ (362,781) 3.125 - 6.625
Canceled or expired.................................................. (196,660) 3.125 - 7.625
- ---------------------------------------------------------------------------------------------
Outstanding at July 29, 1995 1,520,762 3.125 - 8.000
=============================================================================================
Balances as of July 29, 1995:
Exercisable.......................................................... 608,658 $ 3.125 - 8.000
Available for Future Grant........................................... 169,717
</TABLE>
Generally, options vest in monthly increments during a four or five year period
from the date of grant. Vested options are exercisable during the ten year
period from the date of grant. The Company adopted an option exchange program in
September 1992 whereby holders of common stock options under the 1983 Stock
Option Plan on October 6, 1992, were given the opportunity to exchange options
for 959,100 shares at a weighted average exercise price of $5.14 per share for
the same number of options at $3.25 per share, the fair market value of the
stock on that date. The holders of these exchanged options maintain all the
rights and privileges associated with the original grant, except the new options
were not exercisable until April 6, 1993. The effect of the exchange is
reflected in the fiscal 1993 activity above.
In connection with the unsecured senior debt, the Company issued 175,000
warrants as consideration for the execution of the financing agreement. The
exercise price of the warrants is $6.756. The expiration date is September 15,
2001.
Authorized, unissued shares of common stock were reserved for the following
purposes as of the end of each fiscal year noted:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee & Director Stock Plans............. 1,690,479 2,099,581 2,213,077
Warrants.................................... 175,000 --- ---
- ----------------------------------------------------------------------------------------------------------
Total authorized, unissued shares 1,865,479 2,099,581 2,213,077
==========================================================================================================
</TABLE>
8. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS
109) Accounting for Income Taxes at the beginning of fiscal 1994. Adoption of
SFAS 109 did not have a significant effect on the determination of income tax
expense, nor did it result in a cumulative effect adjustment on the Company's
opening retained earnings for fiscal 1994.
Page 20
<PAGE> 21
The provision for income taxes is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities. The provision for income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
State and Local...................................................... $ 19 $ 50 $ 50
Foreign.............................................................. 5,221 1,696 4,071
------------------------------------------
5,240 1,746 4,121
------------------------------------------
Deferred:
State and Local...................................................... 50 (50) ---
Foreign.............................................................. (205) 615 (942)
------------------------------------------
(155) 565 (942)
- ---------------------------------------------------------------------------------------------------------------------
Total income taxes $ 5,085 $ 2,311 $ 3,179
=====================================================================================================================
</TABLE>
Tax benefit of $0.1 million and $0.4 million in fiscal 1995 and fiscal 1994,
respectively, was allocated to additional paid-in capital for deductions
associated with the Company's stock option plans.
The provision for income taxes differs from the "expected" tax expense (computed
by applying the Federal statutory corporate rate to income (loss) before taxes).
A reconciliation between the Company's expected tax expense and the actual tax
expense is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes based on Federal statutory rate........................... $ 3,269 $ 1,403 $ (3,637)
State income taxes, net of Federal income tax effect................... 69 --- 30
Tax rate differential on foreign income and effect
of foreign losses.................................................... 1,202 (955) 1,971
Unutilized U.S. losses................................................. 545 1,813 4,844
Other adjustments...................................................... --- 50 (29)
- --------------------------------------------------------------------------------------------------------------------
Total income taxes $ 5,085 $ 2,311 $ 3,179
====================================================================================================================
</TABLE>
Major components of the deferred provision for income taxes prior to the
adoption of SFAS 109 are as follows (in thousands):
<TABLE>
<CAPTION>
1993
- ------------------------------------------------------------------------------------
<S> <C>
Tax depreciation in excess of
depreciation reported in the financial statements.................... $ (6)
Catalog expenses deferred for
financial reporting.................................................. 3
Non-deductible portion of
inventory and warranty reserve....................................... 85
Effect of installment sales & bad debts................................ 1
Restructuring charges (924)
Other.................................................................. (101)
- ------------------------------------------------------------------------------------
$ (942)
====================================================================================
</TABLE>
Deferred tax assets are recognized for deductible temporary differences,
operating loss carryforwards and credit carryforwards if it is more likely than
not that the tax benefits will be realized. To the extent a deferred tax asset
cannot be recognized under this criterion, a valuation allowance must be
established. Based on historical taxable income and future taxable income
projections over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will realize tax
benefit
Page 21
<PAGE> 22
in an amount equivalent to the net deferred tax asset. Major components of
deferred tax assets and liabilities including the corresponding valuation
allowance are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Net operating losses and credit carryforwards............... $ 13,704 $ 12,646
Inventory valuation......................................... 605 1,030
Employee benefits........................................... 609 429
Receivable valuation........................................ 153 343
Restructuring............................................... 82 371
Miscellaneous accrued expenses.............................. 636 419
Other....................................................... 262 270
--------------------------
Deferred tax asset before valuation allowance............ 16,051 15,508
Valuation allowance......................................... (14,375) (13,771)
--------------------------
Deferred tax asset net of valuation allowance............ 1,676 1,737
--------------------------
Deferred Tax Liabilities:
Catalog Costs............................................... (521) (651)
Deferred income............................................. (252) (303)
Other....................................................... --- (35)
--------------------------
Deferred tax liability.................................... (773) (989)
- -----------------------------------------------------------------------------------------------
Net Deferred Tax Asset $ 903 $ 748
===============================================================================================
</TABLE>
The Company has approximately $4.5 million in unutilized foreign operating loss
carryforwards and approximately $34 million in U.S. Federal operating loss
carryforwards. Of these loss carryforwards, $3.7 million have no expiration
dates; $34 million expire beginning fiscal 2008 through fiscal 2010; and $0.8
million expire beginning fiscal 2001 through fiscal 2002. In addition, the
Company has approximately $0.6 million of unutilized alternative minimum tax
credits that can be carried forward indefinitely. Under U.S. tax law, certain
changes in stock ownership can result in a limitation on the amount of net
operating loss that can be utilized each year. Under the tax laws of the foreign
countries in which the Company does business, certain changes in stock ownership
can result in restrictions on the use of net operating losses. The net operating
losses are potentially subject to these limitations. Approximately $1.0 million
of the valuation allowance associated with net operating loss and credit
carryforwards will be allocated to additional paid-in capital when realized.
A breakdown of pretax domestic and foreign income after allocation of
elimination entries is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic...................................................... $ (1,602) $ (5,332) $ (14,249)
Foreign....................................................... 11,218 9,459 3,551
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 9,616 $ 4,127 $ (10,698)
===================================================================================================================
</TABLE>
9. EMPLOYEE PROFIT SHARING, BONUS AND BENEFIT PLANS
The Company has various profit sharing and bonus plans under which payments may
be made to employees and to senior management. All payments made pursuant to the
profit sharing and bonus plans are solely at the discretion of the Board of
Directors. Expenses under these plans were approximately $1.8 million in 1995,
$0.1 million in 1994 and $1.1 million in 1993. The Company's contributions to an
employee investment plan pursuant to Section 401(k) of the Internal Revenue Code
totaled approximately $0.1 million in 1995, $0.1 million in 1994 and $0.2
million in 1993.
Page 22
<PAGE> 23
10. FOREIGN OPERATIONS
The Company had operations in fiscal 1994 in North America (Canada and U.S.) and
in Europe (the U.K., Germany, France, the Netherlands and Sweden). The Company
sold its two store retail operation in the U.K. and closed its Japan operation
in fiscal 1993.
The consolidated financial statements include the following significant
components and the elimination of intercompany balances and transactions (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Europe............................................................... $ 116,844 $ 80,805 $ 71,315
North America........................................................ 44,536 41,596 44,060
Intercompany eliminations............................................ (45,031) (21,530) (21,244)
- -----------------------------------------------------------------------------------------------------------------------
$ 116,349 $ 100,871 $ 94,131
=======================================================================================================================
Sales:
Europe............................................................... $ 263,493 $ 236,109 $ 234,995
North America........................................................ 99,018 113,340 107,126
Intercompany eliminations............................................ --- --- (94)
- -----------------------------------------------------------------------------------------------------------------------
$ 362,511 $ 349,449 $ 342,027
=======================================================================================================================
Income before income taxes:
Europe............................................................... $ 11,303 $ 6,489 $ 7,222
North America........................................................ (1,687) (10,321) (10,075)
Intercompany eliminations and consolidating adjustments.............. --- 7,959 (7,845)
- -----------------------------------------------------------------------------------------------------------------------
$ 9,616 $ 4,127 $ (10,698)
=======================================================================================================================
</TABLE>
The Company's assets located outside the United States consist primarily of
cash, accounts receivable and inventories. Intercompany eliminations relating to
revenues resulted primarily from sales from the parent company to its
subsidiaries.
11. INTEREST EXPENSE, NET
Interest expense, net, consists of (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense....................................................... $ 2,386 $ 2,283 $ 2,743
Interest income........................................................ (944) (648) (1,395)
- -------------------------------------------------------------------------------------------------------------------
Interest expense, net $ 1,442 $ 1,635 $ 1,348
===================================================================================================================
</TABLE>
12. QUARTERLY DATA (UNAUDITED)
The following tables present selected quarterly data for fiscal 1995 and 1994
(in thousands, except per share data):
<TABLE>
<CAPTION>
Fiscal 1995 Quarters Ended
--------------------------------------------------------
Oct. 29, Jan. 28, Apr. 29, July 29,
1994 1995 1995 1995
--------------------------------------------------------
<S> <C> <C> <C> <C>
Sales........................................... $ 83,875 $ 89,713 $ 101,326 $ 87,597
Gross profit.................................... $ 28,605 $ 31,311 $ 32,772 $ 27,837
Net income...................................... $ 1,051 $ 1,033 $ 1,921 $ 526
Net income per share............................ $ 0.10 $ 0.10 $ 0.18 $ 0.05
Market price of common stock:
High.......................................... $ 7.00 $ 6 1/4 $ 6 3/8 $ 9 1/2
Low........................................... $ 4 3/8 $ 4 3/4 $ 4 11/16 $ 5 1/2
</TABLE>
Page 23
<PAGE> 24
<TABLE>
<CAPTION>
Fiscal 1994 Quarters Ended
--------------------------------------------------------
Oct. 30, Jan. 29, Apr. 30, July 30,
1993 1994 1994 1994
--------------------------------------------------------
<S> <C> <C> <C> <C>
Sales........................................... $ 79,126 $ 88,926 $ 98,592 $ 82,805
Gross profit.................................... $ 29,890 $ 30,711 $ 32,008 $ 27,198
Net income (loss)............................... $ 642 $ 718 $ 1,040 $ (584)
Net income (loss) per share..................... $ 0.06 $ 0.07 $ 0.10 $ (0.06)
Market price of common stock:
High.......................................... $ 12 1/2 $ 12 5/8 $ 9 3/8 $ 6 1/2
Low........................................... $ 5 1/2 $ 6 1/2 $ 5 5/8 $ 3 1/4
</TABLE>
The Company has experienced, and expects to continue to experience, fluctuations
in sales and net income on a quarterly basis. These fluctuations are due to a
number of factors, including seasonality, the timing of catalog mailings, the
impact of new marketing or new business development programs, and currency
fluctuations.
13. BUSINESS RESTRUCTURING
The 1993 results include pretax charges of $16.5 million ($14.9 million after
taxes or $1.57 per share) for the estimated costs of closing or selling
unprofitable operations, disposing of poorly performing assets, revaluing
certain fixed assets, writing down inventories to net realizable values, and
providing for severance costs related to the strategic restructuring of the
management organization. These costs are identified as "Provision for business
restructuring" in the Company's financial statements.
The accrued restructuring costs balance, identified in Note 4 - Accrued
Liabilities, is analyzed as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 754 $ 3,145 $ 269
Deductions for costs of facilities closed in fiscal 1989 restructuring... --- (201) (68)
Accruals in fiscal 1993 for current portion of estimated future costs
of fiscal 1993 restructuring........................................... --- --- 2,944
Accrued restructuring cost balances reclassified from long-term debt
and other liabilities.................................................. --- 840 ---
Deductions for cash expenses of severance, benefits, relocations,
facility moves, and software changes, etc. as provided for in the
business restructuring in fiscal 1993.................................. (521) (3,030) ---
- --------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 233 $ 754 $ 3,145
====================================================================================================================
</TABLE>
The deductions in fiscal 1995 and 1994 for cash expenses provided for in the
business restructuring in fiscal 1993 include the following items (in
thousands):
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Severance, benefits, and related costs........................ $ 362 $ 1,554
Costs to move Inmac S.A. (France)............................. --- 374
Costs to move Inmac A.B. (Sweden)............................. --- 338
U.S. relocation costs......................................... 159 223
Hiring, training, and outplacement............................ --- 96
Software changes necessitated by new operating structure...... --- 99
Other......................................................... --- 346
- ----------------------------------------------------------------------------------------------------------
$ 521 $ 3,030
==========================================================================================================
</TABLE>
Page 24
<PAGE> 25
Report of Independent Auditors
The Board of Directors and Stockholders
Inmac Corp.:
We have audited the accompanying consolidated balance sheets of Inmac Corp. and
subsidiaries as of July 29, 1995, and July 30, 1994, and the related
consolidated statements of income (loss), stockholders' equity, and cash flows
for each of the years in the three-year period ended July 29, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Inmac Corp. and
subsidiaries as of July 29, 1995 and July 30, 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended July 29, 1995, in conformity with generally accepted accounting
principles.
San Jose, California
September 11, 1995
Page 25
<PAGE> 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This item is not applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of October 1, 1995 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------- --- -------------------------------------------------------
<S> <C> <C>
William P. Doolittle (1) 77 Director
John R. Emrick (1) 53 Director
Robert L. Katz (2) 69 Director
John B. Mumford (2) 52 Director
Kenneth A. Eldred (3) 52 Chairman of the Board of Directors and Secretary
Jeffrey A. Heimbuck (3) 49 President, Chief Executive Officer and Director
Bennet Goldberg 41 Executive Vice President, Worldwide Marketing
Margo M. Hart 50 Vice President, Human Resources
Raymond E. Nystrom 51 Vice President, Finance, Chief Financial Officer, Vice
President, General Manager North American Operations
</TABLE>
(1) Member, Executive Compensation Committee.
(2) Member, Audit Committee.
(3) Member, Stock Option Committee.
All directors hold office until the next annual meeting of stockholders of the
Company or until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors.
William P. Doolittle has served as a director since December 1983. He retired
from Hewlett-Packard Company in April 1983, where he had been employed for over
36 years, most recently as Senior Vice President, International, and had served
as a member of the Hewlett-Packard board of directors for 12 years.
John R. Emrick has served as a director of the Company since April 1977. Mr.
Emrick has been Chairman of the Board of Norm Thompson Outfitters, Inc., a
direct mail marketer of consumer products, since 1988 and has been a director
since 1969. He has also served Norm Thompson Outfitters, Inc. as President from
1971 to 1989 and as Chief Executive Officer from 1974 to 1992.
Robert L. Katz has served as a director of the Company since April 1986. Since
1953, he has been President of Robert L. Katz & Associates, consultants on
corporate strategy. He served as Chairman of the Board and Chief Executive
Officer of Citizens Holdings, Inc., a bank holding company, from 1986 to 1991.
Mr. Katz is a director of Newell Co., a consumer hardware and housewares
manufacturer.
John B. Mumford has served as a director since inception of the Company in 1976.
Since 1972, he has served as President, and is a founder, of Crosspoint
Corporation, which is involved in various investment and venture capital
activities. He has also been a Managing General Partner of Crosspoint Venture
Partners, a venture capital partnership fund, since 1982. Mr. Mumford is a
director of the Office Depot, an office supply distributor, and Hello Direct,
Inc., a direct response marketer of telecommunications equipment.
Page 26
<PAGE> 27
Kenneth A. Eldred, a co-founder of the Company, served as Chief Executive
Officer until November 1994, as a director since the Company's inception in
1976, and as Chairman of the Board since September 1992. He served as President
of the Company until September 1992. Prior to co-founding Inmac, Mr. Eldred was,
from 1973 to 1975, Vice President of Marketing for Robind Corporation, a
manufacturer of binding products.
Jeffrey A. Heimbuck was appointed Chief Executive Officer and President in
November 1994 and was previously Chief Operating Officer and President. Mr.
Heimbuck has been a director of the Company since September 1992. Prior to
joining Inmac, Mr. Heimbuck was, from 1988 to 1992, President of Quantum
Commercial Products, a division of Quantum Corporation responsible for value
added products, commercial and industrial distribution, and direct response.
Quantum Corporation manufactures and sells hard drives and related products.
Prior to this, Mr. Heimbuck held various positions within the personal computer
industry and in the packaged goods industry.
Bennet R. Goldberg joined the Company as Executive Vice President, Worldwide
Marketing in October 1993. From 1985 until joining Inmac, he held several
management positions with Quantum Corporation, most recently as Vice President,
International. Quantum Corporation manufactures and sells hard drives and
related products. Mr. Goldberg was with the International Division of Atari and
with American Can Company prior to joining Quantum Corporation.
Margo M. Hart joined Inmac as Vice President, Human Resources in August 1993.
From 1987 to 1992 she was Director of Corporate Human Resources for Apple
Computer. Prior to that, Ms. Hart was Director, Human Resources at Micro Focus,
a software company, headquartered in the U.K. Ms. Hart also worked as a
consultant and at Control Data Corporation from 1970 to 1980 in various senior
Human Resource positions.
Raymond E. Nystrom joined the Company as Corporate Controller in September 1983
and also held the positions of Treasurer and Worldwide Director of Finance
before being promoted to U.S. General Manager in April 1994. In November 1994,
Mr. Nystrom became Vice President, General Manager of North American Operations.
In July 1995, Mr. Nystrom was appointed Vice President of Finance, Chief
Financial Officer in addition to his Vice President, General Manager of North
American Operations responsibilities. Prior to joining Inmac, Mr. Nystrom held
various finance and accounting positions with Hewlett-Packard Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such
officers, directors and ten-percent stockholders are also required by SEC rules
to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that, during the fiscal year
ended July 29, 1995, all Section 16(a) filing requirements applicable to its
officers, directors and ten-percent stockholders were complied with.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended July 29, 1995,
certain compensation information with respect to the Chief Executive Officer and
each of the four other most highly compensated executive
Page 27
<PAGE> 28
officers who were serving as executive officers as of July 29, 1995 and one
former executive officer who was not serving as an executive officer as of July
29, 1995, but who, if he had been serving, would have been among the five most
highly compensated officers of the Company (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR SALARY($) ($) (1) ($) (2) OPTIONS (#) (3) ($) (4)
--------- ------ ----------- ------- ------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Eldred(5) 1995 313,360 130,000 12,075 -- 2,817
Chairman of the Board, 1994 277,750 -- 12,137 -- 2,545
Secretary and Former Chief 1993 300,200 154,190 9,974 60,000 2,698
Executive Officer
Jeffrey A. Heimbuck(6) 1995 319,820 187,500 11,862 50,000 2,772
President and Chief 1994 258,846 41,000 21,900 -- 2,547
Executive Officer 1993 265,962 161,625 19,660 500,000 --
Bennet R. Goldberg(7) 1995 196,452 122,500 7,410 105,000 114,163
Executive Vice President, 1994 124,986 20,000 10,260 125,000 278
Worldwide Marketing
Raymond E. Nystrom(8) 1995 146,343 50,000 -- 10,000 1,567
Vice President, Finance, Chief 1994 130,014 14,000 -- 4,750 1,875
Financial Officer and Vice 1993 125,927 47,586 -- 30,000(9) 3,265
President of North American
Operations
Margo M. Hart(10) 1995 142,640 58,400 -- 40,000 46,524
Vice President, Human 1994 123,659 8,400 -- 50,000 --
Resources
Michael J. Waide(11) 1995 188,490 42,000 7,410 20,000 2,975
Former Vice President, Finance 1994 184,333 42,300 13,680 10,000 1,953
and Administration, Chief 1993 174,395 71,704 13,680 129,950(12) 3,770
Financial Officer and
Secretary
</TABLE>
- -------------------------------------------
(1) Bonus represents amount paid or accrued for services performed for the
applicable fiscal year.
(2) Executive officers' Other Annual Compensation consists of imputed income
from the use of a Company owned automobile or an automobile allowance.
(3) The Company has awarded no stock appreciation rights ("SAR's").
(4) All Other Compensation consists of Company match on 401(k) plan
contributions, except for Mr. Goldberg and Ms. Hart, whose All Other
Compensation also includes a compensation element associated with stock
option grants which provided for exercise prices below fair market value of
the common stock on the date of grant.
(5) Mr. Eldred stepped down from his responsibilities as Chief Executive
Officer in November 1994.
(6) Mr. Heimbuck was appointed Chief Executive Officer in November 1994.
(7) Mr. Goldberg joined the Company in October 1993.
(8) Mr. Nystrom became an executive officer of the Company upon his appointment
as Vice President, Finance and Chief Financial Officer in July 1995.
(9) Mr. Nystrom's option grant in fiscal 1993 includes the repricing of 17,950
options originally granted prior to fiscal 1993.
(10) Ms. Hart joined the Company in August 1993.
(11) Mr. Waide tendered his resignation from the Company in July 1995.
(12) Mr. Waide's option grant in fiscal 1993 includes the repricing of 94,950
options originally granted prior to fiscal 1993.
Page 28
<PAGE> 29
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS
DURING THE LAST FISCAL YEAR
The following table sets forth certain information regarding options for the
purchase of the Company's Common Stock that were awarded to the Named Executive
Officers during fiscal 1995.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM ($) (2)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED (#)(1) YEAR ($/SH) DATE 5% 10%
---- -------------- ---- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Eldred -- -- -- -- -- --
Jeffrey A. Heimbuck 50,000 15.08 4.75 2/14/05 149,362 378,514
Bennet R. Goldberg 75,000 22.62 3.25 2/14/05 336,544 680,271
Bennet R. Goldberg 30,000 9.05 4.75 2/14/05 89,617 227,108
Raymond E. Nystrom 10,000 3.02 4.75 2/14/05 29,872 75,703
Margo M. Hart 30,000 9.05 3.25 2/14/05 134,617 272,108
Margo M. Hart 10,000 3.02 4.75 2/14/05 29,872 75,703
Michael J. Waide 20,000 6.03 4.75 2/14/05 59,745 151,406
</TABLE>
-----------------------
(1) The Company has awarded no SAR's.
(2) Fair market value of stock on grant date compounded annually at the rate
indicated in the column heading for the option term less the total exercise
price. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future Common Stock prices. The actual
value realized, if any, may vary significantly from the values reflected in
this table.
The following table sets forth certain information on options exercised during
the last fiscal year and options held at fiscal year end by the Named Executive
Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT JULY 29, 1995 (1)
--------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT JULY 29, 1995(#) OPTIONS AT JULY 29, 1995($)(2)
ON VALUE ------------------------------ --------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Eldred -- -- 51,250 8,750 290,844 49,656
Jeffrey A. Heimbuck 10,980 23,332 152,561 251,460 907,554 1,441,572
Bennet R. Goldberg 3,125 10,742 52,083 174,792 84,635 689,428
Raymond E. Nystrom -- -- 9,341 17,509 52,852 86,716
Margo M. Hart -- -- 24,999 65,001 61,585 282,165
Michael J. Waide -- -- 83,909 36,135 483,013 163,501
</TABLE>
-------------------------
(1) The Company has awarded no SAR's.
(2) Difference between the fair market value of the underlying common stock and
the exercise price, for in-the-money options, on July 29, 1995.
COMPENSATION OF DIRECTORS
Each of the Company's outside directors receives a fee of $8,000 per year,
payable in quarterly installments, plus expenses incurred, if any, to attend
Board and Committee meetings. Directors also receive stock options granted
pursuant to the 1988 Directors' Stock Option Plan. See "1988 Directors' Stock
Option Plan" below.
MANAGEMENT BONUS AND PROFIT SHARING PLANS
In July 1994, the Company's Board of Directors adopted an Executive Bonus Plan
(the "Bonus Plan") for fiscal 1995 for senior managers, including the Company's
executive officers, pursuant to which cash bonuses were awarded to employees
based upon the Company's profits and certain other criteria specific to each
eligible individual. The Board of Directors, which administers the Bonus Plan,
established overall corporate performance objectives expressed either in terms
of operating profit and net sales growth or in terms of net income. The
Company's Profit Sharing Plan includes all permanent employees who, as of July
29, 1995, were not eligible for the Bonus Plan and had completed at least three
months of service with the Company.
Page 29
<PAGE> 30
Payments made pursuant to the Bonus and Profit Sharing Plan are completely at
the discretion of the Company's Board of Directors. The fiscal 1995 accrual for
the Bonus and Profit Sharing Plans was $1.8 million.
1988 DIRECTORS' STOCK OPTION PLAN
The Company's 1988 Directors' Stock Option Plan, as amended in December 1992
(the "Directors' Plan"), was originally adopted in October 1988 and approved by
the Company's stockholders in December 1988. A total of 70,000 shares of Common
Stock are reserved for issuance under the Directors' Plan. Only those Directors
who are not employees of the Company ("Outside Directors") are eligible to
participate in the Directors' Plan. All four of the Company's Outside Directors
are eligible to participate in the Directors' Plan.
The Directors' Plan provides that each Outside Director shall receive a grant of
an option to purchase 2,000 shares of Common Stock (the "First Option") on the
date they first become an Outside Director, at the fair market value of the
stock on such date. Such shares shall vest cumulatively as to 6/48ths of the
shares after six months of continuous service and as to 1/48th of the shares for
each full month of continuous service thereafter. Each Outside Director shall
receive annually an automatic subsequent grant of an option to purchase 2,000
shares of Common Stock (the "Subsequent Option") at the fair market value of the
stock on the first day of every fiscal year of the Company. The Subsequent
Option shall vest cumulatively as to 6/48ths of the shares after six months of
continuous service and as to 1/48th of the shares for each full month of
continuous service thereafter. All of the options will have a ten-year term,
provided that the Optionee remains an Outside Director.
The fair market value per share is the last reported sale price for the Common
Stock as of the last trading day immediately preceding the date of grant as
reported by The Nasdaq National Market.
As of July 29, 1995, options to purchase an aggregate of 30,000 shares were
outstanding under the Directors' Plan. Mr. Doolittle had options to purchase an
aggregate of 10,000 shares of Common Stock at a weighted average exercise price
of $4.7375 per share. Mr. Katz had options to purchase an aggregate of 8,000
shares of Common Stock at a weighted average exercise price of $4.2656. Messrs.
Mumford and Emrick each had options to purchase an aggregate of 6,000 shares of
Common Stock at a weighted average exercise price of $4.5208 per share. Mr. Katz
also received nonqualified options pursuant to the Company's 1983 Incentive
Stock Option Plan to purchase 15,000 shares of Common Stock at $6.00 per share
on July 23, 1991 (subsequently repriced to $3.25 per share on October 6, 1992)
as compensation for consulting services.
1992 STOCK OPTION PLAN
The Company's 1992 Stock Option Plan (the "1992 Option Plan") was adopted by the
Board of Directors in 1992 and approved by the stockholders in December 1992. At
July 29, 1995 there were options outstanding under the 1992 Option Plan to
purchase 1,110,944 shares of Common Stock at a weighted average exercise price
of $4.5372 per share, options to purchase 307,339 shares had been exercised, and
131,717 shares remained available for future grant. In June 1993 the Board
established a Stock Option Committee composed of Kenneth A. Eldred and Jeffrey
A. Heimbuck. The Stock Option Committee is authorized to grant options to
employees subject to a maximum limit and ultimate ratification of such option
grants by the Board of Directors.
The 1992 Option Plan permits the grant of both "incentive stock options" (within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
its applicable regulations) and nonqualified stock options. The exercise price
for incentive stock options granted under the 1992 Option Plan must be at least
equal to the fair market value of the Common Stock on the date of grant. The
exercise price for nonqualified options granted under the 1992 Option Plan shall
be determined by the Board or a Committee thereof. The maximum term of every
option granted thereunder is ten (10) years. Employees, including officers of
the Company and its subsidiaries, may receive incentive stock options or
nonqualified stock options. Consultants who are not also employees may only
receive nonqualified stock options. With respect to an incentive stock option
granted to any participant possessing more than ten percent (10%) of the total
combined voting power of all classes of
Page 30
<PAGE> 31
stock of the Company on the date of grant, the exercise price of any option must
be at least equal to 110% of the fair market value on the date of grant, and the
term may be no longer than five (5) years. In the event of a merger or a sale of
substantially all of the assets of the Company where the successor corporation
elects not to assume each outstanding option or issue an equivalent option, the
administrator shall provide for the Optionee to have the right to exercise the
option, including shares that may not otherwise be exercisable.
1983 INCENTIVE STOCK OPTION PLAN
The Company's 1983 Incentive Stock Option Plan (the "1983 Option Plan") was
adopted by the Board of Directors in October 1983 and approved by the Company's
stockholders in December 1983. A total of 1,800,000 shares of Common Stock are
reserved for issuance under the 1983 Option Plan. At July 29, 1995 there were
options outstanding under the 1983 Option Plan to purchase 379,818 shares of
Common Stock at a weighted average exercise price of $3.3155 per share, and
options to purchase 1,314,106 shares had been exercised. The 1983 Option Plan
expired in October 1993, therefore, no options remain available for future
grant. In the event of a merger or a sale of substantially all of the assets of
the Company where the successor corporation elects not to assume each
outstanding option or issue an equivalent option, the Board of Directors shall
at their sole discretion determine if the Optionee shall have the right to
exercise the option, including shares that may not otherwise be exercisable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock on July 29, 1995, as to (a) each person
known by the Company to beneficially own five percent or more of the outstanding
shares of its Common Stock, (b) each of the directors, (c) each of the Named
Executive Officers, and (d) all directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
COMMON STOCK
------------
DIRECTORS, OFFICERS, AND FIVE PERCENT NUMBER OF APPROXIMATE
STOCKHOLDERS(1) SHARES PERCENT OWNED
--------------- ------ -------------
<S> <C> <C>
Kenneth A. Eldred(2) 3,188,099 30.35%
2465 Augustine Drive
Santa Clara, CA 95050
John B. Mumford(3) 556,881 5.33%
One First Street, Suite 2
Los Altos, CA 94022
Dimensional Fund Advisors Inc.(4) 527,000 5.04%
1299 Ocean Avenue, Suite 1100
Santa Monica, CA 90401
John R. Emrick(5) 267,000 2.55%
Jeffrey A. Heimbuck(6) 248,714 2.34%
Bennet R. Goldberg(7) 92,915 *
Michael J. Waide(8) 84,117 *
Margo M. Hart(9) 43,124 *
Robert L. Katz(10) 30,623 *
William P. Doolittle(11) 26,623 *
Raymond E. Nystrom(12) 12,630 *
All executive officers and directors as a group
(9 persons) (13) 4,466,609 41.15%
</TABLE>
- ---------------------
* Represents less than 1% of the outstanding shares of Common Stock.
Page 31
<PAGE> 32
(1) The persons named in the table, to the Company's knowledge, have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes
hereunder.
(2) Includes 368,184 shares for which Mr. Eldred acts as trustee and as to
which he disclaims beneficial ownership. Includes 53,750 shares
issuable upon exercise of options exercisable within 60 days of July
29, 1995.
(3) Includes 391,341 shares for which Mr. Mumford acts as trustee and as to
which he disclaims beneficial ownership. Includes 3,040 shares issuable
upon exercise of options exercisable within 60 days of July 29, 1995.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to beneficially own 527,000 shares as of July 29,
1995, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, the
DFA Investment Trust Company, a registered open-end investment company,
or the DFA Group Trust and the DFA Participating Group Trust,
investment vehicles for qualified employee benefit plans, for all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of such shares.
(5) Includes 60,460 shares for which Mr. Emrick's spouse acts as custodian
and as to which Mr. Emrick disclaims beneficial ownership. Includes
3,040 shares issuable upon exercise of options exercisable within 60
days of July 29, 1995.
(6) Includes 171,310 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(7) Includes 92,915 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(8) Includes 84,117 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(9) Includes 43,124 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(10) Includes 19,623 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(11) Includes 6,623 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(12) Includes 10,430 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
(13) Includes 403,855 shares issuable upon exercise of options exercisable
within 60 days of July 29, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement until August 1, 1997, with Jeffrey A. Heimbuck,
President and Chief Executive Officer, whereby he will receive a salary of
$375,000 per year subject to annual review. He is eligible to participate in the
Executive Bonus Plan. If the market price of the Company's Common Stock exceeds
a predetermined level for a period of twenty consecutive trading days, the term
required for full vesting of his stock options will decrease from five years to
four years. The Company has agreed that if his employment is terminated for any
reason except cause, he will receive a severance payment equal to his salary for
up to twelve months.
The Company has entered into Executive Severance Agreements until July 31, 1996
with Messrs. Goldberg and Nystrom and with Ms. Hart whereby they will receive
their base salaries of $225,000, $202,400 and $146,000, respectively, per year,
subject to periodic review by the Board of Directors. They are eligible to
participate in the Executive Bonus Plan. If they are involuntarily terminated
without cause, they will receive severance payments equal to their monthly base
salaries until they obtain new employment, for up to twelve months (nine months
for Ms. Hart) following the date of their termination. In addition, they will
receive the same severance payments if, following a change in control of the
Company, certain events occur without their prior written consent (such as a
significant geographical relocation or a reduction in their responsibilities,
perquisites, base salaries, or benefits).
With respect to Messrs. Heimbuck, Goldberg and Nystrom and Ms. Hart, each will
receive automatic acceleration of unvested options granted from either the 1992
Stock Option Plan or the 1983 Incentive Stock Option Plan in the event of a
change in control of the Company.
Page 32
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report.
1. Financial Statement Schedule. For the three years ended July 29,
1995, Independent Auditors' Report on Financial Statement Schedule and
Consent.
Other schedules not included here are not applicable to the Company.
Schedule II--Valuation and Qualifying Accounts. A schedule of the
allowance for returns and doubtful accounts is presented below:
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charges Balance at
Beginning Costs and Add End
of Year Expenses (Deduct) of Year
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Amounts deducted from assets to which
they apply:
Fiscal year ended July 31, 1993:
Allowance for returns and
doubtful receivables: $ 3,428 $ 1,273 $ (1,265) $ 3,436
Fiscal year ended July 30, 1994:
Allowance for returns and
doubtful receivables: $ 3,436 $ 424 $ (1,363) $ 2,497
Fiscal year ended July 29, 1995:
Allowance for returns and
doubtful accounts: $ 2,497 $ 376 $ (946) $ 1,927
</TABLE>
Page 33
<PAGE> 34
Report on Financial Statement Schedule
and Consent of Independent Auditors
The Board of Directors and Stockholders
Inmac Corp.:
The audits referred to in our report dated September 11, 1995, included the
related consolidated financial statement schedule as of July 29, 1995, and for
each of the years in the three-year period ended July 29, 1995, included in the
registration statement. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this consolidated financial statement schedule based on our audits.
In our opinion, this consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects the information set forth therein.
We consent to incorporation by reference in the registration statement on Form
S-8 of Inmac Corp. of our report dated September 11, 1995, relating to the
consolidated balance sheets of Inmac Corp. and subsidiaries as of July 29, 1995,
and July 30, 1994, and the related consolidated statements of income (loss),
stockholders' equity, and cash flows for each of the years in the three-year
period ended July 29, 1995, and the related consolidated financial statement
schedule, which reports appear in this July 29, 1995, annual report on Form 10-K
of Inmac Corp.
San Jose, California
October 13, 1995
Page 34
<PAGE> 35
2. Exhibits. The exhibits listed in Item 14(c) are filed as part of
this Annual Report.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
Exhibit
Number Description
------ -----------
3.0* Form of Certificate of Incorporation of
Registrant.
3.1* Form of By-laws of Registrant.
10.1** 1983 Incentive Stock Option Plan as
amended and forms of Incentive Stock
Option Agreement and Nonstatutory Stock
Option Agreement as amended.
10.2* Inmac Employee Investment Plan.
10.3+ Commercial lease dated October 25, 1988
between Registrant and John Arrillaga
Separate Property Trust & Richard T. Peery
Separate Property Trust covering property
located at 2465 Augustine Drive, Santa
Clara, California.
10.4+ Commercial lease dated October 25, 1988
between Registrant and John Arrillaga
Separate Property Trust & Richard T. Peery
Separate Property Trust covering property
located at 2475 Augustine Drive, Santa
Clara, California, as amended.
10.7# 1988 Directors' Stock Option Plan as
amended.
10.14# English language summary and commercial
lease dated April 1, 1992 between
Registrant and Mrs. Josefina Soto Flores
covering property located at Calle Octava
Num. 294 Altos, Zona Centro, Tijuana,
Mexico.
10.16* Commercial lease between Inmac (UK)
Limited and Barratt Properties Limited
covering property located at Bracknell,
United Kingdom.
10.21++ Commercial lease between Inmac Inc. and
Everlast Construction Company Limited and
Ben-Ted Construction Limited for property
located at Mississauga, Ontario, Canada.
10.23*** Commercial lease between Registrant and
East Kilbride Development Corporation
covering property located at Kelvin
Industrial Estate, East Kilbride,
Scotland.
10.24+ Commercial lease dated September 9, 1988
between Registrant and Reuten Associates
covering property located at 4 Reuten
Drive, Borough of Closter, New Jersey.
Page 35
<PAGE> 36
10.27+++ Commercial lease dated November 19, 1990
between Registrant and SUMA (Norwest)
Limited covering property located at Manor
Park, Runcorn, Cheshire, United Kingdom.
10.35# The 1992 Incentive Stock Option Plan.
10.36# Amendment to the 1992 Incentive Stock
Option Plan.
10.37## Commercial lease dated March 29, 1993
covering property located in Irving,
Texas.
10.39## Commercial lease dated September 1991 for
property located at Frankfurter StraBe
103, 6096 Florsheim.
10.40### Commercial lease dated July 31, 1993 for
property located in Mitry Mory, France.
10.41### Commercial lease dated September 1, 1993
for property located in Smedjebacken,
Sweden.
10.42### Commercial lease dated September 1, 1993
for property located in Solna, Sweden.
10.43### Credit agreement dated February 25, 1994
between Registrant and Bank of Montreal.
10.44 Note Agreement dated June 29, 1995,
between Registrant and The Prudential
Insurance Company of America
10.45 Form of Note Agreement dated June 29, 1995
between Registrant and The Prudential
Insurance Company of America.
10.46 Guaranty Agreement dated June 29, 1995,
between Registrant and The Prudential
Insurance Company of America.
10.47 Subsidiary Guaranty Agreement dated June
29, 1995, between Registrant and The
Prudential Insurance Company of America.
10.48 Common Stock Purchase Warrant Agreement
dated June 29, 1995, between the
Registrant and the Prudential Insurance
Company of America.
10.49 Credit Agreement dated June 29, 1995,
between Registrant and ABN AMRO Bank N.V.
11.0 Statement of Computation of Net Income Per
Share.
21.0### Subsidiaries of Registrant.
23.0 Consent of Independent Auditors.
24.0 Power of Attorney.
Page 36
<PAGE> 37
27.0 Financial Data Schedule
* Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1 (No. 33-8646) which became effective
October 17, 1986.
** Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8, S-3 (No. 33-9268) which became
effective March 18, 1987 and to exhibits filed with the Registrant's
Registration Statement on Form S-8 (No. 33-37616) which became effective
November 5, 1990.
*** Incorporated by reference to Form 10-K filed for the year ended July 30,
1988.
+ Incorporated by reference to Form 10-K filed for the year ended July 29,
1989.
++ Incorporated by reference to Form 10-K filed for the year ended July 28,
1990.
+++ Incorporated by reference to Form 10-K filed for the year ended July 27,
1991.
# Incorporated by reference to Form 10-K filed for the year ended July 25,
1992.
## Incorporated by reference to Form 10-K filed for the year ended July 31,
1993.
### Incorporated by reference to Form 10-K filed for the year ended July 30,
1994.
Page 37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INMAC CORP.
Dated: October 17, 1995 By: /s/JEFFREY A. HEIMBUCK
------------------------ -----------------------
Jeffrey A. Heimbuck
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey A. Heimbuck and Raymond E.
Nystrom, jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities on the date indicated.
Page 38
<PAGE> 39
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ------------------------------------------ ----------------
<S> <C> <C>
/s/KENNETH A. ELDRED Chairman of the Board of Directors October 17, 1995
- -------------------- and Secretary ----------------
Kenneth A. Eldred
/s/JEFFREY A. HEIMBUCK President, Chief Executive Officer October 17, 1995
- ---------------------- and Director ----------------
Jeffrey A. Heimbuck
/s/RAYMOND E. NYSTROM Chief Financial Officer, Chief Accounting October 17, 1995
- --------------------- Officer and Vice President North America ----------------
Raymond E. Nystrom Operations
/s/WILLIAM P. DOOLITTLE Director October 17, 1995
- --------------------- ----------------
William P. Doolittle
/s/JOHN R. EMRICK Director October 17, 1995
- --------------------- ----------------
John R. Emrick
/s/ROBERT L. KATZ Director October 17, 1995
- --------------------- ----------------
Robert L. Katz
/s/JOHN B. MUMFORD Director October 17, 1995
- --------------------- ----------------
John B. Mumford
</TABLE>
Page 39
<PAGE> 40
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
Page No. Exhibit No. Exhibit
- -------- ----------- -------
<S> <C> <C>
10.44 Note Agreement dated June 29, 1995, between Registrant and The
Prudential Insurance Company of America
10.45 Form of Note Agreement dated June 29, 1995 between Registrant and The
Prudential Insurance Company of America.
10.46 Guaranty Agreement dated June 29, 1995, between Registrant and The
Prudential Insurance Company of America.
10.47 Subsidiary Guaranty Agreement dated June 29, 1995, between Registrant
and The Prudential Insurance Company of America.
10.48 Common Stock Purchase Warrant Agreement dated June 29, 1995, between
the Registrant and the Prudential Insurance Company of America.
10.49 Credit Agreement dated June 29, 1995, between Registrant and ABN AMRO
Bank N.V.
11.0 Statement of Computation of Net Income Per Share
27.0 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.44
===============================================================================
INMAC B.V.
$13,000,000
Dfl.10,918,600
SENIOR GUARANTEED NOTES DUE SEPTEMBER 15, 2001
--------------
NOTE AGREEMENT
--------------
DATED AS OF JUNE 29, 1995
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. AUTHORIZATION OF ISSUE OF NOTES . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF NOTES AND WARRANTS . . . . . . . . . . . . . . . . 2
3. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. OPINION OF PURCHASER'S SPECIAL COUNSEL . . . . . . . . . . . . . 2
3B. OPINION OF COMPANY'S AND GUARANTOR'S COUNSEL . . . . . . . . . . 2
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT . . . . . . . . . . . 2
3D. PURCHASE PERMITTED BY APPLICABLE LAWS . . . . . . . . . . . . . 3
3E. PRIVATE PLACEMENT NUMBER . . . . . . . . . . . . . . . . . . . . 3
3F. ACCEPTANCE OF AGENT FOR SERVICE OF PROCESS . . . . . . . . . . . 3
3G. PAYMENT OF FEES . . . . . . . . . . . . . . . . . . . . . . . . 3
3H. NO LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3I. CHARTER DOCUMENTS AND GOOD STANDING . . . . . . . . . . . . . . 3
3J. INCUMBENCY CERTIFICATES . . . . . . . . . . . . . . . . . . . . 4
3K. AUTHORIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 4
3L. BRING DOWN AND OTHER CERTIFICATES . . . . . . . . . . . . . . . 4
3M. CONSENTS, APPROVALS, ETC. . . . . . . . . . . . . . . . . . . . 4
3N. GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3O. RECENT BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . 5
3P. COMMITMENT LETTER . . . . . . . . . . . . . . . . . . . . . . . 5
3Q. PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4A. REQUIRED PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . 5
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT . . . . . . . 5
4C. NOTICE OF OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . 6
4D. PARTIAL PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . 6
4E. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . 6
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
5A. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 6
5B. INFORMATION REQUIRED BY RULE 144A . . . . . . . . . . . . . . . 8
5C. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 8
5D. COVENANT TO SECURE NOTES EQUALLY . . . . . . . . . . . . . . . . 9
5E. MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . . . 9
5F. MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS . . . . . . . . 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5G. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . 9
5H. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 10
5I. CORPORATE EXISTENCE, ETC.; BUSINESS . . . . . . . . . . . . . . 10
5J. CURRENCY HEDGING . . . . . . . . . . . . . . . . . . . . . . . . 10
5K. ENVIRONMENTAL AND SAFETY LAWS . . . . . . . . . . . . . . . . . 10
5L. DUTCH CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . 10
5M. ADDITIONAL SUBSIDIARY GUARANTORS . . . . . . . . . . . . . . . . 11
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6A. DEBT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 11
6B. LIEN RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 12
6C. MERGER AND CONSOLIDATION . . . . . . . . . . . . . . . . . . . . 13
6D. TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 14
6E. RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . 15
6F. DEMAND ACCOUNT AND DEPOSIT ARRANGEMENTS . . . . . . . . . . . . 15
6G. SUBSIDIARY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . 15
6H. SALE OF STOCK AND DEBT OF SUBSIDIARIES . . . . . . . . . . . . . 15
6I. NET WORTH OF INMAC S.A. . . . . . . . . . . . . . . . . . . . . 16
6J. RESTRICTION ON LOAN DEBT FACILITY. . . . . . . . . . . . . . . . 16
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7A. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . . . . . . 21
7C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . . . . . . 21
7D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 21
7E. CURRENCY EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . 21
8. REPRESENTATIONS, COVENANTS AND WARRANTIES . . . . . . . . . . . . . . . 22
8A. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8B. BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . 22
8C. ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . . . . . 22
8D. OUTSTANDING DEBT . . . . . . . . . . . . . . . . . . . . . . . . 22
8E. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . . 22
8F. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . . . . . . 23
8H. OFFERING OF NOTES . . . . . . . . . . . . . . . . . . . . . . . 23
8I. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . 24
8J. ERISA AND FOREIGN PENSION PLANS . . . . . . . . . . . . . . . . 24
8K. GOVERNMENTAL CONSENT . . . . . . . . . . . . . . . . . . . . . . 24
8L. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
8M. DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8N. POSSESSION OF FRANCHISES, ETC. . . . . . . . . . . . . . . . . . 25
8O. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . 25
8P. INTELLECTUAL PROPERTIES . . . . . . . . . . . . . . . . . . . . 25
8Q. LABOR AND EMPLOYEE RELATIONS MATTERS . . . . . . . . . . . . . . 26
8R. AUTHORIZATION AND ENFORCEABILITY . . . . . . . . . . . . . . . . 26
8S. FOREIGN ENEMIES AND REGULATIONS . . . . . . . . . . . . . . . . 26
8T. WARRANTS AND WARRANT SHARES . . . . . . . . . . . . . . . . . . 26
8U. DUTCH TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . 27
9A. NATURE OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . 27
9B. SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . 27
10. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10A. YIELD-MAINTENANCE TERMS . . . . . . . . . . . . . . . . . . . . 28
10B. OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11A. NOTE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
11B. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11C. CONSENT TO AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 39
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
LOST NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . . . . . . 40
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . 41
11G. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 41
11H. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . . . . . . 41
11I. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11J. PAYMENTS DUE ON NON-BUSINESS DAYS . . . . . . . . . . . . . . . 42
11K. SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . . . . . . 42
11L. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 42
11M. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11N. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . 42
11O. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11P. JURISDICTION; SERVICE OF PROCESS . . . . . . . . . . . . . . . . 43
11Q. GROSS-UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11R. JUDGMENT CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . 45
11S. ENVIRONMENTAL INDEMNITY . . . . . . . . . . . . . . . . . . . . 45
11T. INDEPENDENCE OF COVENANTS . . . . . . . . . . . . . . . . . . . 46
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
11U. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . 46
11V. CURRENCY DETERMINATION . . . . . . . . . . . . . . . . . . . . . 46
Exhibit A-1 - Form of Note (Dollar)
Exhibit A-2 - Form of Note (Dutch Guilder)
Exhibit B - Form of Warrant
Exhibit C - Form of Guaranty
Exhibit D - Form of Subsidiary Guaranty
Exhibit E - Form of Opinion of Company's Counsel
Exhibit F-1 - Form of Opinion of Subsidiary Guarantors' Counsel
Exhibit F-2 - Form of Opinion of Guarantor's Counsel
Exhibit G - Form of Confidentiality Agreement
Exhibit H - List of Agreements Restricting Debt
Schedule 2 - Wire Information
Schedule 6B - List of Current Liens
Schedule 11D - List of Prohibited Transferees
</TABLE>
<PAGE> 6
INMAC B.V.
KEIENBERGWEG 30
1101 GB AMSTERDAM Z.0.
THE NETHERLANDS
As of June 29, 1995
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Ladies and Gentlemen:
The undersigned, Inmac B.V., a corporation organized under the laws of
The Netherlands (herein called the "Company"), hereby agrees with you as
follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize
the issue of two series of its senior promissory notes, one series in the
aggregate principal amount of $13,000,000 and one series in the aggregate
principal amount of Dfl.10,918,600, each note in each such series to be dated
the date of issue thereof, to mature September 15, 2001, to bear interest on
the unpaid balance thereof from the date thereof until the principal thereof
shall have become due and payable at the rate per annum specified therein and
on overdue payments at the rate specified therein, and to be substantially in
the form of Exhibits A-1 and A-2 attached hereto. The Company will cause the
Guarantor to authorize the issue of its warrants to originally purchase 175,000
(subject to adjustment) shares of its common stock, par value $0.01 per share
(the "Common Stock"), to be dated the date of issue thereof, to expire
September 15, 2001 and to be substantially in the form of Exhibit B attached
hereto. The term "Notes" as used herein shall include each such senior
promissory note delivered pursuant to any provision of this Agreement and each
such senior promissory note delivered in substitution or exchange for any other
Note pursuant to any such provision. The term "Warrants" as used herein shall
include each such common stock purchase warrant delivered pursuant to any
provision of this Agreement and each such warrant delivered in substitution or
exchange for any other Warrant pursuant to any such provision. The Notes will
be guaranteed by the Guarantor pursuant to the Guaranty, to be substantially in
the form
<PAGE> 7
of Exhibit C attached hereto and by the Subsidiary Guarantors pursuant to the
Subsidiary Guaranty, to be substantially in the form of Exhibit D attached
hereto.
2. PURCHASE AND SALE OF NOTES AND WARRANTS. The Company hereby
agrees to sell to you and, subject to the terms and conditions herein set
forth, you agree to purchase from the Company for the Purchase Price, the
series of Notes in the respective principal amounts set forth in paragraph 1 at
100% of such principal amounts and Warrants, for the balance of such Purchase
Price. The Company will deliver to you, at the offices of White & Case at 633
West Fifth Street, 19th Floor, Los Angeles, CA 90071, (i) one or more Notes
registered in your name, evidencing the aggregate principal amount of Notes to
be purchased by you and in the denomination or denominations specified in the
Purchaser Schedule attached hereto and (ii) Warrants originally to purchase
175,000 shares of common stock of the Guarantor, both against payment of the
Purchase Price thereof by transfer of immediately available funds for credit to
the Company at the accounts listed on Schedule 2 attached hereto, on the date
of closing, which shall be June 29, 1995 or any other date on or before June
29, 1995 upon which the Company and you may mutually agree (herein called the
"closing" or the "date of closing").
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay
for the Securities to be purchased by you hereunder is subject to the
satisfaction, on or before the date of closing, of the following conditions:
3A. OPINION OF PURCHASER'S SPECIAL COUNSEL. You shall have
received from White & Case, who are acting as special counsel for you in
connection with this transaction, a favorable opinion satisfactory to you as to
such matters incident to the matters herein contemplated as you may reasonably
request.
3B. OPINION OF COMPANY'S AND GUARANTOR'S COUNSEL. You shall have
received from Baker & McKenzie, special counsel for the Company, a favorable
opinion satisfactory to you and substantially in the form of Exhibit E attached
hereto, and you shall have received from counsel for the Guarantor and counsel
for each Subsidiary Guarantor, a favorable opinion satisfactory to you and
substantially in the form of Exhibits F-1 and F-2 attached hereto.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties contained in paragraph 8 shall be true on and as
of the date of closing, except to the extent of changes caused by the
transactions herein contemplated; there shall exist on the date of closing no
Event of Default or Default; and the Company shall have delivered to you an
Officer's Certificate, dated the date of closing, to both such effects. The
representations and warranties contained in Section 3 of the Guaranty shall be
true on and as of the date of closing, except to the extent of changes caused
by the transactions herein contemplated and the Guarantor shall have delivered
to you an Officer's Certificate, dated the date of closing,
2
<PAGE> 8
to such effect. The representations and warranties contained in Section 3 of
the Subsidiary Guaranty shall be true on and as of the date of closing, except
to the extent of changes caused by the transactions herein contemplated and
each of the Subsidiary Guarantors shall have delivered to you an Officer's
Certificate, dated the date of closing, to such effect.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Securities to be purchased by you on the date of closing on the
terms and conditions herein provided (including the use of the proceeds of such
Securities by the Company) shall not violate any applicable law or governmental
regulation (including, without limitation, section 5 of the Securities Act or
Regulation G, T or X of the Board of Governors of the Federal Reserve System
and any law or regulation of a central bank or bank regulatory agency governing
the currencies evidenced by the Notes) and shall not subject you to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and you shall have received such
certificates or other evidence as you may request to establish compliance with
this condition.
3E. PRIVATE PLACEMENT NUMBER. White & Case shall have obtained
private placement numbers for each series of the Notes from Standard & Poor's
CUSIP Service Bureau.
3F. ACCEPTANCE OF AGENT FOR SERVICE OF PROCESS. CT Corporation
shall have irrevocably accepted its appointment as the Company's agent in New
York to receive service of process pursuant to paragraph 11P hereof until
September 15, 2002.
3G. PAYMENT OF FEES. The Company shall have paid (i) you $75,000
constituting the remaining balance of the structuring fee and (ii) White & Case
its legal fees through June 16, 1995 in accordance with paragraph 11B hereof;
provided that White & Case shall have delivered its invoice to the Company at
least two Business Days prior to the date of closing. A final statement from
White & Case will be presented post closing and payment of the fees set forth
on such statement shall be a condition subsequent to closing.
3H. NO LIENS. You shall have received evidence reasonably
satisfactory to you that there exist no Liens on any Property or other assets
of the Group, including floating charges or conditional or springing Liens,
other than as permitted by paragraph 6B. You agree that satisfactory lien
searches in respect of (i) the Guarantor from the States of California and
Texas, (ii) Inmac Holdings, Limited and Inmac (U.K.) Limited from the United
Kingdom and (iii) Inmac S.A. from the Republic of France shall meet the
requirements of this paragraph 3H.
3I. CHARTER DOCUMENTS AND GOOD STANDING. Each member of the
Obligated Group shall have delivered to you copies of (i) its Articles or
Certificate of Incorporation or similar charter document, certified as of a
recent date by the Secretary of State of the State of
3
<PAGE> 9
Delaware (with respect to the Guarantor), or by the applicable governmental
authority or Responsible Officer (with respect to the other members of the
Obligated Group) and (ii) the Bylaws or comparable charter document of such
member of the Obligated Group, certified as of the date of closing by a
Responsible Officer. The Guarantor and Inmac S.A. shall have delivered to you
corporate and tax good standing certificates from the States of Delaware and
California (with respect to the Guarantor) and confirmation of corporate
existence from the applicable governmental authority (with respect to Inmac
S.A.).
3J. INCUMBENCY CERTIFICATES. Each member of the Obligated Group
(other than Inmac Gesellschaft mit beschrankter Haftung) shall have delivered
to you a certificate signed by a Responsible Officer (who, to the extent
reasonably possible, is not signing any other document or agreement in
connection herewith) certifying as to the offices of certain of the officers of
such member of the Obligated Group, their titles and exemplars of their
signatures (including all officers signing this Agreement and the other
documents delivered and to be delivered hereunder).
3K. AUTHORIZATIONS. Each member of the Obligated Group (other
than Inmac Gesellschaft mit beschrankter Haftung) shall have delivered to you
certified copies of the resolutions of its Board of Directors evidencing
approval of the transactions contemplated by this Agreement, the Securities and
the execution, delivery and performance thereof, and the authorization of the
officers to execute and deliver the same in such form as they deem necessary
and appropriate.
3L. BRING DOWN AND OTHER CERTIFICATES. Each member of the
Obligated Group shall have delivered to you (i) Officer's Certificates dated
the date of closing and certifying (A) that no amendments to or changes in its
charter documents have been made or are reasonably likely, (B) that no
dissolution or liquidation proceedings as to such member of the Group have been
commenced or are contemplated, (C) that no material adverse change in its
financial condition or results of operations has occurred since July 30, 1994,
(D) that no condition, event or act that would have a Material Adverse Effect
has occurred or been threatened, (E) as to the use of proceeds from the Notes
and as to the Consolidated capitalization of the Guarantor immediately after
the date of closing and giving effect to the proposed restructuring of the
Consolidated bank facilities, and (F) as to Debt (other than as represented by
the Notes) outstanding (or that may be borrowed under the Credit Facilities)
after the date of closing, specifying the amounts, termination or expiration
dates, and other material terms thereof and (ii) such other certificates as you
shall reasonably request.
3M. CONSENTS, APPROVALS, ETC. Each member of the Group shall have
received all consents, permits, approvals and other authorizations, and made
all such filings and declarations, as may be required by any law, statute,
regulation or rule, or pursuant to any material contract, judgment, order or
decree to which it is a party or to which it is subject in connection with the
transactions contemplated hereby.
4
<PAGE> 10
3N. GUARANTIES. The Guaranty and the Subsidiary Guaranty shall
have been duly authorized, executed and delivered by the Guarantor and the
Subsidiary Guarantors, respectively, and you shall have received fully executed
counterparts thereof, and on the date of closing the Guaranty and the
Subsidiary Guaranty shall be in full force and effect and you shall have
received such confirmation from the Guarantor and the Subsidiary Guarantors
with respect thereto as you may reasonably request.
3O. RECENT BALANCE SHEET. The Company shall have delivered to you
an unaudited Consolidated balance sheet of the Company as of April 30, 1995.
3P. COMMITMENT LETTER. The Company shall have delivered, or cause
to be delivered, to you a commitment letter in respect of the Dutch Credit
Facility required by paragraph 5L, executed by the agent bank.
3Q. PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in substance and
form to you, and you shall have received all such counterpart originals or
certified or other copies of such documents as you may reasonably request.
