<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
(Mark one)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED DECEMBER 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 0-19856
-------------------------
XIRCOM, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4221884
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2300 CORPORATE CENTER DRIVE
THOUSAND OAKS, CALIFORNIA 91320
(Address of principal executive offices & zip code)
REGISTRANT'S TELEPHONE NUMBER:(805) 376-9300
-------------------------
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
--- ---
There were 20,125,152 shares of the registrant's $.001 par value Common
Stock outstanding as of February 7, 1997.
<PAGE> 2
XIRCOM, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16-17
Item 5. Other Items 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
XIRCOM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
December 31, 1996 September 30, 1996
----------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,286 $ 21,504
Accounts receivable, net 45,124 32,169
Income tax receivable 2,652 2,652
Inventories 20,086 17,277
Deferred income taxes 7,048 7,048
Other current assets 4,124 3,424
--------- --------
Total current assets 103,320 84,074
Equipment and improvements, net 20,837 19,928
Other assets 4,383 4,795
--------- --------
Total assets $ 128,540 $108,797
========= ========
Current liabilities:
Notes payable to bank $ 8,744 $ 5,100
Accounts payable 19,235 12,613
Accrued liabilities 20,356 20,362
Current portion of long-term obligations 1,779 1,456
Accrued income taxes 1,865 1,066
--------- --------
Total current liabilities 51,979 40,597
Long-term obligations 2,175 1,860
Deferred income taxes 737 737
Shareholders' equity:
Common stock 20 20
Paid-in capital 86,810 83,221
Accumulated deficit ( 13,181) (17,638)
-------- --------
Total shareholders' equity 73,649 65,603
--------- --------
Total liabilities and shareholders' equity $ 128,540 $108,797
========= ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
XIRCOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share information)
<TABLE>
<CAPTION>
Three months ended
December 31
1996 1995
---- ----
<S> <C> <C>
Net sales $62,311 $37,698
Cost of sales 38,633 23,944
------- -------
Gross profit 23,678 13,754
Operating expenses:
Research and development 3,785 3,007
Sales and marketing 11,126 9,121
General and administrative 2,450 2,365
------- -------
Total operating expenses 17,361 14,493
------- -------
Operating income (loss) 6,317 ( 739)
Other income (expense), net 50 ( 283)
------- -------
Income (loss) before income taxes 6,367 ( 1,022)
Income tax provision (benefit) 1,910 ( 262)
------- -------
Net income (loss) $ 4,457 $( 760)
======= =======
Weighted average shares outstanding 20,662 18,989
Net income (loss) per share $ .22 $( .04)
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
XIRCOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
December 31
1996 1995
---- ----
<S> <C> <C>
Operating activities:
Net income (loss) $ 4,457 $( 760)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 2,208 1,995
Changes in assets and liabilities:
Accounts receivable (12,955) ( 8,655)
Income tax receivable - 3,000
Inventories ( 2,809) ( 2,351)
Other current assets ( 700) ( 1,436)
Accounts payable and accrued liabilities 6,616 ( 7,638)
Income taxes payable 1,828 ( 170)
------- --------
Net cash used in operating activities ( 1,355) (16,015)
------- --------
Investing activities:
Purchases of equipment and improvements ( 2,728) ( 1,521)
Other 23 37
------- --------
Net cash used in investing activities ( 2,705) ( 1,484)
------- --------
Financing activities:
Proceeds from issuance of capital stock 2,560 504
Proceeds from issuance of long-term debt 960 1,800
Net borrowings under line-of-credit agreement 3,644 10,199
Long-term debt repayments ( 322) ( 277)
------- --------
Net cash provided by financing activities 6,842 12,226
-------- --------
Net increase (decrease) in cash 2,782 ( 5,273)
------- --------
Cash and cash equivalents at beginning of period 21,504 13,658
------- --------
Cash and cash equivalents at end of period $24,286 $ 8,385
======= ========
Supplemental cash flow disclosures:
Cash paid for interest $ 144 $ 41
Tax benefit related to employee stock options $ 1,029 $ 136
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
XIRCOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
by the Company without audit (except for the balance sheet information as of
September 30, 1996, which was derived from audited consolidated financial
statements) pursuant to Securities and Exchange Commission regulations. In the
opinion of management, the financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the consolidated financial position at December 31, 1996 and the consolidated
results of operations for the three-month periods ended December 31, 1996 and
1995, and cash flows for the three-month periods ended December 31, 1996 and
1995, in accordance with generally accepted accounting principles. The
accompanying financial statements are condensed and do not include footnotes
and certain financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
audited financial statements included in the Company's 1996 annual report on
Form 10-K.
The results of operations for the three-month period ended December 31, 1996
are not necessarily indicative of the results to be expected for the entire
fiscal year.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
shares of common stock and dilutive common stock equivalents (stock options)
outstanding. Fully diluted amounts for each period do not materially differ
from the amounts presented herein.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31 September 30
1996 1996
---- ----
<S> <C> <C>
Finished goods $ 7,383 $ 6,154
Subassemblies 2,168 3,251
Work-in-process 1,840 650
Component parts 8,695 7,222
------- -------
$20,086 $17,277
======= =======
</TABLE>
6
<PAGE> 7
XIRCOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
REVENUE RECOGNITION
The Company recognizes revenue from product sales when shipped. The Company
generally provides a lifetime limited warranty against defects in the hardware
component and a two-year limited warranty on the software component of its
network adapters and modem products. Netaccess products have a five-year
hardware warranty and a 90-day software warranty, and ISDN products have a
two-year hardware and a one-year software warranty. In addition, the Company
provides telephone support to purchasers of its products as needed to assist
them in installation or use of the products. The Company makes provisions for
these costs in the period of sale. The Company also has policies and/or
contractual agreements which permit distributors and dealers to return products
under certain circumstances. The Company makes a provision for the estimated
amount of product returns that may occur under these programs and contracts in
the period of sale.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents and are carried at cost
plus accrued interest.
SUBSEQUENT EVENT
On January 16, 1997 the Company announced that it had signed an agreement with
Intel Corporation ("Intel") pursuant to which Intel would purchase a 12.5
percent interest in the Company's common stock (2.5 million newly issued
shares) and acquire a warrant to purchase an additional 7.5 percent of the
Company's common stock (1.5 million newly issued shares). The value of the
initial Intel equity investment, which is subject to regulatory approval, is
approximately $52 million. In addition, the Company and Intel have signed a
three-year technology and OEM agreement.
7
<PAGE> 8
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report contains trend analysis and other forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those projected in the trend
analysis and other forward-looking statements contained herein, as a result of
the risk factors set forth below and elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth the statements of operations as a percentage of
net sales:
<TABLE>
<CAPTION>
Three months ended
December 31
1996 1995
---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 62.0 63.5
----- -----
Gross profit 38.0 36.5
Operating expenses:
Research and development 6.1 8.0
Sales and marketing 17.9 24.2
General and administrative 3.9 6.3
----- -----
27.9 38.5
----- -----
Operating income (loss) 10.1 ( 2.0)
Other income (expense), net 0.1 ( 0.7)
----- -----
Income (loss) before income taxes 10.2 ( 2.7)
Income tax provision (benefit) 3.0 ( 0.7)
----- -----
Net income (loss) 7.2 ( 2.0)%
===== =====
</TABLE>
NET SALES
PC CARD AND PARALLEL PORT PRODUCT SALES. Net sales of LAN adapters, modems and
multifunction LAN and modem cards ("Combo cards") (collectively "client
products") for the quarter ended December 31, 1996 increased 67% from the
corresponding period a year ago primarily due to growth in overall market
demand for local and wide area network connectivity products that connect
portable PCs to networks, the Internet and on-line services and an increase in
unit sales of the Company's client products by its distributors in each of the
last six quarters. The growth in channel sell-through may be indicative of
several factors: an increased growth rate in shipments of portable PCs, which
in turn require network connections; a more competitive pricing strategy first
adopted by the Company during fiscal 1995; continuing increased market
acceptance of the Company's Combo cards; and increased sales of the Company's
modem-only
8
<PAGE> 9
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PC Card products, which were first introduced in September 1995. Unit
shipments of client products increased 110% for the December 1996 quarter
versus the December 1995 quarter but average selling prices declined due to
increased competition in the PC Card LAN adapter market and to a continuing
shift in mix of products from higher-priced parallel port versions to PC Card
versions.
NETACCESS PRODUCT SALES. The Netaccess family of products includes remote
access server products sold to original equipment manufacturers ("OEMs") and
through two-tier distribution channels. Netaccess product sales increased by
54% in the December 1996 quarter compared to the December 1995 quarter, but
decreased to 10% of total net sales from 11% during the same period. Sales to a
significant customer, which accounted for 32% and 29% of Netaccess product
sales in the September 1996 and December 1995 quarters, respectively, declined
significantly in the December 1996 quarter due to the customer developing the
product internally. Sales to this customer are not expected to be significant
during the remainder of fiscal 1997.
INTERNATIONAL SALES. Total international sales (shipments to customers located
outside the U.S.) were 46% of total net sales for the December 1996 quarter,
compared to 36% for the December 1995 quarter. International sales of PC Cards
increased as a percentage of total PC Card sales to 50% in the December 1996
quarter from 38% in the December 1995 quarter. PC Card sales in Europe and
Asia-Pacific grew at a faster rate than in the U.S. during the December 1996
quarter primarily because of greater market growth in Asia and shorter delays
in 1996 as compared to 1995 between initial shipment of new products in the
U.S. and the shipment of internationally approved versions of such products.