4. PREPAYMENTS. The Notes shall be subject to prepayment with
respect to the required prepayments specified in paragraph 4A and the optional
prepayments permitted by paragraph 4B.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full,
the Company shall apply to the prepayment of the Notes, without premium, the
aggregate sums of $1,300,000 with respect to the Dollar denominated Notes and
Dfl.1,091,860 with respect to the Dutch Guilder denominated Notes, on June 15
and September 15 in each of the years 1997 to 2000, inclusive, and on June 15,
2001, and such principal amounts of the Notes, together with interest thereon
to the prepayment dates, shall become due on such prepayment dates. The
remaining principal amount of the Notes, if any, together with interest accrued
thereon, if any, shall become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes
shall be subject to prepayment, in whole at any time or from time to time in
part (in amounts of not less than, and in integral multiples of, $500,000 with
respect to the Dollar denominated Notes and Dfl.900,000 with respect to the
Dutch Guilder denominated Notes), at the option of the Company, at 100% of the
principal amount so prepaid plus interest thereon to the prepayment date and
the Yield-Maintenance Amount, if any, with respect to each Note. Any partial
prepayment of the Notes pursuant to this paragraph 4B shall be applied in
satisfaction of required payments of principal on a pro rata basis.
5
<PAGE> 11
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the
holder of each Note irrevocable written notice of any prepayment pursuant to
paragraph 4B not less than 10 Business Days prior to the prepayment date,
specifying such prepayment date and the series and principal amount of such
series of Notes, and of the Notes of such series held by such holder, to be
prepaid on such date and stating that such prepayment is to be made pursuant to
paragraph 4B. Notice of prepayment having been given as aforesaid, the
principal amount of the Notes specified in such notice, together with interest
thereon to the prepayment date and together with the Yield-Maintenance Amount,
if any, with respect thereto, shall become due and payable on such prepayment
date. The Company shall, on or before the day on which it gives written notice
of any prepayment pursuant to paragraph 4B, give telephonic notice of the
series and the principal amount of such series of Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a
recipient of such notices in the Purchaser Schedule attached hereto or by
notice in writing to the Company.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the
Notes pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated, first, to the outstanding amount of the series of Notes designated
by the Company to be prepaid on a pro rata basis and, thereafter, to such Notes
as the Purchaser so chooses, unless contrary instructions are given by the
Company in writing at the time of prepayment. "Outstanding" for the purpose of
this paragraph 4D only, includes all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A or 4B.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in
whole or in part prior to their stated final maturity (other than by prepayment
pursuant to paragraph 4A or 4B or upon acceleration of such final maturity
pursuant to paragraph 7A or pursuant to Section 1.5 of the Warrant), or
purchase or otherwise acquire, directly or indirectly, Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered to prepay
or otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes held by each other
holder of Notes at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by
the Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
paragraph 4D.
6
<PAGE> 12
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company covenants that it will
deliver to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 45
days after the end of each quarterly period in each fiscal year,
consolidated and consolidating statements of profit and loss and
consolidated statements of stockholders' equity and cash flow of the
Company and its Subsidiaries for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in
each case in comparative form figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and satisfactory
in form to the Required Holder(s) and certified by an authorized
financial officer of the Company, subject to changes resulting from
year-end adjustments;
(ii) as soon as practicable and in any event within 90
days after the end of each fiscal year, consolidating and consolidated
statements of profit and loss and consolidated statements of
stockholders' equity and cash flow of the Company and its Subsidiaries
for such year, and a consolidating and consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year, setting
forth in each case in comparative form corresponding consolidated
figures from the preceding year's financial statements, all in
reasonable detail and satisfactory in form to the Required Holder(s)
and, as to the consolidated statements (if the Company at the time is
having its annual financial statements audited), reported on by
independent public accountants of recognized international standing
selected by the Company whose report shall be without limitation as to
the scope of the audit and satisfactory in substance to the Required
Holder(s) and, as to the consolidating statements and if the Company
at the time is not having its annual financial statements audited, its
consolidated statements, certified by an authorized financial officer
of the Company;
(iii) promptly upon receipt thereof, a copy of each other
report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company or any Subsidiary (other than
local statutory audited reports of Subsidiary Guarantors and so-called
"management letters" issued in the ordinary course of audits of annual
financial statements); and
(iv) promptly after its transmission, such other
certificates, documents and information as the Company or any of its
Subsidiaries may regularly furnish to any holder of its other Debt;
and
7
<PAGE> 13
(v) with reasonable promptness, such other financial data
and other information as such Significant Holder may reasonably
request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance
by the Company and its Subsidiaries with the provisions of paragraphs 6A, 6B,
6D, 6F and 6I and stating that there exists no Event of Default or Default, or,
if any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. If the Company's financial statements are being audited at the time,
the Company will deliver, together with each delivery of financial statements
required by clause (ii) above, to each Significant Holder a certificate of such
accountants stating that, in making the audit necessary for their report on
such financial statements, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event of Default
or Default, specifying the nature and period of existence thereof. Such
accountants, however, shall not be liable to anyone by reason of their failure
to obtain knowledge of any Event of Default or Default which would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards. The Company also covenants that immediately after
any Responsible Officer obtains knowledge of an Event of Default or Default, it
will deliver to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto. Delivery of non-public information shall be
conditioned on such Significant Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D hereof (to the extent
such holder has not already done so).
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that
it will, upon the request of the holder of any Security, provide, or cause to
be provided to, such holder and any qualified institutional buyer designated by
such holder, such financial and other information as such holder may reasonably
determine to be necessary in order to permit compliance with the information
requirements of Rule 144A under the Securities Act in connection with the
resale of the Securities, except at such times as the Company or the Guarantor,
as applicable, is subject to the reporting requirements of section 13 or 15(d)
of the Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act. Delivery of non-public information shall be conditioned on
such qualified institutional buyer's execution of a Confidentiality Agreement.
5C. INSPECTION OF PROPERTY. The Company covenants that it will
permit any duly authorized representative of any Inspecting Holder in writing
to visit and inspect any of the properties of the Company and its Subsidiaries,
to examine the corporate books and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and to discuss the
affairs, finances and accounts of any of such corporations with the
8
<PAGE> 14
principal officers of the Company and its independent public accountants, all
at such reasonable times and as often as such Inspecting Holder may reasonably
request. Access to material, non-public information may be conditioned on such
Inspecting Holder's execution and delivery of a Confidentiality Agreement in
the form of Exhibit G attached hereto. The costs and expenses associated with
the exercise of any rights under this paragraph 5C shall be borne by such
Inspecting Holder, unless and until either a Default or Event of Default has
occurred hereunder or a breach or default has occurred under the Guaranty or
Subsidiary Guaranty, in which event the reasonable costs and expenses thereof
shall be borne by the Company. Delivery of material non-public information
shall be conditioned on such Inspecting Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D hereof (to the extent
such holder has not already done so). The Inspecting Holders shall use
reasonable efforts to coordinate their inspections and requests for copies so
as, to the extent they can, to avoid unnecessary duplication.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that,
if it or any Subsidiary shall create or assume any Lien upon any of its
Property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of paragraph 6B or Section 5.4 of the Guaranty, it
will make or cause to be made effective provision whereby the Notes will be
secured by such Lien equally and ratably with any and all other Debt thereby
secured so long as any such other Debt shall be so secured. The Company
further covenants to disclose the provisions of this paragraph 5D and paragraph
6B in the footnotes to the annual financial statements that are provided to its
lenders and other creditors.
5E. MAINTENANCE OF INSURANCE. The Company covenants that it and
each of its Subsidiaries will maintain insurance in such amounts and against
such liabilities and hazards as is, to the best of its knowledge, customarily
maintained by other companies operating similar businesses.
5F. MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS. The Company
covenants that it and each of its Subsidiaries will (i) maintain or cause to be
maintained in good repair, working order and condition all equipment and other
properties necessary at that time in its business and that are material to the
conduct of its business taken as a whole, and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof;
and (ii) comply with all applicable laws (including Environmental and Safety
Laws), rules, regulations and orders of all national, state, local or foreign
courts or governmental agencies, authorities, instrumentalities or regulatory
bodies, except where such noncompliance could not reasonably be expected to
result in a Material Adverse Effect or to the extent that such compliance is
subject to a Good Faith Contest.
5G. PAYMENT OF TAXES AND CLAIMS. The Company covenants that it
and each of its Subsidiaries will pay all taxes, levies, assessments and other
governmental charges imposed upon it or any of its Properties or assets or in
respect of any of its franchises,
9
<PAGE> 15
business, income or profits before any penalty or interest accrues thereon, and
all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable and which by
law have or might become a Lien upon any of its Properties or assets, except to
the extent that such charge is subject to a Good Faith Contest.
5H. LEGAL PROCEEDINGS. The Company covenants that it and each of
its Subsidiaries will deliver promptly to you any notice of (i) any material
litigation or other legal or administrative proceedings that, if adversely
determined to the Company, could reasonably be expected to result in a Material
Adverse Effect and (ii) its discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Property that such it has
reason to believe could cause any Property or any material part thereof to be
subject to any material restrictions on its ownership, occupancy,
transferability or use under any Environmental and Safety Laws.
5I. CORPORATE EXISTENCE, ETC.; BUSINESS. The Company covenants
that it and each of its Subsidiaries will preserve and keep in full force and
effect at all times its corporate existence, and rights, licenses, permits,
franchises and other similar rights material to its business, except (i) to the
extent otherwise permitted by paragraphs 6C and 6D and (ii) that the corporate
existence of any Subsidiary may be terminated if, in the good faith judgment of
the Board of Directors of the Company, such termination is in the best interest
of the Company and is not disadvantageous to the holders of the Notes. The
Company covenants it will not, and will not permit any Subsidiary to, engage in
any business other than the businesses conducted by it and its Subsidiaries on
the date of the financial statements described in paragraph 8B and any other
business reasonably related thereto.
5J. CURRENCY HEDGING. The Company covenants that it and each of
its Subsidiaries will maintain the same type of currency transaction exposure
practices as are maintained on the date hereof.
5K. ENVIRONMENTAL AND SAFETY LAWS. The Company covenants that it
and each of its Subsidiaries will deliver promptly to you any notice of (i) any
material enforcement, cleanup, removal or other material governmental or
regulatory actions instituted, completed or, to its best knowledge, threatened
pursuant to any Environmental and Safety Laws; (ii) all material Environmental
Liabilities and Costs against it or any of its Subsidiaries or in respect of
any Property; and (iii) its discovery of any occurrence or condition on any
real property adjoining or in the vicinity of any Property that it has reason
to believe could cause any Property or any material part thereof to be subject
to any material restrictions on its ownership, occupancy, transferability or
use under any Environmental and Safety Laws.
5L. DUTCH CREDIT FACILITY. The Company covenants that it will
enter into the Dutch Credit Facility no later than July 15, 1995 and it will
keep such Credit Facility in full
10
<PAGE> 16
force and effect throughout the term hereof, with minimum aggregate borrowing
availability of $10,000,000, on terms similar to those set forth in the
commitment letter delivered to you pursuant to paragraph 3P.
5M. ADDITIONAL SUBSIDIARY GUARANTORS. The Company covenants that
if it creates, forms, purchases, or otherwise acquires a Subsidiary after the
date hereof (other than an Exempt Subsidiary), or assets of Subsidiaries are
transferred to a Subsidiary that is not a Subsidiary Guarantor, in each case
with the result that such Subsidiary has assets with a net book value in excess
of $500,000, it shall cause such Subsidiary to (i) execute and deliver a
guaranty of the Guaranteed Obligations in substantially the form of a
Subsidiary Guaranty and (ii) cause to be executed and delivered in connection
therewith such other documents, certificates and legal opinions as the Required
Holders may reasonably request.
6. NEGATIVE COVENANTS. The Company covenants and agrees that,
unless all of the Notes have been repaid in full and no further obligations on
the part of the Company to perform hereunder shall exist, it will not, and will
not permit any Subsidiary to, unless the Required Holders shall otherwise
consent in writing:
6A. DEBT RESTRICTIONS. Incur, create, assume or permit to exist
at any time any Debt except for:
(i) the Notes;
(ii) the Subsidiary Guaranty;
(iii) overdraft facilities, so long as the amount of such
facilities does not exceed $500,000 at any time for either the Company
or, separately, for any Subsidiary of the Company;
(iv) Capitalized Lease Obligations;
(v) Debt of Exempt Subsidiaries not to exceed at any time
$3,000,000 in the aggregate for all Exempt Subsidiaries;
(vi) additional Debt of the Company pursuant to the Dutch
Credit Facility and Guaranties of such Debt by any Subsidiary
Guarantor; provided, however, that in no event shall any Subsidiary
Guarantor have direct borrowings to such Subsidiary Guarantor (without
regard to co-borrowing obligations) outstanding under the Dutch Credit
Facility that in the aggregate exceed the amount of its liability
under the Subsidiary Guaranty on the date hereof;
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<PAGE> 17
(vii) Debt owed by any Subsidiary (other than an Exempt
Subsidiary) to a wholly-owned Subsidiary or Company or owed by the
Company to any Subsidiary Guarantor;
(viii) obligations under currency swaps or hedging
arrangements permitted by paragraph 5J; and
(ix) Debt of all Subsidiary Guarantors other than as
described in the preceding clauses (i) - (vi) of this paragraph 6A,
provided that (A) Inmac Geschellshaft mit beschrankter Haftung may
maintain until September 15, 1995 not more than 7,500,000DM of Debt
with Barclays Bank and 3,500,000DM with National Westminster Bank; (B)
Inmac aktiebolag may maintain until September 15, 1995 not more than
SEK 5,100,000 of Debt with Barclays Bank; (C) the Company may maintain
until September 15, 1995 not more than Dfl.3,882,000 of Debt with
Midland Bank; and (D) except as otherwise set forth in the immediately
preceding subclauses (A) through (C), all other such additional Debt
shall not exceed $5,000,000 in the aggregate and $2,000,000 for any
individual Subsidiary Guarantor.
provided, further, however, that in no event will any member of the Group
Guarantee any Debt except as provided in clauses (i), (ii) and (vi) of this
paragraph 6A, and except for the Guarantor's Guaranty of the Debt of the
Guarantor's Canadian Subsidiary in the amount of Cdn.$4,000,000, provided that
such Guaranties are terminated no later than December 31, 1995.
6B. LIEN RESTRICTIONS. Create, assume or permit to exist at any
time any Lien of any kind (other than to or in favor of the holders of the
Notes or unless prior written consent to the creation, assumption or
maintenance thereof shall have been obtained pursuant to paragraph 11C) on or
with respect to any of its Property or assets, whether now owned or hereafter
acquired (whether or not provision is made for the equal and ratable securing
of the Notes in accordance with the provisions of paragraph 5D hereof), except
(i) Liens for taxes, assessments or other governmental
levies or charges not yet due or which are subject to a Good Faith
Contest;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or that are subject to a Good
Faith Contest;
(iii) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security or other similar statutory or legal obligations, in
each case not incurred or made in connection with the
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<PAGE> 18
incurrence or maintenance of Debt, the obtaining of advances or credit
or the payment of the deferred purchase price of Property, and
provided that such Liens do not in the aggregate materially detract
from the value of Property or assets so encumbered or materially
impair the use thereof in the operation of its business;
(iv) Liens on Property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company, Guarantor or another
Subsidiary;
(v) Liens that may be required by any of the Note
Documents;
(vi) Liens existing on the date hereof as set forth on
Schedule 6B; provided that the Debt or other obligation secured
thereby does not exceed $1,000,000;
(vii) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights- of-way,
utilities and other similar purposes, or zoning or other restrictions
as to use of real property, that are necessary for the conduct of the
operations of Company and its Subsidiaries or that customarily exist
on properties of corporations engaged in similar businesses and are
similarly situated and that do not in any event materially impair
their use in the operations of the Company and its Subsidiaries; and
(viii) any Lien other than those specified in clauses (i) -
(vii) above that secures Debt or other obligations in an aggregate
principal amount not to exceed at any time the sum of $10,000,000 plus
5% of Consolidated Tangible Net Worth (measured at the end of the
fiscal quarter immediately preceding the date of determination), but
assuming Consolidated Tangible Net Worth is calculated only with
respect to the Company and its Subsidiaries on a consolidated basis;
provided, however, that in no event shall such Liens attach to or
otherwise encumber (A) Consolidated current assets or (B) capital
stock of any Subsidiary.
6C. MERGER AND CONSOLIDATION. Merge or consolidate with or into
any other Person, except that:
(i) any Subsidiary other than the Company may merge or
consolidate with or into Guarantor; provided that Guarantor is the
continuing or surviving corporation,
(ii) any Subsidiary other than the Company may merge or
consolidate with or into a wholly-owned Subsidiary (other than an
Exempt Subsidiary) that is organized and domiciled either in the
United States or in the country of such merged or consolidated
Subsidiary;
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<PAGE> 19
(iii) the Company or any Subsidiary may merge or consolidate with
any other corporation other than the Guarantor or a wholly-owned
Subsidiary, provided that, immediately after giving effect to such
merger or consolidation (a) in the case of a merger or consolidation
involving the Company, the Company is the continuing or surviving
corporation and in the case of a merger or consolidation involving a
Subsidiary, a wholly-owned U.S. Subsidiary or a wholly-owned
Subsidiary organized under the laws of the country of such merged or
consolidated Subsidiary is the continuing or surviving corporation and
(b) no Default or Event of Default exists or would exist before or
after giving effect to such merger or consolidation.
6D. TRANSFER OF ASSETS. Transfer any of its assets except that
(i) any Subsidiary other than the Company may Transfer
assets to Guarantor or a wholly-owned Subsidiary (other than an Exempt
Subsidiary) that is organized and domiciled either in the United
States or in the country of the Transferring Subsidiary;
(ii) the Company or any Subsidiary may sell inventory in
the ordinary course of business;
(iii) the Company or any Subsidiary may Transfer assets
that, in its good faith, reasonable judgment, have no further useful
or productive capacity, are fully used or depreciated, are obsolete or
are no longer necessary or productive in the ordinary course of its
business;
(iv) the Company or any Subsidiary may Transfer trade
receivables to the extent permitted by Section 5.11 of the Guaranty;
and
(v) the Company or any Subsidiary may otherwise Transfer
assets, provided that after giving effect thereto (A) neither the
Annual Percentage of Tangible Assets Transferred nor the Annual
Percentage of Earnings Capacity Transferred pursuant to this clause
(v) shall exceed 5% and (B) neither the Cumulative Percentage of
Tangible Assets Transferred nor the Cumulative Percentage of Earnings
Capacity Transferred pursuant to this clause (v) shall exceed 20%,
assuming, for purposes of this clause (v), that calculations are made
with respect to the Company and its Subsidiaries only on a
consolidated basis.
For purposes of determining compliance with the provisions of this
paragraph 6D, Transfers of assets described in clause (i) - (iv) above shall
not be included in making the calculations required for the percentage
limitations set forth in clause (v) above.
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<PAGE> 20
6E. RELATED PARTY TRANSACTIONS. Directly or indirectly engage in
any transaction, including the purchase, sale, exchange or other transfer of
Property or other assets or the rendering of any services, or otherwise deal
with, any Shareholder or any other Affiliate of Guarantor, except in the
ordinary course of business and upon terms that are materially no less
favorable to Guarantor or such Subsidiary, as the case may be, than those that
might be obtained in an arm's-length transaction with an unrelated third party;
provided, however, that the foregoing shall not apply to any (i) Transfer of
inventory between Guarantor and any Subsidiary or among Subsidiaries on terms
not materially different than those in existence on the date of the Guaranty,
(ii) Related Party transactions on the terms set forth in Schedule 5.13 of the
Guaranty, and (iii) sales to, or purchases from (within the limitations of
Section 5.2 of the Guaranty), any such Related Party of shares of common stock
of Guarantor or cash consideration equal to the fair market value thereof
pursuant to employee stock option, stock appreciation and similar stock-based
incentive plans applicable to employees of Guarantor that have been approved by
a majority of Guarantor's outside directors and Guarantor's shareholders.
6F. DEMAND ACCOUNT AND DEPOSIT ARRANGEMENTS. (i) Open or maintain
cash concentration, checking, savings or other accounts subject to set-off,
bankers lien or similar rights with any bank, savings and loan association,
credit union or other financial institution that holds Debt of Guarantor or any
Subsidiary (collectively, "CREDITOR BANKS") with an aggregate balance among all
such accounts (A) maintained at any individual Creditor Bank in excess of
$3,000,000 at any time and (B) maintained at all Creditor Banks in excess of
$5,000,000 at any time; and (ii) direct or otherwise permit any royalty
payments from any Subsidiary to Guarantor to be deposited in, or to otherwise
flow through, any account at a Creditor Bank; provided, however, the deposit by
the Company or the Guarantor of the proceeds of the Notes into any account it
maintains with any Creditor Bank shall not constitute a breach of this
paragraph 6F so long as the funds remain in such account for a period not to
extend beyond September 15, 1995.
6G. SUBSIDIARY RESTRICTIONS. Enter into, or be otherwise subject
to, any contract, agreement or other binding obligation that, directly or
indirectly, limits the amount of, or otherwise restricts (i) the payment of
dividends to the Company or other redemptions or distributions with respect to
its capital stock by any Subsidiary, (ii) the repayment to the Company by any
Subsidiary of intercompany loans or advances, or (iii) other intercompany
transfers of Property or other assets to the Company by Subsidiaries.
6H. SALE OF STOCK AND DEBT OF SUBSIDIARIES. Pledge or Transfer,
or part with control of, any shares of capital stock (except directors'
qualifying shares) or Debt of any Subsidiary, or permit a Subsidiary to issue
any shares of capital stock, except to Guarantor or a wholly-owned Subsidiary
organized in the United States (other than an Exempt Subsidiary), and except
that all shares of capital stock and Debt of any Subsidiary at the time owned
by or owed to Guarantor and all of its Subsidiaries may be sold as an entirety
to any Person for
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<PAGE> 21
consideration which represents fair value (as determined in good faith by the
Board of Directors of Guarantor) at the time of such sale; provided, however,
that (i) such sale is treated as an asset sale subject to, and is permitted by,
paragraph 6D, (ii) at the time of such sale, such Subsidiary shall not own,
directly or indirectly, any shares of capital stock or Debt of Guarantor or any
other Subsidiary (unless all the shares of capital stock and Debt of such other
Subsidiary owned, directly or indirectly, by Guarantor and all of its
Subsidiaries are simultaneously being sold as permitted by this paragraph 6H),
and (iii) no Default or Event of Default would otherwise result from such
transaction.
6I. NET WORTH OF INMAC S.A. Allow the Net Worth of Inmac S.A. (as
expressed in Dollars, determined in accordance with paragraph 11V herein) to be
less than, at any time, $22,000,000 through May 31, 1998, $16,000,000 through
May 31, 1999, $12,000,000 through May 31, 2000, $8,000,000 through May 31, 2001
and $4,000,000 thereafter. For purposes of this paragraph 6I, "Net Worth"
means, with respect to Inmac S.A., its "capitaux propres" as determined in
accordance with French generally accepted accounting principles and as
reflected in the Inmac S.A. annual financial statements for the most recently
ended fiscal year of Inmac S.A.
6J. RESTRICTION ON LOAN DEBT FACILITY. Enter into any Debt
Facility, agreement or contract otherwise permitted hereunder, or any
amendment, modification or extension thereof, unless such facility, agreement
or contract contains restrictions on the liability of certain Subsidiary
Guarantors substantially the same as those set forth in Section 2.15 of the
Subsidiary Guaranty.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of
or Yield-Maintenance Amount payable with respect to any Note when the
same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than 5 days after the date due; or
(iii) (A) any default or event of default or similar event
occurs under either of the Credit Facilities, whether or not waived,
consented to or amended so as to not constitute such an event or (B)
any of the banks or other financial institution lenders to any member
of a Group shall have rescinded, terminated, cancelled or materially
reduced such bank's or other lender's commitment to lend to such Group
member
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<PAGE> 22
(unless such bank's or lender's commitment is replaced in its entirety
by another bank's or lender's commitment), or such Group member shall
have consented or agreed to such act, or such bank or financial
institution shall have accelerated the Debt or other obligation owed to
it by any Group member, or any Group member shall have agreed to the
repayment of such Debt or other obligation prior to its stated
maturity, facility termination or expiration date or other due date;
provided, that this subclause (B) shall cease to be of any force or
effect (automatically without the need for any further action by or on
the part of the Required Holders or the Company) if at any time after
the date hereof there is no provision similar to this subclause (B) in
any agreement of any Group member relating to either Credit Facility;
or
(iv) any member of the Group or any Exempt Subsidiary
defaults (whether as primary obligor or as guarantor or other surety)
in any payment of principal of or interest on any Debt (other than the
Notes or Debt under the Credit Facilities) beyond any period of grace
provided with respect thereto, or any member of the Group or any
Exempt Subsidiary fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such Debt
is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such
failure or other event is to cause, or to permit the holder or holders
of such obligation (or a trustee on behalf of such holder or holders)
to cause, such obligation to become due (or to be repurchased by such
member of the Group or any Exempt Subsidiary) prior to any stated
maturity, provided that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration (or resale
to such member of the Group or any Exempt Subsidiary) shall occur and
be continuing exceeds $500,000; or
(v) any representation or warranty made by the Company
herein, the Guarantor under the Guaranty or the Warrant, the Guarantor
Subsidiary under the Subsidiary Guaranty or by any of those Persons or
any of their officers in any writing furnished in connection with or
pursuant to this Agreement, the Guaranty, the Warrant, the Subsidiary
Guaranty shall be false in any material respect on the date as of
which made; or
(vi) the Company breaches or fails to perform or observe
any agreement contained in paragraphs 5D or 6 hereof, or the Guarantor
or any Subsidiary Guarantor breaches or fails to perform or observe
any agreement in or obligation under the Guaranty, the Warrant or the
Subsidiary Guaranty, respectively (other than the covenants set forth
in Section 4 of the Guaranty and the Subsidiary Guaranty, except
Section 4.4 thereof); or
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(vii) the Company breaches or fails to perform or observe
any other agreement, term or condition contained herein, or the
Guarantor or any Subsidiary Guarantor breaches or fails to perform or
observe any covenant in Section 4 of the Guaranty or the Subsidiary
Guaranty (other than Section 4.4 thereof), and such breach or failure
shall not be remedied within 30 days after any Responsible Officer
obtains actual knowledge thereof; or
(viii) any member of the Group or any Exempt Subsidiary (A)
makes an assignment for the benefit of creditors; (B) admits its
inability to pay its debts as they come due; (C) is deemed for the
purpose of any applicable law to be unable to pay its debts as they
become due; (D) suspends making payments on its debts or is otherwise
generally not paying its debts as such debts become due, or announces
its intention to do so; or (E) declares, or is materially affected by
any declaration of, a moratorium in respect of any of its Debt; or
(ix) any decree or order for relief in respect of any
member of the Group or any Exempt Subsidiary is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "Bankruptcy
Law"), of any jurisdiction; or
(x) any member of the Group or any Exempt Subsidiary
petitions or applies to any tribunal for, or consents to, the
appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of such member of the Group
or Exempt Subsidiary, or of any substantial part of the assets of such
member of the Group or Exempt Subsidiary, or commences a voluntary
case under the Bankruptcy Law of the United States or any proceedings
(other than proceedings for the voluntary liquidation and dissolution
of a Subsidiary) relating to such member of the Group or Exempt
Subsidiary under the Bankruptcy Law of any other jurisdiction; or
(xi) any such petition or application is filed, or any
such proceedings are commenced, against any member of the Group or any
Exempt Subsidiary and such member of the Group or Exempt Subsidiary by
any act indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings,
and such order, judgment or decree remains unstayed and in effect for
more than 30 days; or
(xii) any order, judgment or decree is entered in any
proceedings against any member of the Group or any Exempt Subsidiary
decreeing, or an effective resolution is passed or a petition is
presented for, the winding up, dissolution, liquidation or
reconstruction of such member of the Group or Exempt Subsidiary, and
such order,
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<PAGE> 24
judgment, decree or resolution remains unstayed (and in the case of a
petition, not withdrawn) and in effect for more than 30 days; or
(xiii) any order, judgment or decree is entered in any
proceedings against the any member of the Group or any Exempt
Subsidiary decreeing a split-up of such member of the Group or Exempt
Subsidiary which requires the divestiture of assets having a net book
value (as at balance sheet date immediately preceding such
divestiture) in excess of $750,000 or the divestiture of the stock of
a Subsidiary whose assets have a net book value (as at balance sheet
date immediately preceding such divestiture) in excess of $750,000 (in
each case, determined in accordance with GAAP) or which requires the
divestiture of assets, or stock of a Subsidiary, which shall have
contributed more than 5% of the Consolidated net income of the Company
(determined in accordance with GAAP) for any of the three fiscal years
then most recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 30 days; or
(xiv) a final judgment in an amount in excess of $750,000
is rendered against any member of the Group or any Exempt Subsidiary
and, within 30 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 30
days after the expiration of any such stay, such judgment is not
discharged; or
(xv) any step is taken or announced by any Person with a
view to the seizure, compulsory acquisition, expropriation,
condemnation, or nationalization of all or a material portion of the
Property or other assets or shares of any member of the Group or any
Exempt Subsidiary; or
(xvi) any restriction or requirement is imposed whether by
legislative enactment, decree, regulation, order or otherwise, which
limits the availability or the transfer of foreign exchange by any
Group member, with the effect of impairing the performance of any
obligation under this Agreement, the Notes, the Guaranty or the
Subsidiary Guaranty, unless, within 15 days after the imposition of
any such restriction or requirement, such Group member delivers to
each Significant Holder a letter duly signed by a Responsible Officer,
as the case may be, and the competent governmental authorities, duly
authorized by all necessary governmental authority, stating that such
obligations are in all respects exempt from such restriction or
requirement, or such Group member shall have otherwise demonstrated to
the satisfaction of the Required Holders that such restriction or
requirement could not reasonably be expected to have a Material
Adverse Effect; or
(xvii) an encumbrancer takes possession, or an
administrative or other receiver, manager, liquidator, custodian or
trustee is appointed over all or
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<PAGE> 25
substantially all of the undertakings or assets of any member of the
Group or any Exempt Subsidiary or a distress, execution or any similar
proceeding is levied or enforced upon or sued out against all or
substantially all of the chattels or Property of such member of the
Group or Exempt Subsidiary and any such action is not discharged
within 30 days; or
(xviii) the obligations of the Company under this Agreement
or the Notes, for any reason other than satisfaction in full of the
obligations hereunder and thereunder, ceases to be in full force and
effect or is declared null and void, or the validity or enforceability
thereof is contested in any proceeding or the Company denies that it
has any further liability hereunder or thereunder, or any other event
or circumstance occurs that the Required Holders reasonably believe
makes it reasonably likely that any of the foregoing will occur;
(xix) the obligations of the Guarantor under the Guaranty
or the Warrant, for any reason other than satisfaction in full of the
obligations thereunder, ceases to be in full force and effect or is
declared null and void, or the validity or enforceability thereof is
contested in any proceeding or the Guarantor denies that it has any
further liability thereunder, or any other event or circumstance
occurs that the Required Holders reasonably believe makes it
reasonably likely that any of the foregoing will occur;
(xx) the obligations of the Subsidiary Guarantors under
the Subsidiary Guaranty, for any reason other than satisfaction in
full of the obligations thereunder, ceases to be in full force and
effect or is declared null and void, or the validity or enforceability
thereof is contested in any proceeding or any Subsidiary Guarantor
denies that it has any further liability thereunder, or any other
event or circumstance occurs that the Required Holders reasonably
believe makes it reasonably likely that any of the foregoing will
occur;
then (a) if such event is an Event of Default specified in clause (i) or (ii)
of this paragraph 7A, the holder of any Note (other than the Company or any of
its Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon, and
the Yield Maintenance Amount, if any, with respect to such Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (ix), (x) or xi of this paragraph 7A, all of the Notes at
the time outstanding shall automatically become immediately due and payable,
together with interest accrued thereon and the Yield-Maintenance Amount, if
any, with respect to each Note, without presentment, demand, protest or notice
of any kind, all of which are hereby waived by the Company, and (c) if such
event is not an Event of Default specified in clause (ix), (x) or (xi) of this
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<PAGE> 26
paragraph 7A, the Required Holder(s) may at its or their option, by notice in
writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and the Yield-Maintenance Amount, if any, with respect
to each Note, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) may, by notice in writing to the Company,
rescind and annul such declaration and its consequences if (i) all overdue
interest on the Notes, the principal of and Yield-Maintenance Amount, if any,
payable with respect to any Notes which have become due otherwise than by
reason of such declaration, and interest on such overdue interest and overdue
principal and Yield-Maintenance Amount at the rate specified in the Notes shall
have been paid, (ii) any amounts which have become due solely by reason of such
declaration shall not have been paid, (iii) all Events of Default and Defaults,
other than non-payment of amounts which have become due solely by reason of
such declaration, shall have been cured or waived pursuant to paragraph 11C,
and (iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement. No such rescission or
annulment shall extend to or affect any subsequent Event of Default or Default
or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall
be declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or other agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
7E. CURRENCY EQUIVALENTS. For purposes of determining whether an
Event of Default that is conditioned upon a specified dollar threshold being
exceeded with respect to the Company or one of its Subsidiaries has occurred,
such U.S. dollar threshold shall be expressed in the local currency of the
country in which the Company or such Subsidiary is domiciled and organized
(determined based on the spot rate in effect on the date such event
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<PAGE> 27
occurred or, if such rate is not readily available, the rate in effect on the
immediately preceding Business Day on which such rate is available), in each
case as such spot rate is published in The Wall Street Journal or another
widely circulated financial daily periodical.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of The Netherlands and each Subsidiary
is duly organized and (where such concept is appropriate) existing in good
standing under the laws of the jurisdiction in which it is incorporated. The
Company and each Subsidiary has the corporate power and authority to conduct
its business as presently conducted, and to execute, deliver and perform the
Notes, this Agreement and the Subsidiary Guaranty.
8B. BALANCE SHEETS. The Company has furnished you with unaudited
Consolidating balance sheets of the Guarantor and its Subsidiaries as of April
30 in each of the years 1994 to 1995, inclusive, identified by a principal
financial officer of the Guarantor. Such consolidating balance sheets
(including any related schedules and/or notes) are true and correct in all
material respects (subject to changes resulting from audits and year-end
adjustments), have been prepared in accordance with GAAP consistently followed
throughout the periods involved, show all liabilities, direct and contingent,
of the Guarantor and its Subsidiaries required to be shown in accordance with
such principles and fairly present the condition of the Guarantor and its
Subsidiaries as at the dates thereof. There has been no material adverse
change in the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole since July 30, 1994.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any Properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which might result in any Material Adverse
Effect.
8D. OUTSTANDING DEBT. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted by paragraph 6A.
There exists no default under the provisions of any instrument evidencing such
Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and marketable title to its respective real properties
(other than Properties which it leases) and good title to all of its other
respective Properties and assets, including the Properties and assets reflected
in the balance sheet as at July 30, 1994 referred to in paragraph 8B (other
than Properties and assets disposed of in the ordinary course of business taken
as a whole), subject to no Lien of any kind except Liens (i) permitted by
paragraph 6B and (ii) that are
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immaterial to the conduct of the business and operation of the Company and its
Subsidiaries taken as a whole. All leases necessary in any material respect
for the conduct of the respective businesses of the Company and its
Subsidiaries are valid and subsisting and are in full force and effect.
8F. TAXES. The Company has and each of its Subsidiaries has filed
all income tax returns which, to the knowledge of the officers of the Company,
are required to be filed, and each has paid all taxes as shown on such returns
and on all assessments received by it to the extent that such taxes have become
due, except such taxes as are currently subject to a Good Faith Contest.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or other corporate restriction which has or could reasonably
have a Material Adverse Effect. To the extent there exists on the date hereof
an agreement or understanding between any member of the Obligated Group and any
lender or other creditor that contains a provision substantially similar to, or
with substantially the same effect as, the provision described in clause (B) of
paragraph 7(A)(iii), it shall be removed on or prior to September 15, 1995.
Neither the execution nor delivery of this Agreement or the Securities, nor the
offering, issuance and sale of the Securities, nor fulfillment of nor
compliance with the terms and provisions hereof and of any Note Document will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the Consolidated Properties or other assets
pursuant to, the charter or by-laws of the Company or any of its Subsidiaries,
any award of any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any of its Subsidiaries is subject. Neither
the Company nor any of its Subsidiaries is a party to, or otherwise subject to
any provision contained in, any instrument evidencing Consolidated Debt, any
agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Consolidated Debt of the type to be evidenced by the Notes except
as set forth in the agreements listed in Exhibit H attached hereto.
8H. OFFERING OF NOTES. None of the Company, the Guarantor or any
agent acting on its or their behalf has, directly or indirectly, offered the
Notes or any similar security of the Company for sale to, or solicited any
offers to buy the Notes or any similar security of the Company from, or
otherwise approached or negotiated with respect thereto with, any Person other
than institutional investors, and none of the Company, the Guarantor or any
agent acting on its or their behalf has taken or will take any action which
would subject the issuance or sale of any of the Securities to the provisions
of section 5 of the Securities Act or to the provisions of any securities or
Blue Sky law of any applicable jurisdiction. The Company has engaged ABN Amro
Securities as its placement agent for the Securities and no
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other agent or intermediary, and shall be solely responsible, with the
Guarantor, for all fees and expenses of such agent in connection with the
transactions contemplated by this Agreement, the Notes and the Warrant.
8I. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). The proceeds of sale of the Securities
will be used to refinance Debt. None of such proceeds will be used, directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any Debt which was originally incurred to purchase or
carry any stock that is currently a margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Exchange
Act, in each case as in effect now or as the same may hereafter be in effect.
8J. ERISA AND FOREIGN PENSION PLANS. (i) Neither the Company nor
any of its Subsidiaries maintains or has maintained a Plan subject to ERISA or
which otherwise has a liability to the PBGC or other similar entity having
jurisdiction over the Company or its Subsidiaries.
(ii) Each Foreign Pension Plan of the Company and any Subsidiary
thereof has been maintained in substantial compliance with its terms and with
the requirements of any and all applicable laws, statutes, rules, regulations
and orders and has been maintained, where required, in good standing with
applicable regulatory authorities except where the failure to so maintain any
such Foreign Pension Plan could not reasonably be expected to have a Material
Adverse Effect.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of
any Subsidiary, nor any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor
any circumstance in connection with the offering, issuance, sale or delivery of
the Securities is such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings after the date
of closing with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Securities or fulfillment of or
compliance with the terms and provisions hereof or of the Securities.
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8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries
and all of their respective Properties and facilities have complied at all
times and in all respects with all national, state, local and regional
statutes, laws, ordinances and judicial or administrative orders, judgments,
rulings and regulations relating to protection of the environment except, in
any such case, where failure to comply would not result in a Material Adverse
Effect.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Company or the
Guarantor in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Subsidiaries which now has or in the
future may (so far as the Company can now foresee) have, a Material Adverse
Effect and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to you by or on behalf of the
Company or the Guarantor prior to the date hereof in connection with the
transactions contemplated hereby.
8N. POSSESSION OF FRANCHISES, ETC. The Company and all its
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from unduly burdensome restrictions, that are necessary in
any material respect for the ownership, maintenance and operation of its
Properties and assets, and neither the Company nor any of its Subsidiaries is
in, or has reason to believe it is in, violation thereof in any material
respect.
8O. COMPLIANCE WITH LAWS. The Company and its Subsidiaries (i)
have complied in all material respects with all applicable laws, statutes,
rules and regulations, including Environmental and Safety Laws, and neither the
Company nor any Subsidiary has received (A) notice of any material failure so
to comply or (B) any information that would lead it to believe that it is the
subject of any national, state, local or foreign investigation; (ii) does not
manage, generate, transport, discharge or store any Hazardous Materials in
material violation of any material Environmental and Safety Laws; (iii) does
not own, operate or maintain any underground storage tanks or surface
impoundments; and (iv) is not aware or any conditions or circumstances
associated with its currently or previously owned or leased Properties or
operations (or those of its tenants), in each case which may give rise to any
liability, fines, penalties or other obligations, including Environmental
Liabilities and Costs, that could have a Material Adverse Effect.
8P. INTELLECTUAL PROPERTIES. All material patents, patent
applications, copyrights, copyright applications, trade secrets, trade names
and trademarks, technologies, methods, processes or other proprietary
properties or information (collectively, "INTELLECTUAL PROPERTIES") which are
used by the Company and its Subsidiaries in the conduct of their respective
businesses are either owned by them or are used, employed or practiced by them
under valid and existing licenses, grants, "shop rights," or other rights.
Neither the
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Company nor any Subsidiary has received a notification of infringement of any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect. No officer, director, employee or Shareholder of the
Company or any Subsidiary (other than the Company or another Subsidiary) owns
or has, nor at the date of closing will own or have, any interest in any
Intellectual Property owned or used by the Company or any Subsidiary in
connection with its businesses.
8Q. LABOR AND EMPLOYEE RELATIONS MATTERS. Neither the Company nor
its Subsidiaries is or, to its knowledge, expects to be the subject of any
labor dispute, and neither the Company nor its Subsidiaries has violated any
applicable law or regulation relating to labor or labor practices, which
violation would give rise to a Material Adverse Effect.
8R. AUTHORIZATION AND ENFORCEABILITY. Each of the Note Documents
has been duly authorized by all necessary corporate action on the part of the
Company and its Subsidiaries, as applicable, and have been duly executed and
delivered by duly authorized officers thereof. Each of the Note Documents
constitutes the legally valid and binding obligation of the Company and/or the
Subsidiary Guarantors that are a party thereto, enforceable against them in
accordance with its terms, except that (i) enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting the rights of creditors generally and (ii) enforcement is subject
to the effect of general principles of equity, whether applied by a court of
law or equity.
8S. FOREIGN ENEMIES AND REGULATIONS. Neither the issue and sale
of the Notes or the Warrants or the execution and delivery of this Note
Agreement nor the use of the proceeds thereof will violate (i) any regulations
promulgated or administered by the Office of Foreign Assets Control, United
States Department of the Treasury, including without limitation, the Foreign
Assets Control Regulations, the Transaction Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian
Assets Control Regulations, the Nicaraguan Trade Control Regulations, the South
African Transaction Regulations, the Iranian Transactions Regulations, the
Iraqi Sanctions Regulations, the Soviet Gold Coin Regulations, the Panamanian
Transaction Regulations or the Libyan Sanctions Regulations of the United
States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended, (ii)
the Trading with the Enemy Act, as amended, (iii) Executive Orders 8389, 9095,
9193, 12543 (Libya), 12544 (Libya), 12722 (Iraq) or 12724 (Iraq), 12775 (Haiti)
or 12779 (Haiti), or 12959 (Iran), all as may be amended, of the President of
the United States or (iv) any rule, regulation or executive order issued or
promulgated pursuant to the laws or regulations described in the foregoing
clauses (i) -(iii).
8T. WARRANTS AND WARRANT SHARES. (i) The Warrants have been duly
authorized by all necessary corporate action on the part of Guarantor and have
been duly executed and delivered by it. The Warrants constitute the valid and
legally binding obligations of
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Guarantor, enforceable against it in accordance with its terms, except that (a)
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting the rights of creditors
generally and (b) enforcement is subject to the effect of general principles of
equity, whether applied by a court of law or equity.
(ii) Guarantor has reserved and unissued shares of its common stock at
least equal to the shares of common stock issuable upon exercise of the
Warrants. The shares of common stock issuable upon exercise of any Warrant
have been duly authorized, and upon payment therefor in accordance with the
terms of such Warrant, shall be validly issued, fully paid and nonassessable
shares, with no liability on the part of the exercising holder with respect to
obligations of Guarantor.
8U. DUTCH TAXES. No liability for any tax (whether income,
documentary, sales, stamp, registration, issue, capital, property, excise or
otherwise), duty, levy, impost, fee, charge or withholding, directly or
indirectly imposed, assessed, levied or collected by or for the account of any
governmental body of or in The Netherlands or any political subdivision thereof
or therein will be incurred by the Company or any holder of any Security as a
result of the execution or delivery of this Agreement or the Securities, and no
deduction or withholding in respect of any such tax, duty, levy, impost, fee,
charge or withholding imposed by or for the account of any governmental body of
The Netherlands or any political subdivision thereof or therein is required to
be made from any payment (or other performance) by the Company under this
Agreement or on the Notes.
9. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
9A. NATURE OF PURCHASE. You are not acquiring the Notes to be
purchased by you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that
the disposition of your Property shall at all times be and remain within your
control.
9B. SOURCE OF FUNDS. No part of the funds being used by you to
pay the purchase price of the Securities being purchased by you hereunder
constitutes assets allocated to any separate account maintained by you. For
the purpose of this paragraph 9B, the term "separate account" shall have the
meaning specified in section 3 of ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in the introductory sentence and in paragraphs 1 and 2 shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified with respect thereto below:
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10A. YIELD-MAINTENANCE TERMS.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City (in relation to Notes
denominated in Dollars), London and Amsterdam (in relation to Notes denominated
in Dutch Guilders) are required or authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B, or is declared to
be immediately due and payable pursuant to paragraph 7A as the context
requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance
with accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Dollar Reinvestment Yield (in the case of Notes denominated in Dollars) or the
or the Dutch Guilder Reinvestment Yield (in the case of Notes denominated in
Dutch Guilder) with respect to such Called Principal.
"DOLLAR REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note denominated in United States dollars, 0.50% over the
yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New
York City time) on the Business Day next preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page 678" on
the Telerate Service (or such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or if such yields shall not be reported as of such time
or the yields reported as of such time shall not be ascertainable, (ii) the
Treasury Constant Maturity Series yields reported, for the latest day for which
such yields shall have been so reported as of the Business Day next preceding
the Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between yields reported for
various maturities.
"DUTCH GUILDER REINVESTMENT YIELD" shall mean, with respect to the
Called Principal of any Note denominated in Dutch Guilders, 0.50% over the
yield to maturity implied by the yield, as determined by Recognized Market
Makers at the close of the Amsterdam market, for the Business Day next
preceding the Settlement Date during which actively traded
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Staatsobligatie shall have been traded, of such securities having an average
life equal (or most nearly equal) to the Average Life of such Called Principal
as of such Settlement Date.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"RECOGNIZED MARKET MAKER" shall mean two internationally recognized
dealers of Staatsobligatie, as determined by you.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B, or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in
no event be less than zero.
10B. OTHER TERMS.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"ANNUAL PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, for
any four consecutive fiscal quarter period, the sum of the Percentages of
Earnings Transferred attributable to each asset Transferred during such period.
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"ANNUAL PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean, for any
four consecutive fiscal quarter period, the sum of the Percentages of Tangible
Assets Transferred attributable to assets Transferred during such period.
"BANKRUPTCY LAW" shall have the meaning specified in clause (xix) of
paragraph 7A.
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any Person,
any rental obligation which, under GAAP, would be required to be capitalized on
the books of such Person, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"COMPANY" shall mean Inmac, B.V., a corporation organized under the
laws of the Netherlands and a wholly-owned Subsidiary of Guarantor.
"CONFIDENTIALITY AGREEMENT" shall mean an agreement in substantially
the form of Exhibit G attached hereto.
"CONSOLIDATED," when used to modify any accounting or defined term,
shall mean such item or defined term as it relates to Guarantor and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED NET EARNINGS" shall mean, as to any fiscal period,
consolidated gross revenues of Guarantor and its Subsidiaries less all costs,
rebates, returns, allowances, discounts, cost of goods sold, selling, general,
administrative and other expenses, and other proper costs, charges and expenses
(including current income taxes and changes in deferred income taxes,
provisions for taxes on unremitted foreign earnings that are included in gross
revenues and current additions to reserves) for such fiscal period.
Consolidated Net Earnings shall not include (i) extraordinary gains; (ii) gains
or losses resulting from the sale or other disposition of capital assets; (iii)
undistributed positive earnings of any Person that is not a Subsidiary; (iv)
gains arising from changes in accounting principles; (v) gains arising from the
write-up of assets; (vi) any undistributed positive earnings of any Subsidiary,
to the extent that the declaration or payment of dividends or other share
distributions, share repurchases or redemptions or repayment of intracompany
loans or advances by such Subsidiary is restricted by charter document,
agreement, law or otherwise; (vii) any gain from the collection of proceeds
from insurance policies or litigation settlements; (viii) any positive earnings
of any Person acquired by Guarantor or a Subsidiary prior to the effective date
of such acquisition;
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and (ix) gains or losses from the acquisition of securities or the retirement
or extinguishment of Debt.
"CONSOLIDATED TANGIBLE ASSETS" shall mean the gross book value of all
assets (including assets held under Capitalized Lease Obligations) of Guarantor
and its Subsidiaries on a consolidated basis, net of (i) the net book value of
all Intangibles; (ii) all reserves relating to such assets; and (iii) any
write-up since July 30, 1994 in the carrying values of such assets, all
determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean the Consolidated Tangible
Assets of Guarantor and its Subsidiaries on a consolidated basis, less (i) all
Consolidated liabilities, (ii) to the extent not already deducted, Consolidated
Debt (including Debt of the type specified in clauses (iii), (iv) or (v) of the
definition of Debt); and (iii) any surplus adjustments attributed to cumulative
translation adjustments.
"CREDIT FACILITIES" shall mean the Dutch Credit Facility and the U.S.
Credit Facility.
"CUMULATIVE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean,
at the time of determination thereof, the sum of the Percentages of Earnings
Capacity Transferred attributable to each asset Transferred from and after the
date hereof.
"CUMULATIVE PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean, at
the time of determination thereof, the sum of the Percentages of Tangible
Assets Transferred attributable to each asset Transferred from and after the
date hereof.
"DEBT" shall mean, with respect to any Person (i) any obligation for
borrowed money, including any obligation evidenced by notes payable, commercial
paper, bonds, debentures or similar written instruments; conditional sales
contracts; and drafts accepted representing extensions of credit (other than
for trade and tax payables, deferred taxes and operating leases); (ii)
Capitalized Lease Obligations; (iii) obligations of another Person secured by a
Lien on, or payable out of the proceeds or production from, such Person's
property whether or not such obligation is expressly assumed by such Person;
(iv) Debt of any partnership or joint venture of which such Person is a general
partner or joint venturer that is not expressly non-recourse with respect to
such Person; (v) Guarantees of any of the foregoing and (vi) any modification,
extension or renewal of any of the foregoing.
"DOLLAR" or "$" shall mean dollars of the United States, being the
lawful currency of that country.
"DUTCH CREDIT FACILITY" shall mean the revolving credit facility of
the Company and certain Subsidiary Guarantors with ABN Amro Bank, N.V. as agent
for a group of banks
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contemplated by the commitment letter referred to in paragraph 5L or any
replacement or successor facility with a minimum aggregate borrowing
availability of $10,000,000.
"DUTCH GUILDERS" or "DFL." shall mean Guilders of The Netherlands,
being the lawful currency of that country.
"ENVIRONMENTAL AND SAFETY LAWS" shall mean all national, state and
local laws, regulations and ordinances relating to the discharge, handling,
disposition or treatment of Hazardous Materials and other substances or the
protection of the environment or of employee health and safety.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean, as to any Person,
all liabilities, obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages, contribution,
cost recovery, costs and expenses (including all fees, disbursements and
expenses of counsel, expert and consulting fees, and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim or demand, by any Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
permit, order or agreement with any Federal, state or local governmental
authority or other Person, arising from environmental, health or safety
conditions, or the release or threatened release of a contaminant, pollutant or
Hazardous Material into the environment, resulting from the operations of such
person or its subsidiaries, or breach of any Environmental and Safety Law or
for which such Person or its subsidiaries is otherwise liable or responsible.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA AFFILIATE" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Guarantor or a Subsidiary Guarantor would be
deemed to be a "single employer" (i) within the meaning of Section 414(b), (c),
(m) or (o) of the Code or (ii) as a result of Guarantor or a Subsidiary being
or having been a general partner of such person.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
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"EXEMPT SUBSIDIARY" shall mean (i) Inmac, Disc, a corporation
organized under the laws of the State of California; (ii) Inmac, S.A. de C.V.,
a corporation organized under the laws of Mexico; (iii) Inmac, S.p.A., a
corporation organized under the laws of Italy; (iv) Inmac, Inc., a corporation
organized under the laws of Canada, and (v) Subsidiaries formed and designated
as Exempt Subsidiaries after the date of closing; provided that the amount of
assets contributed or transferred to such post-closing Subsidiary shall be
treated as a Transfer of assets for purposes of computing compliance with
paragraph 6D hereof and provided further that the Subsidiaries described in
clauses (i),(ii) and (iii) shall be disregarded for purposes of paragraph 7A
hereof.
"FOREIGN PENSION PLAN" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Company or any other
member of the Group primarily for the benefit of employees residing outside the
United States of America of the Company or such other member which plan, fund
or other similar program provides for retirement income for such employees in
contemplation of retirement or provides for payments to be made to such
employees upon termination of employment, and which plan is not subject to
ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles, as in
effect in the United States from time to time.
"GOOD FAITH CONTEST" shall mean, with respect to any tax, assessment,
Lien, obligation, claim, liability, judgment, injunction, award, decree, order,
law, regulation, statute or similar item, any challenge or contest thereof by
appropriate proceedings timely initiated in good faith by the Person subject
thereto for which adequate reserves therefor have been taken in accordance with
GAAP.
"GROUP" shall mean, collectively, the Guarantor and its Subsidiaries
(including the Company), other than Exempt Subsidiaries.
"GUARANTEE" shall mean, as to any Person, any guarantee or endorsement
by such Person of any obligations, or such Person's contingent liability for
any obligations, including an endorsement of such obligation or an agreement
by such Person to purchase or otherwise acquire securities of another Person,
to provide funds for capital contributions or for the payment or discharge of
another Person's obligation, to maintain the solvency, net worth or other
financial condition of another Person, or to make payment for products or
services regardless of whether such products or services are actually used,
delivered or provided, if, in any such case, the intent or effect of such
agreement is to provide assurance that such obligation will be paid or
discharged or that the holders of such obligation will be protected against any
loss in respect thereof.
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"GUARANTOR" shall mean Inmac Corp., a corporation organized under the
laws of the State of Delaware.
"GUARANTY" shall mean that certain Guaranty of the Guarantor, dated as
of June 29, 1995, as it may be amended, supplemented or otherwise modified from
time to time.
"HAZARDOUS MATERIALS" shall mean (i) any material or substance defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "toxic substances" or any other formulations intended to
define, list or classify substances by reason of their deleterious properties,
(ii) any oil, petroleum or petroleum derived substance, (iii) any flammable
substances or explosives, (iv) any radioactive materials, (v) asbestos in any
form, (vi) electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of 50 parts per
million, (vii) pesticides or (viii) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
agency or authority or which may or could pose a hazard to the health and
safety of persons in the vicinity thereof.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation."
"INSPECTING HOLDER" shall mean (i) the Purchaser and (ii) at any time
prior to the occurrence of an Event of Default, any other holder of at least
25% of the principal amount of the Notes outstanding at such time (determined
in accordance with paragraph 11V) and at any time after occurrence of an Event
of Default, any other holder of a Note, regardless of amount.
"INTANGIBLES" shall mean any patents, trademarks, copyrights, trade
names, goodwill (including any amounts, however designated, representing the
cost of acquisition of business and investments in excess of the book value
thereof), unamortized debt discount and expense, deferred research and
development costs, any write-up of asset value after July 31, 1994, and any
other assets treated as intangible assets under GAAP.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, contractual, statutory or common law right of set- off, lien
(statutory or otherwise) or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or any similar law
relating to the creation and perfection of security interests of any
jurisdiction, except for vendor liens and title retention agreements relating
to inventory and incurred in the ordinary course of business; provided (i) no
security agreement or UCC-1 Financing Statement is actually executed, (ii) no
other formal action is taken by the debtor in furtherance of creating a
perfected lien, and (iii) in the aggregate, such vendor liens and title
retention contracts do not
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exceed at any time 25% of Consolidated inventory (determined as of the end of
the fiscal quarter immediately preceding the date of such determination and net
of returns, rebates, allowances and similar items)) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect on
the business, assets, operations, prospects or condition, financial or
otherwise, of Guarantor and its Subsidiaries, taken as a whole, (ii) material
impairment of the ability of the Company to perform any of its obligations
hereunder or under the Notes, or (iii) material impairment of the
enforceability or the rights of, or the benefits available to, the
beneficiaries of the Guaranty or Subsidiary Guaranty, or holders of the
Warrants, or holders of the Notes or (iv) material impairment of the ability of
the Guarantor or any Subsidiary Guarantor to perform any of its or their
obligations under the Guaranty, the Subsidiary Guaranty or under the Warrants.
"NOTES" shall mean the the two (2) series of Senior Guaranteed Notes
due 2001 issued by Company pursuant to the Note Agreement.
"NOTE DOCUMENTS" shall mean (i) this Note Agreement; (ii) the
Subsidiary Guaranty; (iii) the Guaranty; (iv) the Notes; (v) the Warrants; and
(vi) any other agreement, instrument, certificate or document executed and
delivered in connection with any Note Document or the Guaranty.
"NOTEHOLDERS" shall mean the Purchaser and any of its Transferees.
"OBLIGATED GROUP" shall mean the Company, the Guarantor and the
Subsidiary Guarantors.
"OFFICER'S CERTIFICATE" shall mean, in the case of the Guarantor or
any of its Subsidiaries incorporated in the United States, a certificate signed
in the name of the Guarantor or such Subsidiary by a Responsible Officer and,
in the case of any other member of the Group (including Exempt Subsidiaries), a
certificate signed in the name of such member by its Secretary or any director
thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, with respect
to each asset Transferred pursuant to clause (v) of paragraph 6D, the ratio
(expressed as a percentage) of (i) aggregate Consolidated Net Earnings produced
by, or otherwise attributable
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to, such asset during the 36 month period most recently ended prior to the
effective date of such Transfer to (ii) Consolidated Net Earnings for such 36
month period.
"PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean, with respect
to each asset Transferred pursuant to clause (v) of paragraph 6D, the ratio
(expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of such Transfer) to (ii) Consolidated
Tangible Assets (determined as of the last day of the fiscal quarter
immediately preceding the date of such Transfer).
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any multiemployer or single-employer plan as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Guarantor or a Subsidiary of the
Guarantor or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Guarantor, or a Subsidiary
of the Guarantor or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"PROPERTY" shall mean all real property owned or leased by Company or
any of its Subsidiaries, and all personal property located thereon or used or
consumed in the operation of the business conducted thereat.
"PURCHASE PRICE" shall mean the aggregate of $13,000,017.50 and
Dfl.10,918,600.
"PURCHASER" shall mean The Prudential Insurance Company of America and
its successors and assigns.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least
66-2/3% of the aggregate principal amount of the Notes from time to time
outstanding (determined in accordance with paragraph 11V).
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company, the Guarantor or any Subsidiary Guarantor, as the case may be, or any
other officer or director of the Company, the Guarantor or any Subsidiary
Guarantor, as the case may be, involved principally in its financial
administration or its controllership function.
"S&P" shall mean Standard & Poor's Corporation, or any successor
entity.
"SECURITIES" shall mean, collectively, the Notes and the Warrants.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDER" shall mean any Person (other than any Noteholder) who
owns, either individually or together with all other Persons to whom such
Person is related by blood, adoption or marriage or who is an Affiliate of such
Person, 5% or more of any class of Guarantor's capital stock. For purposes of
making this computation, all warrants, rights, options, convertible securities
and other rights to purchase or acquire a class of Company capital stock held
by such holder (other than the holders of the Warrants) shall be deemed to be
exercised.