GROSS PROFIT
Gross profit margins for the December 1996 quarter increased to 38.0% compared
with 36.5% for the comparable prior-year period. The increase in gross profit
as a percentage of net sales was primarily attributable to a change in the
discount structure on products sold into the distribution channel beginning in
the September 1996 quarter and a change in the classification of certain
expenses effective in the December 1996 quarter. Increased shipments and the
resulting decrease in fixed costs as a percentage of total cost of sales, as
well as the favorable impact of cost reduction efforts including the successful
transition of all the Company's PC Card production to its own manufacturing
facility in Penang, Malaysia also contributed to the increase in gross profit
margins. These positive margin impacts were partially offset by the increased
portion of sales represented by PC Card products, which have lower gross profit
margins than the Company's parallel port products, and to selling price
reductions on PC Card products. In addition, start-up expenses related to the
Malaysian manufacturing facility had a negative impact on gross margins in the
first quarter of fiscal 1996.
9
<PAGE> 10
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING EXPENSES
Operating expenses for the December 1996 quarter increased by 20% compared to
the corresponding prior-year period because of the expansion of product lines
and expanded international operations, but decreased as a percentage of sales
due to more focused product development activities, a reduction in certain
promotional spending and the higher sales in the December 1996 quarter. Total
operating expenses are expected to increase for the balance of fiscal 1997 but
may fluctuate as a percentage of net sales.
Research and development expenses increased by 26% in the December 1996 quarter
compared to the December 1995 quarter due to expenditures on product
enhancements and new product introductions offset partially by reduced spending
on the Netwave product line, which was sold in August 1996. Research and
development expenses decreased as a percentage of sales due to higher sales
levels and more focused product development efforts. Although the Company
continues to focus on a narrower set of product areas, total expenditures for
research and development expenses are likely to continue to increase in 1997
due to planned expenditures on product enhancements and new product
introductions.
Sales and marketing expenses increased by 22% but decreased as a percentage of
sales in the December 1996 quarter as compared with the December 1995 quarter.
The increase in expenses was due to additional headcount and marketing
activities to support the increased sales levels. In addition, as discussed in
"Gross profit" above, the Company changed its discount structure on products
sold into the distribution channel beginning in the September 1996 quarter and,
as a result, improved its gross profit margins. The additional gross profit
dollars were used to invest in sales and marketing programs focused on
accelerating product sell-through in the distribution channel. Sales and
marketing expenses increased at a slower rate than the sales growth due to the
consolidation of certain sales operations and reduced overall promotional
spending resulting from a more focused product line. Sales and marketing
expenses are expected to increase through the remainder of fiscal 1997 to
support planned new product introductions.
General and administrative expenses increased by 4% in the December 1996
quarter compared to the comparable prior-year period due to expanded
information systems hardware and software and the need to support growth in the
overall organization. General and administrative expenses have decreased as a
percentage of sales primarily due to the higher sales in the December 1996
quarter. General and administrative expenses are expected to increase modestly
during the remainder of fiscal 1997.
OTHER INCOME (EXPENSE), NET
Net other income or expense includes interest income from the investment of
available cash, early payment discounts earned by the Company offset by early
payment
10
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XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
discounts taken by customers, foreign currency transaction gains and losses,
and interest expense on notes payable and capital leases. Net other income for
the fiscal 1997 period compared to net other expense for the fiscal 1996 period
is due primarily to lower interest expense and higher interest income as a
result of increased cash balances and reduced borrowings under the Company's
credit facilities, and increased net foreign currency transaction gains.
INCOME TAXES
The Company's effective tax rate for the three-month period ended December 31,
1996 was 30.0%. The difference between the effective tax rate in the current
quarter and the 35% federal statutory tax rate is due primarily to benefits
from the tax holiday status of the Company's operations in Malaysia, offset by
the nondeductible amortization of goodwill. The Company's effective tax
benefit for the three-month period ended December 31, 1995 was 25.6%. The
difference between the effective tax benefit in the December 1995 quarter and
the 35% federal statutory tax rate is due primarily to the nondeductible
amortization of goodwill.
RISK FACTORS
The market for portable PC LAN adapters has grown rapidly since the Personal
Computer Memory Card International Association (PCMCIA) introduced a standard
form factor for PC Card (originally "PCMCIA") LAN adapters in 1993. Companies
with greater name recognition in the PC, desktop LAN adapter and PC Card modem
industries and with greater financial resources now have a significant presence
in the PC Card adapter market. As a result, the Company's net sales and gross
profit margins have been and could continue to be adversely impacted by several
competitive factors, including increased price competition, new product
introductions by competitors, promotional efforts by competitors, any reduction
in the Company's percentage market share of the PC Card adapter markets, and
the levels of inventories in the Company's distribution channels. Although
competition is expected to remain intense, the Company believes its share of
the PC Card LAN adapter market stabilized in 1996 and the first quarter of
fiscal 1997, primarily because of a more competitive pricing strategy for PC
Card products adopted during fiscal 1995, the success of its combination
Ethernet LAN and Modem PC Card, and the introduction of several new PC Card
products in late 1996, including the Company's Fast Ethernet PC Card which
began shipping in June 1996, its CardBus Ethernet adapter which began shipping
in October 1996, and its fourth-generation Combo cards which began shipping in
September 1996.
The Company believes that the market for PC Card LAN adapters, modems and Combo
cards will continue to be price competitive for the long-term and thus could
continue to result in lower gross profit margins than the Company has earned
from such products in the past. The Company believes its current product costs
are competitive, and continues to redesign its products for cost savings. In
addition, the
11
<PAGE> 12
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Company's manufacturing facility, which began volume production in early fiscal
1996 and is now producing all of the Company's PC Card products, is operating
at a greater efficiency level than in the first half of fiscal 1996. While the
in-house manufacturing facility is expected to continue to have a positive
impact on cost reduction efforts, the proportion of revenues derived from the
Combo and modem-only PC Cards, which have lower gross profit margins compared
to LAN PC Cards and Netaccess products, have negatively impacted overall gross
margins and may continue to offset improvements from manufacturing and design
efficiencies if such revenue mix changes continue. In addition, there can be
no assurances that cost reductions achieved through increased manufacturing
efficiencies will keep pace with competitors' cost reductions or will be
sufficient in the event of anticipated competitive price reductions to allow
price reductions required to maintain or increase market share without
adversely affecting gross profit margins.
The Company generally ships products within one to six weeks after receipt of
orders and therefore its sales backlog is typically minimal. Accordingly, the
Company's expectations of future net sales are based largely on its own
estimate of future demand and not on firm customer orders. If net sales do not
meet expectations, the Company may not be able to reduce expenses
commensurately in the near-term, and profitability would be adversely affected.
The Company's net sales may be affected by its distributors' decisions as to
the quantity of the Company's products to be maintained in their inventories.
At December 1996, the Company believes its distributors had what the Company
considers to be normal levels of inventory overall. However, there can be no
assurance that distributors will not choose to reduce inventory levels
nonetheless, which would adversely affect net sales.
There can be no assurances that new products that the Company may introduce
will achieve market acceptance or sell through to end users in sufficient
quantities to make them viable for the long-term. In addition, the Company may
have difficulty in establishing its presence in markets in which it does not
have significant brand recognition, such as remote access.
The Company introduced a line of modem-only PC Card products late in fiscal
1995, utilizing existing technologies from its Combo cards and modem-based
remote access products. While the PC Card modems generally have lower gross
profit margins than PC Card LAN adapters, increased sales volume from modems
would have a positive impact on coverage of fixed manufacturing costs, which in
time could partially offset the generally lower margins on modem products.
While product areas such as remote access and ISDN are expected to contribute
higher gross profit margins, any sales growth achieved in these areas may not
exceed sales growth, if any, in PC Card products, and therefore any positive
impact on overall gross margins may be limited.
Because all PC Card products are being manufactured at the Company's own
facilities, interruptions in supply of products could occur if the Company is
unable to accurately
12
<PAGE> 13
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
forecast or react to changes in product demand, which in turn could adversely
affect future sales. Interruptions could also occur due to political or
economic changes in Malaysia.
In summary, gross profit margins are impacted by a number of factors, including
the rate of sales growth, competitive pricing pressures, the mix of product
sales, component and manufacturing costs, and shipment of new products, which
often have lower margins until market acceptance and increased volumes permit
component cost reductions and manufacturing efficiencies. Frequent product
transitions also increase the risk of inventory obsolescence and interruptions
of sales.
Historically, Netaccess (and previously PRI) has focused its sales and
development efforts on the OEM market and has recorded limited sales to date in
the end-user market. There can be no assurances that the Company will be able
to successfully develop the end-user market for its remote access products or
be able to compete effectively with other companies that have significantly
greater resources.
The Company's corporate headquarters, research and development facilities and
other critical business operations are located near major earthquake faults.
Operating results could be materially adversely affected in the event of a
major earthquake.
A number of additional factors could have an impact on the Company's future
operating results. The industry in which the Company operates is characterized
by rapid technological change and short product life cycles. While the Company
has historically been successful in developing leading technology for its
products, ongoing investment in research and development will be required to
maintain the Company's technological position, and the Company could be
required to increase the rate of such investments depending on competitive
factors. Many of the Company's competitors have greater financial and
technical resources than the Company. It is also possible that networking
capability could be included in the PC itself or in extension modules to PCs,
which could cause a reduction in the demand for add-on networking devices. The
Company's results are also dependent on continued growth in the underlying
market for portable networking products as well as the Company's ability to
retain its market share.