"SIGNIFICANT HOLDER" shall mean (i) the Purchaser, so long as it shall
hold any Note, or (ii) any other holder of at least $2,500,000 original
principal amount of Notes (or the equivalent in Dutch Guilders, determined in
accordance with paragraph 11V).
"SUBSIDIARY" shall mean, as to any Person (i) any corporation, at
least 80% of the total combined voting power of all classes of Voting Shares of
which shall, at the time as of which any determination is being made, be owned
by such Person, either directly or through its other Subsidiaries and (ii) any
partnership or other entity in which such Person or any of its Subsidiaries
holds more than a 80% equity interest and controls the management of such
entity. Unless otherwise clearly specified, "Subsidiaries" of Guarantor shall
include Company.
"SUBSIDIARY GUARANTORS" shall mean those Subsidiaries who, at the date
of such determination, have guaranteed the Notes pursuant to the Subsidiary
Guaranty.
"SUBSIDIARY GUARANTY" shall mean the guaranty dated June 29, 1995 by
Inmac S.A., a French corporation, Inmac Holdings Limited, a limited liability
company organized under the laws of the United Kingdom and registered in
England and Wales, Inmac (U.K.) Limited, a limited liability company organized
under the laws of the United Kingdom and registered in England and Wales, Inmac
aktiebolag, a corporation organized under the laws of Sweden, Inmac
Gesellschaft mit beschrankter Haftung, a corporation organized under the laws
of Germany, in favor of the holders of the Notes and any other Subsidiary who
becomes a party to the Subsidiary Guaranty subsequent to the date hereof
pursuant to paragraph 5M hereof.
"TRANSFER" shall mean, with respect to any property or other asset of
a Person, the sale, lease, disposition, exchange or other transfer thereof.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by you under this Agreement.
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"U.S. CREDIT FACILITY" shall mean the credit facility of the Guarantor
with ABN Amro Bank, N.V., as agent for a group of banks or any replacement or
successor facility with a maximum aggregate borrowing availability of
$5,000,000.
"VOTING SHARES" shall mean, with respect to any company, any shares of
such company whose holders are entitled under ordinary circumstances to vote
for the election of directors of such company (irrespective of whether at the
time shares of any other class or classes shall have or might have voting power
by reason of the happening of any contingency).
"WARRANTS" shall mean the detachable warrants to originally purchase
175,000 shares of Guarantor's common stock issued concurrently with the Notes.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All
references in this Agreement to "GAAP" shall be deemed to refer to generally
accepted accounting principles in effect in the United States at the time of
application thereof. Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all unaudited financial statements and
certificates and reports as to financial matters required to be furnished
hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the most recent audited consolidated financial statements of
the Company and its Subsidiaries delivered pursuant to clause (ii) of paragraph
5A or, if no such statements have been so delivered, the most recent audited
financial statements referred to in clause (i) of paragraph 8B.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as you shall
hold any Note, it will make payments of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds
for credit (not later than 12:00 noon, New York City time, on the date due) to
your account or accounts as specified in the Purchaser Schedule attached
hereto, or such other account or accounts in the United States as you may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. You agree that, before disposing of
any Note, you will make a notation thereon (or on a schedule attached thereto)
of all principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits of
this paragraph 11A to any Transferee which shall have made the same agreement
as you have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay on demand, and save you and
any Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such
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transactions, including (i) all document production and duplication charges and
the reasonable fees and expenses of any special counsel engaged by you or any
Significant Holder in connection with any Note Document, the transactions
contemplated hereby and any subsequent modification of, or consent under, any
Note Document, whether or not such consent is granted; provided that, with
respect to any amendment proposed by any Significant Holder prior to the
occurrence of an Event of Default, such holder shall notify the Company and the
Guarantor prior to engaging outside counsel to prepare such amendment, and (ii)
the reasonable costs and expenses, including attorneys' fees, incurred by you
or such Transferee in enforcing (or determining whether or how to enforce) any
rights under any Note Document or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with any Note
Document or the transactions contemplated hereby or by reason of your or such
Transferee's having acquired any Security, including without limitation costs
and expenses incurred in any restructuring, workout or bankruptcy case. The
obligations of the Company under this paragraph 11B shall survive the transfer
of any Note or portion thereof or interest therein by you or any Transferee and
the payment of any Note and transfer or full exercise of the Warrants. The
Company agrees to pay you a structuring fee in respect of this transaction of
$100,000 of which the Purchaser acknowledges $25,000 has already been paid.
The remaining $75,000 shall be paid at closing pursuant to paragraph 3G. The
foregoing notwithstanding, the Company shall be obligated to pay the fees and
expenses of only one outside law firm that is acting as counsel to the
Noteholders as a group, provided, that (A) in the event that Required Holders
determine that legal advice or assistance is needed with respect to the laws of
the jurisdiction in which the Company is domiciled at the time, then the
Noteholders shall have the right to retain an additional outside law firm in
such jurisdiction, and (B) if any Noteholder reasonably determines that there
exists a conflict of interest between itself and the other Noteholders it may
engage separate counsel at the expense of the Company. Further, in cases
brought by individual Noteholders resulting from the failure of the Company to
make payments in respect of their Note, each Noteholder may, if it so elects,
retain its own outside counsel, but the Guarantor shall only be liable for the
fees and expenses of up to four outside law firms.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holder(s)
except that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement shall change the
maturity or currency of any Note, or change the principal of, or the rate or
time of payment of interest on or any Yield-Maintenance Amount payable with
respect to any Note, or affect the time, amount or allocation of any
prepayments, or change the proportion of, or method of calculating, the
principal amount of the Notes required with respect to any consent, amendment,
waiver or declaration. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph
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<PAGE> 45
11C, whether or not such Note shall have been marked to indicate such consent,
but any Notes issued thereafter may bear a notation referring to any such
consent. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein
and in the Notes, the term "this Agreement" and references thereto shall mean
this Agreement as it may from time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $1,000,000 (or the equivalent in Dutch Guilders,
determined in accordance with paragraph 11V) except as may be necessary to
reflect any principal amount not evenly divisible by $1,000,000. The Company
shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Upon
surrender for registration of transfer of any Note at the principal office of
the Company, the Company shall, at its expense, execute and deliver one or more
new Notes of like tenor and of a like aggregate principal amount, registered in
the name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever
any Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled
to receive. Every Note surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any
such loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
You agree, and by his, her or its acceptance of the Notes, each
Transferee agrees, not to sell, assign or otherwise transfer all or any part of
your or its Notes to any Person listed on Schedule 11D. Concurrently with the
Transfer of any Note to a Person who will become a Significant Holder, such
Person shall execute and deliver to the Company (with a copy to the Guarantor)
a Confidentiality Agreement.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of
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<PAGE> 46
principal of, interest on and any Yield-Maintenance Amount payable with respect
to such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue, and the Company shall not be affected by notice to the
contrary. Subject to the preceding sentence and any applicable securities
laws, the holder of any Note may from time to time grant participations in such
Note to any Person in minimum denominations of $1,000,000 (or the equivalent in
Dutch Guilders, determined in accordance with paragraph 11V) on such terms and
conditions as may be determined by such holder in its sole and absolute
discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of either of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
11H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that
the holder of any Security may deliver copies of any financial statements and
other documents delivered to such holder, and disclose any other information
disclosed to such holder, by or on behalf of the Company or any Subsidiary in
connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants, (ii) any other holder
of any Security, (iii) any Person to which such holder offers to sell such
Security or any part thereof, (iv) any Person to which such holder sells or
offers to sell a participation in all or any part of such Security, (v) any
Person from which such holder offers to purchase any other security of the
Company, (vi) any national or state regulatory authority having jurisdiction
over such holder, (vii) the National Association of Insurance Commissioners or
any similar organization or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance with any law,
rule, regulation or order applicable to such holder, (b) in response to any
subpoena or other legal process or informal investigative demand or (c) in
connection with any litigation to which such holder is a party or (d) in order
to protect such holder's investment in the any Security. Disclosure of
material, non-public information to Persons specified in clauses (iii), (iv) or
(v) (other than existing holders of any Security) shall be conditioned on such
Person's execution and delivery to the Company (with a copy to the Guarantor)
of a Confidentiality Agreement in substantially the form of Exhibit G.
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11I. NOTICES. All written communications provided for hereunder
shall be sent by international or nationwide (as applicable) overnight delivery
service (with charges prepaid) and (i) if to you, addressed to you at the
address specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as you shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the Company
in writing or, if any such other holder shall not have so specified an address
to the Company, then addressed to such other holder in care of the last holder
of such Note which shall have so specified an address to the Company, and (iii)
if to the Company, addressed to it at Keienbergweg 30, 1101 GB Amsterdam Z.O.,
the Netherlands, with a copy to the Guarantor at 2465 Augustine Drive, Santa
Clara, California 95052 U.S.A., or at such other address as the Company shall
have specified to the holder of each Note in writing; provided, however, that
any such communication to the Company may also, at the option of the holder of
any Note, be delivered by any other means either to the Company at its address
specified above or to any officer of the Company.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the computation of
the interest payable on such Business Day.
11K. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
11L. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of New York.
11M. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11N. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
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11O. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
11P. JURISDICTION; SERVICE OF PROCESS. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY NOTE, OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH THEREOF, BROUGHT BY
ANY HOLDER OF A NOTE AGAINST THE COMPANY OR ANY OF THEIR RESPECTIVE PROPERTY,
MAY BE BROUGHT BY SUCH HOLDER OF A NOTE IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY AS SUCH HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND, BY
THE EXECUTION AND DELIVERY OF THIS AGREEMENT, IRREVOCABLY SUBMITS TO THE
JURISDICTION OF EACH SUCH COURT; AND AGREES THAT PROCESS SERVED EITHER
PERSONALLY OR BY REGISTERED MAIL SHALL, TO THE EXTENT PERMITTED BY LAW,
CONSTITUTE ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT. WITHOUT LIMITING THE
FOREGOING, THE COMPANY HEREBY APPOINTS, IN THE CASE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE OF NEW YORK, CT
CORPORATION, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW
YORK 10019, TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS IN THE
STATE OF NEW YORK WITH RESPECT THERETO, PROVIDED THE COMPANY MAY APPOINT ANY
OTHER PERSON, REASONABLY ACCEPTABLE TO THE REQUIRED HOLDERS, WITH OFFICES IN
THE STATE OF NEW YORK TO REPLACE SUCH AGENT FOR SERVICE OF PROCESS UPON
DELIVERY TO THE NOTEHOLDERS OF A REASONABLY ACCEPTABLE AGREEMENT OF SUCH NEW
AGENT AGREEING SO TO ACT. IN ADDITION, THE COMPANY HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, BROUGHT IN THE SAID COURTS,
AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF
A NOTE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES, IN ANY MANNER PERMITTED
BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE COMPANY, IN SUCH OTHER
JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THIS
PARAGRAPH SHALL SURVIVE THE TERMINATION OF
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THE NOTE DOCUMENTS, THE EXERCISE IN FULL OF THE WARRANTS OR TRANSFER OF ALL THE
WARRANTS, AND THE REPAYMENT IN FULL OF THE NOTES.
11Q. GROSS-UP. All payments whatsoever by the Company (the
"Payor") under this Agreement or the Notes denominated in Dollars shall be made
in the lawful currency of the United States of America (and, with respect to
the Notes denominated in other currencies, payments on those Notes shall be
made in the currencies in which each Note is denominated) free and clear of,
and without reduction or liability for or on account of, any present or future
taxes, levies, imposts, duties, fees, charges, restrictions, conditions,
deductions or withholdings of any nature whatsoever imposed by or for a
government or other authority having power to tax (other than income taxes of
the United States) (hereinafter called "Tax") unless any withholding or
deduction for or on account of Tax is required by law.
If the Payor shall be obligated by law to make any such withholding or
deduction for any Tax imposed, levied, collected, assessed or withheld by or
within the jurisdiction in which the Payor is organized or resident for tax
purposes or The Netherlands or any political subdivision or taxing authority
thereof or therein or by any other country or jurisdiction (or any taxing
authority thereof or therein) from or through which payments hereunder by the
Payor are actually made (each, a "Taxing Jurisdiction"), then the Payor will
promptly (i) pay over to the relevant Taxing Jurisdiction the full amount
required to be deducted, withheld or otherwise paid in by the Payor (including
the full amount required to be deducted or withheld from or otherwise paid by
the Payor in respect of any Additional Payment (as defined below) required to
be made pursuant to clause (ii) hereof) and (ii) pay to each Person entitled
under this Agreement or the Notes to receive the payment from which the amount
referred to in clause (i) has been so deducted, withheld or otherwise paid such
additional amount (the "Additional Payment") as is necessary in order that the
amount received by such Person after any required deduction, withholding or
other payment of Tax (including any required deduction, withholding or other
payment of Tax on or with respect to such additional amount), shall equal the
amount such Person would have received had no such deduction, withholding or
other payment of Tax been paid. Any Person receiving an Additional Payment
agrees to use its reasonable efforts to determine whether it actually received
any foreign tax credits for U.S. income tax purposes by virtue of the Tax that
gave rise to the Additional Payment, and if so, to determine the amount of such
tax credit and to pay the same over to the Payor promptly after such
determination, it being understood, however,that (A) such determination shall
be in the sole and absolute discretion of such receiving Person; (B) the Payor
shall not have any audit or other rights with respect to such determination;
(C) such receiving Person shall not be obligated to make such determination
until it has actually closed with the appropriate taxing authorities its U.S.
income tax return for the taxable period in which it received such Additional
Payment; and (D) such receiving Person shall sustain no liability, and shall
not otherwise be obligated, for any errors in the determination of such foreign
tax credit.
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11R. JUDGMENT CURRENCY INDEMNITY. Any payment on account of an
amount that is payable hereunder in Dollars or Dutch Guilders (the "Required
Currency") which is made to or for the account of any Noteholder in the lawful
currency of any other jurisdiction ("Currency"), whether as a result of any
judgment or order or the enforcement thereof or the realization of any security
or the liquidation of the Person obligated to make such payment shall
constitute a discharge of such Person's obligation under this Agreement or the
Notes only to the extent of the amount of the Required Currency which such
Noteholder could purchase in the New York foreign exchange markets with the
amount of other Currency in accordance with normal banking procedures at the
rate of exchange prevailing on the first Business Day following receipt of the
payment first referred to above. If the amount of the Required Currency that
could be so purchased is less than the amount of the Required Currency
originally due to such Noteholder, the Person obligated hereunder to make such
payment shall indemnify and save harmless such Noteholder from and against all
loss or damage arising out of or as a result of such deficiency. This
indemnity shall constitute an obligation separate and independent from the
other obligations contained in this Agreement or the Notes, shall give rise to
a separate and independent cause of action, shall apply irrespective of any
indulgence granted by such Noteholder from time to time and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated
sum in respect of an amount due hereunder or under any judgment or order. This
paragraph shall survive the termination of the Note Documents, the exercise in
full of the Warrants or Transfer of all the Warrants, and the repayment in full
of the Notes.
11S. ENVIRONMENTAL INDEMNITY. The Company agrees to indemnify and
exonerate each Noteholder and each of their respective officers, directors,
employees, agents and attorneys (collectively the "Indemnitees" and
individually, an "Indemnitee") from, and hold each Indemnitee harmless against,
any losses, liabilities, claims, damages (including, without limitation,
consequential and punitive damages), expenses, judgments, penalties, fines,
attorneys' and consultants' fees, disbursements and costs (including, without
limitation, investigatory, removal, remedial and other response costs under the
relevant Environmental Law) of any kind or nature imposed on, incurred by, or
asserted against any Indemnitee, directly, indirectly, or consequentially
arising under or pertaining to any Environmental Law as a result of or which
relate to or concern (i) an Environmental Claim involving any member of the
Group or their respective properties; (ii) any member of the Group's (and their
respective predecessors') past, present or future businesses, operations or
conditions at any site or facility now or previously owned, operated or leased
by them; (iii) the actual or alleged presence in the air, surface water or
groundwater, or on the surface or subsurface of or adjacent to any such site,
facility or property, of Hazardous Materials; and/or (iv) any member of the
Group's (and their respective predecessors') generation, handling, use,
treatment, storage and disposal of Hazardous Materials. This indemnity does
not extend to losses, liabilities, claims, damage, etc. to the extent incurred
by reason of the gross negligence or wilful misconduct of the Indemnitee in
question. This paragraph shall survive
45
<PAGE> 51
the termination of Note Documents, the exercise in full of the Warrants or
Transfer of all the Warrants, and the repayment in full of the Notes.
11T. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of an Event of Default or
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holders of the Notes to prohibit (through equitable
action or otherwise) the taking of any action by any member of the Group or any
of its Subsidiaries which would result in an Event of Default or Default.
11U. WAIVER OF JURY TRIAL. The Company and the holders of the
Notes or Warrants agree to waive their respective rights to a jury trial of any
claim or cause of action based upon or arising out of the Note Documents or any
dealings between them relating to the subject matter of this transaction and
the lender/borrower relationship that is being established. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The holders of the
Securities and the Company each acknowledge that this waiver is a material
inducement to enter into this business relationship, that each has already
relied on the waiver in entering into this Agreement, and that each will
continue to rely on the waiver in their related future dealings. The holders
of the Securities and the Company further represent and warrant that each has
reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENT, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE NOTES,
THE WARRANTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE NOTES OR
THE WARRANTS. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court. This paragraph shall survive the
termination of the Note Documents, the exercise in full of the Warrants or
Transfer of all the Warrants, and the repayment in full of the Notes.
11V. CURRENCY DETERMINATION. For purposes of determining
percentage of ownership of, and calculating aggregate amounts outstanding
under, the Notes, amounts expressed in currencies other than Dollars shall be
converted to Dollars based on the spot rate in effect on the day before the day
the determination is to be made, or, if such rate is not readily available, the
rate in effect on the immediately preceding Business Day on which such rate is
available, in each case as such spot rate is published in The Wall Street
Journal or another widely circulated financial daily periodical.
46
<PAGE> 52
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
INMAC B.V.
By
--------------------------
Title: Director
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By
------------------------------
Second Vice President
<PAGE> 53
PURCHASER SCHEDULE
<TABLE>
<CAPTION>
Aggregate
Principal
amount of Note
Notes to be Denomi-
Purchased nation(s)
----------- -----------
<S> <C> <C>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA $13,000,000 $13,000,000
(1) All payments on account of Notes in
Dollars held by such purchaser shall be
made by wire transfer of immediately
available funds for credit to:
Account No. 050-54-526 (in the case of
payments on account of the Note
originally issued in the principal
amount of $13,000,000)
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth
the name of the Company, a reference to
"9.87% Senior Notes due September 15, 2001,
Security No. IINV 5098!", and the due date and
application (as among principal, interest
and Yield-Maintenance Amount) of the
payment being made.
(2) All payments on account of Notes in Dfl.10,918,600 Dfl.10,918,600
Dutch Guilders held by such Purchaser
shall be made by wire transfer of
immediately available funds for credit
to:
</TABLE>
<PAGE> 54
Rabo Bank
Utrecht (RABONL2U)
Account Name
MGTCNY, Brussels
Account No. 390809802
Subaccount: Prudential Global
Funding Inc.
Account No. 687-44727-13-69
Each such transfer shall set forth the
name of the Company, a reference to
"10.24% Senior Notes due September 15, 2001,
Security No. IINV ____!," and the due date
and application (as among principal interest
and Yield Maintenance Amount) of the payment
being made.
(3) Address for all notices relating to payments in Dollars:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Manager, Investment Structure and Pricing
(4) Address for all notices relating to payments in
Dutch Guilder:
Prudential Global Funding,Inc.
2 Gateway Center, 5th Floor
Newark, New Jersey 07102-5096
Attention: Associate Manager
(201) 802-6398
<PAGE> 55
(5) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Manager, Investment Structure and Pricing
With a copy to:
Prudential Capital Group
777 South Figueroa Street, Suite 2950
Los Angeles, California 90017
Attention: Managing Director
(6) Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
(201) 802-7500
Managing Director, Prudential Capital Group
(213) 486-5350
(7) Tax Identification No.: 22-1211670
<PAGE> 56
Schedule 2
WIRE INSTRUCTIONS
For US Dollars Federal Reserve Bank of New York
A/C ABN AMRO New York
Acct#: 026-009580
Favor: Grand Cayman
For Dutch Guilders ABN AMRO N.V., Amsterdam
Acct: ABN AMRO Chicago Treasury
Acct#: 54.04.33.918
Favor: Grand Cayman
47
<PAGE> 1
EXHIBIT 10.45
EXHIBIT A-1
[FORM OF NOTE]
This Note has not been registered under the Securities Act of
1933 and may not be transferred in the absence of such registration or an
exemption therefrom under such Act.
INMAC B.V.
9.87% SENIOR GUARANTEED NOTE DUE SEPTEMBER 15, 2001
No. 001 June 29, 1995
$13,000,000
PPN N4575#AA6
FOR VALUE RECEIVED, the undersigned, INMAC B.V. (herein called the
"Company"), a corporation organized and existing under the laws of The
Netherlands, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA or registered assigns, the principal sum of THIRTEEN MILLION DOLLARS on
September 15, 2001, with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance thereof at the rate of 9.87% per
annum from the date hereof, payable quarterly on the 15th day of December,
March, June and September in each year, commencing on September 15, 1995 and
continuing until the principal hereof shall have become due and payable, and (b)
on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Yield-Maintenance
Amount (as defined in the Note Agreement referred to below), payable quarterly
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the greater of (i) 11.87% or (ii)
2.0% over the rate of interest publicly announced by Morgan Guaranty Trust
Company of New York from time to time in New York City as its Prime Rate.
A1-1
<PAGE> 2
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Morgan
Guaranty Trust Company of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is one of a series of Senior Guaranteed Notes (herein called
the "Notes") issued pursuant to a Note Agreement, dated as of June 29, 1995
(herein called the "Agreement"), between the Company and The Prudential
Insurance Company of America and is entitled to the benefits thereof. As
provided in the Agreement, this Note is subject to prepayment, in whole or from
time to time in part, in certain cases without premium and in other cases with
premium, as more specified in the Agreement. This Note is fully and
unconditionally guaranteed by Inmac Corp., a Delaware corporation and the parent
of the Company, pursuant to a Guaranty of even date herewith, and by certain
subsidiaries of the Company pursuant to a Subsidiary Guaranty of even date
herewith.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
INMAC B.V.
By
-----------------
A1-2
<PAGE> 3
EXHIBIT A-2
[FORM OF NOTE]
This Note has not been registered under the Securities Act of
1933 and may not be transferred in the absence of such registration or an
exemption therefrom under such Act.
INMAC B.V.
10.24% SENIOR GUARANTEED NOTE DUE SEPTEMBER 15, 2001
No. 002 June 29, 1995
Dfl.10,918,600
PPN N4575#AC2
FOR VALUE RECEIVED, the undersigned, INMAC B.V. (herein called the
"Company"), a corporation organized and existing under the laws of The
Netherlands, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA or registered assigns, the principal sum of TEN MILLION NINE HUNDRED
EIGHTEEN THOUSAND SIX HUNDRED DUTCH GUILDERS on September 15, 2001, with
interest (computed on the basis of a 360-day year--30-day month) (a) on the
unpaid balance thereof at the rate of 10.24% per annum from the date hereof,
payable quarterly on the 15th day of December, March, June and September in each
year, commencing on September 15, 1995 and continuing until the principal hereof
shall have become due and payable, and (b) on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Yield-Maintenance Amount (as defined in the Note
Agreement referred to below), payable quarterly as aforesaid (or, at the option
of the registered holder hereof, on demand), at a rate per annum from time to
time equal to the greater of (i) 12.24% or (ii) 2.0% over the Overnight Dutch
Guilder Funding Rate publicly announced by Morgan Guaranty Trust Company of New
York from time to time in its Amsterdam office.
A1-3
<PAGE> 4
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Morgan
Guaranty Trust Company of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
The Netherlands.
This Note is one of a series of Senior Guaranteed Notes (herein called
the "Notes") issued pursuant to a Note Agreement, dated as of June 29, 1995
(herein called the "Agreement"), between the Company and The Prudential
Insurance Company of America and is entitled to the benefits thereof. As
provided in the Agreement, this Note is subject to prepayment, in whole or from
time to time in part, in certain cases without premium and in other cases with
premium, as more specified in the Agreement. This Note is fully and
unconditionally guaranteed by Inmac Corp., a Delaware corporation and the parent
of the Company, pursuant to a Guaranty of even date herewith, and by certain
subsidiaries of the Company pursuant to a Subsidiary Guaranty of even date
herewith.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
INMAC B.V.
By
----------------
A1-4
<PAGE> 1
EXHIBIT 10.46
EXHIBIT C
GUARANTY
This GUARANTY is entered into as of June 29, 1995, by INMAC
CORP., a Delaware corporation ("GUARANTOR"), in favor of and for the benefit of
The Prudential Insurance Company of America, a New Jersey corporation, as the
original purchaser (the "PURCHASER") of the Notes (as hereinafter defined).
RECITALS
A. Inmac, B.V., a corporation organized under the laws of The
Netherlands, and a wholly-owned subsidiary of Guarantor ("COMPANY"), has entered
into that certain Note Agreement dated as of June 29, 1995 with the Purchaser
(said Note Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "NOTE AGREEMENT").
B. The proceeds of the Notes will be advanced either to
Guarantor or to its wholly owned Subsidiaries to repay indebtedness, a
significant portion of which Guarantor has guaranteed, and thus the Guaranteed
Obligations (as hereinafter defined) are being incurred for and will inure to
the benefit of Guarantor (which benefits are hereby acknowledged).
C. It is a condition precedent to the purchase of the Notes
under the Note Agreement that Company's obligations thereunder be guaranteed by
Guarantor.
D. Guarantor is willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Purchaser to enter into the Note
Agreement and to purchase the Notes thereunder, Guarantor hereby agrees as
follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Capitalized terms defined in the Note
Agreement and not otherwise defined herein shall have the respective meanings
assigned to them in the Note Agreement. As used in this Guaranty, the following
terms shall have the following meanings unless the context otherwise requires:
C-1
<PAGE> 2
"AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a corporation
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"ANNUAL PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall
mean, for any four consecutive fiscal quarter period, the sum of the Percentages
of Earnings Transferred attributable to each asset Transferred during such
period.
"ANNUAL PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean,
for any four consecutive fiscal quarter period, the sum of the Percentages of
Tangible Assets Transferred attributable to each asset Transferred during such
period.
"BANKRUPTCY LAW" shall have the meaning specified in clause
(xix) of paragraph 7A of the Note Agreement.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under GAAP, is or will be required to be capitalized on the
books of Guarantor or any Subsidiary, taken at the amount thereof accounted for
as indebtedness (net of interest expense) in accordance with such principles.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et. seq.), as amended,
and the regulations promulgated thereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"COMPANY" shall mean Inmac, B.V., a corporation organized
under the laws of the Netherlands and a wholly-owned Subsidiary.
"CONFIDENTIALITY AGREEMENT" shall mean an agreement in
substantially the form of Exhibit G to the Note Agreement.
"CONSOLIDATED," when used to modify any accounting or defined
term, shall mean such item or defined term as it relates to Guarantor and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE" shall mean all consolidated
interest expense of Guarantor and its Subsidiaries, including all commissions,
discounts or
C-2
<PAGE> 3
related amortization and other fees and charges with respect to
letters of credit and bankers' acceptance financing and the net costs associated
with interest swap obligations, amortization of debt expense and original issue
discount and the interest portion of any deferred payment obligation, calculated
in accordance with the effective interest method; provided, however, that
Consolidated Interest Expense shall not include the structuring fee payable
pursuant to the Note Agreement or any legal or agents' fees and expenses payable
in connection with the issuance of the Notes.
"CONSOLIDATED NET EARNINGS" shall mean, as to any fiscal
period, consolidated gross revenues of Guarantor and its Subsidiaries less all
costs, rebates, returns, allowances, discounts, cost of goods sold, selling,
general, administrative and other expenses, and other proper costs, charges and
expenses (including current income taxes and changes in deferred income taxes,
provisions for taxes on unremitted foreign earnings that are included in gross
revenues and current additions to reserves) for such fiscal period. Consolidated
Net Earnings shall not include (i) extraordinary gains; (ii) gains or losses
resulting from the sale or other disposition of capital assets; (iii)
undistributed positive earnings of any Person that is not a Subsidiary; (iv)
gains arising from changes in accounting principles; (v) gains arising from the
write-up of assets; (vi) any undistributed positive earnings of any Subsidiary,
to the extent that the declaration or payment of dividends or other share
distributions, share repurchases or redemptions or repayment of intracompany
loans or advances by such Subsidiary is restricted by charter document,
agreement, law or otherwise; (vii) any gain from the collection of proceeds from
insurance policies or litigation settlements; (viii) any positive earnings of
any Person acquired by Guarantor or a Subsidiary prior to the effective date of
such acquisition; and (ix) gains or losses from the acquisition of securities or
the retirement or extinguishment of Debt.
"CONSOLIDATED TANGIBLE ASSETS" shall mean the gross book value
of all assets (including assets held under Capitalized Lease Obligations) of
Guarantor and its Subsidiaries on a consolidated basis, net of (i) the net book
value of all Intangibles; (ii) all reserves relating to such assets; and (iii)
any write-up since July 30, 1994 in the carrying values of such assets, all
determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, with respect to
any Person, the Consolidated Tangible Assets of Guarantor and its Subsidiaries
on a consolidated basis, less (i) all Consolidated liabilities, (ii) to the
extent not already deducted, Consolidated Debt (including Debt of the type
specified in clauses (iii), (iv) or (v) of the definition of Debt); and (iii)
any surplus adjustments attributed to cumulative translation adjustments.
"CREDIT FACILITIES" shall mean the Dutch Credit Facility and
the U.S. Credit Facility.
"CUMULATIVE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall
mean, at the time of determination thereof, the sum of the Percentages of
Earnings
C-3
<PAGE> 4
Capacity Transferred attributable to each asset Transferred from and
after the date hereof.
"CUMULATIVE PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall
mean, at the time of determination thereof, the sum of the Percentages of
Tangible Assets Transferred attributable to each asset Transferred from and
after the date hereof.
"DEBT" shall mean (i) any obligation for borrowed money,
including any obligation evidenced by notes payable, commercial paper, bonds,
debentures or similar written instruments; conditional sales contracts; and
drafts accepted representing extensions of credit (other than for trade and tax
payables, deferred taxes and operating leases); (ii) Capitalized Lease
Obligations; (iii) obligations of a Person other than Guarantor or a Subsidiary
secured by a Lien on, or payable out of the proceeds or production from,
property of Guarantor or any Subsidiary whether or not such obligation is
expressly assumed by Guarantor or such Subsidiary; (iv) Debt of any partnership
or joint venture of which Guarantor or any of its Subsidiaries is a general
partner or joint venturer that is not expressly non-recourse with respect to
Guarantor or Subsidiary; (v) Guarantees of any of the foregoing and (vi) any
modification, extension or renewal of any of the foregoing.
"DOLLAR" or "$" shall mean dollars of the United States, being
the lawful currency of that country.
"DUTCH CREDIT FACILITY" means the revolving credit facility of
the Company and certain Subsidiary Guarantors with ABN Amro Bank, N.V. as agent
for a group of banks contemplated by the commitment letter referred to in
paragraph 5L of the Note Agreement or any replacement or successor facility with
a minimum aggregate borrowing availability of $10,000,000.
"ENVIRONMENTAL AND SAFETY LAWS" shall mean all Federal, state
and local laws, regulations and ordinances relating to the discharge, handling,
disposition or treatment of Hazardous Materials and other substances or the
protection of the environment or of employee health and safety, including
without limitation, CERCLA, the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et. seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 7401 et. seq.), the Clean Air Act (42 U.S.C. Section 401 et.
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et. seq.) and the
Emergency Planning and Community Right-To-Know Act (42 U.S.C. Section 11001 et.
seq.), each as the same may be amended and supplemented.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean, as to any
Person, all liabilities, obligations, responsibilities, remedial actions,
losses, damages, punitive damages, consequential damages, treble damages,
contribution, cost recovery, costs
C-4
<PAGE> 5
and expenses (including all fees, disbursements and expenses of counsel, expert
and consulting fees, and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, permit, order or agreement with any
Federal, state or local governmental authority or other Person, arising from
environmental, health or safety conditions, or the release or threatened release
of a contaminant, pollutant or Hazardous Material into the environment,
resulting from the operations of such person or its subsidiaries, or breach of
any Environmental and Safety Law or for which such Person or its subsidiaries is
otherwise liable or responsible.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA AFFILIATE" shall mean each person (as defined in
Section 3(9) of ERISA) which together with Guarantor or a Subsidiary would be
deemed to be a "single employer" (i) within the meaning of Section 414 (b), (c),
(m) or (o) of the Code or (ii) as a result of Guarantor or a Subsidiary being or
having been a general partner of such person.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A of the Note Agreement, provided that there has been satisfied any
requirement in connection with such event for the giving of notice, or the lapse
of time, or the happening of any further condition, event or act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXEMPT SUBSIDIARY" shall mean (i) Inmac, Disc, a corporation
organized under the laws of the State of California; (ii) Inmac, S.A. de C.V., a
corporation organized under the laws of Mexico; (iii) Inmac S.p.A., a
corporation organized under the laws of Italy; (iv) Inmac, Inc., a corporation
organized under the laws of Canada, and (v) Subsidiaries formed and designated
as Exempt Subsidiaries after the date of closing; provided that the amount of
assets contributed or transferred to such post-closing Subsidiary shall be
treated as a Transfer of assets for purposes of computing compliance with
Section 5.9(v) hereof.
"FIXED CHARGES" shall mean the sum of (i) Consolidated
Interest Expense minus Consolidated interest income plus (ii) Consolidated
operating lease payments minus rental income actually received from the sublease
of real property that is then under lease.
C-5
<PAGE> 6
"FOREIGN PENSION PLAN" means any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by Guarantor or
any one or more of its Subsidiaries primarily for the benefit of employees of
Guarantor or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"GAAP" shall mean generally accepted accounting principles, as
in effect in the United States from time to time.
"GOOD FAITH CONTEST" shall mean, with respect to any tax,
assessment, Lien, obligation, claim, liability, judgment, injunction, award,
decree, order, law, regulation, statute or similar item, any challenge or
contest thereof by appropriate proceedings timely initiated in good faith by the
Person subject thereto for which adequate reserves therefor have been taken in
accordance with GAAP.
"GUARANTEE" shall mean, as to any Person, any guarantee or
endorsement by such Person of any obligations, or such Person's contingent
liability for any obligations, including an endorsement of such obligation or an
agreement by such Person to purchase or otherwise acquire securities of another
Person, to provide funds for capital contributions or for the payment or
discharge of another Person's obligation, to maintain the solvency, net worth or
other financial condition of another Person, or to make payment for products or
services regardless of whether such products or services are actually used,
delivered or provided, if, in any such case, the intent or effect of such
agreement is to provide assurance that such obligation will be paid or
discharged or that the holders of such obligation will be protected against any
loss in respect thereof.
"GUARANTEED OBLIGATIONS" has the meaning assigned to that term
in subsection 2.1.
"GUARANTY" means this Guaranty dated as of June 29, 1995, as
it may be amended, supplemented or otherwise modified from time to time.
"HAZARDOUS MATERIALS" shall mean (i) any material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "toxic substances" or any other formulations
intended to define, list or classify substances by reason of their deleterious
properties, (ii) any oil, petroleum or petroleum derived substance, (iii) any
flammable substances or explosives, (iv) any radio active materials, (v)
asbestos in any form, (vi) electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million, (vii) pesticides or (viii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated
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by any governmental agency or authority or which may or could pose a hazard to
the health and safety of persons in the vicinity thereof.
"INCLUDING" shall mean, unless the context clearly requires
otherwise, "including without limitation."
"INSPECTING HOLDER" shall mean (i) the Purchaser and (ii) at
any time prior to the occurrence of an Event of Default, any other holder of at
least 25% of the principal amount of the Notes outstanding at such time
(determined in accordance with paragraph 11V of the Note Agreement) and at any
time after the occurrence of an Event of Default, any other holder of a Note,
regardless of amount.
"INTANGIBLES" shall mean any patents, trademarks, copyrights,
trade names, goodwill (including any amounts, however designated, representing
the cost of acquisition of business and investments in excess of the book value
thereof), unamortized debt discount and expense, deferred research and
development costs, any write-up of asset value after July 31, 1994, and any
other assets treated as intangible assets under GAAP.
"LIEN" shall mean any mortgage, pledge, priority, security
interest, contractual, statutory or common law set-off, encumbrance, lien
(statutory or otherwise) or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or any similar law
relating to the creation and perfection of security interests of any
jurisdiction, except for vendor liens and title retention agreements relating to
inventory and incurred in the ordinary course of business; provided (i) no
security agreement or UCC-1 Financing Statement is actually executed, (ii) no
other formal action is taken by the debtor in furtherance of creating a
perfected lien, and (iii) in the aggregate, such vendor liens and title
retention contracts do not exceed at any time 25% of Consolidated inventory
(determined as of the end of the fiscal quarter immediately preceding the date
of such determination and net of returns, rebates, allowances and similar
items)) or any other type of preferential contractual arrangement (including
written set-off arrangements) for the purpose, or having the effect, of
protecting a creditor against loss or securing the payment or performance of an
obligation.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse
effect on the business, assets, operations, prospects or condition, financial or
otherwise, of Guarantor and its Subsidiaries, taken as a whole, (ii) material
impairment of the ability of Guarantor to perform any of its obligations
hereunder or under the Warrants, (iii) material impairment of the enforceability
or the rights of, or the benefits available to, the beneficiaries of this
Guaranty, or holders of the Warrants or the holders of the Notes, or (iv)
material impairment of the ability of the Company to perform under the Note
Agreement or the Notes.
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"MOODY'S" shall mean Moody's Investors Services, Inc.,
including the NCO/Moody's Commercial Division, or any successor Person.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET PROCEEDS" shall mean the net cash proceeds from the sale
or other issuance at fair market value of any Qualified Stock, other than from
the sale or issuance of Qualified Stock pursuant to employee stock option or
other stock-based employee incentive plans or programs, net of all underwriters'
discounts and commissions, other marketing and selling expenses, attorneys' fees
and expenses and other expenses in connection with such issuance.
"NOTE AGREEMENT" shall mean the Note Agreement dated June 29,
1995 between the Company, as issuer of the Notes, and the Purchaser.
"NOTES" shall mean the the two (2) series of Senior Guaranteed
Notes due 2001 issued by Company pursuant to the Note Agreement.
"NOTE DOCUMENTS" shall mean (i) the Note Agreement; (ii) the
Subsidiary Guaranty; (iii) this Guaranty; (iv) the Notes; (v) the Warrants; and
(vi) any other agreement, instrument, certificate or document executed and
delivered in connection with any Note Document or this Guaranty.
"NOTEHOLDERS" shall mean the Purchaser and any of their
Transferees.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of Guarantor by a Responsible Officer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means
payment in full of the Guaranteed Obligations including all principal, interest,
costs, fees and expenses (including legal fees and expenses) of holders of the
Notes as required under the Note Documents.
"PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (v) of Section 5.9, the
ratio (expressed as a percentage) of (i) aggregate Consolidated Net Earnings
produced by, or otherwise attributable to, such asset during the 36 month period
most recently ended prior to the effective date of such Transfer to (ii)
Consolidated Net Earnings for such 36 month period.
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"PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (v) of Section 5.9, the
ratio (expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of such Transfer) to (ii) Consolidated
Tangible Assets (determined as of the last day of the fiscal quarter immediately
preceding the date of such Transfer).
"PERSON" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Guarantor or a Subsidiary or
an ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which Guarantor, or a Subsidiary or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"PROHIBITED TRANSACTION" shall mean any transaction described
in section 406 of ERISA which is not exempt by reason of section 408 of ERISA or
the transitional rules set forth in section 414(c) of ERISA and any transaction
described in section 4975(c) of the Code which is not exempt by reason of
section 4975(c)(2) or section 4975(d) of the Code, or the transitional rules of
section 2003(c) of ERISA.
"PROPERTY" shall mean all real property owned or leased by
Guarantor or any of its Subsidiaries, and all personal property located thereon
or used or consumed in the operation of the business conducted thereat.
"PURCHASER" shall mean The Prudential Insurance Company of
America and its successors and assigns.
"QUALIFIED STOCK" shall mean Guarantor's common stock or any
other class of Company capital stock that does not have any of the following
rights or features: (i) fixed mandatory or accruing dividends or similar
obligations, (ii) redemption or repurchase (or establishment of a sinking fund
for such purpose) of such capital stock prior to the final maturity of the
Notes, whether mandatory, scheduled or at the option of the holder thereof or
(iii) convertibility or exchangability into securities of the type described in
clauses (i) or (ii) above. Qualified Stock does not include capital stock issued
pursuant to exercise of employee stock options or other similar instruments or
securities issued under stock-based incentive plans.
"REPORTABLE EVENT" shall mean an event described in Section
4043 (c) of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Regulation Section 2615.
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"REQUIRED HOLDER(S)" shall mean the holder or holders of at
least 66-2/3% of the aggregate principal amount of the Notes from time to time
outstanding (determined in accordance with paragraph 11V of the Note Agreement).
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
the Company, the Guarantor or any Subsidiary Guarantor, as the case may be, or
any other officer or director of the Company, the Guarantor or any Subsidiary
Guarantor, as the case may be, involved principally in its financial
administration or its controllership functions.
"RESTRICTED PAYMENTS" shall mean, with respect to any Person
(i) any dividend payments or other distributions of cash, assets, properties,
obligations or securities on account of any shares of any class of such Person's
capital stock (other than stock dividends); and (ii) any repurchases,
redemptions, retirement or other acquisitions of such Person's capital stock or
the establishment of any sinking fund or other fund for any such purpose;
provided, however, that the foregoing items, to the extent paid to the Company,
shall not be deemed Restricted Payments.
"S&P" shall mean Standard & Poor's Corporation, or any
successor entity.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SHAREHOLDER" shall mean any Person (other than any
Noteholder) who owns, either individually or together with all other Persons to
whom such Person is related by blood, adoption or marriage or who is an
Affiliate of such Person, 5% or more of any class of Guarantor's capital stock.
For purposes of making this computation, all warrants, rights, options,
convertible securities and other rights to purchase or acquire a class of
Company capital stock held by such holder (other than the holders of the
Warrants) shall be deemed to be exercised.
"SIGNIFICANT HOLDER" shall mean (i) the Purchaser, so long as
it shall hold any Note, or (ii) any other holder of at least $2,500,000 original
principal amount of Notes (or the equivalent in Dutch Guilders, determined in
accordance with paragraph 11V of the Note Agreement).
"SUBSIDIARY" shall mean, as to any Person (i) any corporation,
at least 80% of the total combined voting power of all classes of Voting Stock
of which shall, at the time as of which any determination is being made, be
owned by such Person, either directly or through its other Subsidiaries and (ii)
any partnership or other entity in which such Person or any of its Subsidiaries
holds more than a 80% equity interest and controls the management of such
entity. Unless otherwise clearly specified, "Subsidiaries" of Guarantor shall
include Company.
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"SUBSIDIARY GUARANTORS" shall mean those Subsidiaries who, at
the date of such determination, have guaranteed the Notes pursuant to the
Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" shall mean the guaranty dated June 29,
1995 by Inmac S.A., a French corporation, Inmac Holdings Limited, a limited
liability company organized under the laws of the United Kingdom and registered
in England and Wales, Inmac (U.K.) Limited, a limited liability company
organized under the laws of the United Kingdom and registered in England and
Wales, Inmac aktiebolag, a corporation organized under the laws of Sweden, Inmac
Gesellschatt mit beschrankter Haftung, a corporation organized under the laws of
Germany, in favor of the holders of the Notes and any other Subsidiary who
becomes a party to the Subsidiary Guaranty subsequent to the date hereof
pursuant to paragraph 5M of the Note Agreement.
"TRANSFER" shall mean, with respect to any property or other
asset of a Person, the sale, lease, disposition, exchange or other transfer
thereof.
"TRANSFEREE" shall mean any direct or indirect transferee or
assignee of all or any part of any Note purchased by any Purchaser under the
Note Agreement.
"UNFUNDED CURRENT LIABILITY" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"U.S. CREDIT FACILITY" shall mean the credit facility of the
Guarantor with ABN Amro Bank, N.V., as agent for a group of banks or any
replacement or successor facility with a maximum aggregate borrowing
availability of $5,000,000.
"VOTING STOCK" shall mean, with respect to any company, any
shares of such company whose holders are entitled under ordinary circumstances
to vote for the election of directors of such company (irrespective of whether
at the time shares of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"WARRANTS" shall mean the detachable warrants to originally
purchase 175,000 shares of Guarantor's common stock issued concurrently with the
Notes.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all unaudited financial statements and
certificates and reports as to
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financial matters required to be furnished hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent with the most recent audited
consolidated financial statements of the Company and its Subsidiaries delivered
pursuant to Section 4.1(i) or (ii) or, if no such statements have been so
delivered, the most recent audited financial statements referred to in Section
3.2. Any reference herein to any specific citation, section or form of law,
statute, rule or regulation shall refer to such new, replacement or analogous
citation, section or form should citation, section or form be modified, amended
or replaced.
1.2 INTERPRETATION.
(a) References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided. Except as otherwise specified herein,
all accounting terms not otherwise defined herein shall have the
meanings assigned to them under GAAP.
(b) In the event of any conflict or inconsistency between the
terms, conditions and provisions of this Guaranty and the terms,
conditions and provisions of the Note Agreement, the terms, conditions
and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTEED OBLIGATIONS. Subject to the provisions
of subsection 2.2, Guarantor hereby irrevocably and unconditionally guarantees,
as primary obligor and not merely as surety, the due and punctual payment in
full of all Guaranteed Obligations when the same shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of any
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section
362(a)). The term "GUARANTEED OBLIGATIONS" is used herein in its most
comprehensive sense and includes:
(a) any and all liabilities or other obligations of Company
and, to the extent applicable, any Subsidiary Guarantor, in respect of
or under the Notes, including principal of, interest on and Yield
Maintenance Amounts in respect of, the Notes (and in the currencies in
which such Notes may be denominated), or any other Note Document,
including legal fees and expenses of counsel, allocated costs of
internal counsel, indemnities, and other fees and costs, whether such
liabilities or other obligations be absolute or contingent, liquidated
or unliquidated, due or not due, or in existence on the date hereof or
arising hereafter (including pursuant to any renewal, extension or
modification of any Note or Note Document); and
(b) those expenses set forth in subsection 2.9 hereof.
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2.2 CONTRIBUTION BY GUARANTOR. Guarantor under this Guaranty, and each
guarantor under other guaranties, if any, relating to the Note Agreement,
including the Subsidiary Guaranty (the "RELATED GUARANTIES") which contain a
contribution provision similar to that set forth in this subsection 2.2,
together desire to allocate among themselves (collectively, the "CONTRIBUTING
GUARANTORS"), in a fair and equitable manner, their obligations arising under
this Guaranty and the Related Guaranties. Accordingly, in the event any payment
or distribution is made on any date by Guarantor under this Guaranty or a
guarantor under a Related Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair
Share (as defined below) as of such date, that Funding Guarantor shall be
entitled to a contribution from each of the other Contributing Guarantors in the
amount of such other Contributing Guarantor's Fair Share Shortfall (as defined
below) as of such date, with the result that all such contributions will cause
each Contributing Guarantor's Aggregate Payments (as defined below) to equal its
Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors, multiplied by (ii) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty and the Related Guaranties in respect of the
obligations guarantied. "FAIR SHARE SHORTFALL" means, with respect to a
Contributing Guarantor as of any date of determination, the excess, if any, of
the Fair Share of such Contributing Guarantor over the Aggregate Payments of
such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with
respect to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty and/or the Related Guaranties, as applicable, that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law; provided that, solely for
purposes of calculating the "Fair Share Contribution Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under any similar provision contained in a Related
Guaranty shall not be considered as assets or liabilities of such Contributing
Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty and/or the Related Guaranties (including
in respect of this subsection 2.2 or any similar provision contained in a
Related Guaranty) minus (ii) the aggregate amount of all payments received on or
before such date by such Contributing Guarantor from the other Contributing
Guarantors as contributions under this subsection 2.2 or any similar provision
contained in a Related Guaranty. The amounts payable as contributions hereunder
and under similar provisions in the
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Related Guaranties shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this subsection 2.2 or any similar provision contained in a Related Guaranty
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder or under a Related Guaranty. Each Contributing Guarantor
under a Related Guaranty is a third party beneficiary to the contribution
agreement set forth in this subsection 2.2. In determining the Fair Share
Contribution Amount of the Contributing Guarantors, the Contributing Guarantors
have agreed amongst themselves, and by their acceptance of this Guaranty, each
holder of the Notes agrees, that notwithstanding the foregoing provisions of
this subsection 2.2 any demand for payment of any Guaranteed Obligation by
Guarantor under this Guaranty may be satisfied by payment(s) strictly in
accordance with such request by any Subsidiary Guarantor in accordance with the
terms of the Subsidiary Guaranty; provided that such allocation amongst the
Contributing Guarantors shall in no manner limit or restrict the ability and
right of the Noteholders to make claims under the Related Guarantees or limit
the liability of the Contributing Guarantors under the Related Guarantees and is
intended solely as a limit amongst the Contributing Guarantors on the allocation
mechanism described in this subsection 2.2
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Subject to the
provisions of subsection 2.2, Guarantor hereby agrees, in furtherance of the
foregoing and not in limitation of any other right which any Person may have at
law or in equity against Guarantor by virtue hereof, that upon the failure of
Company or a Subsidiary Guarantor to pay any of the Guaranteed Obligations when
and as the same shall become due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362 (a)), Guarantor will upon
demand of any Noteholder pay, or cause to be paid, in cash, to such holder on a
ratable basis, an amount equal to the sum of the unpaid principal amount of all
Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on
such Guaranteed Obligations (including interest which, but for the filing of a
petition in bankruptcy with respect to Company or a Subsidiary Guarantor, would
have accrued on such Guaranteed Obligations, whether or not a claim is allowed
against such debtor for such interest in any such bankruptcy proceeding) and all
other Guaranteed Obligations then owed to/or Noteholders as aforesaid. All such
payments shall be applied promptly from time to time:
First, to the payment of the costs and expenses of any
collection, enforcement or other realization under this Guaranty,
including reasonable compensation to, and all expenses, liabilities and
advances made or incurred by, any agent or counsel acting on behalf of
the Noteholders in connection therewith;
Second, to the payment of all other Guaranteed Obligations;
and
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Third, after payment in full of all Guaranteed Obligations, to
the payment to Guarantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such payments.
2.4 LIABILITY OF GUARANTOR ABSOLUTE. Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guaranteed Obligations. In furtherance of the foregoing and without limiting the
generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not
of collectibility.
(b) Any Noteholder may enforce this Guaranty upon the
occurrence of any Event of Default, notwithstanding the existence of
any dispute between Noteholders and Company with respect to the
existence of such Event of Default.
(c) The obligations of Guarantor hereunder are independent of
the respective obligations of Company or the Subsidiary Guarantors
under the Note Documents and a separate action or actions may be
brought and prosecuted against Guarantor whether or not any action is
brought against Company or any Subsidiary Guarantor and whether or not
Company or such Subsidiary Guarantor is joined in any such action or
actions.
(d) Guarantor's payment of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for any portion of the Guaranteed Obligations
which has not been paid. Without limiting the generality of the
foregoing, if any Noteholder is awarded a judgment in any suit brought
to enforce Guarantor's covenant to pay a portion of the Guaranteed
Obligations, such judgment shall not be deemed to release Guarantor
from its covenant to pay the portion of the Guaranteed Obligations that
is not the subject of such suit.
(e) Any Noteholder, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of Guarantor's
liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the
time, place, manner or terms of payment of the Guaranteed Obligations,
(ii) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the
Guaranteed
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Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the
Guaranteed Obligations and take and hold security for the payment of
this Guaranty or the Guaranteed Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for
payment of the Guaranteed Obligations, any other guaranties of the
Guaranteed Obligations, or any other obligation of any Person with
respect to the Guaranteed Obligations; (v) enforce and apply any
security now or hereafter held by or for the benefit of any Noteholder
in respect of this Guaranty or the Guaranteed Obligations and direct
the order or manner of sale thereof, or exercise any other right or
remedy that the Noteholders, or any of them, may have against any such
security, as such Noteholder(s) in its or their sole discretion may
determine consistent with the Note Documents and any applicable
security agreement, including foreclosure on any such security pursuant
to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though
such action operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of Guarantor against Company or
any security for the Guaranteed Obligations; and (vi) exercise any
other rights available to it under any Note Document.
(f) This Guaranty and the obligations of Guarantor hereunder
shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of the Guaranteed Obligations),
including without limitation the occurrence of any of the following,
whether or not Guarantor shall have had notice or knowledge of any of
them: (i) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order
of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy
(whether arising under any Note Document, at law, in equity or
otherwise) with respect to the Guaranteed Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security
for the payment of the Guaranteed Obligations; (ii) any rescission,
waiver, amendment or modification of, or any consent to departure from,
any of the terms or provisions (including without limitation provisions
relating to events of default) of any Note Document, or of any other
guaranty or security for the Guaranteed Obligations, in each case
whether or not in accordance with the terms of any Note Document; (iii)
the Guaranteed Obligations, or any agreement relating thereto, at any
time being found to be illegal, invalid or unenforceable in any
respect; (iv) the application of payments received without instruction
from any source (other than payments received pursuant to any Note
Document or from the proceeds of any security for the Guaranteed
Obligations, except to the extent such security also serves as
collateral for
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indebtedness other than the Guaranteed Obligations) to
the payment of indebtedness other than the Guaranteed Obligations, even
though Noteholders, or any of them, might have elected to apply such
payment to any part or all of the Guaranteed Obligations; (v) any
Noteholder's consent to the change, reorganization or termination of
the corporate structure or existence of Guarantor or any of its
Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guaranteed
Obligations; (vii) any defenses, set-offs or counterclaims which
Company or any Subsidiary Guarantor may allege or assert against any
Noteholder in respect of the Guaranteed Obligations, including but not
limited to failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and
usury; and (viii) any other act or thing or omission, or delay to do
any other act or thing, which may or might in any manner or to any
extent vary the risk of Guarantor as an obligor in respect of the
Guaranteed Obligations.
2.5 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the
benefit of Noteholders:
(a) any right to require Noteholders, as a condition of
payment or performance by Guarantor, to (i) proceed against Company or
any Subsidiary Guarantor or any other Person, (ii) proceed against or
exhaust any security held from Company or any Subsidiary Guarantor or
any other Person, (iii) proceed against or have resort to any balance
of any deposit account or credit on the books of any Noteholder in
favor of Company or any Subsidiary Guarantor or any other Person, or
(iv) pursue any other remedy in the power of any Noteholder whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company or any
Subsidiary Guarantor including any defense based on or arising out of
the lack of validity or the unenforceability of the Guaranteed
Obligations or any agreement or instrument relating thereto or by
reason of the cessation of the liability of Company or any Subsidiary
Guarantor from any cause other than payment in full of the Guaranteed
Obligations;
(c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the
principal;
(d) any defense based upon any Noteholder's errors or
omissions in the administration of the Guaranteed Obligations, except
behavior which amounts to bad faith;
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(e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of Guarantor's
obligations hereunder, (ii) the benefit of any statute of limitations
affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that any Noteholder protect,
secure, perfect or insure any security interest or Lien or any property
subject thereto;
(f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guaranty, notices of default under any
Note Document, notices of any renewal, extension or modification of the
Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to Company or any Subsidiary Guarantor and notices
of any of the matters referred to in subsection 2.4 and any right to
consent to any thereof; and
(g) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guaranty.
2.6 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection
2.6, any reference to "the principal" includes Company, and any reference to
"the creditor" includes each Noteholder. In accordance with Section 2856 of the
California Civil Code:
(a) Guarantor agrees to withhold the exercise of any and all
rights of subrogation, reimbursement and contribution against Company,
against any other guarantor of any of the Guaranteed Obligations, and
against any collateral or security for any of the Guaranteed
Obligations, until the Guaranteed Obligations shall have been paid in
full, all as more fully set forth in subsection 2.7;
(b) Guarantor waives any and all other rights and defenses
available to Guarantor by reason of Sections 2787 to 2855, inclusive,
2899 and 3433 of the California Civil Code, including without
limitation any and all rights or defenses Guarantor may have by reason
of protection afforded to the principal with respect to any of the
Guaranteed Obligations, or to any other guarantor of any of the
Guaranteed Obligations with respect to any of such guarantor's
obligations under its guaranty, in either case pursuant to the
antideficiency or other laws of the State of California limiting or
discharging the principal's indebtedness or such guarantor's
obligations, including without limitation Section 580a, 580b, 580d, or
726 of the California Code of Civil Procedure; and
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(c) Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for a Guaranteed Obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of
Section 580d of the Code of Civil Procedure or otherwise; and even
though that election of remedies by the creditor, such as nonjudicial
foreclosure with respect to security for an obligation of any other
guarantor of any of the Guaranteed Obligations, has destroyed
Guarantor's rights of contribution against such other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.6.
In accordance with subsection 6.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles. This
subsection 2.6 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guaranteed
Obligations.
2.7 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
Guaranteed Obligations shall have been paid in full, Guarantor shall withhold
exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor
now has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute (including without limitation under California Civil Code
Section 2847, 2848 or 2849), under common law or otherwise and including without
limitation (i) any right of subrogation, reimbursement or indemnification that
Guarantor now has or may hereafter have against Company, (ii) any right to
enforce, or to participate in, any claim, right or remedy that any Noteholder
now has or may hereafter have against Company, and (iii) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by any
Noteholder, and (b) any right of contribution Guarantor may have against any
other guarantor of any of the Guaranteed Obligations (including without
limitation any such right of contribution under California Civil Code Section
2848 or under a Related Guaranty as contemplated by subsection 2.2). Guarantor
further agrees that, to the extent the agreement to withhold the exercise of its
rights of subrogation, reimbursement, indemnification and contribution as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Guarantor may have against Company or against any collateral or
security, and any rights of contribution Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights Noteholders may
have against Company, to all right, title and interest Noteholders may have in
any such collateral or security, and to any right Noteholders may have against
such other guarantor. Any Noteholder, on behalf of all
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Noteholders, may use, sell or dispose of any item of collateral or security as
it sees fit without regard to any subrogation rights Guarantor may have, and
upon any such disposition or sale any rights of subrogation Guarantor may have
shall terminate. If any amount shall be paid to Guarantor on account of any such
subrogation, reimbursement or indemnification rights at any time when all
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust by the Guarantor for the benefit of Noteholders and shall
forthwith be ratably paid over to each Noteholder for credit to and application
against the Guaranteed Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.8 SUBORDINATION OF COMPANY OBLIGATIONS. Any indebtedness of Company
now or hereafter held by Guarantor (other than royalty payments in the ordinary
course of business) is hereby subordinated in right of payment to the Guaranteed
Obligations, and any such indebtedness of Company to Guarantor collected or
received by Guarantor after an Event of Default has occurred and is continuing
shall be held in trust by the Guarantor for the benefit of Noteholders and shall
forthwith be ratably paid over to each Noteholder for credit to and application
against the Guaranteed Obligations but without affecting, impairing or limiting
in any manner the liability of Guarantor under any other provision of this
Guaranty.