The Company is aware that competitors have duplicated certain functionality of
the Company's products. There can be no assurance that the Company's patents,
copyrights, trademarks and other efforts to protect its intellectual property
will prevent duplication of the Company's technology or that they will provide
a competitive advantage. The Company is also aware that there can be no
assurance that a patent issued to the Company would be upheld as valid if
litigation over a patent were initiated. The Company believes that, due to the
rapid pace of technological change in the LAN communications industry, the
Company's success is likely to depend more upon continued innovation, technical
expertise, marketing skills and customer support and service than legal
protection of the Company's proprietary rights.
13
<PAGE> 14
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
With the proliferation of new products and rapidly changing technology in the
PC Card and remote access server markets, there is a significant volume of
patents or similar intellectual property rights held by third parties. Given
the nature of the Company's products and development efforts, there are risks
that claims associated with such patents or intellectual property rights could
be asserted by third parties. These risks may include the following: the cost
of licensing a given technology if the Company believes it may be prudent to
secure such rights; the claimant may not offer such a license on terms
acceptable to the Company; the cost of litigation or settlement of such claims
could be substantial regardless of the merits of the allegations; the Company
may not prevail in the event of litigation; if the Company did not prevail in
litigation, it could be required to pay significant damages, and/or to cease
sales and production of infringing products, and only make future sales of a
noninfringing design.
The Company currently includes software licensed from third parties in certain
of its Ethernet+Modem, modem-only, Token Ring and remote access products,
which, in the aggregate, accounted for 64% of revenues in the first quarter of
fiscal 1997. The Company's operating results could be adversely affected by a
number of factors relating to this third-party software, including failure by a
licensor to promote or support the software, delays in shipment of the
Company's products as a result of delays in the introduction of licensed
software or errors in the licensed software, excess customer support costs or
product returns experienced by the Company due to errors in licensed software,
or termination of the Company's relationship with such licensors.
Because of frequent technology changes and rapid industry growth, the cost and
availability of components used to manufacture the Company's products may
fluctuate. Some components, including custom chipsets, are available from only
one supplier. Any interruptions in these supply sources or limitations on
availability could impact the Company's ability to deliver its products and in
turn adversely affect future earnings.
The Company is also subject to additional risk factors as identified in its
Annual Report to Shareholders and filing on Form 10-K for the year ended
September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996 the Company had $24.3 million in cash and cash
equivalents. The Company's operating activities used cash of approximately
$1.4 million in the three-month period ended December 31, 1996, primarily as a
result of increases in accounts receivable and inventories offset partially by
income from operations and an increase in accounts payable and accrued
liabilities. Accounts receivable increased due to higher quarterly revenue and
fewer early payment discounts offered in the December 1996 quarter compared to
the September 1996 quarter. Inventories increased primarily due to an increase
in the volume of PC Card business and to lower revenues in the Netaccess
business. The Company had capital expenditures of $2.7 million in the first
three months of fiscal 1997 primarily for manufacturing equipment at its
Malaysian manufacturing facility. The Company has no material fixed
commitments and does not expect an increase in the rate of capital expenditures
during the
14
<PAGE> 15
XIRCOM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
remainder of fiscal 1997 except that it has signed a letter of intent to
purchase its manufacturing facilities in Penang, Malaysia for approximately
$5.6 million. The Company is currently evaluating its options for funding the
purchase price.
On December 30, 1996, the Company entered into a two-year credit facility with
a bank that permits borrowings up to $25.0 million under base rate advances at
the prime rate or under London Interbank Offered Rate ("LIBOR") advances at the
related LIBOR rate plus 1-1/4%. The new facility replaced the Company's
previous credit facility with a financial institution. Advances under the new
agreement are based on eligible accounts receivable and inventories and are
secured by all U.S.-based assets of the Company. As of December 31, 1996,
there was $2.4 million outstanding under this agreement, which expires in
December 1998. The Company also has a credit facility in Malaysia totaling
$10.8 million with interest ranging from a fixed rate of approximately 7.0% to
a variable rate of 1/2% to 1-1/2% over the bank's reference rate. As of
December 31, 1996, there was $6.3 million in demand notes and $3.9 million in
term loans outstanding under this facility, which expires in December 1998. At
December 31, 1996 the Company had approximately $11.7 million in borrowings
available under its credit facilities.
On January 16, 1997 the Company announced that it had signed an agreement with
Intel Corporation ("Intel") pursuant to which Intel would purchase a 12.5
percent interest in the Company's common stock (2.5 million newly issued
shares) and acquire a warrant to purchase an additional 7.5 percent of the
Company's common stock (1.5 million newly issued shares). The value of the
initial Intel equity investment, which is subject to regulatory approval, is
approximately $52 million. The Company intends to use the proceeds from the
equity investment for working capital purposes.
The Company believes that cash on hand, borrowings available under its existing
facilities or from other financing sources and cash provided by operations will
be sufficient to support its working capital and capital expenditure
requirements for at least the next twelve months. However, there can be no
assurances that future cash requirements to fund operations will not require
the Company to seek additional capital sooner than the twelve months, or that
such additional capital will be available when required on terms acceptable to
the Company.
15
<PAGE> 16
XIRCOM, INC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on
January 17, 1997. The following is a brief description of each
matter voted upon at the meeting and the number of affirmative
votes and the number of negative votes cast with respect to each
matter.
(a) The shareholders elected the following persons as directors
of the Company: Michael F.G. Ashby, Kenneth J. Biba, Gary J.
Bowen, Dirk I. Gates, J. Kirk Mathews, William J. Schroeder, and
Delbert W. Yocam. The votes for and against (withheld) each
nominee were as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Michael F.G. Ashby 18,390,162 130,536
Kenneth J. Biba 18,388,928 130,536
Gary J. Bowen 18,385,778 130,536
Dirk I. Gates 18,345,535 130,536
J. Kirk Mathews 18,387,695 130,536
William J. Schroeder 18,387,962 130,536
Delbert W. Yocam 18,332,462 130,636
</TABLE>
(b) The shareholders approved an amendment to the Company's 1992
Stock Option Plan to increase the number of shares of common stock
reserved for issuance thereunder from 6,000,000 shares to
6,600,000 shares. There were 10,322,987 votes in favor of and
7,972,826 votes cast against the amendment. There were 56,835
abstentions.
(c) The shareholders approved an amendment to the Company's 1992
Director Stock Option Plan to increase the number of shares of
common stock reserved for issuance thereunder from 225,000 shares
to 425,000 shares. There were 11,314,307 votes in favor of and
6,947,907 votes cast against the amendment. There were 49,274
abstentions.
(d) The shareholders approved an amendment to the Company's 1994
Employee Stock Purchase Plan to increase the number of shares of
common stock reserved for issuance thereunder from 250,000 shares
to 400,000 shares. There were 17,680,347 votes in favor of and
582,976 votes cast against the amendment. There were 48,165
abstentions.
16
<PAGE> 17
XIRCOM, INC.
PART II
OTHER INFORMATION
(e) The shareholders ratified the appointment of Ernst & Young
LLP as independent auditors for the Company for the year ending
September 30, 1997. There were 18,347,423 votes in favor of and
117,686 votes cast against the appointment of Ernst & Young LLP as
independent auditors. There were 24,077 abstentions.
ITEM 5. OTHER ITEMS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10.29g Amendment #3 to Loan and Security Agreement, dated
as of December 16, 1996 between the CIT
Group/Credit Finance, Inc., and Xircom, Inc. and
Primary Rate Incorporated
10.30 Credit Agreement Among Xircom, Inc., Certain
Lenders Named Herein and NationsBank of Texas,
N.A. as Administrative Agent, dated as of December
30, 1996
10.30a Security Agreement Between Xircom, Inc. as Debtor
and NationsBank of Texas, N.A. as Administrative
Agent, dated as of December 30, 1996
10.30b Security Agreement Between Netaccess, Inc. as
Debtor and NationsBank of Texas, N.A. as
Administrative Agent, dated as of December 30,
1996
10.30c Intellectual Property Security Agreement Between
Xircom, Inc. as Debtor and NationsBank of Texas,
N.A. as Administrative Agent, dated as of December
30, 1996
10.30d Intellectual Property Security Agreement Between
Netaccess, Inc. as Debtor and NationsBank of
Texas, N.A. as Administrative Agent, dated as of
December 30, 1996
10.30e Subsidiary Guaranty, dated effective December 30,
1996, between Netaccess, Inc. and NationsBank of
Texas, N.A. as Administrative Agent
27 Financial Data Schedule
(b) Reports on Form 8-K
A Report on Form 8-K was filed by the Company on January 23,
1997 pursuant to Item 5 of Form 8-K ("Other Events"). The
report related to certain press releases issued by Xircom,
Inc. on January 16, 1997 regarding an OEM agreement and an
investment agreement between Xircom, Inc. and Intel
Corporation, and the release by Xircom, Inc. of its first
quarter 1997 earnings. Copies of the press releases were
filed as an exhibit to such report.
17
<PAGE> 18
SIGNATURES
----------
Pursuant to the requirements 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.
XIRCOM, INC.
------------
(Registrant)
Date: February 13, 1997 /s/ Dirk I. Gates
----------------- ------------------------------------
Dirk I. Gates
Chairman of the Board, President and
Chief Executive Officer
Date: February 13, 1997 /s/ Steven F. DeGennaro
----------------- ------------------------------------
Steven F. DeGennaro
Vice President, Finance and
Chief Financial Officer
18
<PAGE> 1
EXHIBIT 10.29g
[THE CIT GROUP LETTERHEAD]
December 16, 1996
Xircom, Inc.