2.9 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand,
and to save Noteholders harmless against liability for (i) any and all
reasonable costs and expenses (including fees and disbursements of outside
counsel and allocated costs of internal counsel) incurred or expended by any
Noteholder in connection with the preparation of any subsequent modification of,
or consent under, this Guaranty, whether or not such consent is granted provided
that, with respect to any amendment proposed by any Significant Holder prior to
the occurrence of an Event of Default, such holder shall notify the Company and
the Guarantor prior to engaging outside counsel to prepare such amendment, (ii)
all reasonable costs and expenses (including outside counsel fees and allocated
costs of internal counsel) incurred by any Noteholder in enforcement or
preservation of any rights under this Guaranty and (iii) any registration tax
incurred in connection with the registration or filing of this Guaranty or any
judgment with respect thereto; provided, however, that, notwithstanding the
foregoing, Guarantor shall be obligated to pay the fees and expenses of only one
outside law firm that is acting as counsel to the Noteholders as a group, except
in the event that any Noteholder reasonably determines that there exists a
conflict of interest between itself and the other Noteholders, it may engage
separate counsel at the expense of the Guarantor. Further, in cases brought by
individual Noteholders resulting from the failure of the Company to make
payments in respect of their Notes, each Noteholder may, if it so elects, retain
its own counsel but the Guarantor shall only be liable for the fees and expenses
of up to four outside law firms.
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2.10 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a
continuing guaranty and shall remain in effect until all of the Guaranteed
Obligations shall have been paid in full. Guarantor hereby irrevocably waives
any right (including without limitation any such right arising under California
Civil Code Section 2815) to revoke this Guaranty as to future transactions
giving rise to any Guaranteed Obligations.
2.11 AUTHORITY OF GUARANTOR OR COMPANY. It is not necessary for any
Noteholder to inquire into the capacity or powers of Guarantor, Company or any
Subsidiary Guarantor or the officers, directors or any agents acting or
purporting to act on behalf of any of them, including ABN Amro Securities.
2.12 FINANCIAL CONDITION OF COMPANY. Any Notes may be issued by Company
or other indebtedness incurred by it or any Subsidiary Guarantor or renewed,
extended, refinanced or otherwise continued from time to time without notice to
or authorization from Guarantor regardless of the financial or other condition
of Company of such Subsidiary Guarantor at the time of any such grant or
continuation. Noteholders shall have no obligation to disclose or discuss with
Guarantor their assessment, or Guarantor's assessment, of the financial
condition of Company or any Subsidiary Guarantor. Guarantor, as the sole
shareholder of Company and as controlling indirect shareholder of the Subsidiary
Guarantors, has adequate means to obtain information on a continuing basis
concerning the financial condition of Company or any Subsidiary Guarantor and
their respective abilities to perform their obligations under the Note
Documents, and Guarantor assumes the responsibility for being and keeping
informed of the financial condition of Company and the Subsidiary Guarantors and
of all circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations. Guarantor hereby waives and relinquishes any duty on the part of
any Noteholder to disclose any matter, fact or thing relating to the business,
operations or conditions of Company or any Subsidiary Guarantor now known or
hereafter known by any Noteholder.
2.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to
Noteholders by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Noteholders by virtue of
any statute or rule of law or in any Note Document or any other agreement
between Guarantor, Company or any Subsidiary Guarantor and the Noteholders. Any
forbearance or failure to exercise, and any delay by any Noteholder in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
2.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
So long as any Guaranteed Obligations remain outstanding, Guarantor shall not,
without the prior written consent of the Required Holder(s), commence or join
with any other Person in commencing any bankruptcy, reorganization or insolvency
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proceedings of or against Company or any Subsidiary Guarantor. The obligations
of Guarantor under this Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Company or any Subsidiary Guarantor or by any
defense which Company or such Subsidiary Guarantor may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Guaranteed Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guaranteed Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guaranteed Obligations if said proceedings had not been
commenced) shall be included in the Guaranteed Obligations because it is the
intention of Guarantor that the Guaranteed Obligations which are guarantied by
Guarantor pursuant to this Guaranty should be determined without regard to any
rule of law or order which may relieve Company or any Subsidiary Guarantor of
any portion of such Guaranteed Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Noteholders, or allow the claim of each
Noteholder in respect of, any such interest accruing after the date on which
such proceeding is commenced.
(c) In the event that all or any portion of the Guaranteed
Obligations are paid by Company and/or the Subsidiary Guarantors, the
obligations of Guarantor hereunder shall continue and remain in full force and
effect or be reinstated, as the case may be, in the event that all or any part
of such payment(s) are rescinded or recovered directly or indirectly from any
Noteholder as a preference, fraudulent transfer or otherwise, and any such
payments which are so rescinded or recovered shall constitute Guaranteed
Obligations for all purposes under this Guaranty.
2.15 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge thereof,
Guarantor shall give Noteholders written notice of any condition or event which
has resulted in (a) an event, development or change with respect to Guarantor,
Company or any material Subsidiary thereof that has resulted or could reasonably
be expected to result in a Material Adverse Effect or (b) a breach of or
noncompliance with any term, condition or covenant contained herein or in any
Note Document.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Noteholders to accept this Guaranty, to
enter into the Note Agreement and to purchase the Notes and the Warrants,
Guarantor hereby represents and warrants to Noteholders that the following
statements are true and correct:
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3.1 ORGANIZATION. (i) Guarantor is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, each
Subsidiary is duly organized and (where such concept is appropriate) existing in
good standing under the laws of the jurisdiction identified in Schedule 3.1
hereto, and Guarantor has and each Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted.
(ii) Schedule 3.1 contains (except as noted therein) complete and
correct lists (A) of Guarantor's Subsidiaries, showing, as to each Subsidiary,
the correct legal name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its Voting Stock and other equity
interests, if any, outstanding owned by Guarantor and/or another Subsidiary, (B)
of Guarantor's Affiliates, other than Subsidiaries, and (C) of Guarantor's
directors, senior officers and Shareholders.
(iii) All of the outstanding shares of Voting Stock or other equity
interests of each Subsidiary shown in Schedule 3.1 as being owned by Guarantor
and/or another Subsidiary have been validly issued, are fully paid and
nonassessable and are owned by Guarantor or such other Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 3.1). Any shares of
Voting Stock or other equity interests in a Subsidiary that are held by any
Person, other than Guarantor or another Subsidiary, are not entitled to
preemptive rights and no such Persons have been granted options, warrants (other
than the Warrants) or other rights to acquire additional shares of such
Subsidiary's Voting Stock or other equity interests, except as disclosed in
Schedule 3.1.
3.2 FINANCIAL STATEMENTS. Guarantor has furnished you with the
following financial statements, identified by a principal financial officer of
Guarantor: (i) a consolidated balance sheet of Guarantor and its Subsidiaries as
of July 30, 1994 and July 31, 1993, and consolidated statements of income
(loss), stockholders' equity and cash flows of Guarantor and its Subsidiaries
for each such fiscal year, all certified by KPMG Peat Marwick, LLP and (ii) a
consolidated balance sheet of Guarantor and its Subsidiaries as of January 28,
1995 and January 29, 1994 and consolidated statements of income (loss),
stockholders' equity and cash flows for the six-month period ended on each such
date, prepared by Guarantor. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with GAAP consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of Guarantor and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of Guarantor and its
Subsidiaries as at the dates thereof, and the statements of income (loss),
stockholders' equity and statements of cash flows fairly present the results of
the operations of Guarantor and its Subsidiaries for the periods indicated.
There has been no material adverse change in the business, condition (financial
or otherwise) or operations of Guarantor and its Subsidiaries, taken as a whole,
since July 30, 1994.
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3.3 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Guarantor, threatened against
Guarantor or any of its Subsidiaries, or any of its properties or rights, by or
before any court, arbitrator or administrative or governmental body which might
result in any Material Adverse Effect.
3.4 OUTSTANDING DEBT. Neither Guarantor nor any of its
Subsidiaries has outstanding any Debt except as permitted by Section 5.6. There
exists no default under the provisions of any instrument evidencing such Debt or
of any agreement relating thereto.
3.5 TITLE TO PROPERTIES. Guarantor and its Subsidiaries have good and
marketable title to its respective real properties (other than properties which
it leases) and good title to all of its other respective properties and assets,
including the properties and assets reflected in the balance sheet as at July
30, 1994, referred to in Section 3.2 (other than properties and assets disposed
of in the ordinary course of business taken as a whole), subject to no Lien of
any kind except Liens (i) permitted by Section 5.4 or (ii) that are immaterial
to the conduct of the business and operations of Guarantor and its Subsidiaries,
taken as a whole. All leases necessary in any material respect for the conduct
of the respective businesses of Guarantor and its Subsidiaries are valid and
subsisting and are in full force and effect.
3.6 TAXES. Guarantor and each of its Subsidiaries has filed all
federal, state, local, foreign and other income tax returns which, to the
knowledge of the officers of the Guarantor, are required to be filed, and each
has paid all taxes as shown on such returns and on all assessments received by
it to the extent that such taxes have become due, except such taxes as are
currently subject to a Good Faith Contest. All pending or threatened tax
assessments, audits, investigations or other proceedings are set forth in
Schedule 3.6.
3.7 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Guarantor nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which has or could reasonably have a
Material Adverse Effect. Neither the execution nor delivery of this Guaranty or
any Note Document nor the offering, issuance and sale of the Notes or the
Warrants, nor fulfillment of nor compliance with the terms and provisions hereof
or any Note Document will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of Guarantor or any of its Subsidiaries pursuant to, the charter or
by-laws of Guarantor or any of its Subsidiaries, any award of any arbitrator or
any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Guarantor or any of
its Subsidiaries is subject. Neither Guarantor nor any of its Subsidiaries is a
party to, or otherwise subject to any provision contained in, any
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instrument evidencing Debt of Guarantor or Subsidiary, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
Guarantor of the type to be evidenced by this Guaranty except as set forth in
the agreements listed in Schedule 3.7 attached hereto.
3.8 OFFERING OF NOTES. None of Guarantor, Company or any agent acting
on their behalf has, directly or indirectly, offered this Guaranty, the
Subsidiary Guaranty, the Notes, the Warrants or any similar security for sale
to, or solicited any offers to buy this Guaranty, the Subsidiary Guaranty, the
Notes, the Warrants or any similar security, from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and none of Guarantor, Company or any agent acting on their behalf
has taken or will take any action which would subject the issuance or sale of
this Guaranty, the Subsidiary Guaranty, the Notes or the Warrants (including the
shares of Company common stock issuable thereunder) to registration under the
provisions of section 5 of the Securities Act, to qualification under the
provisions of any securities or Blue Sky law of any applicable jurisdiction or
to registration or filing with, or approval or other action by, any other
governmental authority or body.
3.9 REGULATION G, ETC. Neither Guarantor nor any of its Subsidiaries
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). The proceeds of sale of the Notes will be
used to refinance existing Indebtedness and for other working capital purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation G. None of Guarantor,
Company or any agent acting on their behalf have or has taken or will take any
action which might cause this Guaranty or any Note Document to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.
3.10 COMPLIANCE WITH ERISA. (i) Each Plan is in substantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability; no Plan has an accumulated or waived funding deficiency or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code; all contributions required to be made with respect to a
Plan and a Foreign Pension Plan have been timely made; neither Guarantor nor any
Subsidiary nor any ERISA Affiliate has incurred any material liability to or on
account of a Plan pursuant to Section 409, 502 (i), 502 (1), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of
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ERISA or Section 401 (a) (29), 4971, 4975 or 4980 of the Code or expects to
incur any liability (including any indirect, contingent, or secondary liability)
under any of the foregoing Sections with respect to any Plan; no proceedings
have been instituted to terminate or appoint a trustee to administer any Plan;
no condition exists which presents a material risk to Guarantor or any
Subsidiary or any ERISA Affiliate of incurring a liability to or on account of a
Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial
assumptions and computation methods consistent with Part 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of Guarantor and its Subsidiaries
and its ERISA Affiliates to all Plans which are multiemployer plans (as defined
in Section 4001 (a) (3) of ERISA) in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such Plan
ended prior to the date hereof, would not exceed $500,000; no Lien imposed under
the Code or ERISA on the assets of Guarantor or any Subsidiary or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and Guarantor and
its Subsidiaries may cease contributions to or terminate any employee benefit
plan maintained by any of them without incurring any material liability.
(ii) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. Neither the Guarantor nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of
Guarantor's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
3.11 GOVERNMENTAL CONSENT. No circumstance in connection with the
execution and delivery of this Guaranty or the Subsidiary Guaranty, or the
offering, issuance, sale and delivery of the Notes or the Warrants is such as to
require any authorization, consent, approval, exemption or other action by or
notice to or filing with any court or administrative or governmental body (other
than routine filings after the date of closing with the Securities and Exchange
Commission and/or state Blue Sky authorities)(collectively, "CONSENTS") in
connection herewith and therewith, other than Consents already obtained by or on
behalf of Guarantor.
3.12 HOLDING COMPANY AND INVESTMENT COMPANY STATUS. None of Guarantor
nor any of its Subsidiaries 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," or a "public utility," within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended. None
of Guarantor nor any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
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Company Act of 1940, as amended, or an "investment adviser" within the meaning
of the Investment Advisers Act of 1940, as amended.
3.13 POSSESSION OF FRANCHISES, ETC. Guarantor and all its Subsidiaries
possess all franchises, certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory authorities, free from
unduly burdensome restrictions, that are necessary in any material respect for
the ownership, maintenance and operation of its properties and assets, and none
of Guarantor nor any of its Subsidiaries is in, or has reason to believe it is
in, violation thereof in any material respect.
3.14 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.14 hereto,
Guarantor and its Subsidiaries (i) have complied in all material respects with
all applicable laws, statutes, rules and regulations, including Environmental
and Safety Laws, and neither Guarantor nor any Subsidiary has received (A)
notice of any material failure so to comply or (B) any information that would
lead it to believe that it is the subject of any Federal, state, local or
foreign investigation; (ii) does not manage, generate, transport, discharge or
store any Hazardous Materials in material violation of any material
Environmental and Safety Laws; (iii) does not own, operate or maintain any
underground storage tanks or surface impoundments; and (iv) is not aware or any
conditions or circumstances associated with its currently or previously owned or
leased Properties or operations (or those of its tenants), in each case which
may give rise to any liability, fines, penalties or other obligations, including
Environmental Liabilities and Costs, that could have a Material Adverse Effect.
3.15 INTELLECTUAL PROPERTIES. All material patents, patent
applications, copyrights, copyright applications, trade secrets, trade names and
trademarks, technologies, methods, processes or other proprietary properties or
information (collectively, "INTELLECTUAL PROPERTIES") which are used by
Guarantor and its Subsidiaries in the conduct of their respective businesses are
either owned by them or are used, employed or practiced by them under valid and
existing licenses, grants, "shop rights", or other rights. None of Guarantor nor
any Subsidiary has received a notification of infringement of any Intellectual
Property that, individually or in the aggregate, would have a Material Adverse
Effect. No officer, director, employee or Shareholder of Guarantor or any
Subsidiary (other than Guarantor or another Subsidiary) owns or has, nor at the
date of closing will own or have, any interest in any Intellectual Property
owned or used by Guarantor or any Subsidiary in connection with its businesses.
3.16 LABOR AND EMPLOYEE RELATIONS MATTERS. Except as set forth on
Schedule 3.16:
(i) None of Guarantor or its Subsidiaries is or to its
knowledge expects to be the subject of any union organizing activity or labor
dispute, and none of Guarantor or its Subsidiaries has violated any applicable
federal or state law or
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regulation relating to labor or labor practices, which violation would give rise
to a Material Adverse Effect.
(ii) Except as set forth on Schedule 3.16, no present or
former employee of Guarantor or any Subsidiary has advanced claims in writing
against Guarantor or any Subsidiary (whether under any foreign, federal, state
or common law, through a government agency, under an employment agreement,
collective bargaining agreement, personal service or independent contractor
agreement or otherwise) that are currently pending for (A) overtime pay, other
than overtime pay for the current period; (B) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period);
(C) vacations, time off (including without limitation, potential sick leave) or
pay in lieu of vacation or time off, other than vacation or time off (or pay in
lieu thereof) earned in respect of Guarantor's or any Subsidiary's current
fiscal year; (D) any violation of any statute, ordinance or regulation relating
to minimum wages or maximum hours of work; (E) discrimination against employees
on any basis; (F) unlawful employment or termination practices; (G) any
violation of occupational safety and/or health standards; (H) benefits under any
employee plans or compensation arrangement; and (I) breach of any employment,
personal service or independent contractor agreement; provided, however, that
the Guarantor shall not be deemed to have breached this representation and
warranty unless the liability for clauses (A)-(I) in the aggregate exceeds, or
could reasonably be expected to exceed, $1,000,000.
3.17 AUTHORIZATION AND ENFORCEABILITY. This Guaranty and the Note
Documents have been duly authorized by all necessary corporate action on the
part of Guarantor and its Subsidiaries, as applicable, and have been duly
executed and delivered by duly authorized officers thereof. Each of this
Guaranty and the Note Documents constitutes the legally valid and binding
obligation of Guarantor, Company and/or the Subsidiary Guarantors that is a
party thereto, enforceable against them in accordance with its terms, except
that (i) enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting the rights of creditors
generally and (ii) enforcement is subject to the effect of general principles of
equity, whether applied by a court of law or equity.
3.18 PARI PASSU NATURE. The obligations of Guarantor hereunder do and
will continue to rank pari passu with all other unsecured, senior obligations of
Guarantor, except to the extent of Liens permitted by Section 5.4 hereof or the
obligations listed in Schedule 3.18 or that are mandatorily preferred under
applicable law.
3.19 FOREIGN ENEMIES AND REGULATIONS. Neither the issue and sale of the
Notes or the Warrants or the execution and delivery of this Guaranty or the
Subsidiary Guaranty nor the use of the proceeds thereof as stated in Section 3.9
will violate (i) any regulations promulgated or administered by the Office of
Foreign Assets Control, United States Department of the Treasury, including
without
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limitation, the Foreign Assets Control Regulations, the Transaction
Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds
Control Regulations, the Iranian Assets Control Regulations, the Nicaraguan
Trade Control Regulations, the South African Transaction Regulations, the
Iranian Transactions Regulations, the Iraqi Sanctions Regulations, the Soviet
Gold Coin Regulations, the Panamanian Transaction Regulations or the Libyan
Sanctions Regulations of the United States Treasury Department, 31 C.F.R.,
Subtitle B, Chapter V, as amended, (ii) the Trading with the Enemy Act, as
amended, (iii) Executive Orders 8389, 9095, 9193, 12543 (Libya), 12544 (Libya),
12722 (Iraq) or 12724 (Iraq), 12775 (Haiti), 12779 (Haiti) or 12959 (Iran), all
as may be amended, of the President of the United States or (iv) any rule,
regulation or executive order issued or promulgated pursuant to the laws or
regulations described in the foregoing clauses (i) -(iii).
3.20 SOLVENCY. Other than as set forth in Schedule 3.20, none of the
Company's liability evidenced by the Notes and the Note Agreement, Guarantor's
liability evidenced by this Guaranty and the Warrants, or the Subsidiary
Guarantors' liability evidenced by the Subsidiary Guaranty, was incurred with
the intent to hinder, delay or defraud any of their respective creditors or any
other Person to which it is, on or after the date hereof, indebted. None of
Guarantor, Company or any Subsidiary Guarantor is insolvent on the date hereof,
or will become insolvent as a result of becoming obligated hereunder or under
the Note Documents to which it is a party. For purposes of this Section 3.20,
the term "insolvent" means, with respect to any Person, the financial condition
such that either (i) the sum of such Person's liabilities (including contingent
and unliquidated liabilities computed in the manner set forth below) is greater
than all of its property, at fair valuation or (ii) the present fair salable
value of its assets is less than the amount that will be required to pay its
probable liability on its existing Indebtedness as they become absolute and
matured. Guarantor, Company and each Subsidiary Guarantor each does not intend
to incur, nor does it believe that it is incurring, Indebtedness beyond its
ability to pay as such Indebtedness matures. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the known facts and circumstances
existing at such time represents the amount that can reasonably be expected to
become an actual or matured liability. None of Guarantor, Company or any
Subsidiary Guarantor is engaged in any business or transaction for which the
property remaining with it after giving effect to such business or transaction
would be an unreasonably small amount of capital.
3.21 WARRANTS AND WARRANT SHARES. (i) The Warrants have been duly
authorized by all necessary corporate action on the part of Guarantor and have
been duly executed and delivered by it. The Warrants constitute the valid and
legally binding obligations of Guarantor, enforceable against it in accordance
with its terms, except that (i) enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
the rights of creditors generally and (ii) enforcement is subject to the effect
of general principles of equity, whether applied by a court of law or equity.
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(ii) Guarantor has reserved and unissued shares of its common stock at
least equal to the shares of common stock issuable upon exercise of the
Warrants. The shares of common stock issuable upon exercise of any Warrant have
been duly authorized, and upon payment therefor in accordance with the terms of
such Warrant, shall be validly issued, fully paid and nonassessable shares, with
no liability on the part of the exercising holder with respect to obligations of
Guarantor.
3.22 DISCLOSURE. Neither this Guaranty nor any other Note Document
furnished to you by or on behalf of Guarantor, Company or any Subsidiary
Guarantor in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to
Guarantor or any of its Subsidiaries which now has or in the future may (so far
as Guarantor can now foresee) have a Material Adverse Effect and which has not
been set forth in this Guaranty or in the Note Documents.
SECTION 4. AFFIRMATIVE COVENANTS.
4.1 FINANCIAL STATEMENTS. Guarantor covenants that it will
deliver to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period in each fiscal year (A)
consolidated statements of income, retained earnings and cash flows and
consolidating statements of income, in each case of Guarantor and its
Subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period and (B) consolidated and
consolidating balance sheets of Guarantor and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and satisfactory in form to the
Required Holder(s) and certified by an authorized financial officer of
Guarantor, subject to changes resulting from year-end adjustments;
provided, however, that delivery pursuant to clause (iii) below of
copies of the Quarterly Report on Form 10-Q of Guarantor for such
fiscal quarter filed with the Securities and Exchange Commission shall
be deemed to satisfy the requirements to deliver consolidated
statements and balance sheets under subclauses (A) and (B) of this
clause (i);
(ii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, consolidated statements of income,
retained earnings and cash flows of Guarantor and its Subsidiaries for
such year and consolidated balance sheets of Guarantor and its
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding figures from the preceding annual audit,
all in reasonable detail and
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satisfactory in form to the Required Holder(s) and reported on by
independent public accountants of recognized national standing (which,
if not a "Big Six" accounting firm shall be reasonably acceptable to
the Required Holders) selected by Guarantor whose report shall be
without limitation as to the scope of the audit and satisfactory in
substance to the Required Holder(s); provided, however, that delivery
pursuant to clause (iii) below of copies of the Annual Report on Form
10-K of Guarantor for such fiscal year filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (ii) to deliver annual financial statements;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration
statements (without exhibits) and all reports, including Reports on
Form 8-K, which it files with the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other
report submitted to Guarantor or any Subsidiary by independent
accountants in connection with any interim or special audit made by
them of the books of Guarantor or any Subsidiary (other than local
statutory audited reports of Subsidiary Guarantors and so-called
"management letters" issued in the ordinary course of audits of annual
financial statements);
(v) within the time periods specified in clauses (i) and
(ii), unaudited data showing revenues and gross profits by product
segment;
(vi) no later than September 30, 1995 and September 30,
1996, an Officer's Certificate showing, with supporting calculations
and underlying assumptions in reasonable detail, projected compliance
with Sections 5.1, 5.2, 5.3, 5.5(ix), 5.6, 5.10 and 5.12 on a quarterly
basis for the fiscal years ending July 31, 1996 and July 31, 1997,
respectively;
(vii) promptly after its transmission, such other
certificates, documents and information as any Guarantor may regularly
furnish to any holder of its other Debt; and
(viii) with reasonable promptness, such other financial data
and other information as such Significant Holder may reasonably
request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, Guarantor will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
it with the provisions of Sections 5.1-5.3, 5.4(viii), 5.5(ix), 5.6, 5.7, 5.9,
5.10, 5.12, 5.14 and
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5.19 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action Guarantor proposes to take with
respect thereto. Together with each delivery of financial statements required by
clause (ii) above, Guarantor will deliver to each Significant Holder a
certificate of such accountants stating that, in making the audit necessary for
their report on such financial statements, they have obtained no knowledge of
any breach of the financial covenants in this Guaranty, or, if they have
obtained knowledge of any such breach, specifying the nature and period of
existence thereof. Such accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any breach hereunder that would
not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. Guarantor also covenants that forthwith
upon its chief executive officer or principal financial officer obtaining
knowledge of any breach or default hereunder, it will deliver, or cause to be
delivered, to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action Guarantor proposes to
take with respect thereto. Delivery of non-public information shall be
conditioned on such Significant Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D of the Note Agreement
(to the extent such holder has not already done so).
4.2 INFORMATION REQUIRED BY RULE 144A. Guarantor covenants that it
will, upon the request of any Noteholder, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of the Securities, except at such
times as Guarantor is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act. For the purpose of this Section 4.2, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act. Delivery of material non-public information shall be
conditioned on such qualified institutional buyer's execution and delivery of a
Confidentiality Agreement.
4.3 INSPECTION OF PROPERTY. Guarantor covenants that it will permit any
duly authorized representative of any Inspecting Holder in writing to visit and
inspect any of its or any of its Subsidiaries' properties, to examine their
corporate books and financial records and make copies thereof or extracts
therefrom and to discuss any of their affairs, finances and accounts with the
principal officers of Guarantor or such Subsidiary and its independent public
accountants, all at such reasonable times and as often as such Inspecting Holder
may reasonably request. Access to material, non-public information may be
conditioned on such Inspecting Holder's execution and delivery to Guarantor or
such Subsidiary of a Confidentiality Agreement. The costs and expenses
associated with the exercise of any rights under this Section 4.3 shall be borne
by such Inspecting Holder, unless and until either a Default or Event of Default
has occurred under the Note Agreement or a breach or default has occurred
hereunder, in which event the reasonable costs and expenses thereof shall be
borne by
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Guarantor. Delivery of material non-public information shall be
conditioned on such Inspecting Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D of the Note Agreement
(to the extent such holder has not already done so). The Inspecting Holders
shall use reasonable efforts to coordinate their inspections and requests for
copies so as, to the extent they can, to avoid unnecessary duplication.
4.4 COVENANT TO SECURE NOTE EQUALLY. Guarantor covenants that, if it or
any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of Section 5.4 (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to Section 6.4), it will
make or cause to be made effective provision whereby the Notes and this Guaranty
will be secured by such Lien equally and ratably with any and all other Debt
thereby secured so long as any such other Debt shall be so secured. Guarantor
further covenants to disclose the provisions of this Section 4.4 and Section 5.4
in the footnotes to the annual financial statements that are provided to its
lenders and other creditors.
4.5 MAINTENANCE OF INSURANCE. Guarantor covenants that it and each of
its Subsidiaries will maintain insurance in such amounts and against such
liabilities and hazards as is, to the best of its knowledge, customarily
maintained by other companies operating similar businesses.
4.6 MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS . Guarantor
covenants that it and each Subsidiary will (i) maintain or cause to be
maintained in good repair, working order and condition all equipment and other
properties necessary at that time in its business and that are material to the
conduct of its business taken as a whole and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof; and
(ii) comply with all applicable laws (including Environmental and Safety Laws),
rules, regulations and orders of all Federal, state, local or foreign courts or
governmental agencies, authorities, instrumentalities or regulatory bodies;
except where such noncompliance could not reasonably be expected to result in a
Material Adverse Effect or to the extent that such compliance is subject to a
Good Faith Contest.
4.7 PAYMENT OF TAXES AND CLAIMS. Guarantor will, and will cause each
Subsidiary to, pay all taxes, levies, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums that have become due and payable and
which by law have or might become a Lien upon any of its properties or assets,
except to the extent that such charge is subject to a Good Faith Contest.
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4.8 ERISA. As soon as possible and, in any event, within 10 days after
Guarantor, any Subsidiary or any ERISA Affiliate knows or has reason to know of
the occurrence of any of the following, Guarantor will deliver to each of the
Noteholders a certificate of the chief financial officer of Guarantor setting
forth details as to such occurrence and the action, if any, that Guarantor, such
Subsidiary or such ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed with or by
Guarantor, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or
the Plan administrator with respect thereto; that a Reportable Event has
occurred; that an accumulated funding deficiency has been incurred or an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan; that a contribution required to be made
to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been
or may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan; that a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Plan; that Guarantor, any Subsidiary or any ERISA Affiliate will or may
incur any liability (including any indirect, contingent, or secondary liability)
to or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401 (a) (29), 4971, 4975 or 4980 of the Code or Section 409 or 502
(i) or 502 (1) of ERISA; or that Guarantor or any Subsidiary may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3 (1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3 (2) of ERISA). Upon the
request of any Significant Holder, Guarantor will deliver a complete copy of the
annual report (Form 5500) of each Plan (including, to the extent required, the
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed with
the Internal Revenue Service. In addition to any certificates or notices
delivered to the Noteholders pursuant to the first sentence hereof, copies of
annual reports and any material notices received by Guarantor, any Subsidiary or
any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be
delivered to the Noteholders no later than 10 days after the date such report
has been filed with the Internal Revenue Service or such notice has been
received by Guarantor, the Subsidiary or the ERISA Affiliate, as applicable.
4.9 LEGAL PROCEEDINGS. Guarantor covenants that it will, and will cause
each Subsidiary to, deliver promptly to you any notice of (i) any material
litigation or other legal or administrative proceedings that, if adversely
determined to Guarantor, could reasonably be expected to result in a Material
Adverse Effect, including enforcement, cleanup, removal or other material
governmental or regulatory actions
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instituted, completed or, to its best knowledge, threatened pursuant to any
Environmental and Safety Laws and the amount of Environmental Liabilities and
Costs associated therewith; and (ii) its discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any Property that
such it has reason to believe could cause any Property or any material part
thereof to be subject to any material restrictions on its ownership, occupancy,
transferability or use under any Environmental and Safety Laws.
4.10 ROYALTY ARRANGEMENTS. Guarantor covenants that it will maintain
the existing royalty arrangements between it and its Subsidiaries parties
thereto on terms no less favorable to Guarantor than those that exist on the
date hereof and as are set forth in Schedule 4.10, except for changes, to the
extent necessary, to minimally comply with applicable legal requirements;
provided in no event shall such changes terminate or substantially reduce the
minimum fixed royalty payments to Guarantor.
4.11 CORPORATE EXISTENCE, ETC.; BUSINESS. Guarantor covenants that it
will, and will cause all its Subsidiaries to, preserve and keep in full force
and effect at all times its corporate existence, and rights, licenses, permits,
franchises and other similar rights material to its business, except (i) to the
extent otherwise permitted by Section 5.8 or 5.9, (ii) that the corporate
existence of any Subsidiary may be terminated if, in the good faith judgment of
the Board of Directors of Guarantor, such termination is in the best interest of
Guarantor and is not disadvantageous to the holders of the Notes and (iii) for
any Transfer, by the Guarantor in a single transaction or a series of related
transactions within a six (6) month period, of substantially all of its assets
(other than its rights to the name "Inmac" and its right to reserve royalty
payments from Subsidiaries) to a Subsidiary formed under the laws of any state
of the United States that (A) is not an Exempt Subsidiary and (B) executes and
delivers, simultaneously with the effectiveness of such Transfer, a guaranty of
the Guaranteed Obligations in substantially the form of this Guaranty. Guarantor
covenants it will not, and will not permit any Subsidiary to, engage in any
business other than the businesses conducted by it and its Subsidiaries on the
date of the financial statements described in Section 3.2 and any other business
reasonably related thereto.
4.12 CURRENCY HEDGING. In addition to the covenant set forth in Section
5.18 hereof, Guarantor covenants that it and its Subsidiaries will maintain the
same type of currency transaction exposure practices as are maintained on the
date hereof.
4.13 ADDITIONAL SUBSIDIARY GUARANTORS. Guarantor covenants that if it
creates, forms, purchases, or otherwise acquires a Subsidiary after the date
hereof (other than an Exempt Subsidiary), or assets of Subsidiaries are
Transferred to a Subsidiary that is not a Subsidiary Guarantor, in each case
with the result that such Subsidiary has assets with a net book value in excess
of $500,000, it shall cause such Subsidiary to (i) execute and deliver a
guaranty of the Guaranteed Obligations in substantially the form of the
Subsidiary Guaranty; and (ii) cause to be executed and
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delivered in connection therewith such other documents, certificates and legal
opinions as the Required Holders may reasonably request.
5. NEGATIVE COVENANTS. Guarantor covenants and agrees that,
unless and until all of the Guaranteed Obligations shall have been paid in full,
unless Required Holders shall otherwise consent in writing, it will not, and
will not permit any Subsidiary to:
5.1 CURRENT RATIO REQUIREMENT. Permit the ratio of Consolidated
current assets to Consolidated current liabilities to be less than the required
minimum ratios during the time periods
set forth below:
<TABLE>
<CAPTION>
<S> <C>
Minimum Current Ratio Time Period
- --------------------- -----------
1.50 Date of closing through July 26, 1997
1.35 July 27, 1997 through July 31, 1999
1.25 At all times from and after August 1, 1999
</TABLE>
5.2 CONSOLIDATED TANGIBLE NET WORTH REQUIREMENT. Permit Consolidated
Tangible Net Worth to be less than the sum of (A) $32,000,000 plus (B) on a
cumulative basis, 75% of positive Consolidated Net Earnings for each quarter
after the fiscal quarter ended July 30, 1994 plus (C) 75% of all Net Proceeds
received from all issuances of Qualified Stock after July 30, 1994.
5.3 RESTRICTED PAYMENTS LIMITATION. Directly or indirectly make,
declare, pay or set apart any sum of money or other property for any Restricted
Payments unless, after giving effect thereto (A) no Default or Event of Default
exists or will result therefrom; and (B) the aggregate amount of all Restricted
Payments made after the date of closing does not exceed 25% (or minus 100% in
the case of losses) of Consolidated Net Earnings for each fiscal quarter
beginning July 30, 1995. Notwithstanding the foregoing, Guarantor shall not
make, pay or declare or set apart any sum of money or other property for any
Restricted Payments in excess of $1,000,000 in the aggregate during the period
beginning with the date of this Guaranty and ending on July 26, 1997.
5.4 LIEN RESTRICTIONS. Create, assume or permit to exist at any time
any Lien of any kind (other than to or in favor of the holders of the Notes or
unless prior written consent to the creation, assumption or maintenance thereof
shall have been obtained pursuant to Section 6.4) on or with respect to any of
its property or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Notes in accordance
with the provisions of Section 4.4 hereof), except
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(i) Liens for taxes, assessments or other governmental
levies or charges not yet due or which are subject to a Good Faith
Contest;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course
of business for sums not yet due or that are subject to a Good Faith
Contest;
(iii) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security or other similar statutory or legal obligations, in each case
not incurred or made in connection with the incurrence or maintenance
of Debt, the obtaining of advances or credit or the payment of the
deferred purchase price of property, and provided that such Liens do
not in the aggregate materially detract from the value of the property
or assets so encumbered or materially impair the use thereof in the
operation of its business;
(iv) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to Company, Guarantor or another
Subsidiary;
(v) Liens that may be required by this Guaranty;
(vi) Liens existing on the date hereof as set forth on
Schedule 5.4; provided that the Indebtedness secured thereby does not
exceed $1,000,000;
(vii) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions
as to use of real property, that are necessary for the conduct of the
operations of Guarantor and its Subsidiaries or that customarily exist
on properties of corporations engaged in similar businesses and are
similarly situated and that do not in any event materially impair their
use in the operations of Guarantor and its Subsidiaries; and
(viii) any Lien other than those specified in clauses (i) -
(vii) above that secures Debt in an aggregate principal amount not to
exceed at any time the sum of $10,000,000 plus 5% of Consolidated
Tangible Net Worth (measured at the end of the fiscal quarter
immediately preceding the date of determination); provided, however,
that in no event shall such Liens attach to or otherwise encumber (A)
Consolidated current assets or (B) capital stock of any Subsidiary.
5.5 LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding at any time any loan or advance to, or own, purchase or acquire
stock, obligations or securities of, or any other investment or other interest
in, or make any
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capital contribution to, any Person, or commit or agree to do any of the
foregoing, except for:
(i) [intentionally deleted];
(ii) stock, obligations or securities of a corporation which is, or
after such purchase or acquisition becomes, a Subsidiary;
(iii) obligations directly issued by the United States or any of its
agencies or obligations fully guaranteed by the United States, provided
that such obligations mature within one year from the date acquired;
(iv) (A) certificates of deposit which mature within one year from
the date of purchase that are issued by, or (B) bankers' acceptances
eligible for rediscount under requirements of The Board of Governors of
the Federal Reserve System that are accepted by, any commercial bank or
trust company (1) organized under the laws of the United States or any
of its states or having branch offices therein, (2) having consolidated
capital, surplus and undivided profits aggregating at least
$750,000,000 and (3) whose senior unsecured debt securities are rated
AA or better by S&P or Aa2 or better by Moody's;
(v) commercial paper given an A-1 or better rating by S&P, a P-1 or
better rating by Moody's and maturing not more than 270 days from the
date acquired;
(vi) loans and advances (A) between Guarantor and any wholly owned
Subsidiary (other than Exempt Subsidiaries) or (B) between wholly owned
Subsidiaries (other than Exempt Subsidiaries);
(vii) outstanding loans and advances to employees for travel and other
similar expenses reasonably incurred in the ordinary course of
business;
(viii) notes receivables with a term not in excess of 180 days arising
from transactions with customers and suppliers in the ordinary course
of business; and
(ix) any loans, advances or investments other than as specified in
clauses (i) - (viii) above, so long as the aggregate of all such loans,
advances and investments does not, at any time, exceed the sum of (A)
$2,000,000 plus (B) 10% of Consolidated Tangible Net Worth, the latter
measured at the end of the fiscal quarter immediately preceding the
date of determination thereof.
5.6 DEBT RESTRICTIONS. Incur, create, assume or permit to exist
at any time any Debt except for:
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(i) the Notes, this Guaranty and the Subsidiary Guaranty;
(ii) Debt owed by any Subsidiary (other than an Exempt
Subsidiary) to a wholly owned Subsidiary or Guarantor
or owed by Guarantor to any Subsidiary Guarantor;
(iii) additional Debt of Guarantor not to exceed $5,000,000
at any time;
(iv) overdraft facilities, so long as the amount of such
facilities does not exceed $500,000 at any time for
either Guarantor or, separately, for any Subsidiary of
Guarantor;
(v) Capitalized Lease Obligations;
(vi) additional Debt of all the Subsidiary Guarantors
provided that (A) Inmac Geschellshaft mit beschrankter
Haftung may maintain until September 15, 1995 not more
than 7,500,000DM of Debt with Barclays Bank and
3,500,000DM with National Westminster Bank; (B) Inmac
aktiebolag may maintain until September 15, 1995 not
more than SEK 5,100,000 of Debt with Barclays Bank; (C)
the Company may maintain until September 15, 1995 not
more than Dfl.3,882,000 of Debt with Midland Bank; and
(D) except as otherwise set forth in the immediately
preceding subclauses (A) through (C) all other such
additional Debt shall not exceed $5,000,000 in the
aggregate for all Subsidiary Guarantors and $2,000,000
in the aggregate for any individual Subsidiary
Guarantor;
(vii) Debt of Exempt Subsidiaries not to exceed at any time
$3,000,000 in the aggregate for all Exempt
Subsidiaries;
(viii) additional Debt of the Company pursuant to the Dutch
Credit Facility and Guaranties of such Debt by any
Subsidiary Guarantor; provided, however, that in no
event shall any Subsidiary Guarantor have direct
borrowings to such Subsidiary Guarantor (without regard
to co-borrowing obligations) outstanding under the
Dutch Credit Facility that in the aggregate exceed the
amount of its liability under the Subsidiary Guaranty
on the date hereof;
(ix) obligations under currency swaps or hedging
arrangements permitted by paragraph 5J of the Note
Agreement;
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provided, however, that in no event will Guarantor, the Company or any
Subsidiary Guarantor Guarantee any Debt except as provided in clauses (i) and
(viii) of this Section 5.6, and except for the Debt of the Guarantor's Canadian
Subsidiary in the amount of Cdn.$4,000,000, provided that such Guaranties are
terminated no later than December 31, 1995.
5.7 LEVERAGE RESTRICTIONS. Notwithstanding the provisions of Section 5.6
hereof, incur, create, assume or permit to exist at any time any Debt, except to
the extent that the ratio of (a) Consolidated Debt, including the Notes to (b)
the sum of Consolidated Tangible Net Worth plus Consolidated Debt does not, at
any time exceed:
(i) for the period from and after the date of closing through and
including July 26, 1997, 50%;
(ii) for the period from and after July 27, 1997 through and
including July 31, 1999, 47.5%; and
(iii) at all times from and after August 1, 1999, 45%.
5.8 MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, except that:
(i) any Subsidiary other than the Company may merge or consolidate with
or into Guarantor; provided that Guarantor is the continuing or
surviving corporation,
(ii) any Subsidiary other than the Company may merge or consolidate
with or into a wholly owned Subsidiary (other than an Exempt
Subsidiary) that is organized and domiciled either in the United States
or in the country of such merged or consolidated Subsidiary;
(iii) Guarantor may merge with any other solvent corporation, provided
that (A) Guarantor shall be the continuing or surviving corporation;
and (B) no Default or Event of Default exists or would exist
immediately before or after giving effect to such merger; and
(iv) any Subsidiary may merge or consolidate with any other
corporation, provided that, immediately after giving effect to such
merger or consolidation (a) a wholly owned Subsidiary established under
the laws of any State in the United States or established in the
country of such merged or consolidated Subsidiary shall be the
continuing or surviving corporation and (b) no Default or Event of
Default exists or would exist before or after giving effect to such
merger or consolidation.
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5.9 TRANSFER OF ASSETS. Transfer any of its assets except that
(i) any Subsidiary other than the Company may Transfer assets
to Guarantor or a wholly owned Subsidiary (other than an
Exempt Subsidiary) that is organized and domiciled either in
the United States or in the country of the Transferring
Subsidiary;
(ii) Guarantor or any Subsidiary may sell inventory in the
ordinary course of business;
(iii) Guarantor or any Subsidiary may Transfer assets that, in
its good faith, reasonable judgment, have no further useful or
productive capacity, are fully used or depreciated, are
obsolete or are no longer necessary or productive in the
ordinary course of its business;
(iv) Guarantor may Transfer assets if permitted in Section
4.11(iii) or Guarantor or any Subsidiary may Transfer trade
receivables to the extent permitted by Section 5.11; and
(v) Guarantor or any Subsidiary may otherwise Transfer
assets, provided that after giving effect thereto (A) neither
the Annual Percentage of Tangible Assets Transferred nor the
Annual Percentage of Earnings Capacity Transferred pursuant to
this clause (v) shall exceed 5% and (B) neither the Cumulative
Percentage of Tangible Assets Transferred nor the Cumulative
Percentage of Earnings Capacity Transferred pursuant to this
clause (v) shall exceed 20%.
For purposes of determining compliance with the provisions of this
Section 5.9, Transfers of assets described in clause (i) - (iv) above shall not
be included in making the calculations required for the percentage limitations
set forth in clause (v) above.
5.10 SALE AND LEASE-BACK. Enter into any arrangement providing for the
leasing by Guarantor or any Subsidiary of real or personal property which has
been or is to be sold or transferred by Guarantor or any Subsidiary to a lender
or investor or to any other Person to whom funds have been or are to be advanced
by such lender, investor or other Person on the security of such property or
rental obligations of Guarantor or any Subsidiary; provided, however, that
Guarantor and its Subsidiaries may engage in such sale and lease-back
arrangements so long as (i) the aggregate amount of assets subject to such
arrangements, valued at original cost, does not at any time exceed $5,000,000;
(ii) the sales of such assets are subject to, and are permitted by, Section 5.9;
and (iii) the leases of such assets are subject to, and are permitted by,
Section 5.12.
5.11 SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its account
receivables,
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except (i) for sales without recourse of trade receivables as is
customary in countries other than the United States and Canada in the ordinary
course of business and in accordance with the practices and procedures set forth
in Schedule 5.11 hereto; (ii) sales, without recourse and otherwise on market
terms, of trade receivables, the collection of which is doubtful under GAAP; and
(iii) sales of receivables among Company, Guarantor and any Subsidiary
Guarantor.
5.12 FIXED CHARGE COVERAGE. Permit the ratio of (a) Consolidated Net
Earnings plus Consolidated Fixed Charges to (b) Consolidated Fixed Charges for
the four consecutive fiscal quarter period most recently ended as of the date of
determination to be less than (i) 1.05 between the date of closing and July 26,
1997 and (ii) 1.15 at all times from and after July 27, 1997.
5.13 RELATED PARTY TRANSACTIONS. Directly or indirectly engage in any
transaction, including the purchase, sale, exchange or other transfer of
property or other assets or the rendering of any services, or otherwise deal
with, any Shareholder or any other Affiliate of Guarantor, except in the
ordinary course of business and upon terms that are materially no less favorable
to Guarantor or such Subsidiary, as the case may be, than those that might be
obtained in an arm's-length transaction with an unrelated third party; provided,
however, that the foregoing shall not apply to any (i) Transfer of inventory
between Guarantor and any Subsidiary or among Subsidiaries on terms not
materially different than those in existence on the date of this Guaranty, (ii)
related party transactions on the terms set forth in Schedule 5.13, and (iii)
sales to, or purchases from (within the limitations of Section 5.2), any such
Related Party of shares of common stock of Guarantor for cash consideration
equal to the fair market value thereof pursuant to employee stock option, stock
appreciation and similar stock-based incentive plans applicable to employees of
Guarantor that have been approved by a majority of Guarantor's outside directors
and Guarantor's shareholders.
5.14 DEMAND ACCOUNT AND DEPOSIT ARRANGEMENTS. (i) Open or maintain cash
concentration, checking, savings or other accounts subject to set-off, bankers
lien or similar rights with any bank, savings and loan association, credit union
or other financial institution that holds Debt of Guarantor or any Subsidiary
(collectively, "CREDITOR BANKS") with an aggregate balance among all such
accounts (A) maintained at any individual Creditor Bank in excess of $3,000,000
at any time and (B) maintained at all Creditor Banks in excess of $5,000,000 at
any time; and (ii) direct or otherwise permit any royalty payments from any
Subsidiary to Guarantor to be deposited in, or to otherwise flow through, any
account at a Creditor Bank; provided, however, the deposit by the Company or the
Guarantor of the proceeds of the Notes into any account it maintains with any
Creditor Bank shall not constitute a breach of this paragraph 5.14 so long as
the funds remain in such account for a period not to extend beyond September 15,
1995.
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5.15 SUBSIDIARY RESTRICTIONS. Enter into, or be otherwise subject to,
any contract, agreement or other binding obligation that limits the amount of,
or otherwise restricts (i) the payment to Guarantor of dividends or other
redemptions or distributions with respect to its capital stock by any
Subsidiary, (ii) the repayment by any Subsidiary to Guarantor of intercompany
loans or advances, or (iii) other intercompany transfers of property or other
assets to Guarantor by Subsidiaries.
5.16 QUARTERLY PROFITABILITY. Permit Consolidated Net Earnings for
any period of two consecutive fiscal quarters to be negative (i.e., a net loss
when such quarters are combined).
5.17 SALE OF STOCK AND DEBT OF SUBSIDIARIES. Pledge or Transfer, or part
with control of, any shares of capital stock (except directors' qualifying
shares) or Debt of any Subsidiary, or permit a Subsidiary to issue any shares of
capital stock, except to Guarantor or a wholly owned Subsidiary organized in the
United States (other than an Exempt Subsidiary), and except that all shares of
capital stock and Debt of any Subsidiary at the time owned by or owed to
Guarantor and all of its Subsidiaries may be sold as an entirety to any Person
for consideration which represents fair value (as determined in good faith by
the Board of Directors of Guarantor) at the time of such sale; provided,
however, that (i) such sale is treated as an asset sale subject to, and is
permitted by, Section 5.9, (ii) at the time of such sale, such Subsidiary shall
not own, directly or indirectly, any shares of capital stock or Debt of
Guarantor or any other Subsidiary (unless all the shares of capital stock and
Debt of such other Subsidiary owned, directly or indirectly, by Guarantor and
all of its Subsidiaries are simultaneously being sold as permitted by this
Section 5.17), and (iii) no Default or Event of Default would otherwise result
from such transaction.
5.18 CURRENCY SWAP ARRANGEMENTS. Enter into or permit to remain
outstanding any currency swap or similar currency derivative arrangement, except
to the extent that (i) the face or notational amount of all such arrangements
does not exceed, at any time, $20,000,000; (ii) the counterparties to all such
arrangements are any of (A) ABN Amro Bank, N.V., (B) the Purchaser or any of its
Subsidiaries or Affiliates or (C) any other Person whose senior unsecured debt
securities are rated AA or better by S&P or Aa2 or better by Moody's or whose
commercial paper is rated A-1 or better by S&P or a P-1 or better by Moody's;
(iii) such arrangement has terms and conditions that are standard market,
ordinary course terms, including an agreement substantially similar to the
standard form swap agreement then being used by the International Swap Dealers
Association, Inc. or any successor entity; and (iv) such swap arrangement is not
primarily speculative in nature.
5.19 NET WORTH OF INMAC S.A. Allow the Net Worth of Inmac S.A. (as
expressed in Dollars, determined in accordance with paragraph 11V of the Note
Agreement) to be less than, at any time, $22,000,000 through May 31, 1998,
$16,000,000 through May 31, 1999, $12,000,000 through May 31, 2000, $8,000,000
through May 31, 2001 and $4,000,000 thereafter. For purposes of this paragraph
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5.19, "Net Worth" means, with respect to Inmac S.A., "capitaux propres" as
determined in accordance with French generally accepted accounting principles
and as reflected in the annual financial statements for the most recently ended
fiscal year of Inmac S.A.
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Note Documents.
6.2 NOTICES. Any communications between Guarantor and any notices or
requests provided herein to be given may be given in accordance with paragraph
11I of the Note Agreement, and shall be deemed to have been received if given in
accordance with said paragraph.
6.3 SEVERABILITY. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
6.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of the Required Holders and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
6.5 HEADINGS. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
6.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND NOTEHOLDERS HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Noteholders and their respective successors and
assigns. Guarantor shall not assign this Guaranty or any of the rights or
obligations of
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<PAGE> 45
Guarantor hereunder without the prior written consent of all Noteholders. Any
Noteholder may, without notice or consent, assign its interest in this Guaranty
in whole or in part. The terms and provisions of this Guaranty shall inure to
the benefit of any Transferee, and in the event of such transfer or assignment
the rights and privileges herein conferred upon Noteholders shall automatically
extend to and be vested in such Transferee, all subject to the terms and
conditions hereof.
6.8 CONSENT TO JURISDICTION AND SERVICES OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTY
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY. Guarantor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to Guarantor
at its address provided in subsection 6.2, such substituted service of process
being hereby acknowledged by Guarantor to be sufficient for personal
jurisdiction in any action against Guarantor in any such court and to be
otherwise effective and binding service in every respect. Without limiting the
foregoing, Guarantor hereby appoints in the case of any such action or
proceeding brought in the courts of or in the State of New York, CT Corporation,
with offices on the date hereof at 1633 Broadway, New York, New York 10019, to
receive, for it and on its behalf, service of process in the State of New York
with respect thereto. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of any Noteholder to
bring proceedings against Guarantor in the courts of any other jurisdiction.
6.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, THE NOTEHOLDERS EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, the
Noteholders each (i) acknowledges that this waiver is a material inducement for
Guarantor to enter into a business relationship, that Guarantor has already
relied on this waiver in entering into this Guaranty or accepting the benefits
thereof, as the case may be, and that each will continue to rely on this waiver
in their related future dealings and (ii) further warrants and represents that
each has reviewed this waiver with its legal counsel, and
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that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
6.10 NO OTHER WRITING. This writing is intended by Guarantor as the
final expression of this Guaranty and is also intended as a complete and
exclusive statement of the terms of their agreement with respect to the matters
covered hereby. No course of dealing, course of performance or trade usage, and
no parol evidence of any nature, shall be used to supplement or modify any terms
of this Guaranty. There are no conditions to the full effectiveness of this
Guaranty.
6.11 FURTHER ASSURANCES. At any time or from time to time, upon the
request of Required Holders, Guarantor shall execute and deliver such further
documents and do such other acts and things as Required Holders may reasonably
request in order to effect fully the purposes of this Guaranty.
6.12 JUDGMENT CURRENCY INDEMNITY. Any payment on account of an amount
that is payable hereunder in Dollars or Dutch Guilders (the "Required Currency")
which is made to or for the account of any Noteholder in the lawful currency of
any other jurisdiction ("Currency"), whether as a result of any judgment or
order or the enforcement thereof or the realization of any security or the
liquidation of the Person obligated to make such payment shall constitute a
discharge of such Person's obligation under this Guaranty, the Note Agreement or
the Notes only to the extent of the amount of the Required Currency which such
Noteholder could purchase in the New York foreign exchange markets with the
amount of other Currency in accordance with normal banking procedures at the
rate of exchange prevailing on the first Business Day following receipt of the
payment first referred to above. If the amount of the Required Currency that
could be so purchased is less than the amount of the Required Currency
originally due to such Noteholder, the Person obligated hereunder to make such
payment shall indemnify and save harmless such Noteholder from and against all
loss or damage arising out of or as a result of such deficiency. This indemnity
shall constitute an obligation separate and independent from the other
obligations contained in this Guaranty, the Note Agreement or the Notes, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by such Noteholder from time to time and
shall continue in full force and effect notwithstanding any judgment or order
for a liquidated sum in respect of an amount due hereunder or under any judgment
or order. This paragraph shall survive the termination of this Guaranty, the
Note Agreement, the Notes and the Parent Guaranty and the repayment in full of
the Notes.
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first written above.
INMAC CORP.
By
-----------------------------
Title
-----------------------------
Address: 2465 Augustine Drive
Santa Clara, California 95054
Attention: Chief Financial Officer
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<PAGE> 1
EXHIBIT 10.47
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of June 29, 1995,
by INMAC S.A., a French corporation, INMAC HOLDINGS LIMITED., a limited
liability company organized under the laws of the United Kingdom and registered
in England and Wales, INMAC (U.K). LIMITED a limited liability company organized
under the laws of the United Kingdom and registered in England and Wales, INMAC
AKTIEBOLAG, a corporation organized under the laws of Sweden and INMAC
GESELLSCHAFT MIT BESCHRaNKTER HAFTUNG, a corporation organized under the laws of
Germany (each a "SUBSIDIARY GUARANTOR" and together the "SUBSIDIARY
GUARANTORS"), in favor of and for the benefit of The Prudential Insurance
Company of America, as the original purchaser (the "PURCHASER") of the Notes (as
hereinafter defined) and all subsequent Noteholders.
RECITALS
A. Inmac, B.V., a corporation organized under the laws of The
Netherlands, ("COMPANY"), has entered into that certain Note Agreement dated as
of June 29, 1995 with the Purchaser (said Note Agreement, as it may hereafter be
amended, supplemented or otherwise modified from time to time, being the "NOTE
AGREEMENT").
B. Each of the Subsidiary Guarantors and the Company is a
wholly owned Subsidiary of Inmac Corp., a Delaware corporation ("PARENT").
C. The proceeds of the Notes will be advanced either to the
Subsidiary Guarantors or to repay indebtedness of the Parent, a significant
portion of which the Subsidiary Guarantors have guaranteed, and thus the
Guaranteed Obligations (as hereinafter defined) are being incurred for and will
inure to the benefit of each of the Subsidiary Guarantors (which benefits are
hereby acknowledged). Parent is entering into a Guaranty dated as of June 29,
1995 (the "PARENT GUARANTY") pursuant to which it is guaranteeing the
obligations of Company under the Note Agreement and the Notes.
D. It is a condition precedent to the purchase of the Notes
under the Note Agreement that Company's obligations thereunder be guaranteed by
each of the Subsidiary Guarantors.
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<PAGE> 2
E. Each of the Subsidiary Guarantors is willing irrevocably
and unconditionally to guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Purchaser to enter into the Note
Agreement and to purchase the Notes thereunder, each of the Subsidiary
Guarantors hereby jointly and severally agrees as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Capitalized terms defined in the Note
Agreement or the Parent Guaranty and not otherwise defined herein shall have the
respective meanings assigned to them in the Note Agreement and the Parent
Guaranty.
1.2 INTERPRETATION.
(a) References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Subsidiary Guaranty
unless otherwise specifically provided. Except as otherwise specified
herein, all accounting terms not otherwise defined herein shall have
the meanings assigned to them under GAAP.
(b) In the event of any conflict or inconsistency between the
terms, conditions and provisions of this Subsidiary Guaranty and the
terms, conditions and provisions of the Note Agreement, the terms,
conditions and provisions of this Subsidiary Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTEED OBLIGATIONS. Subject to the provisions
of subsection 2.2, each of the Subsidiary Guarantors hereby, jointly and
severally, irrevocably and unconditionally guarantees, as primary obligor and
not merely as surety, the due and punctual payment in full of all Guaranteed
Obligations when the same shall become due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
amounts that would become due but for the operation of any automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) or under any
similar provisions of any applicable Bankruptcy Law. The term "GUARANTEED
OBLIGATIONS" is used herein in its most comprehensive sense and includes:
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<PAGE> 3
(a) any and all liabilities or other obligations of Company in
respect of or under the Notes, including principal of, interest on and
Yield Maintenance Amounts in respect of, the Notes (and in the
currencies in which the Notes may be denominated), or any other Note
Document, including legal fees and expenses of counsel, allocated costs
of internal counsel, indemnities, and other fees and costs, whether
such liabilities or other obligations be absolute or contingent,
liquidated or unliquidated, due or not due, or in existence on the date
hereof or arising hereafter (including pursuant to any renewal,
extension or modification of any Note or Note Document); and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 CONTRIBUTION BY A SUBSIDIARY GUARANTOR. Each of the Subsidiary
Guarantors under this Subsidiary Guaranty, and each guarantor under other
guaranties, if any, relating to the Note Agreement, including the Parent
Guaranty (the "RELATED GUARANTIES") which contain a contribution provision
similar to that set forth in this subsection 2.2, together desire to allocate
among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Subsidiary Guaranty and
the Related Guaranties. Accordingly, in the event any payment or distribution is
made on any date by a Subsidiary Guarantor under this Subsidiary Guaranty or a
guarantor under a Related Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair
Share (as defined below) as of such date, that Funding Guarantor shall be
entitled to a contribution from each of the other Contributing Guarantors in the
amount of such other Contributing Guarantor's Fair Share Shortfall (as defined
below) as of such date, with the result that all such contributions will cause
each Contributing Guarantor's Aggregate Payments (as defined below) to equal its
Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors, multiplied by (ii) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Subsidiary Guaranty and the Related Guaranties in respect
of the obligations guaranteed. "FAIR SHARE SHORTFALL" means, with respect to a
Contributing Guarantor as of any date of determination, the excess, if any, of
the Fair Share of such Contributing Guarantor over the Aggregate Payments of
such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with
respect to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Subsidiary Guaranty and/or the Related Guaranties, as applicable, that would not
render its obligations hereunder or thereunder subject to avoidance as a
fraudulent transfer or
D-3
<PAGE> 4
conveyance under (but only to the extent applicable) Section 548 of Title 11 of
the United States Code or any comparable or similar provisions of law applicable
to such Contributing Guarantor; provided that, solely for purposes of
calculating the "Fair Share Contribution Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under any similar provision contained in a Related
Guaranty shall not be considered as assets or liabilities of such Contributing
Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Subsidiary Guaranty and/or the Related Guaranties
(including in respect of this subsection 2.2 or any similar provision contained
in a Related Guaranty) minus (ii) the aggregate amount of all payments received
on or before such date by such Contributing Guarantor from the other
Contributing Guarantors as contributions under this subsection 2.2 or any
similar provision contained in a Related Guaranty. The amounts payable as
contributions hereunder and under similar provisions in the Related Guaranties
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this subsection 2.2 or any
similar provision contained in a Related Guaranty shall not be construed in any
way to limit the liability of any Contributing Guarantor hereunder or under a
Related Guaranty. Each Contributing Guarantor under a Related Guaranty is a
third party beneficiary to the contribution agreement set forth in this
subsection 2.2. In determining the Fair Share Contribution Amount of the
Contributing Guarantors, the Contributing Guarantors have agreed amongst
themselves, and by their acceptance of this Subsidiary Guaranty, each holder of
the Note agrees, that notwithstanding the foregoing provisions of this
subsection 2.2 any demand for payment of any Guaranteed Obligation by Subsidiary
Guarantor under this Subsidiary Guaranty may be satisfied by payment(s) strictly
in accordance with such request by any other Subsidiary Guarantor in accordance
with the terms of this Subsidiary Guaranty; provided that such allocation
amongst the Contributing Guarantors shall in no manner limit or restrict the
ability and right of the Noteholders to make claims under the Related Guarantees
or limit the liability of the Contributing Guarantors under the Related
Guarantees and is intended solely as a limit amongst the Contributing Guarantors
on the allocation mechanism described in this subsection 2.2.
2.3 PAYMENT BY SUBSIDIARY GUARANTOR; APPLICATION OF PAYMENTS. Subject
to the provisions of subsection 2.2, each Subsidiary Guarantor hereby agrees, in
furtherance of the foregoing and not in limitation of any other right which any
Person may have at law or in equity against any Subsidiary Guarantor by virtue
hereof, that upon the failure of Company, Parent or any other Subsidiary
Guarantor
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to pay any of the Guaranteed Obligations when and as the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)), or the equivalent provision of any other applicable
bankruptcy or insolvency law, any Subsidiary Guarantor will upon demand of any
Noteholder pay, or cause to be paid, in cash, to such holder on a ratable basis,
an amount equal to the sum of the unpaid principal amount of all Guaranteed
Obligations then due as aforesaid, accrued and unpaid interest on such
Guaranteed Obligations (including interest which, but for the filing of a
petition in bankruptcy with respect to Company or a Subsidiary Guarantor, would
have accrued on such Guaranteed Obligations, whether or not a claim is allowed
against such debtor for such interest in any such bankruptcy proceeding) and all
other Guaranteed Obligations then owed to/or Noteholders as aforesaid. All such
payments shall be applied promptly from time to time:
First, to the payment of the costs and expenses of any
collection, enforcement or other realization under this Subsidiary
Guaranty, including reasonable compensation to, and all expenses,
liabilities and advances made or incurred by, any agent or counsel
acting on behalf of the Noteholders in connection therewith;
Second, to the payment of all other Guaranteed Obligations;
and
Third, after payment in full of all Guaranteed Obligations, to
the payment to Subsidiary Guarantor, or its successors or assigns, or
to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then
remaining from such payments.
2.4 LIABILITY OF EACH SUBSIDIARY GUARANTOR ABSOLUTE. Each Subsidiary
Guarantor agrees that its obligations hereunder are joint and several,
irrevocable, absolute, independent and unconditional and shall not be affected
by any circumstance which constitutes a legal or equitable discharge of a
guarantor or surety other than payment in full of the Guaranteed Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Subsidiary Guarantor agrees as follows:
(a) This Subsidiary Guaranty is a guaranty of payment when due
and not of collectibility.
(b) Any Noteholder may enforce this Subsidiary Guaranty upon
the occurrence of any Event of Default notwithstanding the existence of
any
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dispute between Noteholders and Company with respect to the existence
of such Event of Default.
(c) The obligations of each Subsidiary Guarantor hereunder are
independent of the respective obligations of Company, Parent or the
other Subsidiary Guarantors under the Note Documents and a separate
action or actions may be brought and prosecuted against any Subsidiary
Guarantor whether or not any action is brought against Company, Parent
or any of the other Subsidiary Guarantors and whether or not Company,
Parent or any of the other Subsidiary Guarantors is joined in any such
action or actions.
(d) Any Subsidiary Guarantor's payment of a portion, but not
all, of the Guaranteed Obligations shall in no way limit, affect,
modify or abridge such Subsidiary Guarantor's liability for any portion
of the Guaranteed Obligations which has not been paid. Without limiting
the generality of the foregoing, if any Noteholder is awarded a
judgment in any suit brought to enforce any Subsidiary Guarantor's
covenant to pay a portion of the Guaranteed Obligations, such judgment
shall not be deemed to release such Subsidiary Guarantor from its
covenant to pay the portion of the Guaranteed Obligations that is not
the subject of such suit.
(e) Any Noteholder, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Subsidiary Guaranty or giving rise to any
reduction, limitation, impairment, discharge or termination of any
Subsidiary Guarantor's liability hereunder, from time to time may (i)
renew, extend, accelerate, increase the rate of interest on, or
otherwise change the time, place, manner or terms of payment of the
Guaranteed Obligations, (ii) settle, compromise, release or discharge,
or accept or refuse any offer of performance with respect to, or
substitutions for, the Guaranteed Obligations or any agreement relating
thereto and/or subordinate the payment of the same to the payment of
any other obligations; (iii) request and accept other guaranties of the
Guaranteed Obligations and take and hold security for the payment of
this Subsidiary Guaranty or the Guaranteed Obligations; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive,
alter, subordinate or modify, with or without consideration, any
security for payment of the Guaranteed Obligations, any other
guaranties of the Guaranteed Obligations, or any other obligation of
any Person with respect to the Guaranteed Obligations; (v) enforce and
apply any security now or hereafter held by or for the benefit of any
Noteholder in respect of this Subsidiary Guaranty or the Guaranteed
Obligations and direct the order or manner of sale thereof, or exercise
any other right or remedy that Noteholders, or any of them, may have
against any
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such security, as such Noteholder(s) in its or their sole discretion
may determine consistent with the Note Documents and any applicable
security agreement, including foreclosure on any such security pursuant
to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though
such action operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of any Subsidiary Guarantor
against Company or any security for the Guaranteed Obligations; and
(vi) exercise any other rights available to it under any Note Document.
(f) This Subsidiary Guaranty and the obligations of each
Subsidiary Guarantor hereunder shall be valid and enforceable and shall
not be subject to any reduction, limitation, impairment, discharge or
termination for any reason (other than payment in full of the
Guaranteed Obligations), including without limitation the occurrence of
any of the following, whether or not any Subsidiary Guarantor shall
have had notice or knowledge of any of them: (i) any failure or
omission to assert or enforce or agreement or election not to assert or
enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or
demand or any right, power or remedy (whether arising under any Note
Document, at law, in equity or otherwise) with respect to the
Guaranteed Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the
Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including without limitation provisions relating to events
of default) of any Note Document, or of any other guaranty or security
for the Guaranteed Obligations, in each case whether or not in
accordance with the terms of any Note Document; (iii) the Guaranteed
Obligations, or any agreement relating thereto, at any time being found
to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received without instruction from any source
(other than payments received pursuant to any Note Document or from the
proceeds of any security for the Guaranteed Obligations, except to the
extent such security also serves as collateral for indebtedness other
than the Guaranteed Obligations) to the payment of indebtedness other
than the Guaranteed Obligations, even though Noteholders, or any of
them, might have elected to apply such payment to any part or all of
the Guaranteed Obligations; (v) any Noteholder's consent to the change,
reorganization or termination of the corporate structure or existence
of Parent and/or any Subsidiary Guarantor or any of their respective
Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guaranteed
Obligations; (vii) any defenses, set-offs or
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counterclaims which Company, Parent or any Subsidiary Guarantor may
allege or assert against any Noteholder in respect of the Guaranteed
Obligations, including but not limited to failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations,
accord and satisfaction and usury; and (viii) any other act or thing or
omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of any Subsidiary Guarantor
as an obligor in respect of the Guaranteed Obligations.
2.5 WAIVERS BY SUBSIDIARY GUARANTORS. Each Subsidiary Guarantor hereby
waives, for the benefit of Noteholders:
(a) any right to require Noteholders, as a condition of
payment or performance by such Subsidiary Guarantor, to (i) proceed
against Company, Parent or any of the other Subsidiary Guarantors or
any other Person, (ii) proceed against or exhaust any security held
from Company, Parent or any of the other Subsidiary Guarantors or any
other Person, (iii) proceed against or have resort to any balance of
any deposit account or credit on the books of any Noteholder in favor
of Company, Parent or any of the other Subsidiary Guarantors or any
other Person, or (iv) pursue any other remedy in the power of any
Noteholder whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company, Parent or any
of the other Subsidiary Guarantors including any defense based on or
arising out of the lack of validity or the unenforceability of the
Guaranteed Obligations or any agreement or instrument relating thereto
or by reason of the cessation of the liability of Company, Parent or
any of the other Subsidiary Guarantors from any cause other than
payment in full of the Guaranteed Obligations;
(c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the
principal;
(d) any defense based upon any Noteholder's errors or
omissions in the administration of the Guaranteed Obligations, except
behavior which amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Subsidiary Guaranty and any legal or equitable discharge of such
Subsidiary Guarantor's obligations hereunder, (ii) the benefit of any
statute of limitations affecting
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such Subsidiary Guarantor's liability hereunder or the enforcement
hereof, (iii) any rights to set-offs, recoupments and counterclaims,
and (iv) promptness, diligence and any requirement that any Noteholder
protect, secure, perfect or insure any security interest or Lien or any
property subject thereto;
(f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Subsidiary Guaranty, notices of default
under any Note Document, notices of any renewal, extension or
modification of the Guaranteed Obligations or any agreement related
thereto, notices of any extension of credit to Company, Parent or any
of the other Subsidiary Guarantors and notices of any of the matters
referred to in subsection 2.4 and any right to consent to any thereof;
and
(g) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Subsidiary
Guaranty.
2.6 EACH SUBSIDIARY GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION,
ETC. Until the Guaranteed Obligations shall have been paid in full, no
Subsidiary Guarantor shall withhold exercise of (a) any claim, right or remedy,
direct or indirect, that such Subsidiary Guarantor now has or may hereafter have
against Company or any of its assets in connection with this Subsidiary Guaranty
or the performance by such Subsidiary Guarantor of its obligations hereunder, in
each case whether such claim, right or remedy arises in equity, under contract,
by statute, under common law or otherwise and including without limitation (i)
any right of subrogation, reimbursement or indemnification that such Subsidiary
Guarantor now has or may hereafter have against Company, (ii) any right to
enforce, or to participate in, any claim, right or remedy that any Noteholder
now has or may hereafter have against Company, and (iii) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by any
Noteholder, and (b) any right of contribution any Subsidiary Guarantor may have
against any other guarantor of any of the Guaranteed Obligations. Each
Subsidiary Guarantor further agrees that, to the extent the agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Subsidiary Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Subsidiary Guarantor may have against any such other
guarantor, shall be junior and subordinate to any rights Noteholders may have
against Company, to all right, title and interest Noteholders may have in any
such collateral or security, and to any
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right Noteholders may have against such other guarantor. Any Noteholder, on
behalf of all Noteholders, may use, sell or dispose of any item of collateral or
security as it sees fit without regard to any subrogation rights such Subsidiary
Guarantor may have, and upon any such disposition or sale any rights of
subrogation such Subsidiary Guarantor may have shall terminate. If any amount
shall be paid to any Subsidiary Guarantor on account of any such subrogation,
reimbursement or indemnification rights at any time when all Guaranteed
Obligations shall not have been paid in full, such amount shall be held in trust
by such Subsidiary Guarantor for the benefit of Noteholders and shall forthwith
be ratably paid over by such Subsidiary Guarantor to each Noteholder for credit
to and application against the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company now
or hereafter held by any Subsidiary Guarantor (other than royalty payments in
the ordinary course of business) is hereby subordinated in right of payment to
the Guaranteed Obligations, and any such indebtedness of Company to any
Subsidiary Guarantor collected or received by a Subsidiary Guarantor after an
Event of Default has occurred and is continuing shall be held in trust by such
Subsidiary Guarantor for the benefit of Noteholders and shall forthwith be
ratably paid over to each Noteholder for credit to and application against the
Guaranteed Obligations but without affecting, impairing or limiting in any
manner the liability of such Subsidiary Guarantor under any other provision of
this Subsidiary Guaranty.
2.8 EXPENSES. Each Subsidiary Guarantor agrees to pay, or cause to be
paid, on demand, and to save Noteholders harmless against liability for (i) any
and all reasonable costs and expenses (including fees and disbursements of
outside counsel and allocated costs of internal counsel) incurred or expended by
any Noteholder in connection with the preparation of any subsequent modification
of, or consent under, this Subsidiary Guaranty, whether or not such consent is
granted; provided that with respect to amendments proposed by any Significant
Holder prior to the occurrence of an Event of Default, such holder shall notify
the Company and the Guarantor prior to engaging outside counsel to prepare such
amendment, (ii) all reasonable costs and expenses (including outside counsel
fees and allocated costs of internal counsel) incurred by any Noteholder in
enforcement or preservation of any rights under this Subsidiary Guaranty and
(iii) any registration tax incurred in connection with the registration or
filing of this Subsidiary Guaranty or any judgment with respect thereto;
provided, however, that notwithstanding the foregoing, the Subsidiary Guarantors
shall be obligated to pay the fees and expenses of only one outside law firm
that is acting as counsel to Noteholders as a group, provided, that (A) in the
event that Required Holders determine that legal advice or assistance is needed
with respect to the laws of the jurisdiction in which any Subsidiary Guarantor
is established, then the Noteholders shall have the right to retain an
additional outside
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law firm in any such jurisdiction, (B) if any Noteholder reasonably determines
that there exists a conflict of interest between itself and the other
Noteholders it may engage separate counsel at the expense of the Subsidiary
Guarantors. Further, in cases brought by individual Noteholders resulting from
the failure of the Company to make payments in respect of their Notes, each
Noteholder may, if it so elects, retain its outside counsel but the Subsidiary
Guarantors shall only be liable for the fees and expenses of up to four outside
law firms.
2.9 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Subsidiary
Guaranty is a continuing guaranty and shall remain in effect until all of the
Guaranteed Obligations shall have been paid in full. Each Subsidiary Guarantor
hereby irrevocably waives any right to revoke this Subsidiary Guaranty as to
future transactions giving rise to any Guaranteed Obligations.
2.10 AUTHORITY OF EACH SUBSIDIARY GUARANTOR OR COMPANY. It is not
necessary for any Noteholder to inquire into the capacity or powers of any
Subsidiary Guarantor, Company or Parent or the officers, directors or any agents
acting or purporting to act on behalf of any of them, including ABN Amro
Securities.
2.11 FINANCIAL CONDITION OF COMPANY. Any Notes may be issued by Company
or other indebtedness incurred by it or any other of the Subsidiary Guarantors
or renewed, extended, refinanced or otherwise continued from time to time
without notice to or authorization from any Subsidiary Guarantor regardless of
the financial or other condition of Company of such other of the Subsidiary
Guarantors at the time of any such grant or continuation. Noteholders shall have
no obligation to disclose or discuss with any Subsidiary Guarantor their
assessment, or such Subsidiary Guarantor's assessment, of the financial
condition of Company, Parent or any other of the Subsidiary Guarantors. Each
Subsidiary Guarantor has adequate means to obtain information on a continuing
basis concerning the financial condition of Company, Parent or any other of the
Subsidiary Guarantors and their respective abilities to perform their
obligations under the Note Documents, and each Subsidiary Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Company, Parent and each of the other Subsidiary Guarantors and of all
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.
Each Subsidiary Guarantor hereby waives and relinquishes any duty on the part of
any Noteholder to disclose any matter, fact or thing relating to the business,
operations or conditions of Company, Parent or any of the other Subsidiary
Guarantors now known or hereafter known by any Noteholder.
2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to
Noteholders by this Subsidiary Guaranty are cumulative and shall be in addition
to and independent of all rights, powers and remedies given to Noteholders by
virtue of
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any statute or rule of law or in any Note Document or any other agreement
between Parent, Company or any of the Subsidiary Guarantors and the Noteholders.
Any forbearance or failure to exercise, and any delay by any Noteholder in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
So long as any Guaranteed Obligations remain outstanding, no Subsidiary
Guarantor shall, without the prior written consent of the Required Holder(s),
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against Company, Parent or any of
the other Subsidiary Guarantors. The obligations of any Subsidiary Guarantor
under this Subsidiary Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Company, Parent or any of the other Subsidiary
Guarantors or by any defense which Company, Parent or such Subsidiary Guarantor
may have by reason of the order, decree or decision of any court or
administrative body resulting from any such proceeding.
(b) Each Subsidiary Guarantor acknowledges and agrees that any
interest on any portion of the Guaranteed Obligations which accrues after the
commencement of any proceeding referred to in clause (a) above (or, if interest
on any portion of the Guaranteed Obligations ceases to accrue by operation of
law by reason of the commencement of said proceeding, such interest as would
have accrued on such portion of the Guaranteed Obligations if said proceedings
had not been commenced) shall be included in the Guaranteed Obligations because
it is the intention of such Subsidiary Guarantor that the Guaranteed Obligations
which are guaranteed by such Subsidiary Guarantor pursuant to this Subsidiary
Guaranty should be determined without regard to any rule of law or order which
may relieve Company, Parent or any of the other Subsidiary Guarantors of any
portion of such Guaranteed Obligations. Each Subsidiary Guarantor will permit
any trustee in bankruptcy, receiver, debtor in possession, assignee for the
benefit of creditors or similar person to pay Noteholders, or allow the claim of
each Noteholder in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guaranteed
Obligations are paid by Company and/or Parent and/or any of the other Subsidiary
Guarantors, the obligations of each Subsidiary Guarantor hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any
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part of such payment(s) are rescinded or recovered directly or indirectly from
any Noteholder as a preference, fraudulent transfer or otherwise, and any such
payments which are so rescinded or recovered shall constitute Guaranteed
Obligations for all purposes under this Subsidiary Guaranty.
2.14 NOTICE OF EVENTS. As soon as any Subsidiary Guarantor obtains
knowledge thereof, such Subsidiary Guarantor shall give Noteholders written
notice of any condition or event which has resulted in (a) an event, development
or change with respect to such Subsidiary Guarantor, Parent, Company or any of
the other Subsidiary Guarantors that has resulted or could reasonably be
expected to result in a Material Adverse Effect or (b) a breach of or
noncompliance with any term, condition or covenant contained herein or in any
Note Document.
2.15 CERTAIN LIMITATIONS. (a) Section 2.1 of this Subsidiary Guaranty
notwithstanding, the liability of Inmac Gesellschaft mit beschrankter Haftung
under this Subsidiary Guaranty shall be limited at all times to the amount by
which Inmac Gesellschaft mit beschrankter Haftung's equity (the calculation of
which shall take into account the captions reflected in Section 266(3)A.I
through V of the German Commercial Code) at that time exceeds Inmac Gesellschaft
mit beschrankter Haftung's registered share capital (the "Surplus Equity") and
further provided that in determining the Surplus Equity such liabilities shall
not be valued below their true value and such assets shall not be valued above
their true realizable value so that such liabilities under the Subsidiary
Guaranty would at no time require the payment of any monies which are needed to
maintain a net asset value which is at least equal to Inmac Gesellschaft mit
beschrankter Haftung's registered share capital.
(b) Section 2.1 of this Subsidiary Guaranty notwithstanding,
the liability of Inmac aktiebolag, under this Subsidiary Guaranty, shall be
limited at all times by (i) the exclusion of such amounts as may be loaned,
whether directly or indirectly by the Company or any other Subsidiary Guarantors
to the Parent; the amounts loaned to the Parent shall, however, not exceed
$8,000,000 and (ii) the amount which corresponds to the unrestricted equity of
Inmac aktiebolag ("fritt eget kapital") calculated in accordance with Chapter
12, Section 2 of the Swedish Companies Act.
(c) Section 2.1 of this Subsidiary Guaranty notwithstanding,
the maximum amount payable at any time by Inmac S.A. under this Subsidiary
Guaranty (expressed in Dollars, determined as necessary in accordance with
paragraph 11V of the Note Agreement) shall not exceed the Maximum Financial
Capacity of Inmac S.A. at the time of such payment where "Maximum Financial
Capacity" means, as of the time of its determination, an amount equal to the
excess of (A) the equivalent in Dollars (as determined in accordance with
paragraph 11V of the Note Agreement) of
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the Net Worth of Inmac S.A. over (B) $1,000,000 and where "Net Worth" means,
with respect to Inmac S.A., its "capitaux propres" as determined in accordance
with French generally accepted accounting principles as reflected in the annual
financial statements for the most recently ended fiscal year of Inmac S.A.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Noteholders to accept this Subsidiary
Guaranty, to enter into the Note Agreement and to purchase the Notes and the
Warrants, each Subsidiary Guarantor hereby severally represents and warrants to
Noteholders that the following statements are true and correct:
3.1 ORGANIZATION. Such Subsidiary Guarantor is a corporation duly
organized and existing under the laws of jurisdiction named at the head of this
Subsidiary Guaranty and each Subsidiary Guarantor has the corporate power to own
its respective property and to carry on its respective business as now being
conducted.
3.2 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of such Subsidiary Guarantor, threatened
against such Subsidiary Guarantor or any of its Subsidiaries, or any of its
properties or rights, by or before any court, arbitrator or administrative or
governmental body which might result in any Material Adverse Effect.
3.3 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Subsidiary
Guarantors nor any of their respective Subsidiaries is a party to any contract
or agreement or subject to any charter or other corporate restriction which has
or could reasonably have a Material Adverse Effect. Neither the execution nor
delivery of this Subsidiary Guaranty nor compliance with the terms and
provisions hereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of any Subsidiary Guarantor or any of its Subsidiaries pursuant to,
the charter or by-laws of such Subsidiary Guarantor or any of its Subsidiaries,
any award of any arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which such Subsidiary Guarantor or any of its Subsidiaries is
subject. Neither any Subsidiary Guarantor nor any of their Subsidiaries is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Debt of a Subsidiary Guarantor or such Subsidiary, any agreement
relating thereto or any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes restrictions on the incurring
of, Debt of such Subsidiary Guarantor of the type to be evidenced by this
Subsidiary Guaranty except as set forth in the agreements listed in Schedule 3.3
attached hereto.
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3.4 PENSION PLANS. Each Foreign Pension Plan of such Subsidiary
Guarantor has been maintained in substantial compliance with its terms and with
the requirements of any and all applicable laws, statutes, rules, regulations
and orders and has been maintained, where required, in good standing with
applicable regulatory authorities. Neither such Subsidiary Guarantor nor any of
its Subsidiaries has incurred any obligation in connection with the termination
of or withdrawal from any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan for
such Subsidiary Guarantor or its Subsidiaries, determined as of the end of such
Subsidiary Guarantor's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
3.5 GOVERNMENTAL CONSENT. No circumstance in connection with the
execution and delivery of this Subsidiary Guaranty, is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body in any jurisdiction
in which such Subsidiary Guarantor is organized or does business.
3.6 AUTHORIZATION AND ENFORCEABILITY. This Subsidiary Guaranty has been
duly authorized by all necessary corporate action on the part of such Subsidiary
Guarantor and has been duly executed and delivered by duly authorized officers
thereof. This Subsidiary Guaranty constitutes the legally valid and binding
obligation of such Subsidiary Guarantor, enforceable against such Subsidiary
Guarantor in accordance with its terms, except that (i) enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting the rights of creditors generally and (ii) enforcement
is subject to the effect of general principles of equity, whether applied by a
court of law or equity.
3.7 PARI PASSU NATURE. The obligations of such Subsidiary Guarantor
hereunder do and will continue to rank pari passu with all other unsecured,
senior obligations of such Subsidiary Guarantor except to the extent of Liens
permitted by Section 5.4 of the Guaranty or the obligations listed in Schedule
3.18 of the Guaranty or that are mandatorily preferred under applicable law.
3.8 SOLVENCY. None of such Subsidiary Guarantor's liability evidenced
by this Subsidiary Guaranty was incurred with the intent to hinder, delay or
defraud any of their respective creditors or any other Person to which it is, on
or after the date hereof, indebted. Such Subsidiary Guarantor is not insolvent
on the date hereof, and will not become insolvent as a result of becoming
obligated hereunder. For purposes of this Section 3.8, the term "insolvent"
means, with respect to any Person, the
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financial condition such that either (i) the sum of such Person's liabilities
(including contingent and unliquidated liabilities computed in the manner set
forth below) is greater than all of its property, at fair valuation or (ii) the
present fair salable value of its assets is less than the amount that will be
required to pay its probable liability on its existing Indebtedness as they
become absolute and matured. Such Subsidiary Guarantor does not intend to incur,
nor does it believe that it is incurring, Indebtedness beyond its ability to pay
as such Indebtedness matures. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the known facts and circumstances existing at such
time represents the amount that can reasonably be expected to become an actual
or matured liability. Such Subsidiary Guarantor is not engaged in any business
or transaction for which the property remaining with it after giving effect to
such business or transaction would be an unreasonably small amount of capital.
3.9 DISCLOSURE. Neither this Subsidiary Guaranty nor any other Note
Document furnished to you by or on behalf of any Subsidiary Guarantor in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to any Subsidiary
Guarantor or any of its Subsidiaries which now has or in the future may (so far
as such Subsidiary Guarantor can now foresee) have a Material Adverse Effect and
which has not been set forth in this Subsidiary Guaranty or in the Note
Documents.
SECTION 4. COVENANTS.
4.1 INSPECTION OF PROPERTY. Each Subsidiary Guarantor covenants that it
will permit any duly authorized representative of any Inspecting Holder in
writing to visit and inspect any of its or any of its Subsidiaries' properties,
to examine their corporate books and financial records and make copies thereof
or extracts therefrom and to discuss any of their affairs, finances and accounts
with the principal officers of such Subsidiary Guarantor or such Subsidiary and
its independent public accountants, all at such reasonable times and as often as
such Inspecting Holder may reasonably request. Access to material, non-public
information may be conditioned on such Inspecting Holder's execution and
delivery to such Subsidiary Guarantor or such Subsidiary of a Confidentiality
Agreement. The costs and expenses associated with the exercise of any rights
under this Section 4.1 shall be borne by such Inspecting Holder, unless and
until either a Default or Event of Default has occurred under the Note Agreement
or a breach or default has occurred hereunder, in which event the reasonable
costs and expenses shall be borne by such Subsidiary Guarantor. Delivery of
material non-public information shall be conditioned on such Significant
Holder's execution and delivery of a Confidentiality Agreement as required under
paragraph 11D of the Note Agreement (to the extent such holder has not already
done so). The
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Inspecting Holders shall use reasonable efforts to coordinate their inspections
and requests for copies so as, to the extent they can, to avoid unnecessary
duplication.
4.2 COVENANT TO SECURE EQUALLY. Each Subsidiary Guarantor covenants
that if it shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of Section 5.4 of the Parent Guaranty, it will make or cause to be
made effective provision whereby this Subsidiary Guaranty will be secured by
such Lien equally and ratably with any and all other Debt thereby secured so
long as any such other Debt shall be so secured.
4.3 ROYALTY ARRANGEMENTS. Each Subsidiary Guarantor covenants that it
will maintain the existing royalty arrangements between it and Parent on terms
no less favorable to Parent than those that exist on the date hereof and as are
set forth in Schedule 4.10 to the Parent Guaranty, except for changes, to the
extent necessary, to minimally comply with applicable legal requirements;
provided in no event shall such changes terminate or substantially reduce the
minimum fixed royalty payments to Parent.
4.4 OTHER COVENANTS. Each Subsidiary Guarantor covenants that it will
perform or otherwise comply with the covenants set forth in Sections 4 and 5 of
the Parent Guaranty, to the extent such covenants specifically apply to
Subsidiaries of the Parent or the Company, and such covenants shall be binding
on the Subsidiary Guarantor as if restated herein in their entirely and made
applicable to each Subsidiary Guarantor mutatis mutandis.
SECTION 5. MISCELLANEOUS
5.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Subsidiary Guaranty and the other Note Documents.
5.2 NOTICES. All written communications provided for hereunder shall be
sent by international or nationwide (as applicable) overnight delivery service
(with charges prepaid) and (i) if to a Noteholder, addressed to it in accordance
with paragraph 11I of the Note Agreement, and (iii) if to any Subsidiary
Guarantor, addressed to it at the address specified on the signature page hereof
or at such other address as such Subsidiary Guarantor shall have specified to
the holder of each Note in writing; provided, however, that any such
communication to any Subsidiary Guarantor may also, at the option of the holder
of any Note, be delivered by any other means either to such Subsidiary Guarantor
at the address specified above or to any director or officer of such Subsidiary
Guarantor.
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5.3 SEVERABILITY. In case any provision in or obligation under this
Subsidiary Guaranty shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
5.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Subsidiary Guaranty, and no consent to any
departure by any Subsidiary Guarantor therefrom, shall in any event be effective
without the written concurrence of the Required Holders and, in the case of any
such amendment or modification, each Subsidiary Guarantor. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
5.5 HEADINGS. Section and subsection headings in this Subsidiary
Guaranty are included herein for convenience of reference only and shall not
constitute a part of this Subsidiary Guaranty for any other purpose or be given
any substantive effect.
5.6 APPLICABLE LAW. THIS SUBSIDIARY GUARANTY AND THE RIGHTS AND
OBLIGATIONS OF EACH SUBSIDIARY GUARANTOR AND NOTEHOLDERS HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
5.7 SUCCESSORS AND ASSIGNS. This Subsidiary Guaranty is a continuing
guaranty and shall be binding upon each Subsidiary Guarantor and its successors
and assigns. This Subsidiary Guaranty shall inure to the benefit of Noteholders
and their respective successors and assigns. No Subsidiary Guarantor shall
assign this Subsidiary Guaranty or any of the rights or obligations of such
Subsidiary Guarantor hereunder without the prior written consent of all
Noteholders. Any Noteholder may, without notice or consent, assign its interest
in this Subsidiary Guaranty in whole or in part. The terms and provisions of
this Subsidiary Guaranty shall inure to the benefit of any Transferee, and in
the event of such transfer or assignment the rights and privileges herein
conferred upon Noteholders shall automatically extend to and be vested in such
Transferee, all subject to the terms and conditions hereof.
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5.8 CONSENT TO JURISDICTION AND SERVICES OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY SUBSIDIARY GUARANTOR ARISING OUT OF OR RELATING
TO THIS SUBSIDIARY GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF
THIS SUBSIDIARY GUARANTY EACH SUBSIDIARY GUARANTOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS SUBSIDIARY GUARANTY. Each Subsidiary Guarantor hereby
agrees that service of all process in any such proceeding in any such court may
be made by registered or certified mail, return receipt requested, to such
Subsidiary Guarantor at its address provided in subsection 5.2, such substituted
service of process being hereby acknowledged by such Subsidiary Guarantor to be
sufficient for personal jurisdiction in any action against such Subsidiary
Guarantor in any such court and to be otherwise effective and binding service in
every respect. Without limiting the foregoing, each Subsidiary Guarantor hereby
appoints in the case of any such action or proceeding brought in the courts of
or in the State of New York, CT Corporation, with offices on the date hereof at
1633 Broadway, New York, New York 10019, to receive, for it and on its behalf,
service of process in the State of New York with respect thereto. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of any Noteholder to bring proceedings against any
Subsidiary Guarantor in the courts of any other jurisdiction.
5.9 WAIVER OF TRIAL BY JURY. EACH SUBSIDIARY GUARANTOR AND, BY ITS
ACCEPTANCE OF THE BENEFITS HEREOF, THE NOTEHOLDERS EACH HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS SUBSIDIARY GUARANTY. The scope of this waiver is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each Subsidiary Guarantor and, by its
acceptance of the benefits hereof, the Noteholders each (i) acknowledges that
this waiver is a material inducement for each Subsidiary Guarantor to enter into
a business relationship, that each Subsidiary Guarantor has already relied on
this waiver in entering into this Subsidiary Guaranty or accepting the benefits
thereof, as the case may be, and that each will continue to rely on this waiver
in their related future dealings and (ii) further warrants and represents that
each has reviewed this waiver
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<PAGE> 20
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS SUBSIDIARY GUARANTY. In the event of litigation, this
Subsidiary Guaranty may be filed as a written consent to a trial by the court.
5.10 NO OTHER WRITING. This writing is intended by each Subsidiary
Guarantor as the final expression of this Subsidiary Guaranty and is also
intended as a complete and exclusive statement of the terms of their agreement
with respect to the matters covered hereby. No course of dealing, course of
performance or trade usage, and no parol evidence of any nature, shall be used
to supplement or modify any terms of this Subsidiary Guaranty. There are no
conditions to the full effectiveness of this Subsidiary Guaranty.
5.11 FURTHER ASSURANCES. At any time or from time to time, upon the
request of Required Holders, any Subsidiary Guarantor shall execute and deliver
such further documents and do such other acts and things as Required Holders may
reasonably request in order to effect fully the purposes of this Subsidiary
Guaranty.
5.12 GROSS-UP. All payments whatsoever by any Subsidiary
Guarantor (the "Payor") under this Subsidiary Guaranty shall be made in the
lawful currency of the United States of America (except for payment in respect
of Notes denominated in a foreign currency in which case payment shall be made
in the currencies in which each Note is denominated) free and clear of, and
without reduction or liability for or on account of, any present or future
taxes, levies, imposts, duties, fees, charges, restrictions, conditions,
deductions or withholdings of any nature whatsoever imposed by or for a
government or other authority having power to tax (other than income taxes of
the United States) (hereinafter called "Tax") unless any withholding or
deduction for or on account of Tax is required by law.
If the Payor shall be obligated by law to make any such withholding or
deduction for any Tax imposed, levied, collected, assessed or withheld by or
within the jurisdiction in which the Payor is organized or resident for tax
purposes or any political subdivision or taxing authority thereof or therein or
by any other country or jurisdiction (or any taxing authority thereof or
therein) from or through which payments hereunder by the Payor are actually made
(each, a "Taxing Jurisdiction"), then the Payor will promptly (i) pay over to
the relevant Taxing Jurisdiction the full amount required to be deducted,
withheld or otherwise paid in by the Payor (including the full amount required
to be deducted or withheld from or otherwise paid
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<PAGE> 21
by the Payor in respect of any Additional Payment (as defined below) required to
be made pursuant to clause (ii) hereof) and (ii) pay to each Person entitled
under this Subsidiary Guaranty to receive the payment from which the amount
referred to in clause (i) has been so deducted, withheld or otherwise paid such
additional amount (the "Additional Payment") as is necessary in order that the
amount received by such Person after any required deduction, withholding or
other payment of Tax (including any required deduction, withholding or other
payment of Tax on or with respect to such additional amount), shall equal the
amount such Person would have received had no such deduction, withholding or
other payment of Tax been paid. Any Person receiving an Additional Payment
agrees to use its reasonable efforts to determine whether it actually received
any foreign tax credits for U.S. income tax purposes by virtue of the Tax that
gave rise to the Additional Payment, and if so, to determine the amount of such
tax credit and to pay the same over to the Payor promptly after such final
determination, it being understood, however, that (A) such determination shall
be in the sole and absolute discretion of such receiving Person; (B) the Payor
shall not have any audit or other rights with respect to such determination; (C)
such receiving Person shall not be obligated to make such determination until it
has actually filed its U.S. income tax return for the taxable period in which it
received such Additional Payment; and (D) such receiving Person shall sustain no
liability, and shall not otherwise be obligated for any errors in the
determination of such foreign tax credit.
5.13 JUDGMENT CURRENCY INDEMNITY. Any payment on account of an amount
that is payable hereunder in Dollars or Dutch Guilders (the "Required Currency")
which is made to or for the account of any Noteholder in the lawful currency of
any other jurisdiction ("Currency"), whether as a result of any judgment or
order or the enforcement thereof or the realization of any security or the
liquidation of the Person obligated to make such payment shall constitute a
discharge of such Person's obligation under this Subsidiary Guaranty, the Note
Agreement or the Notes only to the extent of the amount of the Required Currency
which such Noteholder could purchase in the New York foreign exchange markets
with the amount of other Currency in accordance with normal banking procedures
at the rate of exchange prevailing on the first Business Day following receipt
of the payment first referred to above. If the amount of the Required Currency
that could be so purchased is less than the amount of the Required Currency
originally due to such Noteholder, the Person obligated hereunder to make such
payment shall indemnify and save harmless such Noteholder from and against all
loss or damage arising out of or as a result of such deficiency. This indemnity
shall constitute an obligation separate and independent from the other
obligations contained in this Subsidiary Guaranty, the Note Agreement or the
Notes, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by such Noteholder from time to
time and shall continue in full force and effect notwithstanding any judgment or
order for a liquidated sum in respect of an amount
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<PAGE> 22
due hereunder or under any judgment or order. This paragraph shall survive the
termination of this Subsidiary Guaranty, the Note Agreement, the Notes and the
Parent Guaranty and the repayment in full of the Notes.
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<PAGE> 23
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Subsidiary Guaranty to be duly executed and delivered as of the date first
written above.
INMAC S.A.
By_________________________
Title:
Address:
INMAC HOLDINGS LIMITED
By_________________________
Title:
Address:
INMAC (U.K.) LIMITED
By_________________________
Title:
Address:
INMAC AKTIEBOLAG
By_________________________
Title:
Address:
INMAC GESELLSCHAFT MIT BESCHRANKTER HAFTUNG
By_________________________
Title:
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<PAGE> 24
Address:
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<PAGE> 1
EXHIBIT 10.48
- ---------------------------------------------------------------
INMAC CORP.
------------------------------------------
COMMON STOCK PURCHASE WARRANT
------------------------------------------
JUNE 29, 1995
This Warrant and any shared acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and
may not be transferred in the absence of such registration or on
exemption therefrom under such Act. This Warrant expires after the
close of normal business hours on September 15, 2001, unless exercised
prior to such time.
- ---------------------------------------------------------------
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B-2
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
- ----------------------------------------------------------------------------------------------------------
<S> <C>
1. Exercise of Warrant........................................................................ 1
1.1. Manner of Exercise................................................................ 1
1.2. When Exercise Deemed Effected..................................................... 2
1.3. Delivery of Stock Certificates, etc............................................... 2
1.4. Company to Reaffirm Obligation.................................................... 2
1.5. Payment by Application of Notes or
Surrender of Warrant.............................................................. 3
2. Adjustment of Common Stock Issuable Upon Exercise.......................................... 4
2.1. Number of Shares; Warrant Price................................................... 4
2.2. Adjustment of Warrant Price....................................................... 4
2.3. Treatment of Options and Convertible Securities................................... 5
2.4. Treatment of Stock Dividends, Stock Splits, etc................................... 7
2.5. Computation of Consideration...................................................... 8
2.6. Adjustments for Combinations, etc................................................. 9
2.7. Dilution in Case of Other Securities.............................................. 10
2.8. Minimum Adjustment of Warrant Price............................................... 10
3. Consolidation, Merger, Sale of Assets, Reorganization, etc................................. 10
3.1. General Provisions................................................................ 10
3.2. Assumption of Obligations......................................................... 11
4. Other Dilutive Events...................................................................... 12
5. No Dilution or Impairment.................................................................. 12
6. Accountants' Report as to Adjustments...................................................... 13
7. Notices of Corporate Action................................................................ 13
8. Restrictions on Transfer................................................................... 14
8.1. Restrictive Legends............................................................... 14
8.2. Notice of Proposed Transfer; Removal of Legend.................................... 15
</TABLE>
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<TABLE>
<S> <C>
8.3. Termination of Restrictions....................................................... 16
9. Registration under Securities Act, etc..................................................... 16
9.1. Registration on Request........................................................... 16
9.2. Incidental Registration........................................................... 19
9.3. Registration Procedures........................................................... 20
9.4. Underwritten Offerings............................................................ 24
9.5. Preparation; Reasonable Investigation............................................. 25
9.6. Indemnification................................................................... 25
9.7. Adjustments Affecting Registrable Securities...................................... 28
9.8. Covenants Relating to Rule 144.................................................... 28
10. Availability of Information................................................................ 28
11. Reservation of Stock, etc.................................................................. 29
12. Listing on Securities Exchanges............................................................ 29
13. Ownership, Transfer and Substitution of Warrants........................................... 29
13.1. Ownership of Warrants............................................................. 29
13.2. Transfer and Exchange of Warrants................................................. 30
13.3. Replacement of Warrants........................................................... 30
14. Definitions................................................................................ 30
15. Remedies................................................................................... 37
16. No Rights or Liabilities as Stockholder.................................................... 37
17. Notices.................................................................................... 38
18. Expiration; Notice......................................................................... 38
19. Miscellaneous.............................................................................. 38
</TABLE>
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INMAC CORP.
Common Stock Purchase Warrant
Expiring September 15, 2001
Santa Clara, California
June 29, 1995
No. W-1
Inmac Corp., a Delaware corporation (the "Company"), for value
received, hereby certifies that The Prudential Insurance Company of America, or
registered assigns (the "Purchaser"), is entitled to purchase from the Company
One Hundred Seventy-Five Thousand (175,000) duly authorized, validly issued,
fully paid and nonassessable shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), at the initial purchase price per share of
$6.756 at any time or from time to time during the Exercise Period, all subject
to the terms, conditions and adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by the Company of its
two series of its Senior Guaranteed Notes due September 15, 2001 (together with
all notes issued in substitution therefor, the "Notes"), pursuant to the Note
and Warrant Purchase Agreement (the "Note Agreement"), dated as of June 29, 1995
among Inmac, B.V., the Company and the Purchaser listed in the Purchaser
Schedule attached thereto. The Warrants originally so issued evidence rights to
purchase an aggregate of 175,000 shares of Common Stock, subject to adjustment
as provided herein. Certain capitalized terms used in this Warrant are defined
in section 14.
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant
may be exercised by the holder hereof, in whole or in part, during Normal
Business Hours on any Business Day during the Exercise Period by surrender of
this Warrant, with the form of subscription at the end hereof (or a reasonable
facsimile thereof) duly executed by such holder, to the Company at its principal
office (or, if such exercise shall be in connection with an underwritten Public
Offering of shares of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, at the location at which the Company shall have agreed
to deliver the shares of Common Stock (or Other Securities) subject to such
underwritten Public Offering), accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company or by the application
of Notes or surrender of this Warrant in the manner provided in section
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<PAGE> 6
1.5 or by wire transfer of immediately available funds (or by any combination of
such methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment therein) designated in
such form of subscription by (b) $6.756, and such holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. When Exercise Deemed Effected. Each exercise of this
Warrant shall be deemed to have been effected immediately prior to the close of
Normal Business Hours on the Business Day during the Exercise Period on which
this Warrant shall have been surrendered to the Company (or, if such exercise
shall be in connection with an underwritten Public Offering of shares of Common
Stock (or Other Securities) issuable upon the exercise of this Warrant, at such
time as the holder hereof and the Company may agree to permit the holder hereof
to participate in such Public Offering) as provided in section 1.1, and at such
time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock (or Other Securities) shall be issuable
upon such exercise as provided in section 1.3 shall be deemed to have become the
holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as
practicable after the exercise of this Warrant, in whole or in part, and in any
event within three Business Days thereafter (unless such exercise shall be in
connection with an underwritten Public Offering of shares of Common Stock (or
Other Securities) subject to this Warrant, in which event concurrently with such
exercise), the Company at its expense (including the payment by it of any
applicable taxes payable by the Company) will cause to be issued in the name of
and delivered to the holder hereof or, subject to section 8, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per share of such Common Stock
(or Other Securities) on the Business Day next preceding the date of
such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in section 1.1.
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1.4. Company to Reaffirm Obligations. The Company will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the holder hereof or of any shares of Common Stock (or Other Securities) issued
upon such exercise, acknowledge in writing its continuing obligation to afford
to such holder all rights (including, without limitation, any right of
registration of any shares of Common Stock (or Other Securities) issuable upon
exercise of this Warrant pursuant to section 9) to which such holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
such rights to such holder.
1.5. Payment by Application of the Notes or Surrender of
Warrant. (a) Upon any exercise of this Warrant, the holder hereof may, at its
option, instruct the Company, by so specifying in the form of subscription
submitted therewith as provided in section 1.1, to apply to the payment required
by section 1.1 all or any part of the principal amount then unpaid and of the
interest on such principal amount then accrued on any one or more Notes at the
time held by such holder, in which case the Company will accept the aggregate
amount of principal and accrued interest on such principal specified in such
form of subscription in satisfaction of a like amount of such payment. In case
less than the entire unpaid principal amount of any Note shall be so specified,
the principal amount so specified shall be credited, as of the date of such
exercise, on a pro rata basis against all future installments of principal of
such Note. Within five days after receipt of any such notice, the Company will
pay to the holder of the Notes submitting such form of subscription, the manner
provided in such Notes and the Note Agreement, all unpaid interest accrued (but
not applied to the payment required by section 1.1 under this section 1.5) to
the date of exercise of such Warrant on the principal amount so specified in
such form of subscription. In the event that the entire unpaid principal amount
of any Note is applied to the payment required by section 1.1 under this section
1.5, such Note shall be promptly surrendered and cancelled and shall be deemed
no longer outstanding for all purposes of the Note Agreement, except as provided
in paragraph 4E thereof.
(b) Upon any exercise of this Warrant, the holder hereof may,
at its option, make the payment required by section 1.1 by surrendering this
Warrant, and making the appropriate instruction in the form of subscription
submitted therewith as provided in section 1.1, in which event the Company shall
issue to the holder hereof, and will otherwise comply with section 1.3 with
respect to, a number of shares of Common Stock computed using the following
formula:
(A-B)
-----
X = Y A
- ------------------------------------ --
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<PAGE> 8
where: X = the number of shares of Common Stock to be issued to
holder pursuant to this paragraph (b).
Y = the number of shares of Common
Stock issuable upon any exercise other than
pursuant to this paragraph (b).
A = the Market Price of one share of Common Stock.
B = the Warrant Price.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1.
Number of Shares; Warrant Price. The number of shares of Common Stock which the
holder of this Warrant shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (i) the numerator is $6.756 and (ii) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $6.756 per share, shall be adjusted and readjusted from time to
time as provided in this section 2 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this section 2.
2.2. Adjustment of Warrant Price. 2.2.1. Issuance of
Additional Shares of Common Stock. In case the Company, at any time or from time
to time after June 29, 1995 (the "Initial Date"), shall issue or sell Additional
Shares of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to section 2.3 or 2.4) without consideration or for a
consideration per share less than the Base Price in effect, in each case, on the
date of and immediately prior to such issue or sale, then, and in each such
case, subject to section 2.8, the Warrant Price then in effect shall be reduced,
concurrently with such issue or sale, to a price (calculated to the nearest .001
of a cent) determined by multiplying such Warrant Price by a fraction,
(a) the numerator of which shall be (i) the number of shares
of Common Stock outstanding immediately prior to such issue or sale
plus (ii) the number of shares of Common Stock which the aggregate
consideration received (as determined pursuant to section 2.5) by the
Company for the total number of such Additional Shares of Common Stock
so issued or sold would purchase at the Base Price, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale,
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provided that, for the purposes of this section 2.2.1 (x) shares of Common Stock
issuable pursuant to outstanding Convertible Securities or Options (other than
Additional Shares of Common Stock deemed to have been issued pursuant to section
2.3 or 2.4) shall be deemed to be outstanding, (y) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (z) treasury shares shall not be deemed to be outstanding.
2.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the Initial Date shall declare,
order, pay or make, or shall fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution
(including, without limitation, any distribution of other or additional stock or
other securities or property or Options by way of dividend or spin-off,
reclassification, recapitalization or similar corporate rearrangement) on any
Common Stock , other than (a) a dividend payable in Additional Shares of Common
Stock or in Options for Common Stock or (b) a regular, periodic dividend payable
in cash and declared out of the earned surplus of the Company (not to exceed the
earned surplus as at the date thereof or otherwise the maximum amount then
permitted by applicable law), then, and in each such case, subject to section
2.8, the Warrant Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of any class of
securities entitled to receive such dividend or distribution shall be reduced,
effective as of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Warrant Price by a fraction,
(i) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the value of such dividend or distribution (as determined
in good faith by the Board of Directors of the Company) applicable to
one share of Common Stock, and
(ii) the denominator of which shall be such Current Market
Price.
2.3. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the Initial Date shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or
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exchange of such Convertible Securities, shall be deemed to be issued for
purposes of section 2.1 as of the time of such issue, sale, grant or assumption
or, in case such a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on an ex-dividend
basis on such record date, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the Base Price in
effect, in each case, on the date of and immediately prior to such issue, sale,
grant or assumption or immediately prior to the close of business on such record
date (or, if the Common Stock trades on an ex-dividend basis on such record
date, on the date prior to the commencement of ex-dividend trading), as the case
may be, and provided, further, that in any case in which Additional Shares of
Common Stock are so deemed to be issued,
(a) no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Additional Shares of Common Stock
or Convertible Securities upon the exercise of such Options or the
conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration of any such Options or of the rights
of conversion or exchange under any such Convertible Securities which
shall not have been exercised (or upon purchase by the Company and
cancellation or retirement of any such Options which shall not have
been exercised or of any such Convertible Securities the rights of
conversion or exchange under which shall not have been exercised), the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
shall,
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upon such expiration (or such cancellation or retirement, as the case
may be), be recomputed as if:
(i) in the case of Options for Common Stock or of
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was (x) in
the case of Options, an amount equal to (1) the consideration
actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
(2) the consideration actually received by the Company upon
such exercise, minus (3) the consideration paid by the Company
for any purchase of such Options which were not exercised, or
(y) in the case of Convertible Securities, an amount equal to
(1) the consideration actually received by the Company for the
issue, sale, grant or assumption of all such Convertible
Securities which were actually converted or exchanged or
purchased by the Company, plus (2) the additional
consideration, if any, actually received by the Company upon
such conversion or exchange, minus (3) the consideration paid
by the Company for any purchase of such Convertible Securities
the rights of conversion or exchange under which were not
exercised, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
(y) the consideration deemed to have been received by the
Company (pursuant to section 2.5) upon the issue or sale of
the Convertible Securities with respect to which such Options
were actually exercised, minus (z) the consideration paid by
the Company for any purchase of such Options which were not
exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Warrant Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
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(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Warrant Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the Initial Date shall declare or
pay any dividend or other distribution on any class of stock of the Company
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
then, and in each such case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or (b) in the case of any such subdivision, at the close of
business on the day immediately prior to the day upon which such corporate
action becomes effective.
2.5. Computation of Consideration. For the purposes of this section 2:
(a) The consideration for the issue or sale of any Additional
Shares of Common Stock or for the issue, sale, grant or assumption of
any Options or Convertible Securities, irrespective of the accounting
treatment of such consideration, shall
(i) insofar as it consists of cash, be computed at
the amount of cash received by the Company, after deducting
any expenses paid or incurred by the company or any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services and any accrued interest or dividends in connection
with such issue or sale,
(ii) insofar as it consists of consideration
(including securities) other than cash, be computed at the
Fair Value thereof at the time of such issue or sale, after
deducting any expenses paid or incurred by the Company for any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services and any accrued interest or dividends in connection
with such issue or sale, and
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(iii) in case Additional Shares of Common Stock are
issued or sold or Options or Convertible Securities are
issued, sold, granted or assumed together with other stock or
securities or other assets of the Company for a consideration
which covers both, be the proportion of such consideration so
received, computed as provided in subdivisions (i) and (ii)
above, allocable to such Additional Shares of Common Stock,
Options or Convertible Securities, as the case may be, all as
determined in good faith by the Board of Directors of the
Company or, if the Requisite Holders of Warrants shall object
to such determination, by an independent investment banking
firm of national standing engaged by the Company that has not
rendered services to the Company, any Subsidiary or any
Affiliate within the three-year period preceding such
engagement and the determination by such investment banking
firm shall be final and binding. If such investment banking
firm allocates such consideration in a manner which is more
favorable to the holders of Warrants then the allocation
determined by the Board of Directors of the Company, the
Company shall pay the fees and expenses of such investment
banking firm; otherwise, the holders of Warrants objecting to
such determination shall pay the fees and expenses of such
investment banking firm.
(b) All Additional Shares of Common Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class of stock of the Company and all Additional
Shares of Common Stock issued to effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock) shall be deemed to have been issued without
consideration.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to section 2.3, relating to Options
and Convertible Securities, shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration) payable to the
Company upon the exercise in full of such Options or the
conversion or exchange of such Convertible Securities or, in
the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and
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<PAGE> 14
the conversion or exchange of such Convertible Securities, in
each case computing such consideration as provided in the
foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
(d) Additional Shares of Common Stock issued or deemed to have
been issued pursuant to the operation of anti-dilution provisions
applicable to Convertible Securities (other than the Warrants), Options
or other securities of the Company (either as a result of the
adjustments provided for by the Warrants or otherwise) shall be deemed
to have been issued without consideration.
2.6. Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Warrant Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one one-hundredth (.01) of a cent, such amount shall be carried
forward for the next five years and adjustment with respect thereto made at the
time of and together with
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<PAGE> 15
any subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate at least one one-hundredth (.01)
of a cent.
3. Change in Control Events, etc. 3.1. General Provisions. In
case the Company, after the Initial Date, shall consummate or announce its
intent to consummate a Change in Control Event, then, and in the case of each
such transaction, the Company shall give written notice thereof to each holder
of any Warrant not less than 30 days, if practicable, prior to the consummation
thereof and proper provision shall be made so that, upon the basis and the terms
and in the manner provided in this section 3, the holder of this Warrant, upon
the exercise hereof at any time after the consummation of such transaction shall
be entitled to receive, at the aggregate Warrant Price in effect at the time of
such consummation for all Common Stock (or Other Securities) issuable upon such
exercise immediately prior to such consummation, in lieu of the Common Stock (or
Other Securities) issuable upon such exercise prior to such consummation, either
of the following, as such holder shall elect by written notice to the Company on
or before the seventh day preceding the date of the consummation of such
transaction (and, in the absence of such notice, the provisions of subdivision
(ii) below shall be deemed to have been elected by such holder on such seventh
day):
(i) the highest amount of cash, securities or other property
to which such holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments
provided for in section 2 and this section 3, provided that if a
purchase, tender or exchange offer shall have been made to and accepted
by the holders of Common Stock under circumstances in which, upon
completion of such purchase, tender or exchange offer, would result in
a Change in Control Event, and if the holder of this Warrant so
designates in such notice given to the Company, the holder of this
Warrant shall be entitled to receive the highest amount of cash,
securities or other property to which such holder would actually have
been entitled as a shareholder if the holder of this Warrant had
exercised this Warrant prior to the expiration of such purchase, tender
or exchange offer, accepted such offer and all of the Common Stock held
by such holder had been purchased pursuant to such purchase, tender or
exchange offer, subject to adjustments (from and after the consummation
of such purchase, tender or exchange offer) as nearly equivalent as
possible to the adjustments provided for in section 2 and this section
3; or
(ii) the number of shares of Voting Common Stock (or
equivalent equity interests) of the Acquiring Person or, if the
Acquiring Person fails to meet, but its Parent meets, the requirements
set forth in the proviso below, of its Parent, subject to adjustments
(subsequent to such corporate action) as nearly equivalent
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as possible to the adjustments provided for in section 2 and this
section 3, determined by dividing (x) the product obtained by
multiplying (1) the number of shares of Common Stock (or Other
Securities) to which the holder of this Warrant would have been
entitled had such holder exercised this Warrant immediately prior to
the consummation of such transaction, times (2) the greater of the
Acquisition Price and the Warrant Price in effect on the date
immediately preceding the date of such consummation, by (y) the Current
Market Price per share of the Voting Common Stock (or equivalent equity
interests) of the Acquiring Person or its Parent, as the case may be,
on the date immediately preceding the date of such consummation;
provided that the Company shall not effect any Change in Control Event unless,
immediately after the date of the consummation of such transaction, the
Acquiring Person or its Parent is required to file, by virtue of having an
outstanding class of Voting Common Stock (or equivalent equity interests),
reports with the Commission pursuant to section 13 or section 15(d) of the
Exchange Act, and such Voting Stock (or equivalent equity interests) is listed
or admitted to trading on a national securities exchange or is quoted in the
NASD automated quotation system. In the event that the Acquiring Person fulfills
the requirements contained in the immediately preceding proviso, then, if the
holder of this Warrant shall elect (or shall be deemed to elect) to receive
Voting Common Stock (or equivalent equity interests) pursuant to subdivision
(ii) above, such holder shall be entitled to receive, upon the basis stated in
such subdivision (ii), only the Voting Common Stock (or equivalent equity
interests) of the Acquiring Person.
3.2. Assumption of Obligations. Notwithstanding anything
contained in this Warrant or the Note Agreement to the contrary, the Company
will not effect any Change in Control Event unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver
any cash, stock or other securities or other property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the holder of this Warrant, (a) the obligations of
the Company under this Warrant (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to, and
shall not release the Company from, any continuing obligations of the Company
under this Warrant), and (b) the obligation to deliver to such holder such cash,
stock or other securities or other property as, in accordance with the foregoing
provisions of this section 3, such holder may be entitled to receive, and such
Person shall have similarly delivered to such holder an opinion of counsel for
such Person, which counsel shall be reasonably satisfactory to such holder,
stating that this Warrant shall thereafter continue in full force and effect and
the terms hereof (including, without limitation, all of the provisions of
section 2 and this section 3) shall be applicable to the cash, stock or other
securities or other property which such Person
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may be required to deliver upon any exercise of this Warrant or the exercise of
any rights pursuant hereto. Nothing in this section 3 or in section 7 shall be
deemed to authorize the Company to enter into any transaction not otherwise
permitted by the Note Agreement or the U.S. Guaranty.