Primary Rate Incorporated
2300 Corporate Center Drive
Thousand Oaks, CA 91320-1420
Attention: Steven F. DeGennaro, Vice President & CFO
RE: LOAN AND SECURITY AGREEMENT DATED NOVEMBER 8, 1995 AND ANY AND ALL
AMENDMENTS THERETO ENTERED INTO BETWEEN XIRCOM, INC., PRIMARY RATE
INCORPORATED (COLLECTIVELY "BORROWER") AND THE CIT GROUP/CREDIT FINANCE,
INC. ("LENDER") (THE "AGREEMENT")
AMENDMENT #3
Dear Steve:
In confirmation of our understanding, the above-captioned Agreement is hereby
amended, effective immediately, as set forth below. To the extent of any
inconsistencies between this letter-amendment and the Agreement, the terms and
conditions set forth below shall govern. In all other respects the Agreement
shall remain in full force and effect.
1. The Term of the Agreement as set forth in Section 9.1 is hereby
extended. The Agreement shall now terminate on January 1, 1997 rather
than on December 18, 1996.
2. In consideration for this accommodation, you agree to pay a fee of
$6,250.00 which shall be charged to your loan account upon execution of
this letter-amendment.
If the foregoing correctly sets forth our agreement please so acknowledge by
<PAGE> 2
December 16, 1996
Page 2 of 2
signing the original of this letter-amendment below and returning the same to
the undersigned.
Very truly yours,
The CIT Group/
Credit Financial, Inc.
Jean V. Grasso
Assistant Vice President
All of the foregoing is hereby approved and agreed to.
Xircom, Inc. Primary Rate Incorporated
By [SIG] By [SIG]
----------------------- ---------------------
Title CFO Title CFO
-------------------- ------------------
<PAGE> 1
EXHIBIT 10.30
================================================================================
$25,000,000
CREDIT AGREEMENT
AMONG
XIRCOM, INC.
CERTAIN LENDERS NAMED HEREIN
AND
NATIONSBANK OF TEXAS, N.A.,
AS ADMINISTRATIVE AGENT
December 30, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1.
Definitions
-----------
<S> <C> <C>
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
Section 1.2 Amendments and Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------
Section 1.3 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------
ARTICLE 2.
Advances
--------
Section 2.1 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------
Section 2.2 Manner of Borrowing and Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------------------------------
Section 2.3 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------
Section 2.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
----
Section 2.5 Prepayments and Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------------------
Section 2.6 Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------
Section 2.7 Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . 23
------------------------------------------------
Section 2.8 Payment of Principal of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------------------------
Section 2.9 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------
Section 2.10 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------
Section 2.11 LIBOR Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
Section 2.12 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------------
Section 2.13 Calculation of LIBOR Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------------------
Section 2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-----
Section 2.15 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------------
Section 2.16 Extension of Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------------------------
ARTICLE 3.
Conditions Precedent
--------------------
Section 3.1 Conditions Precedent to the Initial Advance and the Initial Issuance of Letters of Credit . . . 34
-----------------------------------------------------------------------------------------
Section 3.2 Conditions Precedent to All Advances and Letters of Credit . . . . . . . . . . . . . . . . . . 36
----------------------------------------------------------
Section 3.3 Conditions Precedent to Conversions and Continuations . . . . . . . . . . . . . . . . . . . . . 37
-----------------------------------------------------
</TABLE>
<PAGE> 3
ARTICLE 4.
Representations and Warranties
<TABLE>
<S> <C> <C>
Section 4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 37
------------------------------
Section 4.2 Survival of Representations and Warranties, etc . . . . . . . . . . . . . . . . . 44
-----------------------------------------------
ARTICLE 5.
General Covenants
-----------------
Section 5.1 Preservation of Existence and Similar Matters . . . . . . . . . . . . . . . . . . 44
---------------------------------------------
Section 5.2 Business; Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . 45
----------------------------------------
Section 5.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-------------------------
Section 5.4 Accounting Methods and Financial Records . . . . . . . . . . . . . . . . . . . . 45
----------------------------------------
Section 5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
---------
Section 5.6 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
---------------------------
Section 5.7 Visits and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
----------------------
Section 5.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
---------------
SECTION 5.9 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
---------
Section 5.10 Environmental Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 47
----------------------------
Section 5.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
------------------
Section 5.12 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
------------
ARTICLE 6.
Information Covenants
---------------------
Section 6.2 Annual Financial Statements and Information; Certificate of No Default . . . . . .. 49
----------------------------------------------------------------------
Section 6.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
----------------------
Section 6.4 Copies of Other Reports and Notices . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------------------
Section 6.5 Notice of Litigation, Default and Other Matters . . . . . . . . . . . . . . . . . 51
-----------------------------------------------
Section 6.6 ERISA Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 51
----------------------------
ARTICLE 7.
Negative Covenants
------------------
Section 7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
------------
Section 7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-----
Section 7.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-----------
Section 7.4 Liquidation, Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-------------------
Section 7.5 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
---------------
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.6 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
------------
Section 7.7 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------------------
Section 7.8 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 56
----------------------
Section 7.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
---------------------
Section 7.10 Maximum Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 57
----------------------
Section 7.11 Minimum Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 57
-------------------------------
Section 7.12 Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . 57
--------------------------
Section 7.13 Minimum Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------------------
Section 7.14 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . 57
-------------------------------
Section 7.15 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-------------
Section 7.16 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------
Section 7.17 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-----------
Section 7.18 Amendment of Organizational Documents . . . . . . . . . . . . . . . . . . . 57
-------------------------------------
ARTICLE 8.
Default
-------
Section 8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-----------------
Section 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------
ARTICLE 9.
Changes in Circumstances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate . . . . . . . . . . . . . . . . . . . 61
------------------------------------
Section 9.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
----------
Section 9.3 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
---------------
Section 9.4 Effect On Base Rate Advances . . . . . . . . . . . . . . . . . . . . . . . 63
----------------------------
Section 9.5 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
----------------
ARTICLE 10.
Agreement Among Lenders
-----------------------
Section 10.1 Agreement Among Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 64
-----------------------
Section 10.2 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 67
----------------------
Section 10.3 Benefits of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------------------
ARTICLE 11.
Miscellaneous
-------------
Section 11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
--------
Section 11.3 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
-------
Section 11.4 Calculation by the Lenders Conclusive and Binding . . . . . . . . . . . 69
-------------------------------------------------
Section 11.5 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
-------
Section 11.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
----------
Section 11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------------
Section 11.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------------
Section 11.9 Interest and Charges . . . . . . . . . . . . . . . . . . . . . . . . . 72
--------------------
Section 11.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
--------
Section 11.11 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 72
--------------------
Section 11.12 Exception to Covenants . . . . . . . . . . . . . . . . . . . . . . . . 73
----------------------
Section 11.13 No Liability of Issuing Bank . . . . . . . . . . . . . . . . . . . . . 73
----------------------------
SECTION 11.14 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-------------
SECTION 11.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . 74
--------------------
SECTION 11.16 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
----------------
</TABLE>
- iv -
<PAGE> 6
Schedules and Exhibits
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation and Material Liabilities
Schedule 4: Subsidiaries
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Qualification and Good Standing
Schedule 8: Labor Relations
Schedule 9: Investment Policy
Schedule 10: Intellectual Property
Exhibit A: Promissory Note
Exhibit B: General Security Agreement
Exhibit C: Intellectual Property Security Agreement
Exhibit D: Compliance Certificate
Exhibit E: Assignment Agreement
Exhibit F: Subsidiary Guaranty
Exhibit G: Notice of Borrowing
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of December 30, 1996, among XIRCOM,
INC., a California corporation (the "Borrower"), the Lenders from time to time
party hereto, and NATIONSBANK OF TEXAS, N.A., a national banking association,
as administrative agent for the Lenders.
BACKGROUND
The Lenders have been requested to provide the Borrower the funds
required to finance the ongoing working capital and general corporate
requirements of the Borrower and its Subsidiaries (as hereinafter defined).
The Lenders have agreed to provide such financing, subject to the terms and
conditions set forth below.
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1.
Definitions
Section 1.1 Defined Terms. For purposes of this Agreement:
"Account" has the meaning assigned to such term in the UCC.
"Acquisition" means any transaction pursuant to which the Borrower or
any of its Subsidiaries, (i) whether by means of a capital contribution or
purchase or other acquisition of stock or other securities or other equity
participation or interest, (A) acquires more than 50% of the equity interest in
any Person pursuant to a solicitation by the Borrower or such Subsidiary of
tenders of equity securities of such Person, or through one or more negotiated
block, market, private or other transactions, or a combination of any of the
foregoing, or (B) other than through the formation of such corporation makes
any corporation a Subsidiary of the Borrower or such Subsidiary, or causes any
corporation, other than a Subsidiary of the Borrower or such Subsidiary, to be
merged into the Borrower or such Subsidiary (or agrees to be merged into any
other corporation other than a wholly-owned Subsidiary (excluding directors'
qualifying shares) of the Borrower or such Subsidiary) other than solely to
effect a change in the jurisdiction of incorporation of the Borrower or any of
its Subsidiaries, or (ii) purchases all or substantially all of the business or
assets of any Person or of any operating division of any Person.
"Acquisition Consideration" means, with respect to any Acquisition, an
amount equal to the sum of (a) Equity Consideration plus (b) Non-Equity
Consideration for such Acquisition.
<PAGE> 8
"Administrative Agent" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
"Advance" means any amount advanced by the Lenders to the Borrower
pursuant to Article 2 hereof on the occasion of any borrowing.
"Affiliate" means, as applied to any Person, any other Person that,
directly or indirectly, through one or more Persons, Controls or is Controlled
By or Under Common Control with, that Person.
"Agreement" means this Credit Agreement, as amended, modified,
supplemented or restated from time to time.
"Agreement Date" means the date of this Agreement.
"Applicable Environmental Laws" means applicable laws pertaining to
health or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"Applicable Law" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
Section Section 85 and 86, as amended from time to time, and any other statute
of the United States of America now or at any time hereafter prescribing the
maximum rates of interest on loans and extensions of credit, and the laws of
the State of Texas, including, without limitation, Article 5069-1.04, Title 79,
Revised Civil Statutes of Texas, 1925, as amended ("Art. 1.04"), and any other
statute of the State of Texas now or at any time hereafter prescribing maximum
rates of interest on loans and extensions of credit; provided that the parties
hereto agree that the provisions of Chapter 15, Title 79, Revised Civil
Statutes of Texas, 1925, as amended, shall not apply to Advances, this
Agreement, the Notes or any other Loan Documents.
"Art. 1.04" has the meaning ascribed thereto in the definition of
"Applicable Law".
- 2 -
<PAGE> 9
"Assignees" means any assignee of a Lender pursuant to an Assignment
Agreement and shall have the meaning ascribed thereto in Section 11.6 hereof.
"Assignment Agreement" has the meaning specified in Section 11.6
hereof.
"Authorized Signatory" means such senior personnel of the Borrower as
may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"Base Rate Advance" means any Advance bearing interest at the Base
Rate Basis.
"Base Rate Basis" means, for any day, a per annum interest rate equal
to the lesser of (a) the higher of (i) the sum of (x) 0.50% plus (y) the
Federal Funds Rate on such day or (ii) the Prime Rate on such day or (b) the
Highest Lawful Rate. The Base Rate Basis shall be adjusted automatically
without notice as of the opening of business on the effective date of each
change in the Prime Rate to account for such change.
"Borrowing Base" means, at the time in question, an amount equal to
the sum of (i) 80% of Eligible Accounts, plus (ii) an amount equal to 40% of
Eligible Inventory.
"Business Day" means a day on which banks are open (a) for the
transaction of business in Dallas, Texas, and Los Angeles, California, and, (b)
with respect to any LIBOR Advance, for the transaction of international
business (including dealings in U.S. Dollar deposits) in London, England.
"Capital Expenditures" means, for any period, expenditures made by the
Borrower and its Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements during such period
and the aggregate amount of items leased or acquired under Capitalized Lease
Obligations at the cost of the item, but excluding capital expenditures made
with insurance proceeds to the extent used to replace or repair damaged fixed
assets, plant and equipment) computed in accordance with GAAP, consistently
applied.
"Capital Stock" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital
stock in any Person that is a corporation, and each class of partnership
interest (including, without limitation, general, limited and preference units)
in any Person that is a partnership.
"Capitalized Lease Obligations" means that portion of any obligation
of the Borrower or any Subsidiary of the Borrower as lessee under a lease which
at the time would be required to be capitalized on a balance sheet of the
Borrower or such Subsidiary prepared in accordance with GAAP.
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<PAGE> 10
"Cash and Cash Equivalents" means with respect to the Borrower and
each Subsidiary of the Borrower (a) cash (which, after the occurrence of an
Event of Default, shall exclude any cash proceeds of Accounts) and (b)
Permitted Investments.
"Change of Control" means the occurrence of any of the following
events after the Agreement Date: (a) any Person or any Persons acting together
which would constitute a "group" (a "Group") for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision thereto, other than the Group, together with any Affiliates
or Related Persons thereof, whose nominees constituted a majority of the board
of directors of the Borrower as of the close of business on the Agreement Date,
shall beneficially own (as defined in Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act or any successor provision thereto) at least
35% of the aggregate voting power of all classes of Capital Stock of the
Borrower entitled to vote generally in the election of directors of the
Borrower; or (b) any Person or Group, other than any Person or Group, together
with any Affiliates or Related Persons thereof, whose nominees constituted a
majority of the board of directors of the Borrower as of the close of business
on the Agreement Date, shall succeed in having sufficient of its or their
nominees elected to the Board of Directors of the Borrower, such that such
nominees, when added to any existing director remaining on the Board of
Directors of the Borrower after such election who is an Affiliate or Related
Person of such Group, shall constitute a majority of the Board of Directors of
the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means any collateral hereafter granted by any Person to
the Administrative Agent for the benefit of the Lenders to secure the
Obligations.
"Collateral Document" means any document under which Collateral is
granted and any document related thereto.
"Commitment" means $25,000,000.00.
"Commitment Fee" has the meaning specified in Section 2.4(a) hereof.
"Compliance Certificate" means a certificate, signed by an Authorized
Signatory, in substantially the form of Exhibit D, appropriately completed.
"Control" or "Controlled By" or "Under Common Control" means
possession, directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of voting securities, by
contract or otherwise); provided, however, that in any event any Person which
beneficially owns, directly or indirectly, 5% or more (in number of votes) of
the securities (or in the case of a Person that is not a corporation, 5% or
more of the equity interest) having ordinary voting power for the election of
directors of a corporation shall be conclusively presumed to control such
corporation.
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<PAGE> 11
"Controlled Group" means as of the applicable date, as to any Person
not an individual, all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) which are under common
control with such Person and which, together with such Person, are treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code; provided,
however, that the Subsidiaries of the Borrower shall be deemed to be members of
the Borrower's Controlled Group.
"Creditor" means a creditor of the Borrower or any Subsidiary of the
Borrower and shall not include any Affiliate of any such creditor.
"Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief Laws affecting the rights of creditors
generally from time to time in effect.
"Default" means an Event of Default and/or any of the events specified
in Section 8.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" means a simple per annum interest rate equal to (a)
with respect to Base Rate Advances the lesser of (i) the Highest Lawful Rate or
(ii) the Prime Rate plus 2.00% or (b) with respect to LIBOR Advances, the
lesser of (i) the Highest Lawful Rate or (ii) the LIBOR Basis plus 2.00%.
"Determining Lenders" means, on any date of determination, any
combination of the Lenders having at least 66-2/3% of the aggregate amount of
the Advances then outstanding; provided, however, that if there are no Advances
outstanding hereunder, "Determining Lenders" shall mean any combination of
Lenders whose Specified Percentages aggregate at least 66-2/3%.
"Dividend" means, as to any Person, (a) any declaration or payment of
any dividend (other than a stock dividend) on, or the making of any
distribution, loan, advance or investment to or in any holder of, any shares of
Capital Stock of, or other similar interest in, such Person and (b) any
purchase, redemption, or other acquisition or retirement for value of any
shares of Capital Stock of, or similar interest in, such Person.
"Dollar" or "$" means the lawful currency of the United States of
America.
"Domestic Subsidiary" means any Subsidiary of the Borrower other than
a Foreign Subsidiary.
"EBITDA" means, for any period, determined in accordance with GAAP on
a consolidated basis for the Borrower and its Subsidiaries, the sum of (a)
Pretax Net Income (excluding therefrom, to the extent included in determining
Pretax Net Income, any items of extraordinary gain, including net gains on the
sale of assets other than asset sales in the ordinary course of business, and
adding thereto, to the extent included in determining Pretax Net Income,
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<PAGE> 12
any items of extraordinary loss, including net losses on the sale of assets
other than asset sales in the ordinary course of business), plus (b) interest
expense, plus (c) depreciation, amortization and other non-cash charges (to the
extent deducted from consolidated revenues in determining Pretax Net Income).
"Eligible Accounts" means at the time of any determination thereof,
each Account as to which the following requirements have been fulfilled:
(i) The Borrower or any Subsidiary of the Borrower has
lawful and absolute title to such Account;
(ii) Such Account is a valid, legally enforceable
obligation of the Person who is obligated under such Account (the
"account debtor") for goods or services delivered or rendered to such
Person;
(iii) If such Account and other Accounts are owed by a
Creditor of the Borrower or any Subsidiary of the Borrower, the amount
of all such Accounts included as Eligible Accounts shall be the amount
by which all such Accounts exceeds the aggregate accounts payable owed
by the Borrower or such Subsidiary to such Creditor;
(iv) There has been excluded from such Account any portion
that is subject to any asserted dispute, offset, discount,
counterclaim or other claim or defense on the part of the account
debtor or to any asserted claim on the part of the account debtor
denying liability under such Account;
(v) The Borrower or any Subsidiary of the Borrower has
full and unqualified right to assign and grant a security interest in
such Account to Administrative Agent as security for the Obligations;
(vi) Such Account is evidenced by an invoice rendered to
the account debtor or chattel paper, promissory note or other
instrument payable to the Borrower or any Subsidiary of the Borrower
which has been endorsed and delivered to the Administrative Agent
pursuant to Section 3.01(b) of the General Security Agreement and is
not the result of a conditional sales contract or agreement ;
(vii) Such Account has not been due and payable for more
than 90 days from the invoice date; provided, that, unless Determining
Lenders agree otherwise, no Accounts from an account debtor shall
constitute Eligible Accounts if 20% or more of the aggregate dollar
amount of all Accounts owed to the Borrower or any Subsidiary of the
Borrower by such account debtor have been due and payable for 90 days
or more from their respective invoice dates;
(viii) No account debtor in respect of such Account is (a)
primarily conducting business in and organized under the laws of any
jurisdiction located outside the United
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<PAGE> 13
States of America other than Canada, (b) the subject of a proceeding
under any Debtor Relief Laws or (c) a Tribunal;
(ix) No account debtor in respect of such Account is (a)
an Affiliate of the Borrower or any Subsidiary or (b) an employee of
the Borrower or any Subsidiary of the Borrower; and
(x) Such Account is (a) subject to a fully perfected
first priority security interest in favor of Administrative Agent
pursuant to the Loan Documents, prior to the rights of, and
enforceable as such against, any other Person (including holders of a
purchase money security interest) and (b) not subject to any Lien in
favor of any other Person other than Permitted Collateral Liens.