4. Other Dilutive Events. In case any event shall occur as to
which the provisions of section 2 or section 3 are not strictly applicable but
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent public accountants of recognized national standing (which
may be the regular auditors of the Company) or an independent firm of investment
bankers, which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in sections 2
and 3, necessary to preserve, without dilution, the purchase rights represented
by this Warrant, but in no event shall any such adjustment have the effect of
increasing the Warrant Price or decreasing the number of shares of Common Stock
issuable upon exercise of this Warrant. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the holder of this Warrant and
shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock upon the exercise
of all of the Warrants from time to time outstanding, and (c) will not take any
action which results in any adjustment of the Warrant Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's certificate
of incorporation and available for the purpose of issue upon such exercise.
6. Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly compute such
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adjustment or readjustment in accordance with the terms of the Warrants and the
chief financial officer of the Company will certify such computation and prepare
a report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including without limitation a statement of
(a) the consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued,
(b) the number of shares of Common Stock, outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such certificate and
report to each holder of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a like certificate and
report setting forth the Warrant Price at the time in effect and showing in
reasonable detail how it was calculated. The Company will also keep copies of
all such reports at its principal office and will cause the same to be available
for inspection at such office during Normal Business Hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof. At least once in each fiscal year of the Company, in connection with
the preparation of the Company's annual audited financial statements, the
Company will cause the auditors preparing such statements to review the
certificates and reports delivered pursuant to this section 6 and to confirm in
writing to each holder of a Warrant the correctness of the computations set
forth therein; provided, however, that such review and confirmation need not be
made if the aggregate amounts of adjustments in any fiscal year is less than
$0.10. Such confirmation may accompany or be part of the certificate delivered
by the auditors to the holders of the Notes pursuant to Section 4.1 of the U.S.
Guaranty.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend (other than a regular periodic dividend payable
in cash out of earned surplus) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other Person or any transfer of all or
substantially all the assets of the Company to any other
Person, or
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(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified, in the case of any
date referred to in the foregoing subdivision (i), and at least 30 days prior to
the date therein specified, in the case of the date referred to in the foregoing
subdivision (ii).
8. Restrictions on Transfer. 8.1. Restrictive Legends. Except
as otherwise permitted by this section 8, each Warrant originally issued
pursuant to the Note Agreement and each Warrant issued upon direct or indirect
transfer or in substitution for any Warrant pursuant to section 13 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933
and may not be transferred in the absence of such registration or an
exemption therefrom under such Act."
Except as otherwise permitted by this section 8, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant and each
certificate issued upon the direct or indirect transfer of any such Common Stock
(or Other Securities) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred
in the absence of such registration or an exemption therefrom under
such Act. Such shares are also subject to certain provisions regarding
transferability imposed by Common Stock Purchase Warrants expiring
September 21, 2001, a copy of which is on file at the offices of the
Company."
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<PAGE> 20
8.2. Notice of Proposed Transfer; Removal of Legend. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act (other than a transfer
pursuant to Rule 144, Rule 144A or any comparable rule under such Act), the
holder thereof will give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with this
section 8.2. Each such notice (a) shall describe the manner and circumstances of
the proposed transfer in reasonable detail, including the name and address of
the transferee, the number of shares covered by the Warrants to be transferred,
and the expected settlement date for the transaction, and (b) shall designate
counsel for the holder giving such notice (who may be in-house counsel for such
holder). The holder giving such notice will submit a copy thereof to the counsel
designated in such notice and the Company will promptly submit a copy thereof to
its counsel. The following provisions shall then apply:
(i) If in the opinion of each such counsel the proposed
transfer may be effected without registration, such holder shall
thereupon be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by such holder to the
Company. Each Warrant or certificate, if any, issued upon or in
connection with such transfer shall bear the appropriate restrictive
legend set forth in section 8.1 unless, in the opinion of each such
counsel, such legend is no longer required to ensure compliance with
the Securities Act. Without limiting the generality of the foregoing,
the Company agrees that any transfer of a Warrant to an Institutional
Investor shall be deemed to be in compliance with the Securities Act,
so long as such Institutional Investor executes and delivers to the
Company a writing containing (A) its representation and warranty that
it is acquiring such Restricted Securities for investment and not with
a view to the distribution thereof (subject, however, to any
requirement of law that the disposition thereof shall at all times be
within the control of such holder) and (B) its acknowledgement that the
Company is relying on such representation and warranty in removing said
restrictive legend.
(ii) If the opinion of either or both of such counsel is not
to the effect that the proposed transfer may legally be effected
without registration of such Restricted Securities under the Securities
Act (in which case, such counsel shall issue written opinion(s) stating
the basis of the legal conclusions reached therein), the Company will
promptly so notify the holder thereof and thereafter such holder shall
not be entitled to transfer such Restricted Securities (other than in a
transfer pursuant to Rule 144, Rule 144A or any comparable rule under
the Securities Act) until the conditions specified in subdivision (i)
above shall be satisfied or until registration of such Restricted
Securities under the Securities Act has become effective.
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The Company will pay the reasonable fees and disbursements of counsel (other
than in-house counsel) for any holder of Restricted Securities and of counsel
for the Company in connection with all opinions rendered by them pursuant to
this section 8.2 and pursuant to section 8.3.
8.3. Termination of Restrictions. The restrictions imposed by
this section 8 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering such Restricted
Securities, (b) when, in the opinions of both counsel for the holder thereof and
counsel for the Company, such restrictions are no longer required in order to
insure compliance with the Securities Act, or (c) when the holder of such
securities is entitled to distribute such securities to the public pursuant to
Rule 144(k) under the Securities Act. Whenever such restrictions shall terminate
as to any Restricted Subsidiaries, as soon as practicable thereafter and in any
event within five days, the holder thereof shall be entitled to receive from the
Company, without expense to such holder (other than transfer taxes, if any), new
securities of like tenor not bearing the applicable legend set forth in section
8.1 hereof.
9. Registration under Securities Act, etc. 9.1. Registration
on Request. (a) Request. Upon the written request of one or more Initiating
Holders, requesting that the Company effect the registration under the
Securities Act of all or part of such Initiating Holders' Registrable Securities
and specifying the intended method of disposition thereof, the Company will
promptly give written notice of such requested registration to all holders of
outstanding Registrable Securities, and thereupon will use its best efforts to
effect the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holder or Holders for
disposition in accordance with the intended method of disposition
stated in such request, and
(ii) all other Registrable Securities the Holders of which
have made written requests to the Company for registration thereof
within 20 Business Days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition
thereof),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that (A) the Company shall not be required to effect the
registration pursuant to this section 9.1 of any Warrants (but shall be required
to effect the registration of Registrable Securities described in clauses (b)
and (c) of the definition of Registrable Securities); (B) the Company shall not
be required to effect any registration pursuant to
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<PAGE> 22
this section 9.1 if the aggregate number of Registrable Securities requested to
be registered pursuant to this section 9.1 does not equal or exceed the lesser
of (x) 40% (by number of shares) of the Registrable Securities outstanding on
the date of this Agreement (such outstanding Registrable Securities to be
adjusted from time to time to reflect the issuance of additional shares of
Common Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise by multiplying such number, as the same may have
been previously adjusted, by the percentage by which the number of outstanding
shares of Registrable Securities shall have increased or decreased as a result
of such stock dividend, stock split, combination of shares, recapitalization,
merger or consolidation or other reorganization) and (y) the amount of
Registrable Securities outstanding on the date of such request; (C) the Company
shall not be required to effect more than two registrations pursuant to this
section 9.1; and (D) the Company shall not be required to effect any
registration pursuant to this section 9.1 if within the 45-day period prior to
the date of the written request of any Initiating Holder a registration
statement in connection with a Public Offering shall have become effective under
the Securities Act. If the Board of Directors of the Company shall determine in
its good faith judgment that registration of Registrable Securities pursuant
hereto would be detrimental to the best interests of the Company and its
shareholders, the Company may delay proceeding with such registration for a
period not exceeding 90 days after its receipt of a request therefor. Subject to
subdivision (f), the Company may include in such registration other securities
for sale for its own account or for the account of any other Person.
(b) Registration Statement Form. Registrations under this
section 9.1 shall be on such appropriate registration form of the Commission
that shall be selected by the Company, and be reasonably acceptable to the
holders of more than 50% (by number of shares) of the Registrable Securities so
to be disposed of (it being understood that Form S-2 or Form S-3 or other
comparable "short-form" that the Company is then eligible to utilize is
acceptable unless (i) the managing underwriter, if any, for such distribution,
advises the Initiating Holder(s) that such registration is reasonably likely to
result in a sale of such Registrable Securities on materially less attractive
economic terms than would be the case in a sale pursuant to Form S-1 or similar
"long-form" registration or (ii) in the case of a non-underwritten distribution,
the Initiating Holder(s) reach the same determination, it being agreed, however,
that if, pursuant to clause (i) or (ii), a sale pursuant to Form S-1 or similar
"long form" registration is required by the Initiating Holder(s), such
Initiating Holder(s) shall pay all registration costs in excess of those which,
in the reasonable determination of the managing underwriter, or if there is no
managing underwriter, the Initiating Holder(s), would have been incurred in
connection with a Form S-2, Form S-3 or other comparable "short-form
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<PAGE> 23
registration), and shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods specified in their request for
such registration.
(c) Expenses. The Company will pay all Registration Expenses
in connection with any registration requested and effected pursuant to this
section 9.1. In the event of registrations effected pursuant to this section 9.1
that includes both Registrable Securities and shares other than Registrable
Securities, the Registration Expenses (and underwriting discounts and
commissions and transfer taxes, if any) in connection with such registration
shall be allocated among all Persons on whose behalf securities of the Company
are included in such registration, pro rata among such Persons on the basis of
the respective amounts of the securities then being registered on their behalf.
(d) Selection of Underwriters. If, in the discretion of the
holders of a majority (by number of shares) of the Registrable Securities to be
registered, any offering pursuant to this section 9.1 shall constitute an
underwritten offering, the underwriter or underwriters thereof shall be selected
by such holders subject to the approval of the Company, which shall not
unreasonably withhold its acceptance of such underwriter or underwriters.
(e) Effective Registration Statement. A registration requested
pursuant to this section 9.1 will not be deemed to have been effected (i) unless
it has become effective, provided that a registration which does not become
effective after the Company has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of the Initiating Holders
shall be deemed to have been effected by the Company at the request of such
Initiating Holders, unless such Initiating Holders shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court, or (iii) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied or waived.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this section 9.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering within a price range
acceptable to the Initiating Holders, the Company will include in any such
registration to the extent of the number which the Company is so advised can be
sold in
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<PAGE> 24
such offering (i) first, Registrable Securities requested to be included in such
registration by the Initiating Holders, pro rata among such holders on the basis
of the number of shares of such securities requested to be included by such
holders, (ii) second, other Registrable Securities requested to be included in
such registration, pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities requested
to be included by such holders, and (iii) third, other securities of the Company
proposed to be included in such registration, in accordance with the priorities,
if any, then existing among the Company and the holders of such other
securities.
9.2. Incidental Registration. (a) Right to Include Registrable
Securities. Notwithstanding any limitation contained in section 9.1, if the
Company at any time proposes to register any of its Common Stock under the
Securities Act (other than by a registration on Form S-4, S-8 or any successor
or similar forms), whether or not for sale for its own account, in a manner
which would permit registration of Registrable Securities for sale to the public
under the Securities Act, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so, specifying the
securities to be offered and the amount thereof proposed to be sold, and of such
holders' rights under this section 9.2. Upon the written request of any such
holder made within 15 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that (A) the Company shall not be required to
effect the registration pursuant to this section 9.2 of any Warrants (but shall
be required to effect the registration of Registrable Securities described in
clauses (b) and (c) of the definition of Registrable Securities) and (B) if, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (x) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under section 9.1, and (y) in the case of a determination to delay
registering, shall be permitted to delay registering any
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<PAGE> 25
Registrable Securities for the same period as the delay in registering such
other securities. No registration effected under this section 9.2 shall relieve
the Company of its obligation to effect any registration statement upon request
under section 9.1. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
section 9.2.
(b) Priority in Incidental Registrations. If a registration
pursuant to this section 9.2 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Company, the Company will include in such registration to the extent of the
number which the Company is so advised can be sold in such offering securities
determined as follows:
(1) if such registration as initially proposed by the Company
was solely a primary registration of its securities, (x) first, the
securities proposed by the Company to be sold for its own account, and
(y) second, any Registrable Securities and any other securities of the
Company requested to be included in such registration, pro rata among
the holders thereof requesting such registration on the basis of the
number of shares of such securities requested to be included by such
holders, shall be determined pro rata in accordance with the respective
number of shares of all requesting holders entitled to be included in
such registration), and
(ii) if such registration as initially proposed by the Company
was in whole or in part requested by holders of securities of the
Company, other than holders of Registrable Securities, pursuant to
demand registration rights, (x) first, such securities held by the
holders initiating such registration and the holders of Registrable
Securities, pro rata among the holders thereof, on the basis of the
number of shares of such securities requested to be included by such
holders, (y) second, any other securities of the Company requested to
be included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
such securities requested to be included by such holders, shall be
determined pro rata in accordance with the respective number of shares
of all requesting holders entitled to be included in such
registration).
9.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in sections 9.1 and 9.2, the
Company will as expeditiously as possible:
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<PAGE> 26
(a) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) to effect such registration and use its best
efforts to cause such registration statement to become effective,
provided that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected by
the holders of Registrable Securities whose Registrable Securities are
to be included in such registration copies of drafts of all such
documents proposed to be filed in reasonably final form, which
documents will be subject to the prompt review of such counsel;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or 180 days after such
registration statement becomes effective, provided that if less than
all the Registerable Securities are withdrawn from registration after
the relevant period, the shares to be so withdrawn shall be allocated
pro rata among the holders thereof on the basis of the respective
numbers of Registrable Securities held by them included in such
registration;
(c) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller may reasonably request;
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of
such jurisdictions as each seller thereof shall reasonably request and
to keep such registration or qualification in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for
any such purpose be required to
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<PAGE> 27
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(f) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and the underwriters, if any),
of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of any closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller,
and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten Public Offering, dated the date of
any closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten Public Offerings of securities and, in
the case of the accountants' letter, such other financial matters, as
such seller (or the underwriters, if any) may reasonably request;
(g) notify each holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made, and at the request of any such holder promptly prepare
and furnish to such seller a
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<PAGE> 28
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such
registration statement or prospectus to which any such seller shall
have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof as soon as
practicable, but in any event at least two Business Days prior to the
filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(j) use of its best efforts, at its option, either (1) to
cause all such Registrable Securities covered by such registration
statement to be listed on a national securities exchange within the
United States (if such Registrable Securities are not already so
listed) and on each additional national securities exchange within the
United States on which similar securities issued by the Company are
then listed, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (2) to secure
designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Commission and, without
limiting the generality of the foregoing, to arrange for at least three
market makers to register as such with respect to such Registrable
Securities with the NASD.
The Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such holder and the distribution of such securities as the Company is advised by
its counsel is legally required in connection with such registration.
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<PAGE> 29
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (g) of this
section 9.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (g) of this
section 9.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the periods referred to in subdivision (b)
of this section 9.3 shall be extended by a number of days equal to the number of
days during the period from and including the giving of notice pursuant to
subdivision (g) of this section 9.3 to and including the date when each seller
of any Registrable Securities covered by such registration statement shall
receive the copies of the supplemented or amended or prospectus contemplated by
subdivision (g) of this section 9.3.
9.4 Underwritten Offerings. (a) Requested Underwritten
Offerings. If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to the registration requested under
section 9.1, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be satisfactory in substance
and form to the Company, each such holder and the underwriters and to contain
such representations and warranties by the Company and such other terms as are
customarily contained in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in section 9.6. The holders
of Registrable Securities to be distributed by such underwriters shall execute
and deliver and be parties to such underwriting agreement as a condition to such
holder's participation in the offering and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. No holder of Registrable
Securities shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's ownership of the
Registrable Securities to be sold and such holder's intended method of
distribution and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by
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<PAGE> 30
section 9.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, subject to the provisions of section 9.2(b), use
its best efforts, if requested by any holder of Registrable Securities, to
arrange for such underwriters to include the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall execute and deliver and be parties to the underwriting
agreement as a condition to such holder's participation in the offering between
the Company and such underwriters and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. No holder of Registrable Securities
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's ownership of the Registrable
Securities to be sold and such holder's intended method of distribution and any
other representation required by law.
(c) Holdback Agreements. (i) Each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so required
by the managing underwriter, not to effect any public sale or distribution of
such securities during the seven days prior to and such period of time as is
required by such managing underwriter (not to exceed 120 days) after any
underwritten registration pursuant to section 9.1 or 9.2 has become effective,
except as part of such underwritten registration, whether or not such holder
participates in such registration.
(ii) The Company agrees (x) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven days
prior to and the 90 days after any underwritten registration pursuant to section
9.1 or 9.2 has become effective, except as part of such underwritten
registration and except pursuant to registrations on Form S-4, S-8 or any
successor or similar forms thereto, and (y) to cause each holder of its equity
securities or of any securities convertible into or exchangeable or exercisable
for any of such securities, in each case purchased from the Company at any time
after the date of this Agreement (other than in a Public Offering), to agree not
to effect any such public sale or distribution of such securities, during such
period, except as part of such underwritten registration.
9.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act, the Company will give the holders of Registrable Securities registered
under such
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registration statement, their underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
9.6 Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
the seller of Registrable Securities covered by any registration statement filed
pursuant to section 9.1 or 9.2, its directors and officers, each other Person
who participates as an underwriter in the offering or sale of such securities
and each other Person, if any, who controls any such seller or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director or officer or underwriter or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such seller and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and strictly in conformity with written information (which information shall be
limited to a brief description of the seller, its holdings of the Registrable
Securities to be sold and its plan of distribution therefor) furnished by such
seller to the Company in an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof and provided further that
the Company shall not be liable to any Person who participates as an
underwriter, in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter
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<PAGE> 32
within the meaning of the Securities Act, in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final prospectus to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by such
seller. The Company shall agree to provide for such contribution relating to
such indemnity as shall be reasonably requested by any seller of Registrable
Securities or the underwriters.
(b) Indemnification by the Sellers. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to section 9.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this section 9.6) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and strictly in conformity with written information (which
information shall be limited to a brief description of the seller, its holdings
of the Registrable Securities to be sold and its plan of distribution therefor)
furnished to the Company by such seller in an instrument duly executed by such
seller specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller. Such seller shall agree to provide
for such contribution relating to such indemnity as shall be reasonably
requested by the Company or the underwriters, provided that such seller shall
not be required to make any contribution unless it is at fault under the
standards set forth in the first sentence of this section 9.6(b). The indemnity
and contribution provided by each seller of securities under this section 9.6(b)
shall be provided severally and not jointly or jointly and severally with any
other seller or prospective seller of securities and shall be limited in amount
to the net amount of proceeds received by such seller from the sale of
Registrable Securities pursuant to such registration statement.
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(c) Notices of Claims, etc.. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section 9.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this section 9.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, such indemnified
party shall have the right to employ counsel separate from counsel for the
indemnifying party, but the fees and expenses of such counsel shall be borne by
such indemnified party unless (i) the indemnifying party agrees to pay such fees
and expenses, (ii) the indemnifying party shall have failed to assume the
defense of such claim or engage experienced, independent, nationally-recognized
counsel on behalf of the indemnified party, or (iii) in the reasonable judgment
of the indemnified party, a conflict of interest is likely to exist between the
indemnified party and the indemnifying party with respect to such claims (in
such case, upon notice to the indemnifying party of such determination, the
indemnifying party shall not have the right to assume the defense of such
indemnified party). If none of the events described in clauses (i), (ii) or
(iii) of the preceding sentence exist, the indemnifying party shall be entitled
to participate in and to assume the defense of any action against an indemnified
party, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall consent to entry of any judgment or enter into any settlement
without the consent of the indemnified party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Indemnification Payments. The indemnification required by
this section 9.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
9.7 Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in any registration of its
securities contemplated by this section 9 or the marketability of such
Registrable Securities under any such registration.
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9.8 Covenants Relating to Rules 144 and 144A. The Company will
file reports in compliance with the Exchange Act and will, at its expense,
forthwith upon the request of any holder of Restricted Securities, deliver to
such holder a certificate, signed by the Company's principal financial officer,
stating (a) the Company's name, address, and telephone number (including area
code), (b) the Company's Internal Revenue Service identification number, (c) the
Company's Commission file number, (d) the number of shares of Common Stock of
the Company outstanding as shown by the most recent report or statement
published by the Company, and (e) whether the Company has filed the reports
required to be filed under the Exchange Act for a period of at least 90 days
prior to the date of such certificate and in addition has filed the most recent
annual report required to be filed thereunder. If at any time the Company is not
required to file reports in compliance with either section 13 or section 15 (d)
of the Exchange Act, the Company at its expense will, forthwith upon the written
request of the holder of any Restricted Securities, make available to (i) such
holder adequate current public information with respect to the Company within
the meaning of paragraph (c)(2) of Rule 144 of the General Rules and Regulations
promulgated under the Securities Act or (ii) such holder or a QIB designated by
such holder such financial and other information as such holder may reasonably
determine to be necessary in order to permit compliance with the information
requirements of Rule 144A under the Securities Act in connection with the resale
of the Registrable Securities.
10. Availability of Information. The Company will cooperate
with each holder of any Restricted Securities in supplying such
publicly-available information as may be necessary for such holder to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Restricted Securities. The Company will
furnish to each holder of any Warrants, promptly upon their becoming available
copies of all financial statements, reports, notices and proxy statements sent
or made available generally by the Company to its stockholders, and copies of
all regular and periodic reports and all registration statements and
prospectuses filed by the Company with any securities exchange or with the
Commission; it being understood that the Company shall not be obligated to
provide any such holder with material, non-public information unless such holder
executes and delivers a confidentiality agreement in the form of Schedule 10
hereto.
11. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding, and
if at any time the number of authorized but unissued shares of Common Stock is
insufficient to permit such issuance, the Company shall seek shareholder
approval to amend its certificate of
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incorporation or other charter, and shall take such other action as may be
necessary, to increase the number of authorized shares to such number of shares
as shall be sufficient for such purpose. All shares of Common Stock (or Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued and, in the case of shares, fully paid and nonassessable with
no liability on the part of the holders thereof.
12. Listing on Securities Exchanges. The Company will list on
each national securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon exercise of the Warrants,
and will maintain such listing of, all shares of Common Stock from time to time
issuable upon exercise of the Warrants. During any period when the Common Stock
shall not be listed on any national securities exchange, the Company will
maintain the designation of the shares of Common Stock from time to time
issuable upon exercise of the Warrants as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission and, without
limiting the generality of the foregoing, will arrange for at least three market
makers to register as such with respect to such shares with the NASD. The
Company will also so list on each national securities exchange, and will
maintain such listing of, or, as the case may be, will secure such designation
and such registration with respect to, any Other Securities if at the time any
securities of the same class shall be listed on such national securities
exchange by the Company or shall be so designated, as the case may be.
13. Ownership, Transfer and Substitution of Warrants. 13.1
Ownership of Warrants. The Company may treat the person in whose name any
Warrant is registered on the register kept at the principal office of the
Company as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to section 8, a Warrant, if properly
assigned, may be exercised by a new holder without first having a new Warrant
issued.
13.2 Transfer and Exchange of Warrants. Upon the surrender of
any Warrant, properly endorsed, for registration of transfer or for exchange at
the principal office of the Company, the Company at its expense will (subject to
compliance with section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
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13.3 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than the Purchaser or any
institutional investor, upon the execution and delivery of a written indemnity
agreement reasonably satisfactory to the Company in form and amount or, in the
case of any such mutilation, upon surrender of such Warrant for cancellation at
the principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Definitions. As used herein, unless the context otherwise
requires, the following terms have the respective meanings set forth in this
section 14. Capitalized terms not defined herein shall have the respective
meanings assigned to them in the Note Agreement or the U.S. Guaranty, as
applicable.
Acquiring Person: the continuing or surviving corporation of a
consolidation or merger with the Company (of other than the Company), the
transferee of substantially all of the properties and assets of the Company, the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or, in the case of a capital reorganization or reclassification, the Company.
Acquisition Price: as applied to the Common Stock, with
respect to any transaction to which section 3 applied, (a) the price per share
equal to the greater of the following, determined in each case as of the date
immediately preceding the date of consummation of such transaction: (i) the
Market Price of the Common Stock and (ii) the highest amount of cash plus the
Fair Value of the highest amount of securities or other property which the
holder of this Warrant would have been entitled as a shareholder to receive upon
such consummation if such holder had exercised this Warrant, immediately prior
thereto, or (b) if a purchase, tender or an exchange offer is made by the
Acquiring Person (or by any of its affiliates) to the holders of the Common
Stock and such offer is accepted by the holders of more than 50% of the
outstanding shares of Common Stock, the greater of (i) the price determined in
accordance with the foregoing subdivision (a) and (ii) the price per share equal
to the greater of the following, determined in each case as of the date
immediately preceding the acceptance of such offer by the holders of more than
50% of the outstanding shares of Common Stock: (x) the Market Price of the
Common Stock and (y) the highest amount of cash plus the Fair Value of the
highest amount of securities or other property which the holder of this Warrant
would be entitled as a shareholder to receive pursuant to such offer if such
holder had exercised this Warrant immediately prior to the expiration of such
offer and accepted the same.
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Additional Shares of Common Stock: all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to section 2.3 or
2.4, deemed to be issued) by the Company after the Initial Date, whether or not
subsequently reacquired or retired by the Company, other than (A) shares of
Common Stock issued upon the exercise of Warrants, and (B) shares of Common
Stock issued to officers, directors and employees of and consultants to the
Company pursuant to (i) the 1988 Directors' Stock Option Plan; (ii) the 1992
Stock Option Plan; and (iii) the 1983 Incentive Stock Option Plan (each as
described in the Company's proxy statement dated November 8, 1994) and as
amended from time to time after such date by the Company's Board of Directors),
or (iv) other similar stock-based incentive or option plan approved by the
Company's Board of Directors and shareholders, so long as, in the case of clause
(B), the maximum number of shares issuable under all stock options plans
described in clauses (i) - (iv) above does not exceed by more than two million
shares (as adjusted for stock splits and combinations) the number of such shares
which are issuable under such plans on the date of this Warrant and all other
material terms of each stock option plan described in clauses (i) - (iii) above
remain substantially the same as exist on the date of this Warrant.
Base Price: on any date specified herein, the greater of (i)
the Current Market Price and (ii) the Warrant Price.
Business Day: any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York or the
State of California are authorized by law to be closed, provided that, in
determining the period within which certificates or Warrants are to be issued
and delivered pursuant to section 1.3 at a time when shares of Common Stock (or
Other Securities) are listed or admitted to trading on any national securities
exchange or in the over-the-counter market and in determining the Market Price
of any securities listed or admitted to trading on any national securities
exchange or in the over-the-counter market, "Business Day" shall mean any day
when the principal exchange in which securities are then listed or admitted to
trading is open for trading or, if such securities are traded in the
over-the-counter market in the United States, such market is open for trading,
and provided further that any reference to "days" (unless Business Days are
specified) shall mean calendar days.
Change in Control Event: any of the following: (i) a "person"
or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act), together with their "affiliates" and "associates" (within the meaning of
Rule 12b-2 under the Exchange Act), become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 50% of the Common Stock; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Company's Board of Directors (together with any new
director whose election by the Company's Board of Directors or whose nomination
for election by the Company's
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shareholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the directors then in office; (iii) the
Company consolidates with or merges into another corporation or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates with or merges into the Company, in either event
pursuant to a transaction in which Common Stock is changed into or exchanged for
cash, securities or other property, provided that such transactions (A) between
the Company and Subsidiaries or between Subsidiaries or (B) involving the
exchange of the Company's Voting Stock as consideration in the acquisition of
another business or businesses (without change or exchange of the outstanding
Common Stock into or for cash, securities or other property) shall be excluded
from the operation of this clause (iii); or (iv) the Company or any Subsidiary
of the Company purchases or otherwise acquires, directly or indirectly,
beneficial ownership of Common Stock if, after giving effect to such purchase or
acquisition, the Company (together with its Subsidiaries) acquires 50% or more
of the Common Stock within any 12-month period.
Commission: the Securities an Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange Act,
whichever is the relevant statute for the particular purpose.
Common Stock: the Company's Common Stock, par value $.01 per
share, as constituted on the date hereof, any stock into which such Common Stock
shall have been changed or any stock resulting from any reclassification of such
Common Stock, and all other stock of any class or classes (however designated)
of the Company the holders of which have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference.
Company: Inmac Corp., a Delaware corporation.
Convertible Securities: any notes, debentures, other evidences
of indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
Current Market Price: on any date specified herein, (a) with
respect to Common Stock or to Voting Common Stock (or equivalent equity
interests) of an Acquiring Person or its Parent, (i) the average daily Market
Price during the period of the most recent 10 consecutive Business Days ending
on the date immediately preceding such date, or (ii) if shares of Common Stock
or such Voting Common Stock (or equivalent equity interests), as the case may
be, are not then listed or admitted to
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trading on any national securities exchange and if the closing bid and asked
prices thereof are not then quoted or published in the over-the-counter market,
the Market Price on such date; and (b) with respect to any other securities, the
Market Price on such date.
Event of Default: an Event of Default as defined in the Note
Agreement, other than Events of Default arising from the breach of, or the
failure to perform, any covenant in paragraph 5 (other than paragraph 5D)
thereof.
Exchange Act: the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as to the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
Exercise Period: the period commencing on the earliest to
occur of (a) June 29, 1996; (b) consummation of a Public Offering; (c) an Event
of Default; (d) a Change in Control Event or (e) to the extent not specified in
the preceding clauses (a) - (d), an event of the type described in section 3.1
hereof, and ending at the end of Normal Business Hours, on September 21, 2001.
Fair Value: with respect to any securities or other property,
the fair value thereof as of a date which is within 15 days of the date as of
which the determination is to be made as determined in good faith by the Board
of Directors of the Company or, if the Requisite Holders of Warrants shall
object to such determination, by an investment banking firm mutually acceptable
to the Company and such Holders and the determination by such investment banking
firm shall be final and binding.
Institutional Investor: (i) any bank, savings bank, savings
and loan association, finance company or insurance company, (ii) any pension
plan or portfolio, (iii) any mutual or investment fund, (iv) any registered
investment company, (v) any investment bank or licensed broker-dealer, or (vi)
to the extent not already specified, a QIB or accredited investor (the latter as
defined under Regulation D promulgated under the Securities Act).
Initial Date: the meaning specified in section 2.2.
Initiating Holders: any holder or holders of Registrable
Securities holding at least 33-1/3% (by number of shares outstanding or
purchasable) of Registrable Securities making a written request pursuant to
section 9.1 for the registration of all or part of the Registrable Securities
held by such holder or holders.
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Market Price: on any date specified herein, (a) with respect
to Common Stock or Voting Common Stock (or equivalent equity interests) of an
Acquiring Person or its Parent, the amount per share equal to (i) the last sale
price of shares of such security, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid and asked prices
thereof on such date, in each case as officially reported on the principal
national securities exchange on which the same are then listed or admitted to
trading, or (ii) if no shares of such security are then listed or admitted to
trading on any national securities exchange but such security is designated as a
national market system security by the NASD, the last trading price of such
security on such date, or if such security is not so designated, the average of
the reported closing bid and asked prices thereof on such date as shown by the
NASD automated quotation system or, if no shares thereof are then quoted in such
system, as published by the National Quotation Bureau, Incorporated or any
successor organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by the Company, or (iii) if no shares of such
security are then listed or admitted to trading on any national exchange or
designated as a national market system security and if no closing bid and asked
prices thereof are then so quoted or published in the over-the-counter market,
the higher of (x) the book value thereof as determined by any firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company, as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (y) the Fair
Value thereof; and (b) with respect to any other securities, the Fair Value
thereof.
NASD: the National Association of Securities Dealers.
Normal Business Hours: with respect to any trading of
securities or settlement of any such trade, 9:30 A.M. to 4:00 P.M., New York
City time and, otherwise, 9:00 A.M. to 5:00 P.M. California time.
Note Agreement: the meaning specified in the second paragraph
of this Warrant.
Notes: the meaning specified in the opening paragraphs of this
Warrant.
Options: rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
Other Securities: any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any
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time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to section 3 or
otherwise.
Parent: as to any Acquiring Person, any corporation which (a)
controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in its
consolidated financial statements under generally accepted accounting principles
and (c) is not itself included in the consolidated financial statements of any
other Person (other than its consolidated subsidiaries).
Person: an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, an unincorporated organization or a
government or any department, agency or subdivision thereof.
Public Offering: any offering of Common Stock to the public
pursuant to an effective registration statement under the Securities Act.
Purchaser: the meaning specified in the opening paragraphs of
this Warrant.
QIB: a qualified institutional buyer as defined in Rule 144A
promulgated under the Securities Act.
Registrable Securities: (a) the Warrants, (b) any shares of
Common Stock or Other Securities issued or issuable upon exercise of the
Warrants and (c) any securities issued or issuable with respect to any Common
Stock or Other Securities referred to in subdivision (b) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
For purposes of section 9 and the definition of "Initiating Holders", holders of
Warrants shall be deemed to be the holders of the Registrable Securities which
are at the time issuable upon full exercise thereof whether or not such holders
are entitled to exercise such Warrants pursuant to the terms thereof, and such
Registrable Securities shall be deemed to be outstanding. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (x) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (y) they shall have been sold or otherwise distributed pursuant to
Rule 144 or Rule 144A (or any successor provisions) under the Securities Act, or
(z) they shall have ceased to be outstanding. As to any particular holder of
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when such holder shall be entitled to sell all of such
securities without restriction pursuant to Rule 144(k) (or any successor
provision)
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under the Securities Act, and such securities, once having ceased to be
Registrable Securities by operation of this sentence, shall be reinstated as
Registrable Securities at any time when the holder shall cease to be so entitled
for any reason.
Registration Expenses: all expenses incident to the Company's
performance of or compliance with section 9, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or Blue Sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "comfort" letters required by or incident to
such performance and compliance, the reasonable fees and disbursements of a
single counsel retained by the holders of the Registrable Securities being
registered, and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company, or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
Requisite Holders of Warrants: the holders of at least 66-2/3%
of all the Warrants at the time outstanding determined on the basis of the
number of shares of Common Stock or Other Securities deliverable upon exercise
thereof.
Restricted Securities: (a) any Warrants bearing the applicable
legend set forth in section 8.1, (b) any shares of Common Stock (or Other
Securities) which have been issued upon the exercise of Warrants and which are
evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
Securities Act: the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar Federal statute.
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Transfer: unless the context otherwise requires, any sale,
assignment, pledge or other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is defined in section 2(3)
of the Securities Act.
U.S. Guaranty: the guaranty of the Notes by the Company dated
June 29, 1995, as the same is amended from time to time.
Voting Common Stock: with respect to any corporation,
association or other business entity, stock of any class or classes (or
equivalent interest), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or persons performing
similar functions) of such corporation, association or business entity, even if
the right so to vote has been suspended by the happening of such a contingency.
Warrant Expiration Date: September 21, 2001.
Warrant Price: the meaning specified in section 2.1. The
Warrant Price represents an effective exercise premium (within the meaning of
Rule 144A(a)(7) and for the purposes of Rule 144A(d)(3)(i)) of 115% of the
Market Price of the common stock on the date the Warrants were priced.
Warrants: this Warrant and any warrants issued in replacement,
subdivision or substitution herefor.
15. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. No Rights or Liabilities as Stockholder. Nothing contained
in this Warrant shall be construed as conferring upon the holder hereof any
rights as a stockholder of the Company or as imposing any liabilities on such
holder to purchase any securities or as a stockholder of the Company, whether
such liabilities are asserted by the Company or by creditors or stockholders of
the Company or otherwise.
17. Notices. All notices and other communications to the
Company shall be in writing and sent in the manner and to the locations as are
specified in the Note Agreement and the U.S. Guaranty. All notices and other
communications to any
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holder of any Warrant or any holder of any Common Stock (or Other Securities)
shall be mailed by registered or certified mail, return receipt requested,
addressed to such holder at its address set forth in the register kept at the
principal office of the Company; provided that the exercise of any Warrant shall
be effected in the manner provided in section 1.
18. Expiration; Notice. The Company will give the holder of
this Warrant no less than 45 days' nor more than 90 days' notice of the
expiration of the right to exercise this Warrant. The right to exercise this
Warrant shall expire at the end of Normal Business Hours on the Warrant
Expiration Date.
19. Miscellaneous. This Warrant and any term hereof may be
amended, changed or waived only with the written consent of the Requisite
Holders of Warrants, except that, without the written consent of the holder or
holders of all Warrants at the time outstanding, no amendment to this Warrant
shall change the number of shares purchasable hereunder; the Warrant Price or
the method set forth in section 2.1 for calculating adjustments thereto; the
Warrant Repurchase Price; the Warrant Expiration Date; or the definition of
Requisite Holders of Warrants. The agreements of the Company contained in this
Warrant other than those applicable solely to the Warrants and the holders
thereof shall inure to the benefit of and be enforceable by any holder or
holders at the time of any Common Stock (or Other Securities) issued upon the
exercise of Warrants, whether so expressed or not. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
INMAC CORP.
By: ___________________________
Title:
B-44
<PAGE> 45
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To ______________________________________
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,
______________________ 1 shares of Common Stock of ___________________, [and
herewith makes payment of $________ therefor] [by application pursuant to
section 1.5(a) of such Warrant of $________ aggregate principal amount of Notes
(as defined in such Warrant) plus $________ accrued interest thereon] [by
surrender of the within Warrant pursuant to section 1.5(b) of such Warrant], 2
and requests that the certificates for such shares be issued in the name of, and
delivered to
_________________________________________ whose address is
___________________________________________________________.
Dated: __________________________________
______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
_______________________________
1 Insert here the number of shares called for on the face of
this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case
without making any adjustment for additional Common Stock or any other
stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise.
In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
2 Delete inapplicable language in brackets.
B-45
<PAGE> 1
EXHIBIT 10.49
================================================================================
U.S. $30,000,000
MULTICURRENCY REVOLVING CREDIT AGREEMENT
Dated as of June 27, 1995
Among
INMAC CORP.,
INMAC B.V.,
INMAC GMBH,
INMAC (U.K.) LTD.,
INMAC HOLDINGS LIMITED,
INMAC SA
and
INMAC AB
each a Borrower
and
ABN AMRO BANK N.V.
as Agent and as Issuing Bank
AND
BANKS
================================================================================
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<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<S> <C>
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.04. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ARTICLE II
AMOUNTS AND TERMS OF ADVANCES
<TABLE>
<S> <C>
2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.02. The Swing-Line Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.03. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.04. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.05. Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.06. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.08. Additional Interest on Eurocurrency Rate Advances . . . . . . . . . . . . . . . . . . . . 22
2.09. Interest Rate Determination and Protection. . . . . . . . . . . . . . . . . . . . . . . . 22
2.10. Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.12. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.13. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.14. Extension of Revolver Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.16. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.17. Currency Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.18. Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.19. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ARTICLE III
AMOUNTS AND TERMS OF LETTERS OF CREDIT
AND PARTICIPATIONS THEREIN
<TABLE>
<S> <C>
3.01. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.02. Issuing the Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
3.03. Reimbursement Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.04. Participations Purchased by the Banks . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.05. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.06. Indemnification; Nature of the Issuing Bank's Duties . . . . . . . . . . . . . . . . . . 34
3.07. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.08. Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
ARTICLE IV
THE GUARANTEE
<TABLE>
<S> <C>
4.01. The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.02. Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.03. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.04. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.05 Financial Condition of B Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
ARTICLE V
CONDITIONS OF LENDING
<TABLE>
<S> <C>
5.01. Condition Precedent to Initial Advances and Letters of Credit . . . . . . . . . . . . . . 40
5.02. Conditions Precedent to Each Borrowing and Letter of Credit . . . . . . . . . . . . . . . 41
</TABLE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
6.01. Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.02. Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.06. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.07. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.09. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ARTICLE VII
COVENANTS OF THE BORROWER
<TABLE>
<S> <C>
7.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.03 Financial Covenants of the A Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.04. Financial Covenants of the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
ARTICLE VIII
EVENTS OF DEFAULT
<TABLE>
<S> <C>
8.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
ARTICLE IX
THE AGENT
<TABLE>
<S> <C>
9.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.03. ABN AMRO Bank N.V. and its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ARTICLE X
THE OBLIGATIONS OF THE B BORROWERS
<TABLE>
<S> <C>
10.01. Liability of each B Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.02. Absolute Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.04. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.05. Financial Condition of B Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.06. Certain Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
ARTICLE XI
MISCELLANEOUS
<TABLE>
<S> <C>
11.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.02. Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.04. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.06. Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.08. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 66
11.09. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.10. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.11. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.12. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
11.13. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.14. Confidentiality Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.15. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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<PAGE> 6
MULTICURRENCY REVOLVING CREDIT AGREEMENT, dated as of June 27,
1995, among INMAC CORP., a corporation organized under the laws of
Delaware (the "A Borrower"), INMAC B.V.a corporation organized under the
laws of the Netherlands, INMAC GMBH, a corporation organized under the
laws of Germany, INMAC (U.K.) Ltd., a corporation organized under the
laws of England, INMAC HOLDINGS LIMITED, a corporation organized
under the laws of England, INMAC SA, a corporation organized under the
laws of France, and INMAC AB, a corporation organized under the laws of
Sweden, each a directly or indirectly wholly-owned subsidiary of the A Borrower
(each a "B Borrower" and, collectively, the "B Borrowers" and, together with the
A Borrower, each a "Borrower" and, collectively, the "Borrowers"), the banks
(the "Banks") listed on the signature pages hereof, and ABN AMRO BANK
N.V. as the issuing bank hereunder (the "Issuing Bank") and as agent (the
"Agent") for the Banks and the Issuing Bank hereunder.
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 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 the plural of the terms
defined):
"A Advance" shall mean an advance by a Bank to the A
Borrower as part of an A Borrowing and refers to a Eurocurrency Rate Advance.
"A Advance Liability" shall mean, as of any date of
determination, the sum of all then existing liabilities of the A Borrower to the
Banks in respect of all A Advances (including A Advances required to be made but
not funded by any Bank.)
"A Borrowing" shall mean a borrowing consisting of
simultaneous A Advances made on the same day by the Banks.
"A Commitment" shall mean, as to any Bank, the amount
set forth opposite such Bank's name on the signature pages hereof under the
caption "A Commitment."
"A Letter of Credit Liability" shall mean, as of any
date of determination, all then existing liabilities of the A Borrower to the
Issuing Bank in respect of the Letters of Credit Issued for its account, whether
such liability is contingent or fixed, and shall, in each case, consist of the
sum of (i) the aggregate amount then available to be drawn under such Letters of
Credit (the determination of such maximum amount to assume compliance with all
conditions for drawing) and (ii) the aggregate amount which has then been paid
by, and not
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<PAGE> 7
been reimbursed by the A Borrower to, the Issuing Bank under such
Letters of Credit; provided, however, that such amount, together
with the B Letter of Credit Liability, shall in no event exceed $5,000,000 (or
the equivalent thereof in one or more Alternative Currencies).
"A Note" shall mean a promissory note of the A Borrower
payable to the order of a Bank evidencing the aggregate indebtedness of the A
Borrower to such Bank resulting from A Advances made by such Bank.
"A Swing-Line Advance" shall mean an advance by the
Agent to the A Borrower pursuant to Section 2.02(a) hereof.
"A Swing-Line Liability" shall mean, as of any date of
determination, the sum of the then existing liabilities of the A Borrower to the
Agent in respect of all A Swing-Line Advances (including A Swing-Line Advances
required to be made but not funded by the Agent).
"Advance" shall mean an A Advance or a B Advance made
in either Dollars or an Alternative Currency.
"Affiliate" shall mean, with respect to any Person, any
other entity that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person.
"Alternative Currency" shall mean any of Deutsche
Marks, French Francs, Dutch Guilders, Swedish Krona, British Pounds or Japanese
Yen; provided, however, that at the time of any Advance or
Swing-Line Advance in such Alternative Currency, such Alternative Currency is
freely transferable and convertible into Dollars.
"Annual Percentage of Earnings Capacity Transferred"
shall mean, for any four consecutive fiscal quarter period, the sum of the
Percentages of Earnings Capacity Transferred attributable to each asset
transferred during such period.
"Annual Percentage of Tangible Assets Transferred"
shall mean, for any four consecutive fiscal quarter period, the sum of the
Percentages of Tangible Assets Transferred attributable to assets transferred
during such period.
"Applicable Lending Office" shall mean, with respect to
each Bank, such Bank's Eurocurrency Lending Office.
"B Advance" shall mean an advance by a Bank to a B Borrower as
part of a B Borrowing and refers to a Eurocurrency Rate Advance.
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<PAGE> 8
"B Advance Liability" shall mean, as of any date of
determination, the aggregate of all then existing liabilities of the B Borrowers
to the Banks in respect of all B Advances (including B Advances required to be
made but not funded by any Bank).
"B Borrowing" shall mean a borrowing consisting of
simultaneous B Advances made on the same day by the Banks.
"B Commitment" shall mean, as to any Bank, the amount
set forth opposite such Bank's name on the signature pages hereof under the
caption "B Commitment".
"B Letter of Credit Liability" shall mean, as of any
date of determination, all then existing liabilities of the B Borrowers to the
Issuing Bank in respect of the Letters of Credit Issued for their account,
whether such liability is contingent or fixed, and shall, in each case, consist
of the sum of (i) the aggregate amount then available to be drawn under such
Letters of Credit (the determination of such maximum amount to assume compliance
with all conditions for drawing) and (ii) the aggregate amount which has then
been paid by, and not been reimbursed by the B Borrowers to, the Issuing Bank
under such Letters of Credit; provided, however, that such
amount, together with the A Letter of Credit Liability shall in no event exceed
$5,000,000 (or the equivalent thereof in one or more Alternative Currencies).
"B Note" shall mean a promissory note of a B Borrower
payable to the order of a Bank evidencing the aggregate indebtedness of the B
Borrower to such Bank resulting from B Advances made by such Bank.
"B Swing-Line Advance" shall mean an advance by the
Agent to a B Borrower pursuant to Section 2.02(b) hereof.
"B Swing-Line Liability" shall mean, as of any date of
determination, the aggregate of the then existing liabilities of all B Borrowers
to the Agent in respect of all B Swing-Line Advances (including B Swing-Line
Advances required to be made but not funded by the Agent).
"Bankruptcy Code" shall mean the Bankruptcy Reform Act, Title
11 of the United States Code, as amended from time to time.
"Banks" shall mean those Banks listed on the signature
pages hereof and their successors and assigns.
"Borrowing" shall mean an A Borrowing or a B Borrowing.
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<PAGE> 9
"Business Day" shall mean a day of the year on which
commercial banks are not required or authorized by law to close in New York and
California, and if the applicable Business Day relates to any Eurocurrency Rate
Advances, on which dealing are carried on in the London interbank market and
commercial banks are open for business in London and Paris and in the country of
issue of the Currency of such Eurocurrency Rate Advance.
"Capital Expenditures" shall mean all gross amounts
paid for fixed assets, or improvements, replacements, substitutions or additions
thereto, in each case which have a useful life of more than one year.
"Capitalized Lease Obligations" shall mean, with
respect to any Person, any rental obligation which, under GAAP, would be
required to be capitalized on the books of such Person, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"Closing Date" shall mean the date on which each of the
conditions set forth in Article V hereof shall have either been satisfied or
waived and the initial Borrowing or initial Swing-Line Advance shall have been
made or the initial Letter of Credit shall have been Issued.
"Code" shall mean the United States Internal Revenue
Code of 1986, as amended from time to time.
"Consolidated", "Consolidating" and any
derivative thereof each shall mean, with reference to the accounts or financial
reports of any Person, the consolidated accounts or financial reports of such
Person and each of its Subsidiaries.
"Cumulative Percentage of Earnings Capacity
Transferred" shall mean, at the time of determination thereof, the sum of
the Percentages of Earnings Capacity Transferred attributable to each asset
transferred from and after the date hereof.
"Cumulative Percentage of Tangible Assets Transferred"
shall mean, at the time of determination thereof, the sum of the Percentages of
Tangible Assets Transferred attributable to each asset transferred from and
after the date hereof.
"Currency" shall mean Dollars or an Alternative Currency.
"Current Ratio" shall mean, at any time of computation,
the ratio of current assets of any Person to total current liabilities of such
Person, determined in accordance with GAAP.
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<PAGE> 10
"Debt" shall mean, with respect to any Person at a
particular date, without duplication, (a) any obligation for borrowed money,
including any overdrafts and any obligation evidenced by notes payable,
commercial paper, bonds, debentures or similar written instruments; conditional
sales contracts; and drafts accepted representing extensions of credit (other
than for trade and tax payables, deferred taxes and operating leases); (b) all
obligations, contingent or otherwise, of such Person under acceptances, letters
of credit or similar facilities; (c) Capitalized Lease Obligations; (d)
obligations of another Person secured by a Lien on, or payable out of the
proceeds or production from, such Person's property whether or not such
obligation is expressly assumed by such Person; (e) Debt of any partnership or
joint venture of which such Person is a general partner or joint venturer that
is not expressly non-recourse with respect to such Person; (f) guarantees of any
of the foregoing and (g) any modification, extension or renewal of any of the
foregoing.
"Debt Ratio" shall mean, with respect to any Person, its ratio
of Senior Debt to Senior Debt plus Tangible Net Worth.
"Default" shall mean any of the events specified in
Article VIII hereof, whether or not any requirement for the giving of notice,
the lapse of time, or both, or any other condition has been satisfied.
"Dollars" and the sign "$" shall mean the lawful
currency of the United States of America.
"EBITDA" shall mean, with respect to any Person for any
period, its earnings (or losses, as the case may be) from continuing operations,
before interest expense, depreciation and amortization, as such terms are
defined in accordance with GAAP, and before federal and other income taxes, net
of extraordinary gains and losses.
"Eligible Assignee" shall mean (i) a commercial bank
organized under the laws of the United States, or any State thereof, having
total assets of not less than $10,000,000,000 (or the equivalent thereof in any
Alternative Currency) and (ii) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development (the "OECD") or a political subdivision of such country
having total assets of not less than $10,000,000,000 (or the equivalent thereof
in any Alternative Currency), provided that such bank is acting through a branch
or agency located in the country in which it is organized or another country
which is also a member of the OECD.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
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<PAGE> 11
"Eurocurrency" shall mean Dollars or any Alternative
Currency accruing interest at the Eurocurrency Rate.
"Eurocurrency Lending Office" shall mean, with respect
to any Bank, the office of such Bank specified as its "Eurocurrency Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Bank, or such other office of such Bank
as such Bank may from time to time specify to the Borrowers, the Agent and the
Issuing Bank.
"Eurocurrency Liabilities" shall have the meaning
assigned to that term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurocurrency Rate" shall mean, for any Interest Period
for each Eurocurrency Rate Advance comprising part of the same Borrowing other
than in Swedich Krona, an interest rate per annum (as determined by the
principal office of the Reference Bank in London, England) displayed at 11:00 AM
(London time) two Business Days before the first day of such Interest Period on
Telerate page 3750 (or such other page as may replace such page on the Telerate
Service for the purpose of displaying interest rates at which deposits in the
respective currency are offered by prime banks in the London interbank market)
for deposits in the respective currency in an amount substantially equal to the
Reference Bank's Advance comprising part of such Borrowing and for a period
equal to such Interest Period. The "Eurocurrency Rate" for any Interest Period
for any Borrowing denominated in Swedish Krona shall mean the rate of interest
per annum determined by the Reference Bank to be the rate at which the Reference
Bank is offered deposit of Swedish Krona in Amsterdam, the Netherlands, at 11:00
a.m., Amsterdam time, two Business Days prior to the beginning of such Interest
Period, for delivery on the first day of such Interest Period and for a period
of time equal to such Interest Period, in an amount substantially equal to the
Reference Bank's Advance comprising part of such Borrowing. To the extent
applicable, the Eurocurrency Rate for the Interest Period for each such
Eurocurrency Rate Advance comprising part of the same Borrowing shall be
determined by the Agent on the basis of the applicable rate furnished to and
received by the Agent from the Reference Bank two Business Days before the first
day of such Interest Period, subject, however, to the provisions
of Section 2.07 hereof.
"Eurocurrency Rate Advance" shall mean an advance which
bears interest at a rate per annum determined on the basis of the Eurocurrency
Rate, as proved in Section 2.07 (a) or (b) hereof.
"Eurocurrency Rate Reserve Percentage" of any Bank, for
the Interest Period for any Eurocurrency Rate Advance, shall mean the reserve
percentage applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average
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of such percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for such Bank
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Event of Default" shall have that meaning specified in Section
8.01.
"Exempt Subsidiaries" shall mean INMAC, DISC, a
corporation organized under the laws of the State of California, INMAC, S.A. de
C.V., a corporation organized under the laws of Mexico, INMAC S.p.A., a
corporation organized under the laws of Italy and INMAC, Inc., a corporation
organized under the laws of Canada, and those other Subsidiaries of the A
Borrower created after the Closing Date and designated as such by the A
Borrower.
"Federal Funds Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business 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 on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Fixed Charge Ratio" shall mean, for any Person, its
ratio of EBITDA to Interest Expense.
"GAAP" shall mean generally accepted accounting
principles applied on a consistent basis, set forth in the Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or in such other statements by such other entity as the Majority Banks and
each Borrower may reasonably approve, which are applicable in the circumstances
and as of the date in question, and the requirement that such principles be
applied on a consistent basis shall mean that the accounting principles observed
in a current period are comparable in all material respects to those applied in
a preceding period except for the adoption within any permissible period of new
accounting standards required by the Financial Accounting Standards Board from
time to time.
"Guarantor" shall mean INMAC Corp.
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"Interest Expense" shall mean, with respect to any
Person, the aggregate amount of interest paid, accrued or scheduled to be paid
or accrued in respect of any Debt and all but the principal component of
payments in respect of conditional sales, equipment trust or other title
retention agreements paid, accrued or scheduled to be paid or accrued by such
Person, in each case determined in accordance with GAAP.
"Interest Period" shall mean, for each Eurocurrency
Rate Advance, the period commencing on the date of such Advance and ending on
the last day of the period selected by the applicable Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on the last
day of the immediately preceding Interest Period and ending on the last day of
the period selected by such Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six months;
provided, however, that:
(i) the duration of any Interest Period which commences before
the Revolver Termination Date and otherwise ends after such date shall
end on such date;
(ii) Interest Periods commencing on the same date for Advances
comprising part of the same Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day; such next succeeding Business Day would occur in the
subsequent month, the last day of such Interest Period shall be the
next preceding Business Day; and
(iv) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month.
"Issue" shall mean, with respect to any Letter of
Credit, either to issue, or to extend the expiry of, or to renew, or to increase
the amount of, such Letter of Credit, and the term "Issued" or
"Issuance" shall have corresponding meanings.
"Issuing Bank" shall mean ABN AMRO Bank N.V. or any Affiliate
thereof that may from time to time Issue Letters of Credit for the account of
any Borrower.
"Letter of Credit" shall mean a standby or commercial
letter of credit in form satisfactory to the Issuing Bank, which is at any time
Issued by the Issuing Bank pursuant to Article III, in each case as amended,
supplemented or otherwise modified from time to time.
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"Lien" shall mean any assignment, chattel mortgage,
pledge or other security interest or any mortgage, deed of trust or other lien,
or other charge or encumbrance, upon property or rights (including
after-acquired property or rights), or any preferential arrangement with respect
to property or rights (including after-acquired property or rights) which has
the practical effect of constituting a security interest or lien.
"Loan Documents" shall mean this Agreement and the
Notes, in each case as amended, supplemented, restated or otherwise modified
from time to time.
"Long-Term Debt" shall mean, with respect to any
Borrower at a particular date, the sum of (i) all indebtedness, obligations and
other liabilities of such Borrower which would, in conformity with GAAP as in
effect in the United States, be included under long-term debt on a balance sheet
of such Borrower as at such date, plus (ii) such Borrower's obligations under
Guarantees (except those issued on behalf of its subsidiaries).
"Majority Banks" shall mean, at any time, Banks holding
at least 66-2/3% of the then aggregate unpaid principal amount of the Advances
owing to the Banks, or, if no such principal amount is then outstanding, Banks
having at least 66-2/3% of the Total Commitment.
"Margin Stock" shall mean margin stock as defined in
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Moody's" shall mean Moody's Investors Service, a
corporation organized and existing under the laws of the State of Delaware, its
successors and assigns.
"Multi-employer Plan" shall have the meaning set forth
in section 4001(a) (3) of ERISA.
"Net Income" for any Person shall mean such Person's
earnings (or losses, as the case may be) from continuing operations, net of
federal and other income taxes, as determined in accordance with GAAP, excluding
nonrecurring items which are separately disclosed on the face of such Person's
Consolidated Statement of Operations for the most recently ended fiscal year.
"Net Loss" for any Person shall mean such Person's
losses from continuing operations, net of federal and other income taxes, as
determined in accordance with GAAP, excluding nonrecurring items which are
separately disclosed on the face of such Person's Consolidated Statement of
Operations for the most recently ended fiscal year.
"Notes" shall mean the A Notes and the B Notes in
substantially the form of Exhibit A hereto.
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"Notice of Borrowing" shall have such meaning as is set
forth in Section 2.03(a) hereof.
"Notice of Swing-Line Borrowing" shall have such
meaning as is set forth in Section 2.03(e) hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor entity or entities performing similar functions.
"Payment Office" shall mean, for Dollars, the principal
office of the Agent in San Francisco, and, for any Alternative Currency, such
office of the Agent as shall be from time to time selected by the Agent and
notified by the Agent to the Borrowers, the Banks and the Issuing Bank.
"Percentage of Earnings Capacity Transferred" shall
mean, with respect to each asset transferred pursuant to clause (vii) of Section
7.02(b), the ratio (expressed as a percentage) of (i) aggregate Consolidated Net
Income produced by, or otherwise attributable to, such asset during the 36 month
period most recently ended prior to the effective date of such transfer to (ii)
Consolidated Net Income for such 36 month period.
"Percentage of Tangible Assets Transferred" shall mean,
with respect to each asset transferred pursuant to clause (vii) of Section
7.02(b), the ratio (expressed as a percentage) of (i) the greater of such
asset's fair market value or net book value (determined as of the last day of
the fiscal quarter immediately preceding the date of such transfer) to (ii)
Consolidated Tangible Assets (determined as of the last day of the fiscal
quarter immediately preceding the date of such Transfer).
"Permitted Investment" shall mean:
(a) the loans, investments and advances existing as of the
Closing Date and listed on Schedule II hereto;
(b) stock, obligations or securities of a corporation
which is, or after such purchase or acquisition becomes, a Subsidiary
of the A Borrower;
(c) obligations directly issued by the United States or any of
its agencies or obligations fully guaranteed by the United States,
provided that such obligations mature within one year from the date
acquired;
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(d) (i) certificates of deposit which mature within one year
from the date of purchase that are issued by, or (ii) bankers'
acceptances eligible for rediscount under requirements of The Board of
Governors of the Federal Reserve System that are accepted by, any
commercial bank or trust company (A) organized under the laws of the
United States or any of its states or having branch offices therein,
(B) having consolidated capital, surplus and undivided profits
aggregating at least $750,000,000 and (C) whose senior unsecured debt
securities are rated AA or better by S&P or Aa2 or better by Moody's;
(e) commercial paper given an A-1 or better rating by S&P,
a P-1 or better rating by Moody's and maturing not more than 270 days
from the date acquired;
(f) loans and advances (i) between the A Borrower and any
wholly-owned Subsidiary of the A Borrower (other than Exempt
Subsidiaries) or (ii) between wholly-owned Subsidiaries of the A
Borrower (other than Exempt Subsidiaries);
(g) outstanding loans and advances to employees for travel
and other similar expenses reasonably incurred in the ordinary course
of business;
(h) notes receivable with a term not in excess of 180 days
arising from transactions with customers and suppliers in the ordinary
course of business in an aggregate outstanding amount not in excess of
$5,000,000;
(i) any loans, advances or investments other than as
specified in clauses (a) - (h) above, so long as the aggregate of all
such loans, advances and investments does not, at any time, exceed the
sum of (i) $2,000,000 plus (ii) 10% of Consolidated Tangible Net Worth,
the latter measured at the end of the fiscal quarter immediately
preceding the date of determination thereof; and
(j) loans, advances and investments by the Borrowers to
Exempt Subsidiaries in an aggregate outstanding amount not in excess of
$5,000,000.
"Permitted Lien" shall mean:
(a) Liens for taxes, assessments or other governmental
levies or charges not yet due or which are subject to a good faith
contest;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course
of business for sums not yet due or are subject to a good faith
contest;
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(c) Liens (other than any Lien imposed by ERISA) incurred,
or deposits made, in the ordinary course of business (i) in connection
with workers' compensation, unemployment insurance or other types of
social security, or (ii) otherwise to satisfy statutory or legal
obligations; provided, however, that in each such case such Liens (A)
were not incurred or made in connection with the incurrence or
maintenance of Debt and (B) do not in the aggregate materially detract
from the value of the property or assets so encumbered or materially
impair the use thereof in the operation of its business;
(d) Liens on property or assets of a Subsidiary of the A
Borrower to secure obligations of such Subsidiary to the A Borrower or
any Subsidiary of the A Borrower;
(e) Liens in existence on the Closing Date as set forth on
Schedule IV hereto with an aggregate principal amount not in excess of
$1,000,000;
(f) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions
as to use of real property, that are necessary for the conduct of the
operations of the A Borrower and its Subsidiaries or that customarily
exist on properties of corporations engaged in similar businesses and
are similarly situated and that do not in any event materially impair
their use in the operations of such Borrower and its Subsidiaries;
(g) Liens, other than those specified in clauses (a)
through (f) above, that do not, at any time, secure Debt in aggregate
principal amount in excess of the sum of $10,000,000 plus 5% of
Consolidated Tangible Net Worth of the A Borrower (measured at the end
of the fiscal quarter immediately preceding the date of determination),
and provided such Liens do not encumber any current assets of the A
Borrower or its Subsidiaries.;
(h) Liens granted any Bank.
"Person" shall mean at any time an individual, a
corporation, an association, a trust, a government, a political subdivision, a
governmental agency or instrumentality or any other entity or other
organization.
"Plan" shall mean a defined benefit pension plan under
ERISA for the unfunded liabilities of which, upon termination, the Company could
be held liable by the PBGC.
"Pro Rata" shall mean, as to each Bank, the ratio
determined by dividing such Bank's B Commitment by the aggregate of all Banks' B
Commitments.
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"Prudential Agreement" shall mean that Note Agreement,
dated as of June 29, 1995, between INMAC B.V. and The Prudential Insurance
Company of America relating to the Senior Guaranteed Notes due September 21,
2001 of INMAC B.V.
"Quick Ratio" shall mean the ratio of total current
assets minus inventory to total current liabilities, all determined in
accordance with GAAP.
"Reference Bank" shall mean ABN AMRO Bank N.V.
"Reference Rate" shall mean, as of any date, the higher
of (i) the rate of interest publicly announced from time to time by the Agent at
its principal office in Chicago as its reference rate or (ii) 0.50% above the
Federal Funds Rate in effect on such date.
"Reference Rate Advance" shall mean an Advance which
bears interest at a rate per annum determined on the basis of the Reference
Rate, as provided in Section 2.07 hereof.
"Restricted Payment" of any Person, shall mean (i)
dividend payments or other distributions of assets, properties, obligations or
securities on account of any shares of any class of capital stock (other than
stock dividends) and (ii) repurchases on redemptions of capital stock.
"Revolver Termination Date" shall mean the 364th day
from the Closing Date or the earlier of the termination in whole of the Total
Commitments pursuant to Section 2.05 or 8.01 hereof, or such later date as may
then be in effect pursuant to Section 2.14 hereof.
"S&P" shall mean Standard & Poor's Ratings Group, a
corporation organized and existing under the laws of the State of New York, its
successors and assigns.
"Senior Debt" shall mean all Debt outstanding pursuant
to this Agreement and any other Debt of a Borrower and its Subsidiaries not
expressly subordinated on terms satisfactory to the Majority Banks to the Debt
outstanding under this Agreement.
"Solvent" shall mean, with respect to any Person, that
as of any date of determination, (i) the then fair saleable value of the assets
of such Person is (a) greater than the then total amount of liabilities
(including contingent, subordinated, matured and unliquidated liabilities) of
such Person and (b) greater than the amount that will be required to pay such
Person's probable liability on such Person's then existing debts as they become
absolute and matured, (ii) such Person's capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction, and
(iii) such Person does not intend
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to incur, or believe or reasonably should
believe that it will incur, debts beyond its ability to pay such debts as they
become due.
"Subsidiary" shall mean, with respect to any Person,
any corporation, partnership, trust or other Person of which more than 80% of
the outstanding capital stock (or similar property right in the case of
partnerships and trusts) having ordinary voting power to elect a majority of the
board of directors of such corporation (or similar governing body or Person with
respect to partnerships and trusts) (irrespective of whether or not at the time
capital stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned by such Person, or one or more other Subsidiaries
of such Person, or by one or more other Subsidiaries of such Person.
"Swing-Line Advance" shall mean an A Swing-Line Advance
or a B Swing-Line Advance made in Dollars.
"Tangible Assets" shall have such meaning as is defined
by GAAP, but shall not include any patents, trademarks, copyrights, maskworks or
other intellectual property or rights therein.
"Tangible Net Worth" shall mean, at any time such
amount is being computed, the excess of total assets of any Person over total
liabilities of such Person. Total assets do not include assets which would be
classified as intangible assets under GAAP, including goodwill, patents,
copyrights and similar items. Total liabilities include all current corporate
liabilities, all Long-Term Debt (including debt obligations to affiliated
corporations and subsidiaries), minority interests and deferred items (such as
taxes, income and pension funds).
"Total A Liability" shall mean, as of any date of
determination, the sum of (x) all A Advance Liability plus (y) all A
Swing-Line Liability plus (z) all A Letter of Credit Liability.
"Total B Liability" shall mean as of any date of
determination the sum of (x) all B Advance Liability plus (y) all B
Swing-Line Liability plus (z) all B Letter of Credit Liability.
"Total Commitment" shall mean $30,000,000 (or the
equivalent thereof in one or more Alternative Currencies), as such amount may be
reduced pursuant to Section 2.05 hereof.
"Total Letter of Credit Liability" shall mean, as of
any date of determination, the sum of (a) all A Letter of Credit Liability
plus (y) all B Letter of Credit Liability.
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SECTION 1.02. Computation of Time Periods. In this
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
SECTION 1.03. Accounting Terms. Unless otherwise
specified in this Agreement, all accounting terms used in this Agreement shall
be interpreted, all accounting determinations under this Agreement shall be
made, and all financial statements required to be delivered under this Agreement
shall be prepared in accordance with GAAP as in effect in the United States from
time to time, on a consistent basis.
SECTION 1.04. Interpretation. The following rules shall
apply to the construction of this Agreement unless the context requires
otherwise: (a) the singular includes the plural and the plural the singular; (b)
words importing any gender include the other gender; (c) references to statutes
are to be construed as including all statutory provisions consolidating,
amending or replacing the statute to which reference is made; (d) references to
"writing" include printing, photocopying, typing, lithography and other means of
reproducing words in a tangible visible form; (e) the words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; (f) references to articles, sections (or subdivisions of sections),
exhibits, annexes or schedules are to those of this Agreement unless otherwise
indicated; (g) references to agreements and other contractual instruments shall
be deemed to include all subsequent amendments or modifications not prohibited
by the terms of this Agreement; (h) references to Persons include their
respective permitted successors and assigns; and (i) headings herein are solely
for convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning.
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ARTICLE II
AMOUNTS AND TERMS OF ADVANCES
SECTION 2.01. The Advances. (a) A Advances.
Each Bank severally agrees, on the terms and conditions hereinafter set forth,
to make A Advances to the A Borrower from time to time on any Business Day
during the period from the date hereof until the Revolver Termination Date in an
aggregate amount (determined in Dollars) not to exceed at any time the Dollar
amount of such Bank's A Commitment, as such amount may be reduced pursuant to
Section 2.05 hereof; provided, however, that such Bank shall not
be obligated to make any A Advance if, after giving effect to such A Advance and
the other A Advances to be made by the other Banks as part of the same A
Borrowing, either (i) Total A Liability shall exceed the aggregate A Commitment,
or (ii) the sum of Total A Liability plus Total B Liability shall exceed
the Total Commitment. Each A Borrowing shall be in an aggregate amount not less
than $2,500,000 (or the equivalent thereof in any Alternative Currency) or an
integral multiple of $500,000 (or the equivalent thereof in any Alternative
Currency) in excess thereof, and shall consist of A Advances made in the same
Currency on the same day by the Banks ratably according to their respective A
Commitments. Within the limits of each Bank's A Commitment, the A Borrower may
borrow, prepay pursuant to Section 2.10(a) hereof and reborrow under this
Section 2.01(a).
(b) B Advances. Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make B Advances to each B
Borrower from time to time on any Business Day during the period from the date
hereof until the Revolver Termination Date in an aggregate amount (determined in
Dollars) not to exceed at any time the Dollar amount of such Bank's B
Commitment, as such amount may be reduced pursuant to Section 2.05 hereof;
provided, however, that such Bank shall not be obligated to make
any B Advance if, after giving effect to such B Advance and the other B Advances
to be made by the other Banks as part of the same B Borrowing, either (i) Total
B Liability shall exceed the aggregate B Commitment, or (ii) the sum of Total A
Liability plus Total B Liability shall exceed the Total Commitment. Each
B Borrowing shall be in an aggregate amount not less than $2,500,000 (or the
equivalent thereof in any Alternative Currency) or an integral multiple of
$500,000 (or the equivalent thereof in any Alternative Currency) in excess
thereof and shall consist of B Advances made in the same Currency on the same
day by the Banks ratably according to their respective B Commitments. Within the
limits of each Bank's B Commitment, each B Borrower may borrow, prepay pursuant
to Section 2.10(a) hereof and reborrow under this Section 2.01(b).
(c) For purposes of this Section 2.01 and all other provisions
of this Article II, the equivalent in Dollars of any Alternative
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Currency or the equivalent in any Alternative Currency of Dollars or of any
other Alternative Currency shall be determined in accordance with Section 2.17.
SECTION 2.02. The Swing-Line Advances. (a) A
Swing-Line Advances. The Agent agrees, on the terms and conditions
hereinafter set forth, to make A Swing-Line Advances in Dollars to the A
Borrower from time to time on any Business Day during the period from the date
hereof until the Revolver Termination Date; provided, however,
that the Agent shall not be obligated to make any A Swing-Line Advance if, after
giving effect to such A Swing-Line Advance either (i) Total A Liability shall
exceed the aggregate A Commitment, (ii) the sum of Total A Swing-Line Liability
plus Total B Swing-Line Liability shall exceed $2,500,000, or (iii) the
sum of Total A Liability plus Total B Liability shall exceed the Total
Commitment. Each A Swing-Line Advance shall be in an amount not less than
$1,000,000 or an integral multiple of $500,000 in excess thereof. The A Borrower
may borrow, prepay pursuant to Section 2.10(a) hereof or repay pursuant to
Section 2.06(b), and reborrow under this Section 2.02(a).
(b) B Swing-Line Advances. The Agent severally agrees,
on the terms and conditions hereinafter set forth, to make B Swing-Line Advances
in Dollars to each B Borrower from time to time on any Business Day during the
period from the date hereof until the Revolver Termination Date;
provided, however, that the Agent shall not be obligated to make
any B Swing-Line Advance if, after giving effect to such B Swing-Line Advance
either (i) Total B Liability shall exceed the aggregate B Commitment, (ii) the
sum of Total B Swing-Line Liability plus Total A Swing-Line Liability
shall exceed $2,500,000, or (iii) the sum of Total B Liability plus
Total A Liability shall exceed the Total Commitment. Each Swing-Line Advance
shall be in an amount not less than $1,000,000 or an integral multiple of
$500,000 in excess thereof. Each B Borrower may borrow, prepay pursuant to
Section 2.10(a) hereof or repay pursuant to Section 2.06(b), and reborrow under
this Section 2.02(b).
(c) Participation in Swing-Line Advances.
(i) Promptly after making each Swing-Line Advance, the
Agent will notify each Bank of the date and amount of such Swing-Line
Advance. On the date of that any Swing-Line Advance is not paid when
due, the Agent shall be deemed irrevocably and unconditionally to have
sold and transferred to each Bank without recourse or warranty, and
each Bank shall be deemed to have irrevocably and unconditionally
purchased and received from the Agent, an undivided interest and
participation to the extent of such Bank's Pro Rata share in such
Swing-Line Advance.
(ii) In the event the respective Borrower does not
repay a Swing-Line Advance when due the Agent will promptly notify the
Banks thereof and each Bank shall immediately pay to the Agent, in
lawful money of the United States and in same
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day funds, an amount equal to such Bank's Pro Rata share of such unpaid
Swing-Line Advance with interest at the Federal Funds Rate for each day
commencing on the day after such notification until such amount is paid
to the Agent.
(iii) Promptly after the Agent receives a repayment of
a Swing-Line Advance the Agent shall promptly pay to each Bank which
funded its participation therein, in lawful money of the United States
and in the kind of funds so received, an amount equal to such Bank's
ratable share of such payment, including its ratable share of interest
paid by the respective Borrower after the date such Bank funded its
participation therein.
(iv) The obligation of each Bank to make payments
under this subsection shall be unconditional and irrevocable and such
payments shall be made under all circumstances.
SECTION 2.03. Making the Advances. (a) Each Borrowing shall
be made on notice:
(x) on the fourth Business Day before the requested
date of a proposed Borrowing in Dollars, and
(y) on the fifth Business Day before the requested
date of a proposed Borrowing in an Alternative Currency,
by the respective Borrower to the Agent, which shall then give each Bank prompt
written notice thereof by telecopier (a "Notice of Borrowing"). Each Notice of
Borrowing shall be by telecopier, confirmed immediately in writing, in
substantially the form of Exhibit B-1 hereto, specifying therein (i)
whether the requested Borrowing is an A Borrowing or a B Borrowing, (ii) the
principal amount of the Borrowing, (iii) the Currency of the Borrowing, (iv) the
date of the Borrowing, and (v) the requested initial Interest Period for each
Advance.
Each Bank shall, before 10:00 A.M. (San Francisco time) on the
date of such Borrowing, make available for the account of its Applicable Lending
Office to the Agent, in same day funds, (i) in the case of a Borrowing in
Dollars, at such account maintained at the Payment Office for Dollars as shall
have been notified by the Agent to the Banks prior thereto, such Bank's ratable
portion of such Borrowing in Dollars, and (ii) in the case of a Borrowing in an
Alternative Currency (provided that after giving effect to such Borrowing, the
equivalent in Dollars of Total A Liability or Total B Liability, as the case may
be, does not exceed the aggregate A Commitment or the aggregate B Commitment,
respectively, with such equivalent to be determined on the date of the Notice of
Borrowing), at such account maintained at the Payment Office for Alternative
Currency as shall have been notified by the Agent to the Banks
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prior thereto, such Bank's ratable portion of such Borrowing in such Alternative
Currency. After the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article V hereof, the Agent will make such
funds available to the respective Borrower at the aforesaid applicable Payment
Office.
(b) Each Notice of Borrowing shall be irrevocable and binding
on the respective Borrower. The respective Borrower shall indemnify each Bank
against any loss, cost or expense incurred by such Bank as a result of any
failure to fulfill on or before the date specified in such Notice of Borrowing
for such Borrowing the applicable conditions set forth in Article V, including,
without limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Bank to fund the Eurocurrency Rate Advance to be
made by such Bank as part of such Borrowing when such Eurocurrency Rate Advance,
as a result of such failure, is not made on such date.
(c) Unless the Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's ratable portion of such Borrowing, the Agent may assume that
such Bank has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.03 and the Agent
may, in reliance upon such assumption, make available to the respective Borrower
on such date a corresponding amount. If and to the extent that such Bank shall
not have so made such ratable portion available to the Agent, such Bank and such
Borrower severally agree to repay the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the respective Borrower, the interest
rate applicable at the time to Advances comprising such Borrowing and (ii) in
the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of any Bank to make an Advance to be made by it
as part of any Borrowing shall not relieve any other Bank of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Bank
shall be responsible for the failure of any other Bank to make the Advance to be
made by such other Bank on the date of any Borrowing.
(e) Each Swing-Line Advance shall be made by an irrevocable
notice (a "Notice of Swing-Line Borrowing") in the form of Exhibit B-2,
given not later than 10:00 a.m. (San Francisco time) on the [first] Business Day
before the requested date of such Swing-Line Advance, which Notice may be made
by telephone (and confirmed immediately in writing) and shall specify (i)
whether the requested Swing-Line Advance is an A Swing-Line Advance or a B
Swing-Line Advance, (ii) the principal amount of the Swing-Line Advance,
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and (iii) the date of the Swing-Line Advance. The Agent will promptly notify
each Bank after it makes each Swing-Line Advance. Upon fulfillment of the
applicable conditions set forth in Article V hereof, the Agent will make such
Swing-Line Advance available to the respective Borrower at the Payment Office
for Dollars.
SECTION 2.04. Fees. (a) Commitment Fee. The
Borrowers agree to pay to the Agent for the account of each Bank a commitment
fee in Dollars on the average daily unused portion of such Bank's B Commitment
(less on any day the sum in Dollars of (x) A Advance Liability plus (y)
A Swing-Line Liability plus (z) B Swing-Line Liability) from the Closing
Date until the Revolver Termination Date at the rate of 3/10 of 1% per annum,
payable on the last day of each March, June, September and December during the
term hereof, commencing September 30, 1995, and on the Revolver Termination
Date. For purposes of determining the commitment fee hereunder, the equivalent
in Dollars of each Eurocurrency Rate Advance made by such Bank in an Alternative
Currency as determined on the date of the making of such Advance shall be the
amount of such Bank's B Commitment used in connection with such Advance, and no
further adjustments shall be made with respect to the unused portions of such
Bank's B Commitment based upon fluctuations thereafter in the value of the
Alternative Currency of such Advance.
(b) Participation Fee. The Borrowers agree to pay to
the Agent for the account of the Banks, a participation fee in Dollars in an
aggregate amount of 0.20% of the aggregate B Commitment. Such fee shall be
payable on the Closing Date.
(c) Agent Fees. The Borrowers agree to pay to the Agent
such other fees in Dollars as are specified in a letter agreement dated June 27,
1995 between the Borrowers and the Agent.
SECTION 2.05. Reduction of the Commitments. The A
Borrower shall have the right, upon at least five Business Days' notice to the
Agent, to terminate in whole or permanently reduce ratably in part the unused
portion of the A Commitment of each Bank; provided, however,
that each partial reduction shall be in the aggregate amount of $2,000,000 or an
integral multiple thereof in excess of $1,000,000. Each B Borrower shall have
the right, upon at least five Business Days' notice to the Agent, to reduce
ratably in part the unused portion of the B Commitment to such B Borrower of
each Bank; provided; however, that each partial reduction shall
be in the aggregate amount of $5,000,000 or an integral multiple thereof in
excess of $1,000,000.
SECTION 2.06. Repayment. (a) Advances. Each
Borrower agrees to repay the unpaid principal amount of each Advance made to
such Borrower by each Bank on the Revolver Termination Date. Such payment shall
be made to the applicable Payment Office for the benefit of each such Bank.
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(b) Swing-Line Advances. Each Borrower agrees to repay
the unpaid principal amount of each Swing-Line Advance made to such Borrower on
the seventh day after the making of such Swing-Line Advance. Such payment shall
be made not later than 10:00 a.m. (San Francisco time) in same day funds by
deposit of such funds to the Agent's account maintained at the Payment Office
for Dollars.
SECTION 2.07. Interest. (a) A Advances. The A
Borrower shall pay interest on the unpaid principal amount of each A Advance
made by each Bank from the date of such A Advance until such principal amount
shall be paid in full, at a rate per annum equal at all times during each
Interest Period for such Advance to the sum of the Eurocurrency Rate for such
Interest Period plus 3% per annum payable on the last day of such
Interest Period, and, if such Interest Period is longer than three months,
payable also on the last day of each quarter during such Interest Period. All
interest payments under this Section 2.07(a) are to be made to the applicable
Payment Office for the benefit of each Bank.
(b) B Advances. Each B Borrower shall pay interest on
the unpaid principal amount of each B Advance made by each Bank from the date of
such B Advance until such principal amount shall be paid in full, at a rate per
annum equal at all times during each Interest Period for such Advance to the sum
of the Eurocurrency Rate for such Interest Period plus 1.15% per annum
payable on the last day of such Interest Period, and, if such Interest Period is
longer than three months, payable also on the last day of each quarter during
such Interest Period. All interest payments under this Section 2.07(b) are to be
made to the applicable Payment Office for the benefit of each Bank.
(c) A Swing-Line Advances. The A Borrower shall pay
interest on the unpaid principal amount of each A Swing- Line Advance made by
the Agent from the date of such A Swing-Line Advance until such principal amount
shall be paid in full, at a rate per annum equal to the Reference Rate
plus 1% per annum, and such interest shall be due and payable on the
date of payment of each such Swing-Line Advance. All interest payments under
this Section 2.07(c) are to be made to the Payment Office for Dollars and,
promptly after receipt thereof, to the extent any Bank has purchased a
participation in such Swing-Line Advance as provided in Section 2.02(c) hereof,
the Agent shall distribute to such Bank its Pro Rata share of such interest
payment.
(d) B Swing-Line Advances. Each B Borrower shall pay
interest on the unpaid principal amount of each B Swing- Line Advance made by
the Agent from the date of such B Swing-Line Advance until such principal amount
shall be paid in full, at a rate per annum equal to the Reference Rate, and such
interest shall be due and payable on the date of payment of each such Swing-Line
Advance. All interest payments under this Section 2.07(d) are to be made to the
Payment Office for Dollars, and, promptly after receipt thereof, to the
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extent any Bank has purchased a participation in such Swing-Line Advance as
provided in Section 2.02(c) hereof, the Agent shall distribute to such Bank its
Pro Rata share of such interest payment.
(e) Default Interest. Each Borrower shall pay interest
on the unpaid principal amount of each Advance or Swing- Line Advance that is
not paid when due and on the unpaid amount of all interest, fees and other
amounts payable hereunder that is not paid when due, payable on demand, at a
rate per annum equal at all times to (i) in the case of any amount of principal,
the greater of (x) 2% per annum above the rate per annum required to be paid on
such Advance or Swing-Line Advance immediately prior to the date on which such
amount became due and (y) 2% per annum above the Reference Rate in effect from
time to time and (ii) in the case of all other amounts, 2% per annum above the
Reference Rate in effect from time to time
SECTION 2.08. Additional Interest on Eurocurrency Rate
Advances. Each Borrower agrees to pay to each Bank so long as such Bank
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurocurrency Rate Advance of such Bank from the
date of such Eurocurrency Rate Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times to the remainder obtained
by subtracting (i) the Eurocurrency Rate for the applicable Interest Period for
such Eurocurrency Rate Advance from (ii) the rate obtained by dividing such
Eurocurrency Rate by a percentage equal to 100% minus the Eurocurrency Rate
Reserve Percentage of such Bank for such Interest Period, payable on each date
on which interest is payable on such Eurocurrency Rate Advance. Such additional
interest shall be determined by such Bank and notified to each Borrower through
the Agent.
SECTION 2.09. Interest Rate Determination and
Protection. (a) The Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each Eurocurrency Rate. If the
Reference Bank shall not furnish such timely information to the Agent for the
purpose of determining any such interest rate, the Agent shall determine such
interest rate on the basis of timely information furnished by any other major
international bank reasonably selected by it or as otherwise instructed by the
Majority Banks.
(b) The Agent shall give prompt notice to the respective
Borrower and the Banks of the applicable interest rate determined by the Agent
for purposes of Section 2.07(a), (b), (c) or (d).
(c) If, with respect to any Eurocurrency Rate Advances, the
Majority Banks notify the Agent that the Eurocurrency Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Majority
Banks of making, funding or maintaining their
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respective Eurocurrency Rate Advances for such Interest Period, the Agent shall
forthwith so notify the respective Borrower and the Banks, whereupon
(i) each Eurocurrency Rate Advance will
automatically, on the last day of the then existing Interest
Period therefor, convert into a Reference Rate Advance, and
(ii) the obligation of the Banks to make
Eurocurrency Rate Advances shall be suspended until the Agent shall
notify the respective Borrower and the Banks that the circumstances
causing such suspension no longer exist.
(d) If any Borrower shall fail to select the duration of any
Interest Period for any Eurocurrency Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify such Borrower and the Banks and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, convert into Reference Rate Advances.
SECTION 2.10. Prepayment.
(a) Voluntary Prepayments.
(i) Advances. Any Borrower may, upon at least
five Business Days' notice to the Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is
given such Borrower shall, prepay the outstanding aggregate principal
amount of the Advances comprising part of the same Borrowing in whole
or ratably in part together with accrued interest thereon to the date
of prepayment on the amount prepaid, provided, however,
that (x) each partial prepayment shall be in an aggregate principal
amount not less than $1,000,000 (determined on the date notice of
prepayment is given in accordance with Section 2.17) and (y) any
prepayment of any Eurocurrency Rate Advances shall be made on, and only
on, the last day of an Interest Period for such Advances.
(ii) Swing-Line Advances. Any Borrower may,
upon at least one Business Days' notice to the Agent stating the
proposed date of prepayment, prepay in full any Swing-Line Advance
together with accrued interest thereon to the date of such prepayment.
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(b) Mandatory Prepayments. (i) A Advances. If,
on the last day of any Interest Period for Eurocurrency Rate Advances
comprising the same Borrowing, the equivalent in Dollars of the Total A
Liability exceeds the aggregate A Commitment, the A Borrower agrees to
prepay on such last day such excess to the Agent, with accrued interest
to the date of such prepayment on the principal amount prepaid.
Mandatory prepayments pursuant to this subsection (b)(i) shall be
applied to the ratable payment of all outstanding A Advances.
(ii) B Advances. If, on the last day of any Interest
Period for Eurocurrency Rate Advances comprising the same Borrowing,
the equivalent in Dollars of the Total B Liability exceeds the
aggregate B Commitment or the sum of Total A Liability plus Total B
Liability exceeds the Total Commitment, the B Borrowers agree to prepay
on such last day to the Agent such excess, with accrued interest to the
date of such prepayment on the principal amount prepaid. Mandatory
prepayments pursuant to this subsection (b)(ii) shall be applied to the
ratable payment of all outstanding B Advances.
SECTION 2.11. Increased Costs. (a) If, due to either
(i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements in the case of Eurocurrency Rate
Advances included in the Eurocurrency Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Bank of agreeing to make or making, funding or maintaining Advances,
then each Borrower shall from time to time, upon demand by such Bank (with a
copy of such demand to the Agent), pay to the Agent for the account of such Bank
additional amounts sufficient to compensate such Bank for such increased cost. A
certificate as to the amount of such increased cost, submitted to each Borrower
and the Agent by such Bank, shall be conclusive and binding for all purposes,
absent manifest error.
(b) If any Bank determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such Bank
or any corporation controlling such Bank and that the amount of such capital is
increased by or based upon the existence of such Bank's commitment to lend
hereunder and other commitments of this type, then, upon demand by such Bank
(with a copy of such demand to the Agent), the Borrowers shall immediately pay
to the Agent for the account of such Bank, from time to time as specified by
such Bank, additional amounts sufficient to compensate such Bank or such
corporation in light of such circumstances, to the extent that such Bank
reasonably determines such increase in capital to be allocable to the existence
of such Bank's commitment to lend hereunder. A certificate as to such amounts
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submitted to each Borrower and the Agent by such Bank shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.12. Illegality. Notwithstanding any other
provision of this Agreement, if any Bank shall notify the Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Bank or its Eurocurrency Lending
Office to perform its obligations hereunder to make Eurocurrency Rate Advances
or to fund or maintain Eurocurrency Rate Advances hereunder in any jurisdiction,
(i) the obligation of the Banks to make Advances at the Eurocurrency Rate (or
some variation thereof) in such jurisdiction shall be suspended until the Agent
shall notify each Borrower and the Banks that the circumstances causing such
suspension no longer exist and (ii) each Borrower shall forthwith prepay in full
all Advances made at the Eurocurrency Rate (or some variation thereof) of all
Banks with respect to such jurisdiction then outstanding, together with interest
accrued thereon, unless each Borrower, within five Business Days of notice from
the Agent, converts all Advances made at the Eurocurrency Rate (or same
variation thereof) of all Banks with respect to such jurisdiction then
outstanding into Advances made at the Reference Rate (or some variation thereof)
on the last day of the Interest Period for such Eurocurrency Rate Advances.
SECTION 2.13. Payments and Computations. (a) Each
Borrower shall make each payment hereunder and under the Notes, except with
respect to principal of, interest on, and other amounts relating to Advances
denominated in an Alternative Currency, not later than 10:00 A.M. (San Francisco
time) on the day when due in Dollars to the Agent in same day funds by deposit
of such funds to the Agent's account maintained at the Payment Office for
Dollars in San Francisco. Each Borrower shall make each payment hereunder and
under the Notes with respect to principal of, interest on, and other amounts
relating to Advances denominated in an Alternative Currency not later than 10:00
A.M. (at the Payment Office for such Alternative Currency) on the day when due
in such Alternative Currency to the Agent in same day funds by deposit of the
funds to the Agent's account maintained at such Payment Office. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest or commitment fees ratably (other than amounts payable
pursuant to Section 2.08, 2.11 or 2.15) to each Bank for the account of its
Applicable Lending Office, and like funds relating to the payment of any other
amount payable to any Bank to such Bank for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement.
(b) Each Borrower hereby authorizes each Bank, if and to the
extent payment owed to such Bank is not made when due hereunder or under the
Note held by such Bank, to charge from time to time against any or all of such
Borrower's accounts with such Bank any amount so due.
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(c) All computations of interest and of fees shall be made on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fee is payable.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall 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 or fees, as the case
may be.
(e) Unless the Agent shall have received notice from a Borrower
prior to the date on which any payment is due to the Banks hereunder that such
Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent such Borrower shall not have so made such payment in full to the Agent,
each Bank shall repay to the Agent forthwith on demand such amount distributed
to such Bank together with interest thereon at the Federal Funds Rate, for each
day from the date such amount is distributed to such Bank.
SECTION 2.14. Extension of Revolver Termination Date.
Not earlier than 60 days or more than 90 days before the Revolver Termination
Date then in effect, all the Borrowers may request a 364 day extension of such
Revolver Termination Date. Such request must be submitted in writing to each of
the Banks, the Issuing Bank and the Agent. Not later than 30 days after receipt
of such notice, each Bank shall notify the Agent whether (in its sole and
absolute discretion) it consents to such request (and if any Bank fails to so
notify the Agent, it shall be deemed not to have consented to such request) and
the Agent promptly thereafter shall notify the Borrowers and the Banks of the
results thereof. If the Agent fails to so notify the Borrowers, the Banks shall
be deemed not to have consented to such request. If all of the Banks have
consented, then, so long as the representations and warranties contained in
Article VI hereof (other than (i) representations and warranties
which expressly speak as of a particular date or are no longer true and correct
as a result of a change which is permitted by this Agreement or (ii) as
otherwise disclosed by any Borrower and approved in writing by the Majority
Banks) shall be true and correct on and as of the Revolver Termination Date then
in effect and no Default or Event of Default shall exist, the Revolver
Termination Date shall be extended, effective as of the Revolver Termination
Date then in effect, to the date that is 364 days from such Revolver Termination
Date.
SECTION 2.15. Taxes. (a) Any and all payments by a
Borrower hereunder or under the Notes shall be made, in accordance with Section
2.13, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or
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withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank or the
Agent, as the case may be, is organized or any political subdivision thereof
and, in the case of each Bank, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or
any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If such Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Bank or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.15) such Bank or the Agent, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under the Notes
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrowers agree to indemnify each Bank and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.15) paid by such Bank or the Agent, as the case may be, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Bank or the Agent, as the case may be, makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, each
Borrower agrees to furnish to the Agent, at its address specified in Section
11.02, the original or a certified copy of a receipt evidencing payment thereof.
If no Taxes are payable in respect of any payment hereunder or under the Notes,
such Borrower will furnish to the Agent, at such address, a certificate from
each appropriate taxing authority, or an opinion of counsel acceptable to the
Agent, in either case stating that such payment is exempt from or not subject to
Taxes.
(e) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement, and from time to time thereafter if requested in writing by
the A Borrower (but only so long as such Bank
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remains lawfully able to do so), shall provide the A Borrower with Internal
Revenue Service Form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States. If the
form provided by a Bank at the time such Bank first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from "Taxes" as
defined in subsection (a) of this Section 2.15.
(f) For any period with respect to which a Bank has failed to
provide the A Borrower with the appropriate form described in subsection (e) of
this Section 2.15 (other than if such failure is due to a change
in law occurring subsequent to the date on which a form originally was required
to be provided, or if such form otherwise is not required under the first
sentence of subsection (e) above), such Bank shall not be entitled to
indemnification under subsection (c) of this Section 2.15 with respect to Taxes
imposed by the United States; provided, however, that should a
Bank become subject to Taxes because of its failure to deliver a form required
hereunder, the A Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(g) Without prejudice to the survival of any other agreement of
any Borrower hereunder, the agreements and obligations of each Borrower
contained in this Section 2.15 shall survive the payment in full of principal
and interest hereunder and under the Notes.
(h) In the event that a Borrower becomes obligated to make any
payment pursuant to subsection (a), (b) or (c) of this Section 2.15, such
Borrower may request, by written notice, that the respective Bank with respect
to which the payment was made file a claim for refund of the Taxes or Other
Taxes (as well as any penalties or interest for which a payment was made). Such
written notice shall specify the payments made by such Borrower for which such
Borrower requests that such Bank file a claim for refund and shall contain an
opinion of counsel that such Bank has a reasonable basis for claiming such
refund. Any such Bank that receives such a written notice from a Borrower shall
within 30 days file a claim for refund for the requested amounts and shall take
all reasonable steps to pursue such refund. The requested Bank shall have the
right to control any such refund proceeding as well as any resulting
administrative or judicial proceeding. The requesting Borrower shall indemnify
the requested Bank for all out-of-pocket expenses (including, but not limited
to, attorneys' and accounting fees) incurred by such Bank in connection with
such claim for refund. If such Bank receives a refund, such Bank shall promptly
remit the refund to such Borrower.
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SECTION 2.16. Sharing of Payments, Etc. If any Bank
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Advances made by it
(other than pursuant to Section 2.08, 2.11 or 2.15) in excess of its ratable
share of payments on account of the Advances, obtained by all the Banks, such
Bank shall forthwith purchase from the other Banks such participations in the
Advances made by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase from each Bank shall be
rescinded and such Bank shall repay to the purchasing Bank the purchase price to
the extent of such recovery together with an amount equal to such Bank's ratable
share (according to the proportion of (i) the amount of such Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of any
interest or other amount paid or payable by the purchasing Bank in respect of
the total amount so recovered. Each Borrower agrees that any Bank so purchasing
a participation from another Bank pursuant to this Section 2.16 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.17. Currency Equivalents. For purposes of the
provisions of this Article II, (i) the equivalent in Dollars of any Alternative
Currency shall be determined by using the quoted spot rate at which the Agent's
principal office in London offers to exchange Dollars for such Alternative
Currency in London at 11:00 A.M. (London time) on the date on which such
equivalent is to be determined, (ii) the equivalent in any Alternative Currency
of any other Alternative Currency shall be determined by using the quoted spot
rate at which the Agent's principal office in London offers to exchange such
Alternative Currency for the equivalent in Dollars of such other Alternative
Currency in London at 11:00 A.M. (London time) on the date on which such
equivalent is to be determined, and (iii) the equivalent in any Alternative
Currency of Dollars shall be determined by using the quoted spot rate at which
the Agent's principal office in London offers to exchange such Alternative
Currency for Dollars in London at 11:00 A.M. (London time) on the date on which
such equivalent is to be determined.
SECTION 2.18. Evidence of Debt. The Debt of each
Borrower resulting from the Advances (other than Swing-Line Advances) shall be
evidenced by the Notes delivered to the Banks pursuant to Article V, and the
remaining principal amount thereof shall be recorded by the Banks, and, prior to
any transfer, endorsed on the grids thereto in accordance with the terms of the
Notes. The Agent shall also maintain, in accordance with its usual practices, an
account or accounts evidencing the indebtedness of each Borrower under this
Agreement and the amounts of principal and interest payable and paid to each
Bank from time to time under this Agreement which accounts, among other things,
will provide the record for all borrowings
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and payments of Swing-Line Advances and shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.19. Use of Proceeds. Each Borrower shall use
the proceeds of each Borrowing and Swing-Line Advance made by it to support
working capital needs and for general corporate purposes and such proceeds shall
not be used to purchase or carry any Margin Stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any Margin
Stock.
ARTICLE III
AMOUNTS AND TERMS OF LETTERS OF CREDIT
AND PARTICIPATIONS THEREIN
SECTION 3.01. Letters of Credit. (a) The Issuing Bank
agrees, on the terms and conditions hereinafter set forth, to Issue for the
account of the A Borrower, one or more Letters of Credit from time to time
during the period from the date hereof until the date which occurs 30 days
before the Revolver Termination Date, in an aggregate undrawn amount of not less
than $1,000,000 (or the equivalent thereof in any Alternative Currency) or an
integral multiple of $500,000 (or the equivalent thereof in any Alternative
Currency) in excess of such amount, each such Letter of Credit upon its Issuance
to expire on or before the Revolver Termination Date; provided,
however, that the Issuing Bank shall not be obligated to Issue any
Letter of Credit to the A Borrower if:
(i) after giving effect to the Issuance of such
Letter of Credit,Total A Liability shall exceed the aggregate A
Commitment; or
(ii) after giving effect to the Issuance of such
Letter of Credit, Total Letter of Credit Liability shall exceed
$5,000,000 (or the equivalent thereof in any Alternative
Currency); or
(iii) after giving effect to the Issuance of such
Letter of Credit, the sum of Total A Liability and Total B
Liability shall exceed $30,000,000 (or the equivalent thereof
in any Alternative Currency); or
(iv) the Agent or the Majority Banks shall have
notified the Issuing Bank and the A Borrower that no further
Letters of Credit are to be Issued by the Issuing Bank due to
the failure to meet any of the applicable conditions set
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forth in Article V, and such notice has not expired or been
withdrawn by the Majority Banks.
(b) The Issuing Bank agrees, on the terms and conditions
hereinafter set forth, to Issue for the account of each B Borrower, one or more
Letters of Credit from time to time during the period from the date hereof until
the date which occurs 30 days before the Revolver Termination Date, in an
aggregate undrawn amount of not less than $1,000,000 (or the equivalent thereof
in any Alternative Currency) or an integral multiple of $500,000 (or the
equivalent thereof in any Alternative Currency) in excess of such amount, each
such Letter of Credit upon its Issuance to expire on or before the Revolver
Termination Date; provided, however, that the Issuing Bank shall
not be obligated to Issue any Letter of Credit to any B Borrower if:
(i) after giving effect to the Issuance of such
Letter of Credit, Total B Liability shall exceed the aggregate
B Commitment; or
(ii) after giving effect to the Issuance of such
Letter of Credit, Total Letter of Credit Liability shall exceed
$5,000,000 (or the equivalent thereof in any Alternative
Currency); or
(iii) after giving effect to the Issuance of such
Letter of Credit, the sum of Total A Liability and Total B
Liability shall exceed $30,000,000 (or the equivalent thereof
in any Alternative Currency); or
(iv) the Agent or the Majority Banks shall have
notified the Issuing Bank and such B Borrower that no further
Letters of Credit are to be Issued by the Issuing Bank due to
failure to meet any of the applicable conditions set forth in
Article V, and such notice has not expired or been withdrawn by
the Majority Banks.
(c) Within the limits of the obligations of the Issuing Bank
set forth above, each Borrower may request the Issuing Bank to Issue one or more
Letters of Credit, reimburse the Issuing Bank for payments made thereunder
pursuant to Section 3.03(a), and request the Issuing Bank to Issue one or more
additional Letters of Credit under this Section 3.01.
SECTION 3.02. Issuing the Letters of Credit. Each
Letter of Credit shall be issued on at least five Business Days' notice from the
Borrower to the Issuing Bank specifying the Borrower and the date, amount,
expiry, and beneficiary thereof, accompanied by such application and agreement
for the letter of credit and other documents as the Issuing Bank may specify to
such Borrower, each in form and substance satisfactory to the Issuing Bank. On
the date specified by the Borrower in such notice and upon fulfillment of the
applicable conditions
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set forth in Section 3.01 and Article V, the Issuing Bank
will Issue such Letter of Credit in the form specified in such notice and such
application and agreement for letter of credit and shall promptly notify the
Agent thereof.
SECTION 3.03. Reimbursement Obligations. (a)
Notwithstanding any provisions to the contrary in any application and agreement
for letter of credit applicable to any Letter of Credit, each Borrower shall in
respect of each Letter of Credit issued for its account:
(i) pay to the Issuing Bank an amount equal to, and in
reimbursement for, each amount which the Issuing Bank pays
under any Letter or Credit on or before the earlier of (A) the
time specified therefor in the application and agreement for
letter or credit applicable to such Letter or Credit or (B) the
date which occurs one Business Day after payment of such amount
by the Issuing Bank under the Letter or Credit; and
(ii) pay to the Issuing Bank interest on any amount
remaining unpaid under clause (i) above from the date on which
the Issuing Bank pays such amount under any Letter of Credit
until such amount is reimbursed in full to the Issuing Bank
pursuant to clause (i) above, payable on demand, in the case of
the A Borrower, at a rate per annum of Reference Rate
plus 1% per annum and, in the case of the B Borrower,
at a rate per annum of Reference Rate; provided;
however, that any such amount which is not reimbursed
to such Issuing Bank within one Business Day after notice
thereof by the Issuing Bank shall thereafter bear interest,
until such amount is reimbursed in full to such Issuing Bank
pursuant to clause (i) above, payable on demand, in the case of
the A Borrower, at a rate per annum of Reference Rate
plus 3% per annum and, in the case of the B Borrower,
at a rate per annum of Reference Rate plus 2% per
annum.
(b) All amounts to be reimbursed to the Issuing Bank in
accordance with subsection (a) above may, subject to the limitations set forth
in Section 2.01 (exclusive of the minimum borrowing limitations), be paid from
the proceeds of the Advances as follows:
(i) The A Borrower hereby authorizes the Banks to make
pursuant to Section 2.01(a) A Advances at the Reference Rate
which are in the amounts of the reimbursement obligations of
the A Borrower set forth in subsection (a) above, and further
authorizes the Agent (A) to give the Banks, pursuant to Section
2.03(a), a Notice of Borrowing with respect to the A Borrowing
comprised of such A Advances and (B) to distribute the proceeds
of such A Advances to the Issuing Bank to pay such amounts. The
A Borrower agrees that all such A Advances so made shall be
deemed to have been requested by it,
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and directs that all proceeds thereof shall be used to pay such
reimbursement obligations under subsection (a) above.
(ii) Each B Borrower hereby authorizes the Banks to
make pursuant to Section 2.01(b) B Advances at the Reference
Rate which are in the amounts of the reimbursement obligations
of each B Borrower set forth in subsection (a) above, and
further authorizes the Agent (A) to give the Banks, pursuant to
Section 2.03(a), a Notice of Borrowing with respect to the B
Borrowing comprised of such B Advances and (B) to distribute
the proceeds of such B Advances to the Issuing Bank to pay such
amounts. Each B Borrower agrees that all such B Advances so
made shall be deemed to have been requested by it, and directs
that all proceeds thereof shall be used to pay such
reimbursement obligations under subsection (a) above.
SECTION 3.04. Participations Purchased by the Banks.
(a) On the date of Issuance of each Letter of Credit the Issuing Bank shall be
deemed irrevocably and unconditionally to have sold and transferred to each Bank
without recourse or warranty, and each Bank shall be deemed to have irrevocably
and unconditionally purchased and received from such Issuing Bank, an undivided
interest and participation, to the extent of such Bank's Pro Rata share of such
Letter of Credit and all Total Letter of Credit Liability relating to such
Letter of Credit and all Loan Documents guaranteeing, supporting, or otherwise
benefiting the payment of such Total Letter of Credit Liability. As to each
Letter of Credit Issued or to be Issued by the Issuing Bank, the Agent will
promptly (after it receives notification from the Issuing Bank pursuant to
Section 3.02) notify each Bank of such Letter of Credit of the Borrower, and its
date of Issue, amount, expiry, and reference number.
(b) In the event that any reimbursement obligation under
Section 3.03(a) is not paid when due to the Issuing Bank with respect to any
Letter of Credit, the Issuing Bank shall promptly notify the Agent to that
effect, and the Agent shall promptly notify the Banks of the amount of such
reimbursement obligation and each Bank shall immediately pay to the Issuing
Bank, in lawful money of the United States and in same day funds, an amount
equal to such Bank's Pro Rata share of the amount of such unpaid reimbursement
obligation with interest at the Federal Funds Rate for each day commencing on
the day after such notification until such amount is paid to the Agent.
(c) Promptly after the Issuing Bank receives a payment on
account of a reimbursement obligation with respect to any Letter or Credit, the
Issuing Bank shall pay such amount to the Agent, and the Agent shall promptly
pay to each Bank which funded its participation therein, in lawful money of the
United States and in the kind of funds so received, an amount equal to such
Bank's ratable share thereof.
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(d) Upon request of any Bank, the Agent shall furnish to such
Bank copies of any Letter of Credit and any application and agreement for letter
or credit and other documents related thereto as may be reasonably requested by
such Bank.
(e) The obligation of each Bank to make payments under
subsection (b) above shall be unconditional and irrevocable and shall be made
under all circumstances including, without limitation, any of the circumstances
referred to in Section 3.06(b).
(f) If any payment received on account of any reimbursement
obligation with respect to a Letter of Credit and distributed to a Bank as a
participant under Section 3.04(c) is thereafter recovered from the Issuing Bank
in connection with any bankruptcy or insolvency proceeding relating to any
Borrower, each Bank which received such distribution shall, upon demand by the
Agent, repay to the Issuing Bank such Bank's ratable share of the amount so
recovered together with an amount equal to such Bank's ratable share (according
to the proportion of (i) the amount of such Bank's required repayment to (ii)
the total amount so recovered) of any interest or other amount paid or payable
by the Issuing Bank in respect of the total amount so recovered.
SECTION 3.05. Letter of Credit Fees. (a) The A Borrower hereby
agrees to pay to the Agent for the account of each Bank (ratably in accordance
with its A Commitment) a nonrefundable letter of credit fee with respect to each
Letter of Credit issued for the account of the A Borrower on the maximum amount
available to be drawn under such Letter of Credit from time to time from the
date of Issuance of such Letter of Credit until the expiry or prior termination
thereof at a rate of 3% per annum, payable on each three-month anniversary of
the date of Issuance of such Letter of Credit and on such date of expiry or
prior termination.
(b) Each B Borrower hereby agrees to pay to the Agent for the
account of each Bank (ratably in accordance with its B Commitment) a
nonrefundable letter of credit fee with respect to each Letter of Credit issued
for the account of such B Borrower on the maximum amount available to be drawn
under such Letter of Credit from time to time from the date of Issuance of such
Letter of Credit until the expiry or prior termination thereof at a rate of
1.25% per annum, payable on each three-month anniversary of the date of Issuance
of such Letter of Credit and on such date of expiry or prior termination.
(c) Each Borrower agrees to pay to the Issuing Bank, for its
own account and on demand, (i) a non-refundable fronting fee in respect of each
Letter of Credit issued for the account of such Borrower equal to 0.25% of the
maximum amount to be drawn under such Letter of Credit on the date of Issuance
of such Letter of Credit and payable on such date of Issuance and (ii) sums
equal to standard fees (other than the letter of credit fees referred to in this
Section 3.05(c)), charges and expenses that the Issuing Bank may impose, pay or
incur in connection with the Issuance, amendment, administration, transfer or
cancellation of any or all
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Letters of Credit Issued for the account of such Borrower or in connection with
any payment by the Issuing Bank thereunder.
SECTION 3.06. Indemnification; Nature of the Issuing Bank's
Duties. (a) Each Borrower agrees to indemnify and save harmless the Agent, the
Issuing Bank and each Bank from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Agent, the Issuing Bank or any Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the Issuance of any
Letter of Credit Issued for the account of such Borrower or (ii) any action or
proceeding relating to a court order, injunction, or other process or decree
restraining or seeking to restrain the Issuing Bank from paying any amount under
any such Letter of Credit.
(b) The obligations of each Borrower hereunder with respect to
such Letters of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms hereof under all circumstances, including
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any
such Letter of Credit or Loan Document or any agreement or
instrument relating thereto;
(ii) the existence of any claim, setoff, defense or
other right which any Borrower may have at any time against
the beneficiary, or any transferee, of any such Letter of
Credit, or the Issuing Bank, any Bank, or any other Person;
(iii) any draft, certificate, or other document
presented under any such 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;
(iv) any lack of validity, effectiveness, or
sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in
whole or in part;
(v) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under any such Letter of Credit or the proceeds thereof;
(vi) any failure of the beneficiary to any such
Letter of Credit to strictly comply with the conditions
required in order to draw upon any such Letter of Credit;
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(vii) any misapplication by the beneficiary of any
such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or
(viii) any other circumstance or happening
whatsoever, whether or not similar to the foregoing;
provided, however, that notwithstanding the foregoing, neither the Issuing Bank,
the Agent nor any Bank shall be relieved of any liability it may otherwise have
as a result of its gross negligence or willful misconduct.
SECTION 3.07. Increased Costs. (a) Change in Law. If any
change in any law or regulation or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration thereof
shall either (i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against letters of credit issued by the Issuing Bank or
(ii) impose on the Issuing Bank or any Bank any other condition regarding
letters of credit or, in the case of such Bank, its participation hereunder in
Letters of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Issuing Bank of Issuing
or maintaining or, in the case of such Bank, having a participation in Letters
of Credit, then, upon demand by the Issuing Bank or such Bank, as the case may
be, (with a copy to the Agent) the Borrowers shall immediately pay to such
Issuing Bank or such Bank, as the case may be, from time to time as specified by
such Issuing Bank or such Bank, as the case may be, (with a copy to Agent)
additional amounts which shall be sufficient to compensate the Issuing Bank or
such Bank, as the case may be, for such increased cost. Each certificate as to
such increased cost, and amount thereof, incurred by the Issuing Bank or any
Bank as a result of any event mentioned in clause (i) or (ii) above, submitted
by the Issuing Bank or such Bank to each Borrower and the Agent, shall set out
in reasonable detail the calculation of such amounts and shall be conclusive and
binding for all purposes, absent manifest error.
(b) Capital. If the Issuing Bank or any Bank determines that
compliance with any law or regulation or with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) has or would have the effect of reducing the rate of return on the capital
of the Issuing Bank or such Bank or any corporation controlling the Issuing Bank
or such Bank as a consequence of, or with reference to, the Issuing Bank's
commitment to Issue, issuance of, or, with respect to such Bank's commitment, to
participate in, any Letter of Credit hereunder below the rate that the Issuing
Bank or such Bank or such other corporation could have achieved but for
compliance therewith (taking into account the policies of the Issuing Bank, such
Bank or such corporation with regard to capital), then the Borrowers shall from
time to time, upon demand by the Issuing Bank or such Bank (with a copy of such
demand to the Agent), immediately pay to the
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Issuing Bank or such Bank additional amounts sufficient to compensate the
Issuing Bank or such Bank or other corporation for such reduction. A certificate
as to such amounts, submitted to each Borrower and the Agent by the Issuing Bank
or such Bank, shall be conclusive and binding for all purposes, absent manifest
error. The Issuing Bank and each Bank agrees promptly to notify the Borrowers
and the Agent of any circumstances that would cause the Borrowers to pay
additional amounts pursuant to this subsection (b), provided, that, the failure
to give such notice shall not affect any Borrower's obligation to pay such
additional amounts hereunder.
(c) Survival of Obligations. Without prejudice to the survival
of any other obligation of the Borrowers hereunder, the agreements and
obligations of each Borrower contained in this Section 3.07 shall survive the
payment in full of the Advances (after the Revolver Termination Date).
SECTION 3.08. Uniform Customs and Practice. The Uniform
Customs and Practice for Documentary Credits as most recently published by the
International Chamber of Commerce shall in all respects be deemed a part of this
Article III as if incorporated herein and shall apply to the Letters of Credit.
ARTICLE IVARTICLE IV
THE GUARANTEE
SECTION 4.01. The Guarantee. The A Borrower (in its capacity
as guarantor being the "Guarantor") hereby unconditionally jointly and severally
guarantees (the "Guarantee") to each of the Banks, the Issuing Bank and the
Agent the payment in full when due (whether at stated maturity, by reason of
acceleration or otherwise) of all obligations (the "Obligations") of the B
Borrowers under this Agreement and the Notes of the B Borrowers, or any document
delivered in connection therewith, including without limitation reimbursement
obligations for payments under Letters of Credit issued for the account of any B
Borrower.
SECTION 4.02. Guaranty Absolute. The Guarantor guarantees that
the Obligations will be paid strictly in accordance with their terms, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Bank, the Issuing Bank and/or
the Agent with respect thereto. The obligations of the Guarantor under this
Guarantee are independent of the Obligations, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce the Guarantee
irrespective of whether any action is brought against any B Borrower or whether
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any B Borrower is joined in any such action or actions. The liability of the
Guarantor under this Guarantee shall be absolute and unconditional irrespective
of:
(i) any lack of validity or enforceability of this Agreement
or any Note;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from this Agreement,
including any increase in the Obligations resulting from the extension
of additional credit;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the
Obligations;
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations
or any other assets of any B Borrower;
(v) any change, restructuring or termination of the corporate
structure or existence of any B Borrower; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any B Borrower, or any other
guarantor.
This Guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by any Bank upon the insolvency, bankruptcy or
reorganization of any B Borrower or otherwise, all as though such payment had
not been made.
SECTION 4.03. Waivers. The Guarantor hereby waives (and
consents in advance to the taking, or the failure to take, any action specified
below), to the fullest extent permitted by applicable law:
(i) any requirement that any Bank, the Issuing Bank or the
Agent secure or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against any B
Borrower or any other person (including any other guarantor) or any
collateral;
(ii) any defense arising by reason of any claim or defense
based upon an election of remedies by any Bank, the Issuing Bank or the
Agent (including, without limitation, an election to non-judicially
foreclose on any real or personal property
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collateral) which in any manner impairs, reduces, releases or otherwise
adversely affects its subrogation, reimbursement or contribution rights
or other rights to proceed against any B Borrower, any other guarantor
or any other Person or any collateral;
(iii) any defense arising by reason of the failure of any
other Person to execute this Agreement or any other agreement or
guaranty;
(iv) any defense or benefits that may be derived from
California Civil Code Sections 2808, 2809, 2810, 2815, 2819, 2845 or
2850 or California Code of Civil Procedure Sections 580a, 580d
(including, without limitation, any defense based on estoppel arising
out of the operation of Section 580d of the California Code of Civil
Procedure in the context of nonjudicial foreclosure or any comparable
provision of the law of any other jurisdiction) or 726, or comparable
provisions of the laws of any other jurisdiction and all other
suretyship and other similar defenses it would otherwise have under the
laws of California or any other jurisdiction;
(v) all rights and defenses arising out of an election of
remedies by any Bank, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of
the California Code of Civil Procedure or otherwise.
(vi) any duty on the part of any Bank, the Issuing Bank or the
Agent to disclose to the Guarantor any matter, fact or thing relating
to the business, operation or condition of any B Borrower and its
assets now known or hereafter known by such Bank, the Issuing Bank or
the Agent;
(vii) all benefits of any statute of limitations affecting the
Guarantor's liability under this Guarantee or affecting the enforcement
of this Guarantee or any of the Obligations or realization on any
collateral for the Obligations;
(viii) all setoffs and counterclaims;
(ix) promptness, diligence, presentment, demand for
performance and protest;
(x) notice of non-performance, default, acceleration, protest
or dishonor;
(xi) except for any notice otherwise required by applicable
laws that may not be effectively waived by the Guarantor (all of which
are hereby waived to the fullest
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extent permitted by law), notice of sale or other disposition of any
collateral for the Obligations; and
(xii) notice of acceptance of this Guarantee and of the
existence, creation or incurring of new or additional Obligations.
SECTION 4.04. Waiver of Subrogation. Until the Obligations are
paid in full, Guarantor hereby irrevocably waives any claim or other rights
(including, without limitation, any rights arising under California Civil Code
Sections 2847, 2848 or 2849) that it may now or hereafter acquire against any B
Borrower that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guarantee, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification by or from any B Borrower and any right to participate in any
claim or remedy of any Bank against any B Borrower or any collateral for the
Obligations, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law, including, without limitation, the right
to take or receive from any B Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right. If any amount shall be paid to the Guarantor in
violation of the preceding sentence at any time prior to the later of (x) the
payment in full in cash of the Obligations and all other amounts payable under
this Guarantee and (y) the expiration or termination of any commitment of any
Bank to extend credit under any this Agreement, such amount shall be held in
trust for the benefit of the Agent and the Banks and shall forthwith be paid to
the Agent to be credited and applied to the Obligations and all other amounts
payable under this Guarantee, whether matured or unmatured, or to be held as
collateral for any Obligations or other amounts payable under this Guarantee
thereafter arising. The Guarantor acknowledges that it will receive direct and
indirect benefits from the transactions provided for in this Agreement, and that
the waiver set forth in this Section 4.04 is knowingly made in contemplation of
such benefits.