"Eligible Inventory" means, at the time of any determination thereof,
each item of Inventory (excluding raw materials, work-in-process, obsolete
Inventory, Inventory on consignment and Inventory used for demonstrations and
display, but including finished products not yet packaged) valued at the lower
of cost or market value (allocated on a first-in, first-out basis), as to which
the following requirements have been fulfilled to the satisfaction of the
Determining Lenders:
(i) Borrower or any Subsidiary has lawful and absolute
title to such Inventory;
(ii) Such Inventory is not defective or unmerchantable
goods;
(iii) Such Inventory is located in the United States of
America;
(iv) Such Inventory is (a) subject to a fully perfected
first priority security interest in favor of Administrative Agent
pursuant to the Loan Documents, prior to the rights of, and
enforceable as such against, any other Person (including holders of a
purchase money security interest) and (b) not subject to any Lien in
favor of any other Person other than Permitted Collateral Liens; and
(v) The sale of such Inventory by Administrative Agent
(or its successors or assigns) upon an Event of Default is not subject
to any Necessary Authorization restriction or limitation.
"Equity Consideration" means consideration given by the Borrower or
any of its Subsidiaries for an Acquisition in the form of Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower and its
Subsidiaries, (a) a Reportable Event (other than a Reportable Event not subject
to the provision for 30-day notice
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<PAGE> 14
to the PBGC pursuant to regulations issued under Section 4043 of ERISA), (b)
the withdrawal of any such Person or any member of its Controlled Group from a
Plan subject to Title IV of ERISA during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate under Section 4041(c) of ERISA, (d)
the institution of proceedings to terminate a Plan by the PBGC, (e) the failure
to make required contributions which could result in the imposition of a lien
under Section 412 of the Code or Section 302 of ERISA, or (f) any other event
or condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan or the imposition of any liability under Title IV of
ERISA other than PBGC premiums due but not delinquent under Section 4007 of
ERISA.
"Event of Default" means any of the events specified in Section 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards if necessary to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average of the quotations
for the day for such transactions as determined by the Administrative Agent.
"Fee Letter" has the meaning specified in Section 2.4(b) hereof.
"Fiscal Year" means each period of 52 weeks ending on September 30 of
each year.
"Foreign Subsidiary" means any Subsidiary of the Borrower which is not
organized under the laws of any state of the United States of America or the
District of Columbia.
"GAAP" means 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, or their successors
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles applied in a current period are comparable in
all material respects to those applied in a preceding period.
"General Security Agreement" means the security agreement relating to
all (a) Accounts and Inventory of the Borrower and its Domestic Subsidiaries,
(b) capital stock of each Domestic Subsidiary of the Borrower and its Domestic
Subsidiaries, and (c) 65% of the capital stock of each direct Foreign
Subsidiary of the Borrower and its Domestic Subsidiaries, substantially in the
form of Exhibit B hereto, as amended, modified, renewed, supplemented or
restated from time to time.
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<PAGE> 15
"Guarantor" means each Domestic Subsidiary of the Borrower.
"Guaranty" or "Guaranteed", as applied to an obligation of another
Person, means (a) a guaranty, direct or indirect, in any manner, of any part or
all of such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit.
"Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, the Lenders are then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, the Lenders are permitted to charge on the Obligations
shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be (a)
the indicated rate ceiling described in and computed in accordance with the
provisions of Section (a)(1) of Art. 1.04, or (b) if the parties subsequently
contract as allowed by Applicable Law, the quarterly ceiling or the annualized
ceiling computed pursuant to Section (d) of Art. 1.04; provided, however, that
at any time the indicated rate ceiling, the quarterly ceiling or the annualized
ceiling shall be less than 18% per annum or more than 24% per annum, the
provisions of Sections (b)(1) and (2) of said Art. 1.04 shall control for
purposes of such determination, as applicable.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations under conditional
sale or other title retention agreements relating to property or assets
purchased by such Person, (d) all obligations issued or assumed as the deferred
purchase price of property or services (excluding trade accounts payable and
accrued obligations incurred in the ordinary course of business), (e) all
obligations secured by any Lien on any property or asset owned by such Person
(other than accounts payable arising in the ordinary course of business),
whether or not the obligation secured thereby shall have been assumed (provided
that, unless such obligations shall have been assumed, for purposes of this
definition the amount of such Indebtedness at any time shall be deemed to equal
the fair market value of such property or asset at such time), (f) to the
extent not otherwise included, all Capitalized Lease Obligations of such
Person, all obligations in respect of letters of credit, bankers' acceptances
and similar instruments, and all obligations under Interest Hedge Agreements,
and (g) any Guaranty of such Person of any obligation of another Person
constituting obligations of a type set forth above.
"Indemnified Matters" has the meaning specified in Section 5.9(a)
hereof.
"Indemnitees" has the meaning specified in Section 5.9(a) hereof.
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<PAGE> 16
"Intellectual Property Security Agreement" means the security
agreement relating to all intellectual property of the Borrower substantially
in the form of Exhibit C hereto, as amended, modified, renewed, supplemented or
restated from time to time.
"Interest Coverage Ratio" means the ratio of EBITDA to interest
expense (including interest expense pursuant to Capitalized Lease Obligations),
calculated for the four consecutive fiscal quarters immediately preceding the
date of calculation.
"Interest Hedge Agreements" means any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap, swap or
collar protection agreements, and forward rate currency or interest rate
options, as the same may be amended or modified and in effect from time to
time, and any and all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
"Interest Period" means the period beginning on the day any LIBOR
Advance is made and ending one, two, three or six months thereafter (as the
Borrower shall select); provided, however, that all of the foregoing provisions
are subject to the following:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day, unless, with respect to a LIBOR
Advance, the result of such extension would be to extend such Interest
Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;
(ii) any Interest Period with respect to a LIBOR Advance
that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iii) the Borrower may not select any Interest Period which
ends after the date of a scheduled principal payment on the Advances
unless, after giving effect to such selection, the aggregate unpaid
principal amount of the LIBOR Advances for which Interest Periods end
after such scheduled principal payment shall be equal to or less than
the principal amount to which the Advances are required to be reduced
after such scheduled principal payment is made;
(iv) the Borrower may not select any Interest Period in
respect of Advances having an aggregate amount less than $2,000,000;
and
(v) there shall be outstanding at any one time no more
than five Interest Periods in the aggregate.
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<PAGE> 17
"Inventory" has the meaning assigned to such term in the UCC.
"Investment" means any acquisition of all or substantially all assets
of any Person which is not an Acquisition, or any direct or indirect purchase
or other acquisition of, or beneficial interest in, capital stock or other
securities of any other Person which is not an Acquisition, or any direct or
indirect loan, advance (other than loans or advances to employees for moving
and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution to, or investment in any other
Person which is not an Acquisition, including without limitation the incurrence
or sufferance of Indebtedness or the purchase of accounts receivable of any
other Person that are not current assets or do not arise in the ordinary course
of business.
"Issuing Bank" means NationsBank of Texas, N.A., a national banking
association, in its capacity as issuer of the Letters of Credit.
"Law" means any statute, law, ordinance, regulation, rule, order,
writ, injunction, or decree of any Tribunal.
"Lender" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a portion of the
Commitment or is owed any part of the Obligations (including the Administrative
Agent in its individual capacity), and each Assignee that hereafter becomes a
party hereto pursuant to Section 11.6 hereof, subject to the limitations set
forth therein.
"L/C Cash Collateral Account" has the meaning specified in Section
2.15(g) hereof.
"L/C Related Documents" has the meaning specified in Section 2.15(e)
hereof.
"Letter of Credit" has the meaning specified in Section 2.15(a)
hereof.
"Letter of Credit Agreement" has the meaning specified in Section
2.15(b) hereof.
"Letter of Credit Facility" has the meaning specified in Section
2.15(a) hereof.
"Leverage Ratio" means, for any date of calculation, the ratio of
Total Debt as of the date of determination to EBITDA calculated for the four
consecutive fiscal quarters immediately preceding the date of calculation.
"LIBOR Advance" means an Advance which the Borrower requests to be
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in
accordance with the provisions of Section 2.2 hereof.
"LIBOR Basis" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus
1.25%. The LIBOR Basis shall,
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<PAGE> 18
with respect to LIBOR Advances subject to reserve or deposit requirements, be
subject to premiums for such reserve or deposit requirements assessed by each
Lender to the extent incurred by such Lender, which are payable directly to
each Lender. Once determined, the LIBOR Basis shall remain unchanged during
the applicable Interest Period.
"LIBOR Lending Office" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
other office of the Lender or any of its Affiliates hereafter designated by
notice to the Borrower and the Administrative Agent.
"LIBOR Rate" means, for any LIBOR Advance for any Interest Period
therefor, the interest rate per annum (rounded upward to the nearest 1/100th of
1%) appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days before the first day of such Interest Period
for a term comparable to such Interest Period. If for any reason such rate is
not available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for any
Interest Period therefor, the interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days before the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Lien" means, with respect to any property, any mortgage, lien,
pledge, collateral assignment, hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure, attachment, garnishment or other
similar encumbrance of any kind in respect of such property, whether or not
choate, vested or perfected.
"Litigation" means any proceeding, claim, lawsuit, arbitration, and/or
investigation by or before any Tribunal, including, without limitation,
proceedings, claims, lawsuits, and/or investigations under or pursuant to any
environmental, occupational, safety and health, antitrust, unfair competition,
securities, Tax or other Law, or under or pursuant to any contract, agreement
or other instrument.
"Loan Documents" means this Agreement, the Notes, the Security
Agreements, the Subsidiary Guaranties, any other Collateral Document, the Fee
Letter, any Interest Hedge Agreements entered into with any Lender, and any
other document or agreement executed or delivered from time to time by the
Borrower, any Subsidiary of the Borrower or any other Person in connection
herewith or as security for the Obligations.
"Malaysia Subsidiary" means Xircom Operations (Malaysia) SDN.BHD., a
Malaysian corporation.
"Material Adverse Effect" means any act or circumstance or event that
(a) causes a Default, (b) otherwise could reasonably be expected to be material
and adverse to the business,
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<PAGE> 19
financial condition or results of operations of the Borrower and its
Subsidiaries taken as a whole, (c) in any manner whatsoever does or could
reasonably be expected to materially and adversely affect the validity or
enforceability of any Loan Document, or (d) in any manner could reasonably be
expected to impair the value of any Collateral.
"Maturity Date" means December 24, 1998, as the same may be extended
pursuant to Section 2.16 hereof, or the earlier date of termination in whole of
the Commitment pursuant to Section 2.6 or 8.2 hereof.
"Multiemployer Plan" means, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"NationsBank" means NationsBank of Texas, N.A., a national banking
association, in its capacity as a Lender.
"Necessary Authorization" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with,
any Tribunal or any Person necessary or appropriate to enable the Borrower or
any Subsidiary of the Borrower to maintain and operate its business and
properties.
"Net Equity Proceeds" means, with respect to any sale, transfer or
disposition of Capital Stock of the Borrower, the amount of cash received by
the Borrower in connection with such transaction after deducting therefrom
reasonable brokerage commissions, legal fees, financial advisory fees,
accounting fees, underwriting fees, investment banking fees and other similar
commissions and fees and taxes payable by the Borrower as a result of such
transaction.
"Net Worth" means, for the Borrower and its Subsidiaries, on a
consolidated basis, determined in accordance with GAAP, total assets minus
total liabilities.
"Non-Equity Consideration" means the consideration given by the
Borrower or any of its Subsidiaries for an Acquisition which is other than
Equity Consideration, including but not limited to the sum of (without
duplication) (a) the fair market value of any cash, property or services given,
plus (b) consideration paid with proceeds of Indebtedness permitted pursuant to
this Agreement, plus (c) the amount of any Indebtedness and Operating Leases
(calculated to be the product of annual rentals multiplied by six) assumed,
incurred or guaranteed in connection with such Acquisition by the Borrower or
any Subsidiary which is a Subsidiary immediately prior to such Acquisition.
"Notes" means the promissory notes of Borrower evidencing Advances
hereunder, substantially in the form of Exhibit A hereto, together with any
extension, renewal, or amendment thereof, or substitution therefor.
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<PAGE> 20
"Notice of Borrowing" has the meaning specified in Section 2.2(a)
hereof.
"Notice of Issuance" has the meaning specified in Section 2.15(b)
hereof.
"Obligations" means (a) all obligations of any nature (whether matured
or unmatured, fixed or contingent, including the Reimbursement Obligations) of
the Borrower or any other Obligor to any Lender or the Administrative Agent
under any of the Loan Documents as they may be amended from time to time, and
(b) all obligations of the Borrower or any other Obligor for losses, damages,
expenses or any other liabilities of any kind that any Lender may suffer by
reason of a breach by the Borrower or any other Obligor of any obligation,
covenant or undertaking with respect to any Loan Document payable by the
Borrower or any other Obligor under any Loan Document.
"Obligor" means the Borrower and each Guarantor.
"Operating Lease" means any operating lease, as defined in the
Financial Accounting Standard Board Statement of Financial Accounting Standards
No. 13, dated November, 1976 or otherwise in accordance with GAAP.
"Participant" has the meaning specified in Section 11.6(c) hereof.
"Participation" has the meaning specified in Section 11.6(c) hereof.
"Payment Date" means the last day of the Interest Period for any LIBOR
Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means the investments permitted to be made by
the Borrower and its Subsidiaries as set forth in the Investment Policy of the
Borrower attached hereto as Schedule 9, as such Investment Policy may be
amended after the Agreement Date, but only to the extent that such amendments
are approved in writing by the Determining Lenders, such approval not to be
unreasonably withheld.
"Permitted Liens" means, as applied to any Person:
(a) Any Lien in favor of the Lenders to secure the Obligations
hereunder;
(b) (i) Liens on real estate for ad valorem taxes not yet
delinquent, (ii) Liens on leasehold interests created by the lessor in favor of
any mortgagee of the leased premises, (iii) Liens for taxes, assessments,
governmental charges, levies or claims that are not yet delinquent or that are
being diligently contested in good faith by appropriate proceedings in
accordance with Section 5.6 hereof and for which adequate reserves shall have
been set aside on such Person's books, but only so long as no foreclosure,
restraint, sale or similar proceedings
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have been commenced with respect thereto, and (iv) liens filed by a lessor in
connection with leases of personal property, so long as such liens at all times
are confined to the personal property so leased;
(c) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor;
(d) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or similar
legislation;
(e) Easements, right-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(f) Liens created to secure Indebtedness permitted by Section
7.1(c) hereof, which is incurred solely for the purpose of financing the
acquisition of such assets and incurred at the time of acquisition, so long as
each such Lien shall at all times be confined solely to the asset or assets so
acquired (and proceeds thereof), and refinancings thereof so long as any such
Lien remains solely on the asset or assets acquired and the amount of
Indebtedness related thereto is not increased;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been
secured, provided that (i) such Person shall have established adequate reserves
for such judgments or awards, (ii) such judgments or awards shall be fully
insured and the insurer shall not have denied coverage, or (iii) such judgments
or awards shall have been bonded to the satisfaction of the Determining
Lenders; and
(h) Any Liens which are described on Schedule 2 hereto, and Liens
resulting from the refinancing of the related Indebtedness, provided that the
Indebtedness secured thereby shall not be increased and the Liens shall not
cover additional assets of the Borrower.
"Person" means an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan as defined in Section 3(3) of
ERISA (including a Multiemployer Plan) pursuant to which any employees of the
Borrower, its Subsidiaries or any member of their Controlled Group participate.
"Pretax Net Income" means net profit (or loss) before taxes of the
Borrower and its Subsidiaries, on a consolidated basis, determined in
accordance with GAAP.
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"Prime Rate" means, at any time, the prime interest rate announced or
published by the Reference Lender from time to time as its reference rate for
the determination of interest rates for loans of varying maturities in United
States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Reference Lender as its
"prime rate;" it being understood that such rate may not be the lowest rate of
interest charged by the Reference Lender.
"Quarterly Date" means the last day of each March, June, September and
December, beginning March 31, 1997.
"Quick Ratio" means, for any date of calculation, determined in
accordance with GAAP on a consolidated basis for the Borrower and its
Subsidiaries, the ratio of (a) the sum of (i) Cash and Cash Equivalents plus
(ii) Accounts to (b) current liabilities (including, without limitation, all
outstanding Advances and Reimbursement Obligations hereunder).
"Reference Lender" means NationsBank; provided that if NationsBank's
Commitment shall terminate and it shall have no Advances and Letters of Credit
outstanding hereunder, NationsBank shall cease to be the Reference Lender, and
Administrative Agent (after consultation with Borrower) shall, with notice to
Borrower and Lenders, designate another Lender as the Reference Lender.
"Reimbursement Obligations" means, in respect of any Letter of Credit
as at any date of determination, the sum of (a) the maximum aggregate amount
which is then available to be drawn under such Letter of Credit plus (b) the
aggregate amount of all drawings under such Letter of Credit not theretofore
reimbursed by the Borrower.
"Related Person" means (a) any Affiliate of the Borrower, (b) any
individual or entity who directly or indirectly holds 5% or more of any class
of Capital Stock of the Borrower, (c) any relative of such individual by blood,
marriage or adoption not more remote than first cousin and (d) any officer or
director of the Borrower.
"Release Date" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA.
"Responsible Officer" means the President, General Counsel, Chief
Financial Officer, Vice President-Finance or Corporate Controller of the
Borrower.
"Restricted Payments" means, collectively, (i) Dividends and (ii) any
(A) payment or prepayment of principal, premium or penalty on any Subordinated
Debt of the Borrower or any Subsidiary of the Borrower or any defeasance,
redemption, purchase, repurchase or other acquisition or retirement for value,
in whole or in part, of any Subordinated Debt (including,
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without limitation, the setting aside of assets or the deposit of funds
therefor), other than the conversion thereof into Capital Stock, and (B)
prepayment of interest on any Subordinated Debt.
"Rights" means rights, remedies, powers and privileges.
"Security Agreements" mean the General Security Agreement and the
Intellectual Property Security Agreement.
"Solvent" means, with respect to any Person, that the fair value of
the assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. 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
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability discounted to
present value at rates believed to be reasonable by such Person.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Agent may select.
"Specified Percentage" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof, or if applicable,
specified in its most recent Assignment Agreement.
"Subordinated Debt" means any Indebtedness of the Borrower or any
Subsidiary of the Borrower which shall have been and continues to be, validly
and effectively subordinated to the prior payment of the Obligations on terms
and documentation approved in writing by the Administrative Agent and the
Determining Lenders.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate or other Person of which (or in which) more than 50%
of:
(a) the outstanding capital stock having voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether 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),
(b) the interest in the capital or profits of such
partnership or joint venture,
(c) the beneficial interest of such trust or estate, or
(d) the equity interest of such other Person,
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is at the time directly or indirectly owned by such Person, by such
Person and one or more of its Subsidiaries or by one or more of such
Person's Subsidiaries.