SECTION 4.05 Financial Condition of B Borrowers. The Guarantor
represents to each Bank, the Issuing Bank and the Agent that the Guarantor is
now and will be completely familiar with the business, operations and conditions
of the B Borrowers, and the Guarantor hereby waives and relinquishes any duty on
the part of any Bank, the Issuing Bank or the Agent to disclose any matter, fact
or thing relating to the business, operations or conditions of the B Borrowers
now known or hereafter known by such Bank, the Issuing Bank or the Agent.
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ARTICLE VARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Condition Precedent to Initial Advances and
Letters of Credit. The obligation of each Bank to make its initial Advance, the
Issuing Bank to issue the initial Letter of Credit and the Agent to make its
initial Swing Line Advance is subject to the conditions precedent that (x) the
Borrowers shall have paid the fees referred to in Section 2.04 that are due and
payable on such day, (y) INMAC B.V. shall have sold notes under the Prudential
Agreement in the principal amounts of $13,000,000 and Dfl. 10,918,600 with the
net proceeds thereof to be not less than $13,000,000 and Dfl. 10,918,600 and
with the terms and conditions thereof to be satisfactory to the Majority Banks,
and (z) the Agent shall have received on or before the day of the initial
Borrowing, Letter of Credit or Swing-Line Advance, as the case may be, the
following, each dated such day, in form and substance satisfactory to the Agent
and (except for the Notes) in sufficient copies for each Bank:
(a) The Notes to the order of the Banks, respectively.
(b) Certified copies and certified English translations (if
appropriate) of the resolutions of the Board of Directors of each
Borrower approving each Loan Document to which it is a party, and of
all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to each such Loan
Document.
(c) A signed copy and a certified English translation (if
appropriate) of a certificate of an appropriate officer or director of
each Borrower certifying the names and true signatures of the officers
of such Borrower authorized to sign each Loan Document to which it is a
party and the other documents to be delivered hereunder.
(d) A favorable opinion of Baker & McKenzie, counsel for the A
Borrower and special U.S. counsel for each B Borrower, substantially in
the form of Exhibit C hereto and as to such other matters as any Bank
through the Agent may reasonably request.
(e) A favorable opinion of counsel for each B Borrower,
substantially in the form of Exhibit D-1 through Exhibit D-5 hereof,
respectively, and as to such other matters as any Bank through the
Agent may reasonably request.
SECTION 5.02. Conditions Precedent to Each Borrowing and
Letter of Credit. The obligation of each Bank to make an Advance on the occasion
of each Borrowing (including the initial Borrowing), of the Agent to make each
Swing-Line Advance (including the initial Swing-Line Advance) and of the Issuing
Bank to Issue each Letter of Credit
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(including the initial Letter of Credit) shall be subject to the further
conditions precedent that on the date of such Borrowing, Advance or Issuance, as
the case may be, (a) the following statements shall be true and each of the
giving of the applicable Notice of Borrowing and the acceptance by the Borrower
of the proceeds of such Borrowing, the applicable notice of a Swing-Line Advance
and the acceptance of the proceeds thereof or the applicable notice to request
the Issuance of Letter of Credit, as the case may be, shall constitute a
representation and warranty by each Borrower that on the date of such Advance,
Swing-Line Advance or Issuance, respectively, such statements are true:
(i) The representations and warranties contained in Article VI
of this Agreement are correct on and as of such date, before and after
giving effect to such transaction, as though made on and as of such
date, and
(ii) No event has occurred and is continuing, or would result
from such transaction or from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both;
and (b) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
ARTICLE VIARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter this Agreement and to
make Advances, the Agent to make Swing-Line Advances and the Issuing Bank to
Issue Letters of Credit hereunder, each Borrower represents and warrants as
follows:
SECTION 6.01. Corporate Status. Each Borrower and each of its
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of organization. Each Borrower and
each of its Subsidiaries (i) has the power and authority to own its property and
assets and to transact the business in which it is engaged, and (ii) is duly
qualified as a foreign corporation and in good standing in each jurisdiction
where it owns or leases real property and in which failure to be duly qualified
and in good standing would have a material adverse effect on the business
operations, property or financial or other condition of such Borrower or
Subsidiary taken as a whole.
SECTION 6.02. Corporate Power and Authority. The execution,
delivery and performance by each Borrower of each Loan Document to which it is
or will be a party are
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within such Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no authorization, approval or other action
by or in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under any provision of applicable
law or regulation or of the charter or by-laws of such Borrower or of any
agreement, indenture or instrument evidencing Debt or other material instrument
binding upon such Borrower or result in the creation or imposition of any Lien
on the property or assets of such Borrower.
SECTION 6.03. Binding Effect. This Agreement and the Note
executed by each Borrower is the legal, valid and binding obligation of such
Borrower and is enforceable against such Borrower in accordance with its terms.
SECTION 6.04. Financial Information. (a) The Consolidated
balance sheet of the A Borrower as of April 30, 1995 and the related
Consolidated statements of earnings, shareholders' equity and changes in the
financial position of the A Borrower for the nine month period then ended,
copies of which have been furnished to the Agent, fairly present, in conformity
with GAAP, the Consolidated financial position of the A Borrower as of such date
and its Consolidated results of operations.
(b) Since April 30, 1995 and up to and including the date
hereof, there has been no material adverse change in the business, financial
position, results of operations or prospects of the A Borrower and its
Subsidiaries taken as a whole.
SECTION 6.05. Litigation. Except as disclosed to the Agent in
writing, there is no action, suit or proceeding pending against or, to the
knowledge of any Borrower, threatened against or affecting, any Borrower or any
Subsidiary thereof before any court or arbitrator or any governmental body,
agency or official, which might result in (a) a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Borrowers and their Subsidiaries, taken as a whole, of (b) the
material impairment of the ability of any Borrower to perform any of its
obligations hereunder or the legality, validity or enforceability of this
Agreement or any Note.
SECTION 6.06. Not an Investment Company. No Borrower or
Subsidiary thereof is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 6.07. Compliance With Laws. Except as disclosed on
Schedule V hereto, the A Borrower and its Subsidiaries (i) have complied in all
material respects with all applicable laws, statutes, rules and regulations,
including environmental laws, and neither the A Borrower nor any Subsidiary has
received (A) notice of any material failure so to comply or (B) any information
that would lead it to believe that it is the subject of any Federal, state,
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local or foreign investigation; (ii) does not manage, generate, transport,
discharge or store any hazardous materials in material violation of any material
environmental laws; (iii) does not own, operate or maintain any underground
storage tanks or surface impoundments; and (iv) is not aware or any conditions
or circumstances associated with its currently or previously owned or leased
properties or operations (or those of its tenants), in each case which may give
rise to any material liability, fines, penalties or other obligations.
SECTION 6.08. Taxes. Each of the Borrowers and each Subsidiary
thereof has filed all tax returns and reports required to be filed by it and has
paid all taxes shown due on the returns so filed as well as all other material
taxes, assessments and governmental charges which have become due except for
those which each such Borrower or Subsidiary is contesting in good faith and has
disclosed to the Agent. The charges, accruals and reserves on the books of each
such Borrower and Subsidiary in respect of taxes or other governmental charges
are provided in accordance with GAAP.
SECTION 6.09. Full Disclosure. All information heretofore
furnished by each Borrower to the Agent for the purposes of or in connection
with this Agreement or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished by such Borrower to the Agent will be,
true, accurate and complete in every material respect on the date as of which
such information is stated or certified and does not or will not, as the case
may be, omit any material fact necessary to make such information not
misleading.
ARTICLE VIIARTICLE VII
COVENANTS OF THE BORROWERS
SECTION 7.01. Affirmative Covenants So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding, any amount shall
remain due hereunder, or any Bank shall have any Commitment hereunder, each
Borrower covenants and agrees, unless the Majority Banks otherwise consent in
writing, that:
(a) Information. The Borrowers shall deliver to the Agent:
(i) as soon as available and in any event within 90
days after the end of each fiscal year of the A Borrower, a
Consolidated balance sheet of the A Borrower as of the end of
such fiscal year and related statements of earnings,
shareholders' equity and cash flow for such fiscal year;
setting forth in each case in comparative form the figures for
the preceding fiscal year, all reported in compliance with
GAAP consistently applied and certified as accurate and true
by the chief financial officer of the A Borrower; and in the
case of Consolidated
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<PAGE> 50
annual statements certified as provided in the A Borrower's
10-K filed with the Securities Exchange Commission by a
nationally recognized public accounting firm, together with a
certificate of such accounting firm stating that in the course
of the regular audit of the business of the A Borrower, which
audit was conducted in accordance with GAAP, such accounting
firm has obtained no knowledge that an Event of Default has
occurred and is continuing, or, if in the opinion of such
accounting firm, an Event of Default has occurred and is
continuing, a statement as to the nature thereof and a copy of
the management letter from such accounting firm accompanying
such financing statements;
(ii) as soon as available and in any event within 45
days after the end of the first three fiscal quarters of the A
Borrower, a Consolidated balance sheet for the A Borrower as
of the end of such quarter, the related statements of earnings
for such quarter, and the related statements of shareholders'
equity and cash flows for the portion of the A Borrower's
fiscal year ended at the end of such quarter prepared in
accordance with GAAP consistently applied and certified by the
A Borrower's chief financial officer, setting forth in each
case in comparative form the figures for the corresponding
previous year end, in the case of such balance sheet and
statement of shareholders' equity, and for the corresponding
portion of the A Borrower's previous fiscal year, in the case
of such statements of earnings, together with unaudited
statements of operations of revenues and gross profits by
product segment;
(iii) simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above
(the "Financial Statement"), a certificate of the A Borrower's
chief financial officer (i) setting forth in reasonable detail
the calculations required to establish whether the Borrowers
were in compliance with the applicable financial covenants set
forth in Section 7.03 and 7.04 hereof, as the case may be, and
(ii) stating that on the date of such certificate there is no
Event of Default or Default, or if any such Event of Default
or Default has occurred and is continuing, a statement as to
the nature thereof and the remedial action which the Borrowers
propose to take with respect thereto;
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(iv) as soon as available and in any event within 45
days after the end of each quarter, a Consolidating balance
sheet for the A Borrower as of the end of such quarter and the
related Consolidating statement of earnings for such quarter;
(v) promptly upon the filing thereof, copies of any
registration statements and annual, quarterly or monthly
reports which the A Borrower shall have filed with the
Securities and Exchange Commission;
(vi) if and when the A Borrower or any Subsidiary
thereof or any plan administrator gives or is required to give
notice to the PBGC of any "reportable event" (as defined in
section 4043 of ERISA) with respect to any Plan which is not a
Multi-employer Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or with
respect to any Multi-employer Plan, receives notice as
prescribed in ERISA of any material withdrawal liability
assessed against the A Borrower or any such Subsidiary, a copy
of such notice;
(vii) promptly after receipt thereof, a copy of each
report delivered to the A Borrower by any independent
accounting firm in connection with any annual, interim or
special audit of the A Borrower;
(viii) not later than each September 30, in the case
of the A Borrower, deliver a certificate reflecting projected
compliance with the covenants contained in Sections 7.03 and
7.04 for each of the four fiscal quarters in the fiscal year
ending on the succeeding July 31;
(ix) as may reasonably be requested by the Agent or
any Bank from time to time, a copy of each report or statement
delivered by any Borrower pursuant to the Prudential Agreement
except reports as to compliance with particular provisions of
such Agreement;
(x) as soon as possible and in any event within five
days after any Borrower learns of the occurrence of an Event
of Default, a statement by such Borrower's chief financial
officer setting forth the details of such Event of Default and
the remedial action which any Borrower proposes to take with
respect thereto; provided, however, that no such statement
need be furnished if the Event of Default is cured by the date
on which such statement is due;
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(xi) such additional financial information, including
the books and records of such Borrower, as the Agent or any
Bank may reasonably request in writing to be provided by such
Borrower as soon as reasonably possible.
(b) Payment of Taxes, Etc. Each Borrower shall pay and
discharge, and cause each Subsidiary thereof to pay and discharge,
before the same shall become delinquent, (i) all taxes, assessment and
governmental charges or levies imposed upon it or upon its property,
and (ii) all lawful claims which, if unpaid, might by law become a Lien
upon its property; provided, however, that neither such Borrower nor
any Subsidiary thereof shall be required to pay or discharge any such
tax, assessment, charge or claim which is being contested in good faith
and by proper proceedings and as to which appropriate reserves are
being maintained.
(c) Equal and Ratable Liens. In the event that any Borrower
grants a Lien (other than Permitted Liens) on any of its property, such
Borrower shall at the same time grant a Lien of equal priority on such
property to the Agent, for the benefit of the Banks, to secure such
Borrower's obligations hereunder and, in connection therewith, shall
execute such documents as the Agent reasonably requests.
(d) Maintenance of Property; Insurance. Each Borrower shall,
and cause each of its Subsidiaries to (i) maintain or cause to be
maintained in good repair, working order and condition all equipment
and other properties necessary at that time in its business and that
are material to the conduct of its business taken as a whole and from
time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof; (ii) comply with all applicable
laws, rules, regulations and orders of all Federal, state, local or
foreign courts or governmental agencies, authorities, instrumentalities
or regulatory bodies; except where such noncompliance could not
reasonably be expected to result in material adverse effect or to the
extent that such compliance is subject to a good faith contest; and
(iii) maintain insurance in such amounts and against such liabilities
and hazards as is, to the best of its knowledge, customarily maintained
by other companies operating similar businesses.
(e) Preservation of Corporate Existence. Each Borrower shall
continue, and cause each of its Subsidiaries to continue, to engage in
business of the same general type as now conducted by such Borrower or
Subsidiary, as the case may be, and will preserve, renew and keep in
full force and effect its corporate existence and its material rights,
privileges and franchises necessary or desirable in the normal conduct
of business; provided, however, that this Section 7.01(e) shall not
prevent any transaction permitted by Section 7.02(b); provided,
further, that, except as provided in Section 7.02(b)(ii)(A), the A
Borrower will at all times own directly or indirectly 100% of the
voting stock of each of its Subsidiaries on the date hereof; and,
provided, further, that
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this Section 7.01(e) shall not prevent any transfer by the A Borrower
in a single transaction or a series of related transactions within a
six month period of substantially all of its assets (other than its
rights to the name "INMAC" and its right to receive royalty payments
from its Subsidiaries) to a Subsidiary formed under the laws of any
state of the United States that is not an Exempt Subsidiary which,
prior to any such transfer, has assumed all of the obligations of the A
Borrower hereunder.
(f) Royalty Arrangements. In the case of each Borrower,
maintain royalty arrangements between the A Borrower and the respective
B Borrower on terms no less favorable to the A Borrower than exist on
the Closing Date and as are set forth in Schedule III hereof, except
changes to such terms to the extent needed to be in minimal compliance
with requirements of law; provided, however,that in no event shall such
changes terminate or reduce the minimum royalty payment to the A
Borrower.
(g) Compliance With Laws. Each Borrower shall comply, and
cause each of its Subsidiaries to comply, in all material respects with
all applicable material laws, ordinances, rules, regulations and
requirements of governmental authorities (including, without
limitation, ERISA and the rules and regulations thereunder) except
where the necessity of compliance therewith is contested in good faith
by appropriate proceedings.
(h) Visitation Rights. Each Borrower shall permit, and cause
each of its Subsidiaries to permit, the Agent and any Bank, or any
agents or representatives thereof, at any reasonable time and from time
to time after notice, to examine and make copies of and abstracts from
the records and books of account of, and visit the properties of, such
Borrower and/or any Subsidiary, as the case may be, and to discuss the
affairs, finances and accounts of such Borrower or Subsidiary, as the
case may be, with any of their officers or directors and with their
independent certified public accountants.
(i) Maintenance of Books, Property and Records. Each Borrower
shall keep, and cause each of its Subsidiaries to keep, proper books of
records and account in which full, true and correct entries in
conformity with GAAP shall be made of all dealings and transactions in
relation to its business and activities and will permit the Agent and
any Bank, and any agents or representatives thereof, to discuss the
affairs, finances and accounts of such Borrower or Subsidiary, as the
case may be, with its officers, employees and independent public
accountants, at such reasonable times and as often as may be reasonably
desired. Each of the Agent and the Banks will use reasonable efforts,
consistent with its normal business practices, to maintain the
confidentiality of any information so received.
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<PAGE> 54
(j) Currency Protection Agreements. Each Borrower shall
maintain, and cause each of its Subsidiaries to maintain, substantially
similar currency risk protection arrangements as in effect on the
Closing Date, provided that none of such arrangements are speculative.
SECTION 7.02. Negative Covenants. So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding, any amount shall
remain due hereunder, or any Bank shall have any Commitment hereunder, each
Borrower covenants and agrees, unless the Majority Banks otherwise consent in
writing, that:
(a) Liens, Etc. No Borrower shall create or suffer to exist,
or permit any of its Subsidiaries to create or suffer to exist, any
Lien, upon or with respect to any of its properties, whether now owned
or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, other than Permitted Liens,
provided that Permitted Liens in no event shall include any Lien on the
stock of any direct or indirect Subsidiary of the A Borrower.
(b) Consolidations and Mergers. No Borrower shall at any time,
nor shall it permit any of its Subsidiaries to, at any time merge or
consolidate with another Person or sell, lease, transfer or otherwise
dispose of assets, except that:
(i) any Subsidiary of the A Borrower may merge
or consolidate with or into the A Borrower;
provided that the A Borrower is the
continuing or surviving corporation,
(ii) any Subsidiary of the A Borrower may merge
or consolidate with or into a directly or
indirectly wholly-owned Subsidiary of the A
Borrower (other than an Exempt Subsidiary)
that is organized and domiciled either in
the United States or in the country of such
merged or consolidated Subsidiary;
(iii) any Subsidiary of the A Borrower may merge
or consolidate with any other corporation
other than the A Borrower or a directly or
indirectly wholly-owned Subsidiary of the A
Borrower, provided that, immediately after
giving effect -------- to such merger or
consolidation (a) in the case of a merger or
consolidation involving a Subsidiary of the
A Borrower, a directly or indirectly
wholly-owned U.S. Subsidiary of the A
Borrower or a directly or indirectly
wholly-owned Subsidiary of the A Borrower
organized under the laws of the country of
such merged or consolidated Subsidiary is
the continuing or surviving corporation and
(b) no
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<PAGE> 55
Default or Event of Default exists or would
exist before or after giving effect to such
merger or consolidation;
(iv) any Subsidiary may transfer assets to the A
Borrower or a direct or indirect
wholly-owned Subsidiary of the A Borrower
(other than an Exempt Subsidiary) that is
organized and domiciled either in the United
States or in the country of the transferring
Subsidiary;
(v) any Borrower or any Subsidiary thereof may
sell inventory in the ordinary course of
business or may transfer trade receivables
to the extent permitted by Section 7.02(g);
(vi) any Borrower or any Subsidiary thereof may
transfer assets that, in its good faith,
reasonable judgment, have no further useful
or productive capacity, are fully used or
depreciated, are obsolete or are no longer
necessary or productive in the ordinary
course of its business;
(vii) any Borrower or any Subsidiary thereof may
otherwise transfer assets, provided that
after giving effect thereto (A) neither the
Annual Percentage of Tangible Assets
Transferred nor the Annual Percentage of
Earnings Capacity Transferred pursuant to
this clause (vii) shall exceed 5% and (B)
neither the Cumulative Percentage of
Tangible Assets Transferred nor the
Cumulative Percentage of Earnings Capacity
Transferred pursuant to this clause (vii)
shall exceed 20%, assuming, for purposes of
this clause (vii), that calculations are
made with respect to the Borrowers and their
Subsidiaries only on a Consolidated basis.
For purposes of determining compliance with
the provisions of this Section, transfers of
assets described in clause (iv) - (vi) above
shall not be included in making the
calculations required for the percentage
limitations set forth in clause (vii) above.
(c) Debt. Neither the A Borrower nor any of its Subsidiaries
shall incur, assume, or suffer to exist any Debt except:
(i) the Notes and other obligations thereunder;
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(ii) obligations under the Prudential Agreement
and the guarantees delivered in connection
therewith;
(iii) overdraft facilities of the A Borrower and
any Subsidiary thereof, provided the
outstanding principal amount of such
facilities is not in excess of $500,000 for
either the A Borrower or any Subsidiary
thereof and, provided, further, that the
outstanding principal amount of all such
facilities in the aggregate is not in excess
of $2,500,000;
(iv) Capitalized Leases Obligations in an
aggregate principal amount not in excess of
$10,000,000;
(v) in the case of Exempt Subsidiaries, Debt to
the Borrowers in an aggregate outstanding
principal amount (when combined with the
aggregate outstanding amount of investments
in Exempt Subsidiaries after the Closing
Date by the Borrowers) not in excess of
$5,000,000 and other Debt in an aggregate
outstanding principal amount not in excess
of $3,000,000;
(vi) in the case of any Subsidiary of the A
Borrower (other than an Exempt Subsidiary)
Debt owed to any wholly-owned Subsidiary of
the Borrower or to the A Borrower or in the
case of the A Borrower, Debt owed to any
Subsidiary thereof; and
(vii) in the case of the Borrowers, other than as
described in the preceding clauses (i)
through (vi) of this paragraph (c), (A)
INMAC GMBH may maintain until September 15,
1995 not more than 7,500,000DM of Debt with
Barclays Bank plc and 3,500,000DM of Debt
with National Westminster Bank plc; (B)
INMAC AB may maintain until September 15,
1995 not more than SEK 5,100,000 of Debt
with Barclays Bank plc; (C) INMAC B.V. may
maintain until September 15, 1995 not more
than Dfl.3,882,000 of Debt with Midland Bank
plc; (D) INMAC Corp. may maintain until July
25, 1995 not more than Y456,800,000 and
$3,860,000 of Debt with ABN AMRO Bank N.V.;
and (E) Debt in an aggregate outstanding
principal amount not in excess of $5,000,000
for all B Borrowers, provided that the
amount of such Debt of any individual
Borrower shall not be in outstanding
principal amount in excess of $2,000,000.
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(d) Restricted Payments.
(i) The A Borrower shall not permit any of its
Subsidiaries to incur or permit to exist any restriction on
such Subsidiary's ability to make Restricted Payments to such
Borrower or the Subsidiaries of such Borrower or to otherwise
transfer earnings or assets to such Borrower or the
Subsidiaries of such Borrower.
(ii) The A Borrower shall not at any time make, pay
or declare any Restricted Payments in excess of 25% (or minus
100% in the case of losses) of cumulative Consolidated Net
Income of the A Borrower for the period from the quarter
beginning July 31,1995 to the date of such payment or
declaration.
(e) Limitation on Sales and Leasebacks. No Borrower shall, nor
shall it permit any of its Subsidiaries to, at any time enter into any
contract for the sale and leaseback of property if the net proceeds of
such sale, together with the net proceeds of all prior such sales
during the term of this Agreement, exceeds $5,000,000; provided that in
all cases such sales are subject to, and permitted by subsection (b) of
this Section 7.02 and the resulting lease obligation is subject to, and
permitted by, subsection (g) of Section 7.04.
(f) Transactions with Affiliates. No Borrower shall, nor shall
it permit any of its Subsidiaries to, at any time enter into or
consummate any transactions with Affiliates or shareholders or other
related entities on terms other than such terms that could be obtained
on an arms-length basis from unaffiliated third-parties.
(g) Trade Receivables. No Borrower shall, nor shall it permit
any of its Subsidiaries to, at any time sell or discount trade
receivables with recourse, or discount or otherwise sell receivables
for less than their face value, except (i) as is customary in countries
other than the United States and as described in writing provided prior
to the Closing Date and is acceptable to the Majority Banks, (ii) sales
without recourse of receivables, the collection of which is doubtful in
accordance with GAAP, and (iii) sales between the Borrowers.
(h) Permitted Investments. No Borrower shall, nor shall it
permit any of its Subsidiaries to, at any time make or permit to remain
outstanding any loans, advances or investments except Permitted
Investments.
SECTION 7.03 Financial Covenants of the A Borrower. So long as
any Note of the A Borrower shall remain
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unpaid or any A Letter of Credit Liability shall remain outstanding, the A
Borrower covenants and agrees, unless the Majority Banks otherwise consent in
writing, that:
(a) Tangible Net Worth. It shall maintain Tangible Net Worth
determined at the end of each fiscal quarter of not less than the sum
of $20,000,000 plus 75% of its positive Net Income for the period from
the fiscal quarter subsequent to the Closing Date to the date of
determination plus 75% of the aggregate amount of all equity
contributions (exclusive of purchases not in excess of $1,000,000
pursuant to employee stock programs) to the A Borrower during the
period from the Closing Date to the date of determination.
(b) Debt Ratio. It shall not permit its Debt Ratio determined
at the end of each fiscal quarter to exceed 0.4:1.
(c) Profitability. It shall not permit its Net Losses to
exceed its Net Income on a Consolidated basis by more than $1,000,000
for any two consecutive fiscal quarters.
(d) Net Worth of INMAC S.A. It shall take all necessary action
so that the "Net Worth" (as defined in Section 10.06(b)(ii) hereof) of
INMAC S.A. shall not be less than, at any time, $22,000,000 through the
Revolver Termination Date.
SECTION 7.04. Financial Covenants of the Borrowers. So long as
any Note shall remain unpaid, any Letter of Credit Liability shall remain
outstanding, any amount shall remain due hereunder, or any Bank shall have any
Commitment hereunder, each Borrower covenants and agrees, unless the Majority
Banks otherwise consent in writing, that:
(a) Consolidated Tangible Net Worth. It shall cause the A
Borrower to maintain a Consolidated Tangible Net Worth determined at
the end of each fiscal quarter of not less than the sum of $32,000,000
plus 75% of cumulative positive Consolidated Net Income of the A
Borrower for the period from the fiscal quarter subsequent to the
Closing Date to the date of determination plus 75% of the aggregate
amount of all equity contributions (exclusive of purchases not in
excess of $1,000,000 pursuant to employee stock programs) to the A
Borrower during the period after July 30,1994 to the date of
determination.
(b) Consolidated Debt Ratio. It shall not permit the A
Borrower's Consolidated Debt Ratio determined at the end of each fiscal
quarter to exceed 0.45:1.
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(c) Consolidated Profitability. It shall not permit the A
Borrower's Net Losses to exceed its Net Income on a Consolidated basis
for any two consecutive fiscal quarters.
(d) Capital Expenditures. The aggregate Capital Expenditures
in any fiscal year for all Borrowers shall not exceed $10,000,000.
(e) Consolidated Current Ratio. It shall cause the A Borrower
to maintain a Consolidated Current Ratio, determined at the end of each
fiscal quarter, of not less than 1.25:1.
(f) Consolidated Quick Ratio. It shall cause the A Borrower to
maintain a Consolidated Quick Ratio, determined at the end of each
fiscal quarter, of not less than 0.55:1.
(g) Consolidated Fixed Charge Ratio. It shall cause the A
Borrower to maintain a Consolidated Fixed Charge Ratio determined for
each fiscal quarter of not less than 2:1 on the last day of such fiscal
quarter.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01 Events of Default. If any of the following events
("Events of Default") shall have occurred and be continuing:
(a) any Borrower shall fail to pay when due any principal of
any Advance or Swing-Line Advance or any reimbursement obligation under
any Letter of Credit; or shall fail to pay any interest on any Advance
or Swing-Line Advance or any fees or other amounts payable under any
Loan Document within five Business Days after the same becomes due and
payable; or
(b) any Borrower shall fail to observe or perform any covenant
contained in subsection (e) of Section 7.01 and Section 7.02, 7.03 and
7.04 hereof; or
(c) any representation, warranty, certification or statement
made by any Borrower (or any of its officers) in any Loan Document or
certificate, financial statement or other writing delivered pursuant
thereto shall prove to have been incorrect in any material respect when
made or deemed made; or
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(d) any Borrower shall fail to observe or perform any covenant
or agreement contained in any Loan Document (other than those covered
by clause (a) or (b) above) for thirty days after written notice
thereof has been given to such Borrower by the Agent or any Bank; or
(e) any Borrower or any Subsidiary thereof shall fail to make
any payment in respect of Debt for borrowed money in excess of
$1,000,000 (other than Debt hereunder but including Debt under the
Prudential Agreement) when due (after giving effect to any applicable
grace period) whether such Debt shall become due by scheduled maturity,
by required prepayment, by acceleration, by demand or otherwise; or any
Borrower or Subsidiary thereof shall fail to perform beyond any period
of grace with respect thereto any term, covenant or agreement on its
part to be performed under any agreement or instrument (other than the
Loan Documents) evidencing or securing or relating to such Debt by such
Borrower or Subsidiary thereof when required to be performed, if the
effect of such failure is to accelerate (or permit the acceleration of)
the maturity thereof; or
(f) any Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its Debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its Debts as they become due, or shall take
any corporate action to authorize any of the foregoing; or
(g) an involuntary case or other proceeding shall be commenced
against any Borrower seeking liquidation, reorganization or other
relief with respect to it or its Debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be
entered against any Borrower under the Bankruptcy Code or similar law
under its jurisdiction of formation; or
(h) a judgment or order for the payment of money in excess of
$3,000,000 shall be rendered against any Borrower or any Subsidiary
thereof and such judgment or order shall continue unsatisfied and
unstayed for a period of 60 days; or
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(i) the A Borrower shall fail to pay when due any material
amount which is either uncontested or, if contested, the subject of a
final nonappealable decision and which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of ERISA; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any Plan or Plans, which
proceedings involve a significant likelihood of an outcome which will
materially adversely affect the ability of the A Borrower to perform
its obligations under any Loan Document; or the A Borrower shall fail
to pay when due any material withdrawal liability with respect to any
Multi-employer Plan which is uncontested or, if contested, is the
subject of a final nonappealable decision and the A Borrower fails to
discharge, satisfy or otherwise eliminate such liability with respect
to any Multiemployer Plan within the time required by the judgment;
(m) any provision of the Guarantee after delivery shall for
any reason cease to be valid and binding on the Guarantor, or the
Guarantor shall so state in writing;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to each Borrower, declare the
obligation of each Bank to make Advances, the obligation of the Agent to make
Swing-Line Advances and the obligation of the Issuing Bank to Issue Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, (ii)
shall at the request, or may with the consent, of the Majority Banks, by notice
to each Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by each Borrower, (iii) shall at the
request, or may with the consent, of the Majority Banks demand that each
Borrower, and if such demand is made each Borrower shall, pay to the Agent for
the benefit of the Issuing Bank, an amount in immediately available funds equal
to its share of the then outstanding Total Letter of Credit Liability which
shall be held by the Agent (or the Issuing Bank) as cash collateral in a cash
collateral account under the exclusive control and dominion of the Agent (or the
Issuing Bank) and applied to the reduction of such Borrower's share of the Total
Letter of Credit Liability as drawings are made on outstanding Letters of
Credit, and (iv) shall at the request, or may with the consent, of the Majority
Banks exercise any other remedies provided hereunder or by law; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to any Borrower or any of its Subsidiaries under the Federal
Bankruptcy Code or similar law under such Borrower's or Subsidiary's
jurisdiction of formation, (A) the obligation of each Bank to make Advances, of
the Agent to make Swing-Line Advances and of the Issuing Bank to Issue Letters
of Credit shall automatically be terminated and (B) the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Borrower.
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ARTICLE IX
THE AGENT
SECTION 9.01. Authorization and Action. Each Bank and the
Issuing Bank hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, 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
Majority Banks, and such instructions shall be binding upon all Banks, the
Issuing Bank and all holders of Notes; provided, however, that the Agent shall
not be required to take any action which exposes the Agent to personal liability
or which is contrary to this Agreement or applicable law. The Agent agrees to
give to each Bank and the Issuing Bank prompt notice of each notice given to it
by the Borrower pursuant to the terms of this Agreement.
SECTION 9.02. Agent's Reliance, Etc. 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, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the payee of any Note as the holder thereof and treat the Banks that purchased
or funded a participation with respect to a Letter of Credit as the holder or
owner of Debt resulting therefrom until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and including the agreement
of the assignee or transferee to be bound hereby as it would have been if it had
been an original Bank party hereto, in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for any Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations (whether written or oral) made in or
in connection with any Loan Document; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of any Loan Document on the part of any Borrower or any Subsidiary
thereof or to inspect the property (including the books and records) of such
Borrower or Subsidiary thereof; (v) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant hereto; and (vi) shall incur no liability
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under or in respect of any Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopier) believed
by it to be genuine and signed or sent by the proper party or parties.
SECTION 9.03. ABN AMRO Bank N.V. and its Affiliates. With
respect to its Commitment, the Advances made by it, the Note issued to it and
the participations in Letters of Credit purchased by it, ABN AMRO Bank N.V.
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include ABN AMRO Bank N.V.
in its individual capacity. ABN AMRO Bank N.V. and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, any Borrower, any Subsidiaries thereof and
any Person who may do business with or own securities of any such Borrower or
Subsidiary thereof, all as if ABN AMRO Bank N.V. were not the Agent and without
any duty to account therefor to the Banks.
SECTION 9.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent, the Issuing Bank
or any other Bank and based on the financial statements referred to in Section
6.04 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and any other
Loan Document. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent, the Issuing Bank or any other Bank 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 and any other Loan Document.
SECTION 9.05. Indemnification. The Banks agree to indemnify
the Agent and the Issuing Bank (in each case, to the extent not reimbursed by
any Borrower), ratably according to the respective principal amounts of the
Advances then held by each of them (or, if no Advances are at the time
outstanding, ratably according to the respective amounts of their commitments
hereunder), 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
asserted against the Agent or the Issuing Bank, as the case may be, in any way
relating to or arising out of this Agreement, any other Loan Document or any
Letter of Credit or any action taken or omitted by the Agent or the Issuing
Bank, as the case may be, under this Agreement, any other Loan Document or any
Letter of Credit; provided, however, that no Bank 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 or
the Issuing Bank's, as the case may be, gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank agrees to reimburse the Agent and
the Issuing Bank promptly upon demand for its ratable share of any
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out-of-pocket expenses (including counsel fees) incurred by the Agent or the
Issuing Bank, as the case may be, in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document or any Letter of Credit to the extent that the Agent or the Issuing
Bank, as the case may be, is not reimbursed for such expenses by any Borrower.
SECTION 9.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Banks and each Borrower and the
Agent may be removed at any time with or without cause by the Majority Banks.
Upon any such resignation or removal, the Majority Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Majority Banks, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving of notice of resignation or the Majority
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof, the laws
of the United Kingdom or the laws of France and having a combined capital and
surplus of at least $250,000,000. 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 under this Agreement and any other Loan Document. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement and any other Loan Document.
ARTICLE X
THE OBLIGATIONS OF THE B BORROWERS
SECTION 10.01. Liability of each B Borrower. Each B Borrower
agrees that such B Borrower is jointly and severally liable to each Bank, the
Issuing Bank and the Agent for all Obligations (as defined in Section 4.01).
SECTION 10.02. Absolute Liability. Each B Borrower agrees that
the Obligations will be paid strictly in accordance with their terms, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Bank, the Issuing Bank and/or
the Agent with respect thereto. The obligations of each B Borrower under this
Article X are independent of the Obligations, and a separate action or actions
may be brought and prosecuted against such B Borrower to enforce this Article X
irrespective of whether any action is brought against any other B Borrower or
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whether any other B Borrower is joined in any such action or actions. The
liability of such B Borrower under this Article X shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability of this Agreement
or any Note;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from this Agreement,
including any increase in the Obligations resulting from the extension
of additional credit;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the
Obligations;
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations
or any other assets of any other B Borrower;
(v) any change, restructuring or termination of the corporate
structure or existence of any other B Borrower; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any other B Borrower, or any
guarantor.
The provisions of this Article X shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by any Bank upon the
insolvency, bankruptcy or reorganization of any other B Borrower or otherwise,
all as though such payment had not been made.
SECTION 10.03. Waiver. Each B Borrower hereby waives (and
consents in advance to the taking or failure to take, any action specified
below), to the fullest extent permitted by applicable law:
(i) any requirement that any Bank, the Issuing Bank or the
Agent secure or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against any
other B Borrower or any other person (including any other guarantor) or
any collateral;
(ii) any defense arising by reason of any claim or defense
based upon an election of remedies by any Bank, the Issuing Bank or the
Agent (including, without limitation, an election to non-judicially
foreclose on any real or personal property
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collateral) which in any manner impairs, reduces, releases or otherwise
adversely affects its subrogation, reimbursement or contribution rights
or other rights to proceed against any other B Borrower, any guarantor
or any other Person or any collateral;
(iii) any defense arising by reason of the failure of any
other Person to execute this Agreement or any other agreement or
guaranty;
(iv) any defense or benefits that may be derived from
California Civil Code Sections 2808, 2809, 2810, 2815, 2819, 2845 or
2850 or California Code of Civil Procedure Sections 580a, 580d
(including, without limitation, any defense based on estoppel arising
out of the operation of Section 580d of the California Code of Civil
Procedure in the context of nonjudicial foreclosure or any comparable
provision of the law of any other jurisdiction) or 726, or comparable
provisions of the laws of any other jurisdiction and all other
suretyship and other similar defenses it would otherwise have under the
laws of California or any other jurisdiction;
(v) all rights and defenses arising out of an election of
remedies by any Bank, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed such B Borrower's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of
the California Code of Civil Procedure or otherwise.
(vi) any duty on the part of any Bank, the Issuing Bank or the
Agent to disclose to such B Borrower any matter, fact or thing relating
to the business, operation or condition of any other B Borrower and its
assets now known or hereafter known by such Bank, the Issuing Bank or
the Agent;
(vii) all benefits of any statute of limitations affecting
such B Borrower's liability under this Article X or affecting the
enforcement of this Article X or any of the Obligations or realization
on any collateral for the Obligations;
(viii) all setoffs and counterclaims;
(ix) promptness, diligence, presentment, demand for
performance and protest;
(x) notice of non-performance, default, acceleration, protest
or dishonor;
(xi) except for any notice otherwise required by applicable
laws that may not be effectively waived by such B Borrower (all of
which are hereby waived to the fullest
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extent permitted by law), notice of sale or other disposition of any
collateral for the Obligations; and
(xii) notice of acceptance of this Article X and of the
existence, creation or incurring of new or additional Obligations.
SECTION 10.04. Waiver of Subrogation . Until the Obligations
are paid in full, each B Borrower hereby irrevocably waives any claim or other
rights (including, without limitation, any rights arising under California Civil
Code Sections 2847, 2848 or 2849) that it may now or hereafter acquire against
any other B Borrower that arise from the existence, payment, performance or
enforcement of such B Borrower's obligations under this Article X, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification by or from any other B Borrower and any right to
participate in any claim or remedy of any Bank against any other B Borrower or
any collateral for the Obligations, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from any other B Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to such B Borrower in violation of the preceding sentence at any
time prior to the later of (x) the payment in full in cash of the Obligations
and all other amounts payable under this Article X and (y) the expiration or
termination of any commitment of the Bank to extend credit under any this
Agreement, such amount shall be held in trust for the benefit of the Bank and
shall forthwith be paid to the Bank to be credited and applied to the
Obligations and all other amounts payable under this Article X, whether matured
or unmatured, or to be held as collateral for any Obligations or other amounts
payable under this Article X thereafter arising. Each B Borrower acknowledges
that it will receive direct and indirect benefits from the transactions provided
for in this Agreement, and that the waiver set forth in this Section 10.04 is
knowingly made in contemplation of such benefits.
SECTION 10.05. Financial Condition of B Borrowers. Each B
Borrower represents to each Bank, the Issuing Bank and the Agent that such B
Borrower is now and will be completely familiar with the business, operations
and conditions of the other B Borrowers, and such B Borrower hereby waives and
relinquishes any duty on the part of any Bank, the Issuing Bank or the Agent to
disclose any matter, fact or thing relating to the business, operations or
conditions of the other B Borrowers now known or hereafter known by such Bank,
the Issuing Bank or the Agent.
SECTION 10.06. Certain Limitations. Section 10.01 of this
Agreement notwithstanding:
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(a) the liability of INMAC GmbH under this Agreement for the
Obligations of any other B Borrower shall at all times be limited to
the amount by which INMAC GmbH's equity (the calculation of which shall
take into account the captions reflected in Section 266(3)A I through V
of the German Commercial Code) at that time exceeds INMAC GmbH's
registered share capital (the "Surplus Equity") and further provided
that in determining the Surplus Equity such liabilities shall not be
valued below their true value and such assets shall not be valued above
their true realizable value so that such liabilities under this
Agreement would at no time require the payment of any monies which are
needed to maintain a net asset value which is at least equal to INMAC
GmbH's registered share capital;
(b) the liability of INMAC SA under this Agreement shall at
all times be limited to the Maximum Financial Capacity of Inmac S.A. at
the time of such payment where "Maximum Financial Capacity" means, as
of the time of its determination, an amount equal to the excess of (i)
the Net Worth of Inmac S.A. over (ii) $1,000,000 and where "Net Worth"
means, with respect to Inmac S.A., its "capitaux propres" as determined
in accordance with French generally accepted accounting principles as
reflected in the annual financial statements for the most recently
ended fiscal year of Inmac S.A.; and
(c) the liability of INMAC AB under this Agreement for the
Obligations of any other B Borrower shall at all times (i) not include
any such Obligations to the extent the proceeds of the respective B
Borrowings are loaned directly or indirectly to the A Borrower and (ii)
be limited to the amount which corresponds to the unrestricted equity
of INMAC AB ("fritt eget kapital") calculated in accordance with
Chapter 12, Section 2 of the Swedish Companies Act.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Banks and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all of the Banks, do any of the following: (a)
waive any of the conditions specified in Article V, (b) increase the Commitments
of the Banks or subject the Banks to any additional monetary obligations, (c)
reduce the principal of, or interest on, the Advances, the Swing-Line Advances
or the Notes or any fees or other amounts payable hereunder, (d) postpone any
date fixed for any regularly scheduled payment of principal of, or interest on,
the Advances, the Swing-Line Advances or the Notes or any fees or other amounts
payable hereunder or waive any such payment when due, (e) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Advances,
the Swing-Line Advances or the Notes, or the number or percentage of Banks,
which shall be required for the Banks or any of them to take any action
hereunder or (f) amend this Section 11.01 or Section 11.16; provided, further,
that no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to each of the Banks required above to take such action,
affect the rights or duties of the Agent under this Agreement or any Note or the
principal, interest on or repayment of any Swing-Line Advance; and provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Issuing Bank in addition to the Banks required above to take such
action, affect the rights or duties of the Issuing Bank under this Agreement.
SECTION 11.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier
communication) and mailed (by certified mail, return receipt requested),
telecopied or delivered, if to any Borrower, at INMAC CORP., 2465 Augustine
Drive, Santa Clara, California, 95052-8031, Attention: Mr. Kermit Nolan,
Treasurer; if to any Bank, at its Eurocurrency Lending Office specified opposite
its name on Schedule I hereto; and if to the Agent or the Issuing Bank, at ABN
AMRO BANK N.V., San Francisco International Branch, 101 California Street, Suite
4550, San Francisco, California, 94111-5812, Attention: Mr. Jeffrey French, with
a copy to ABN AMRO BANK N.V., 335 Madison Avenue, New York, New York, 10017,
Attention: Ms. Linda Boardman; or, as to each party, at such other address as
shall be designated by such party in a written notice to the other parties. All
such notices and communications shall, when mailed (by certified mail, return
receipt requested) or telecopied, be effective when deposited in the mails or
confirmed received in the case of a telecopy, except that notices and
communications to the Agent pursuant to Article II or IX or to the Issuing Bank
pursuant to
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Article III or IX shall not be effective until received by the Agent on the
Issuing Bank, as the case may be.
SECTION 11.03. No Waiver; Remedies. No failure on the part of
any Bank, the Issuing Bank or the Agent to exercise, and no delay in exercising,
any right under any Loan Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 11.04. Costs, Expenses and Taxes. (a) Each Borrower
agrees to pay the Agent and the Issuing Bank on demand all reasonable costs and
expenses of the Agent and the Issuing Bank, respectively, in connection with the
preparation, negotiation, approval, execution, delivery, filing, recording,
administration, modification and amendment of any of the Loan Documents and the
other documents to be delivered under such Loan Documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of special and local
counsel for the Agent and the Issuing Bank with respect thereto and with respect
to advising the Agent and the Issuing Bank as to its rights and responsibilities
under any Loan Document and the other documents to be delivered hereunder and
thereunder. Each Borrower further agrees to pay on demand (i) all costs and
expenses, if any, of the Agent, the Issuing Bank or any Bank in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of any Loan Document and any the other documents to be delivered under such Loan
Document, including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 11.04, and (ii) all
costs and expenses in connection with appraisals, valuations, audits and search
reports, all insurance and title costs, and all filing and recording fees
required hereby or associated with any enforcement of rights or remedies
specified in clause (i).
(b) If any payment of principal of any Advance is made other
than on the last day of the Interest Period for such Advance or the maturity
date for such Advance as specified in accordance with Section 2.06, as a result
of a payment pursuant to Section 2.12, acceleration of the maturity of the Notes
pursuant to Section 8.01 or for any other reason, such respective Borrower
shall, upon demand by any Bank (with a copy of such demand to the Agent), pay to
the Agent for the account of such Bank any amounts required to compensate such
Bank for any additional losses, costs or expenses which it may reasonably incur
as a result of such payment, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund or maintain such Advance.
SECTION 11.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the
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consent specified by Section 8.01 to authorize the Agent to declare the Notes
due and payable pursuant to the provisions of Section 8.01 or to demand payment
of all then outstanding Total Letter of Credit Liability, each Bank is hereby
authorized at any time and from time to time, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the credit
or the account of any Borrower against any and all of the obligations of such
Borrower now or hereafter existing under any Loan Document to such Bank
(including, to the fullest extent permitted by law, obligations indirectly owed
to such Bank by virtue of its purchase of a participation of the Total Letter of
Credit Liability pursuant to Section 3.04), whether or not such Bank shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Bank agrees promptly to notify such Borrower after any
such set-off and application made by such Bank, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Bank under this Section 11.05 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Bank may have.
SECTION 11.06. Judgment. (a) If for the purposes of obtaining
a judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in Dollars or in an Alternative Currency (the "Original Currency")
into another currency (the "Other Currency"), the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the Agent
could purchase the Original Currency with the Alternative Currency at the close
of business on the Business Day immediately preceding that on which the final
judgment is given.
(b) The obligation of each Borrower in respect of any sum due
in the Original Currency from it to any Bank, the Issuing Bank or the Agent
hereunder or under the Note held by such Bank shall, notwithstanding any
judgment in any Other Currency, be discharged only to the extent that on the
Business Day following receipt by such Bank, the Issuing Bank or the Agent, as
the case may be, of any sum adjudged to be so due in such Other Currency such
Bank, the Issuing Bank or the Agent, as the case may be, may in accordance with
normal banking procedures purchase Dollars or the appropriate Alternative
Currency, as the case may be, with such Other Currency; if the amount of the
Original Currency so purchased is less than the sum originally due to such Bank
or the Agent, as the case may be, in the Original Currency, each Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Bank, the Issuing Bank or the Agent, as the case may be, against
such loss, and if the amount of the Original Currency so purchased exceeds the
sum originally due to any Bank, the Issuing Bank or the Agent, as the case may
be, in the Original Currency, such Bank, the Issuing Bank or the Agent,as the
case may be, agrees to remit to each Borrower such excess.
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<PAGE> 72
SECTION 11.07. Indemnification. Each Borrower agrees to
defend, protect, indemnify and hold harmless the Agent, each Bank and the
Issuing Bank and their respective Affiliates and the directors, officers,
employees, attorneys and agents of the Agent, each Bank, the Issuing Bank and
such Affiliates (each of the foregoing being an "Indemnitee" and all of the
foregoing being collectively the "Indemnitees") from and against any and all
claims, actions, damages, liabilities, costs and expenses (including, without
limitation, all fees and disbursements of counsel and environmental consultants
which may be incurred in the investigation or defense of any matter) imposed
upon, incurred by or asserted against any Indemnitee by any third-party, whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws or other statutes or regulations (including, without limitation,
securities and commercial laws and regulations), under common law or on
equitable cause, or on contract, tort or otherwise, including, without
limitation, those arising:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document,
any commitments relating thereto, or any transaction contemplated by
any Loan Document; or
(b) in connection with any investigation, litigation,
proceeding or other action relating to any Loan Document (whether or
not any Indemnitee is a party thereto); or
(c) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by
any Person, or any event occurring, in connection therewith, or the
exercise of any rights or remedies thereunder;
provided, however, that, notwithstanding the foregoing, no Borrower shall be
liable to any Indemnitee for any portion of such claims, damages, liabilities
and expenses resulting from such Indemnitee's or such Indemnitee's Affiliate's,
director's, officer's, employee's, attorney's or agent's gross negligence or
willful misconduct. In the event this indemnity is unenforceable as a matter of
law as to a particular matter or consequence referred to herein, it shall be
enforceable to the full extent permitted by law.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the date of
payment in full of the Advances. The indemnification provisions set forth above
shall be in addition to any liability any Borrower may otherwise have. Without
prejudice to the survival of any other obligation of each Borrower hereunder,
the indemnities and obligations of each such Borrower contained in this Section
11.07 shall survive the payment in full of the Advances and the Swing-Line
Advances.
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<PAGE> 73
SECTION 11.08. Survival of Representations and Warranties. All
representations and warranties made in, and in any certificates and other
documents delivered pursuant to, this Agreement and any other Loan Document
shall be deemed to have been relied upon by each Bank and shall survive the
execution and delivery of this Agreement and any other Loan Document, regardless
of any investigation made by or on behalf of any Bank, in full force and effect
until payment in full of all liabilities on the part of the Borrowers arising
under this Agreement or any other Loan Document.
SECTION 11.09. Binding Effect. This Agreement shall become
effective when it shall have been executed by each Borrower, the Agent and the
Issuing Bank and when the Agent shall have been notified by each Bank that such
Bank has executed it and thereafter it shall be binding upon and inure to the
benefit of each Borrower, the Agent, the Issuing Bank and each Bank and their
respective successors and assigns, except that no Borrower shall have the right
to assign its rights hereunder or any interest herein without the prior written
consent of the Banks.
SECTION 11.10. Severability of Provisions. Each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited or unenforceable in any jurisdiction, such provision shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 11.11. Assignments and Participations. (a) Each Bank
may assign to one or more banks or other entities all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its A Commitment, its B Commitment, the Advances owing to it and the
Note or Notes held by it; provided, however, that (i) each such assignment shall
be of a constant, and not a varying, percentage of all rights and obligations
under this Agreement, including a constant percentage at its A Commitment and B
Commitment, (ii) the amount of the A Commitment and B Commitment of the
assigning Bank being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such assignment) shall
in no event be less than $4,000,000, (iii) each such assignment shall be to an
Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance substantially in the form of Exhibit E hereto,
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $2,500, and (v) the assignee shall execute a confidentiality
agreement in such form as in effect at such time between the assigning Bank and
the A Borrower]. Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the
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<PAGE> 74
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and (y) the Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 6.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Bank or any other Bank 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; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in
Section 11.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the Banks
and the A Commitment and B Commitment of, and principal amount of the Advances
owing to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and each Borrower, the Agent and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by any Borrower or any
Bank at any reasonable time and from time to time upon reasonable prior notice.
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<PAGE> 75
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an assignee representing that it is an Eligible
Assignee, together with any Note or Notes subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit E hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to each Borrower. Within five Business Days
after its receipt of such notice, each Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Note or Notes a
new Note to the order of such Eligible Assignee in an amount equal to the A
Commitment and B Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained an A Commitment and B
Commitment hereunder, a new Note to the order of the assigning Bank in an amount
equal to the commitments retained by it hereunder. Such new Note or Notes shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit A hereto.
(e) Each Bank may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
commitments, the Advances owing to it and the Note or Notes held by it;
provided, however, that (i) such Bank's obligations under this Agreement
(including, without limitation, its commitments to the Borrowers hereunder)
shall remain unchanged, (ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Bank
shall remain the holder of any such Note for all purposes of this Agreement, and
(iv) the Borrowers, the Agent and the other Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement.
(f) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.11, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Bank by
or on behalf of the Borrowers; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information relating to the
Borrowers received by it from such Bank.
(g) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
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<PAGE> 76
SECTION 11.12. Governing Law and Jurisdiction. This Agreement
shall be construed in accordance with the laws of the State of California. Each
Borrower hereby irrevocably submits to the jurisdiction of the courts of the
State of California in any action or proceeding arising out of or in connection
with this Agreement, the Advances, the Swing-Line Advances and the Notes.
SECTION 11.13. Execution in Counterparts; Headings and Table
of Contents. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. The Table of Contents and descriptive
headings of the sections and articles are inserted for convenience only and do
not constitute part of this Agreement.
SECTION 11.14. Confidentiality Agreements. Each Bank has
entered into a confidentiality agreement with the A Borrower prior to the date
hereof and all written information identified as confidential and delivered
hereunder to the Banks shall be treated as such in accordance with the terms of
such confidentiality agreement.
SECTION 11.15 JURISDICTION: SERVICE OF PROCESS. EACH BORROWER
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY NOTE, OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGEMENT IN RESPECT OF ANY
BREACH THEREOF, BROUGHT BY ANY BANK OR THE AGENT AGAINST ANY BORROWER OR ANY OF
THEIR RESPECTIVE PROPERTY, MAY BE BROUGHT BY SUCH BANK OR THE AGENT IN THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OR ANY
CALIFORNIA STATE COURT SITTING IN SAN FRANCISCO, CALIFORNIA AS SUCH BANK OR THE
AGENT MAY IN ITS SOLE DISCRETION ELECT, AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, IRREVOCABLY SUBMITS TO THE JURISDICTION OF EACH SUCH COURT; AND
AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL, TO THE
EXTENT PERMITTED BY LAW, CONSTITUTE ADEQUATE SERVICE OF PROCESS IN ANY SUCH
SUIT. WITHOUT LIMITING THE FOREGOING, EACH B BORROWER HEREBY APPOINTS, IN THE
CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE
OF CALIFORNIA, CT CORPORATION, WITH OFFICES ON THE DATE HEREOF AT 818 WEST
SEVENTH STREET, LOS ANGELES, CALIFORNIA 90017, TO RECEIVE FOR IT AND ON ITS
BEHALF, SERVICE OF PROCESS IN THE STATE OF CALIFORNIA WITH RESPECT THERETO,
PROVIDED EACH B BORROWER MAY APPOINT ANY OTHER PERSON, REASONABLY ACCEPTABLE TO
THE AGENT,
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<PAGE> 77
WITH OFFICES IN THE STATE OF CALIFORNIA TO REPLACE SUCH AGENT FOR SERVICE OF
PROCESS UPON DELIVERY TO THE BANKS AND THE AGENT OF A REASONABLY ACCEPTABLE
AGREEMENT OF SUCH NEW AGENT AGREEING SO TO ACT. IN ADDITION, EACH BORROWER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE, BROUGHT IN
THE SAID COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY BANK OR THE AGENT TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES
IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER ANY
BORROWER IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY
APPLICABLE LAW. THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT,
THE EXPIRY OF ALL LETTERS OF CREDIT, AND THE PAYMENT IN FULL OF THE OBLIGATIONS
OF THE BORROWERS HEREUNDER.
SECTION 11.16. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS,
THE AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY
AND THEREBY.
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<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first written.
INMAC CORP.
By:____________________________
Name:
Title:
INMAC B.V.
By:____________________________
Name:
Title:
INMAC GMBH
By:____________________________
Name:
Title:
INMAC (U.K.) LTD.
By:____________________________
Name:
Title:
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<PAGE> 79
INMAC HOLDINGS LIMITED
By:____________________________
Name:
Title:
INMAC SA
By:____________________________
Name:
Title:
INMAC AB
By:____________________________
Name:
Title:
<TABLE>
<CAPTION>
A Commitment B Commitment
- ------------ ------------
<S> <C> <C>
$ 1,166,667 $ 7,000,000 ABN AMRO BANK N.V.
as Agent, Issuing Bank and a Bank
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
</TABLE>
E-79
<PAGE> 80
<TABLE>
<CAPTION>
A Commitment B Commitment
- ------------ ------------
<S> <C> <C>
$ 833,333 $ 5,000,000 BARCLAYS BANK PLC
By:____________________________
Name:
Title:
$ 833,333 $ 5,000,000 CREDIT INDUSTRIEL ET COMMERCIAL
By:____________________________
Name:
Title:
$ 833,333 $ 5,000,000 NATIONAL WESTMINSTER BANK PLC
By:____________________________
Name:
Title:
$ 666,667 $ 4,000,000 BANQUE SAN PAOLO
By:____________________________
Name:
Title:
$ 666,667 $ 4,000,000 MIDLAND BANK PLC
</TABLE>
E-80
<PAGE> 81
<TABLE>
<S> <C>
By:____________________________
Name:
Title:
</TABLE>
E-81
<PAGE> 82
SCHEDULE I
Applicable Lending Offices
<TABLE>
<CAPTION>
Name of Bank Eurocurrency Lending Office
- ------------ ---------------------------
<S> <C>
ABN AMRO Bank N.V. Cayman Island Office
135 South LaSalle Street
Chicago, IL 60603
Barclays Bank plc 1 High Street
Bracknell
Berkshire RG12 1GJ
Credit Industriel et 60 rue de la Victoire
Commerciel de Paris 75452 Paris Cedex 09
National Westminster Bank plc NatWest Markets
19th Floor
175 Water Street
New York, NY 10038
Banque San Paolo 52 Avenue Hoche
75382 Paris, Cedex 08
Midland Bank plc Business Banking Centre
Midland House Queens Court
66/58 Queens Road
Reading
Berkshire RG1 4DB
</TABLE>
E-82
<PAGE> 1
Exhibit 11.0
Inmac Corp. and Subsidiaries
Statement of Computation of Net Income Per Share
(in thousands, except net income per share data)
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
July 29, July 30, July 31,
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 4,531 $ 1,816 $(13,877)
======== ======== ========
Weighted average number
of common shares
outstanding 10,190 9,956 9,464
Weighted average common
equivalent shares - stock options
and stock purchase warrant 560 875 --
-------- -------- --------
Weighted average common and
common equivalent shares
outstanding 10,750 10,831 9,464
======== ======== ========
Net income per common and
common equivalent share $ 0.42 $ 0.17 $ (1.47)
======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-START> JUL-31-1994
<PERIOD-END> JUL-29-1995
<EXCHANGE-RATE> 1
<CASH> 21,165
<SECURITIES> 0
<RECEIVABLES> 50,672
<ALLOWANCES> 1,927
<INVENTORY> 27,924
<CURRENT-ASSETS> 105,889
<PP&E> 21,876
<DEPRECIATION> 13,474
<TOTAL-ASSETS> 116,349
<CURRENT-LIABILITIES> 52,627
<BONDS> 0
<COMMON> 106
0
0
<OTHER-SE> 42,733
<TOTAL-LIABILITY-AND-EQUITY> 116,349
<SALES> 362,511
<TOTAL-REVENUES> 362,511
<CGS> 241,986
<TOTAL-COSTS> 241,986
<OTHER-EXPENSES> 109,467
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,442
<INCOME-PRETAX> 9,616
<INCOME-TAX> 5,085
<INCOME-CONTINUING> 5,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,085
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