"Subsidiary Guaranty" means a guaranty, substantially in the form of
Exhibit F hereto, executed by each direct and indirect Domestic Subsidiary of
the Borrower, as amended, supplemented, modified, renewed or otherwise restated
from time to time.
"Tangible Net Worth" means with respect to the Borrower and its
Subsidiaries on a consolidated basis, as of any date of determination, the
excess of (a) Net Worth over (b) the sum (without duplication) of unamortized
debt discount and expense, goodwill, trademarks, trade names, patents, deferred
charges and other intangible assets and any write-up of the value of assets
after September 30, 1996, all determined in accordance with GAAP.
"Taxes" has the meaning specified in Section 2.14 hereof.
"Total Debt" means, as of any date of determination, determined for
the Borrower and its Subsidiaries on a consolidated basis, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services other than trade payables incurred in the ordinary course
of business, and (iv) Capitalized Lease Obligations.
"Tribunal" means any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision, agency,
department, commission, board, bureau, or instrumentality of a governmental or
other regulatory or public body or authority.
"UCC" means the Uniform Commercial Code of Texas, as amended from time
to time, and the Uniform Commercial Code applicable in such other states as any
Collateral may be located.
"Unused Portion" means an amount equal to the result of (i) the
Commitment minus (ii) the sum of (A) the outstanding Advances plus (B)
outstanding Reimbursement Obligations in respect of the Letters of Credit.
Section 1.2 Amendments and Renewals. Each definition of an
agreement in this Article 1 shall include such agreement as amended to date,
and as amended or renewed from time to time in accordance with its terms, but
only with the prior written consent of the Determining Lenders or all the
Lenders as required pursuant to Section 11.11 hereof.
Section 1.3 Construction. The terms defined in this Article 1
(except as otherwise expressly provided in this Agreement) for all purposes
shall have the meanings set forth in Section 1.1 hereof, and the singular shall
include the plural, and vice versa, unless otherwise specifically required by
the context. All accounting terms used in this Agreement which are not
otherwise defined herein shall be construed in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, unless otherwise
expressly stated herein.
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ARTICLE 2.
Advances
Section 2.1 The Advances.
(a) Each Lender severally agrees, upon the terms and subject to
the conditions of this Agreement, to make Advances to the Borrower from time to
time in an aggregate amount not to exceed its Specified Percentage of the
Commitment less its Specified Percentage of the aggregate amount of all
Reimbursement Obligations then outstanding (assuming compliance with all
conditions to drawing), for the purposes set forth in Section 5.8(b) hereof.
Subject to Section 2.9 hereof, Advances may be repaid and then reborrowed.
Notwithstanding any provision in any Loan Document to the contrary, in no event
shall the (i) sum of (A) the principal amount of all outstanding Advances and
(B) the outstanding Reimbursement Obligations exceed (ii) the lesser of (A) the
Commitment and (B) the Borrowing Base.
(b) Any Advance shall, at the option of the Borrower as provided
in Section 2.2 hereof (and, in the case of LIBOR Advances, subject to the
provisions of Article 9 hereof), be made as a Base Rate Advance or a LIBOR
Advance; provided that there shall not be outstanding, at any one time, more
than five LIBOR Advances.
Section 2.2 Manner of Borrowing and Disbursement.
(a) In the case of Base Rate Advances, the Borrower, through an
Authorized Signatory, shall give the Administrative Agent prior to 11:00 a.m.,
Dallas, Texas time, on the date of any proposed Base Rate Advance irrevocable
written notice, or irrevocable telephonic notice followed immediately by
written notice, in substantially the form of Exhibit G hereto (a "Notice of
Borrowing") (provided, however, that the Borrower's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), of its
intention to borrow a Base Rate Advance hereunder. Such notice of borrowing
shall specify the requested funding date, which shall be a Business Day, and
the amount of the proposed aggregate Base Rate Advances to be made by Lenders.
(b) In the case of LIBOR Advances, the Borrower, through an
Authorized Signatory, shall give the Administrative Agent at least three
Business Days' irrevocable written notice, or irrevocable telephonic notice
followed immediately by written notice (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate any
notice so given) pursuant to a Notice of Borrowing, of its intention to borrow
a LIBOR Advance hereunder. Notice shall be given to the Administrative Agent
prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to
count toward the minimum number of Business Days required. LIBOR Advances
shall in all cases be subject to Article 9 hereof. For LIBOR Advances, the
notice of borrowing shall specify the requested funding date, which shall be a
Business Day, the amount of the proposed aggregate LIBOR Advances to be made by
Lenders
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and the Interest Period selected by the Borrower, provided that no such
Interest Period shall extend past the Maturity Date, or prohibit or impair the
Borrower's ability to comply with Section 2.5 or 2.8 hereof.
(c) Subject to Sections 2.1 and 2.9 hereof, the Borrower shall
have the option (i) to convert at any time all or any part of the outstanding
Base Rate Advances to LIBOR Advances and all or any part of the outstanding
LIBOR Advances to Base Rate Advances or (ii) upon expiration of any Interest
Period applicable to a LIBOR Advance, to continue all or any portion of such
LIBOR Advance equal to $2,000,000 and integral multiples of $100,000 in excess
of that amount as a LIBOR Advance and the succeeding Interest Period(s) of such
continued LIBOR Advance shall commence on the last day of the Interest Period
of the LIBOR Advance to be continued; provided, however, (a) LIBOR Advances may
only be converted into Base Rate Advances on the expiration date of the
Interest Period applicable thereto and (b) notwithstanding anything in this
Agreement to the contrary, no outstanding Advance may be continued as, or
converted into, a LIBOR Advance when any Default or Event of Default has
occurred and is continuing. At least three Business Days prior to a proposed
conversion/continuation date, the Borrower, through an Authorized Signatory,
shall give the Administrative Agent irrevocable written notice, or irrevocable
telephonic notice followed immediately by written notice (provided, however,
that the Borrower's failure to confirm any telephonic notice in writing shall
not invalidate any notice so given), stating (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount
of the Advance to be converted/continued, (iii) in the case of a conversion to,
or a continuation of, a LIBOR Advance, the requested Interest Period, and (iv)
in the case of a conversion of a Base Rate Advance to a LIBOR Advance or
continuation of a LIBOR Advance, stating that no Default or Event of Default
has occurred and is continuing. If the Borrower shall fail to give any notice
in accordance with this Section 2.2(c), the Borrower shall be deemed
irrevocably to have requested that such LIBOR Advance be converted to a Base
Rate Advance in the same principal amount. Notice shall be given to the
Administrative Agent prior to 11:00 a.m., Dallas, Texas time, in order for such
Business Day to count toward the minimum number of Business Days required.
(d) The aggregate amount of Base Rate Advances to be made by the
Lenders on any day shall be in a principal amount which is at least $500,000
and which is an integral multiple of $100,000; provided, however, that such
amount may equal the unused amount of the Commitment. The aggregate amount of
LIBOR Advances having the same Interest Period and to be made by the Lenders on
any day shall be in a principal amount which is at least $2,000,000 and which
is an integral multiple of $100,000.
(e) The Administrative Agent shall promptly notify the Lenders of
each notice received from the Borrower pursuant to this Section. Each Lender
shall, not later than noon, Dallas, Texas time, on the date of any Advance,
deliver to the Administrative Agent, at its address set forth herein, such
Lender's Specified Percentage of such Advance in immediately available funds in
accordance with the Administrative Agent's instructions. Prior to 2:00 p.m.,
Dallas, Texas time, on the date of any Advance hereunder, the Administrative
Agent shall, subject to satisfaction of the conditions set forth in Article 3,
disburse the amounts made
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available to the Administrative Agent by the Lenders by (i) transferring such
amounts by wire transfer pursuant to the Borrower's instructions, or (ii) in
the absence of such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Agent. All Advances shall be made
by each Lender according to its Specified Percentage.
Section 2.3 Interest.
(a) On Base Rate Advances.
(i) The Borrower shall pay interest on the outstanding
unpaid principal amount of the Base Rate Advances outstanding from
time to time, until such Base Rate Advances are due (whether at
maturity, by reason of acceleration, by scheduled reduction, or
otherwise) or repaid at a simple interest rate per annum equal to the
Base Rate Basis for the Base Rate Advances as in effect from time to
time. If at any time the Base Rate Basis would exceed the Highest
Lawful Rate, interest payable on the Base Rate Advances shall be
limited to the Highest Lawful Rate, but the Base Rate Basis shall not
thereafter be reduced below the Highest Lawful Rate until the total
amount of interest accrued on the Base Rate Advances equals the amount
of interest that would have accrued if the Base Rate Basis had been in
effect at all times.
(ii) Interest on the Base Rate Advances shall be computed
on the basis of a year of 365 or 366 days, as appropriate, for the
actual number of days elapsed, and shall be payable in arrears on each
Quarterly Date and on the Maturity Date.
(b) On LIBOR Advances.
(i) The Borrower shall pay interest on the unpaid
principal amount of each LIBOR Advance, from the date such Advance is
made until it is due (whether at maturity, by reason of acceleration,
by scheduled reduction, or otherwise) or repaid, at a rate per annum
equal to the LIBOR Basis for such LIBOR Advance. The Administrative
Agent, whose determination shall be controlling in the absence of
manifest error, shall determine the LIBOR Basis on the second Business
Day prior to the applicable funding date and shall notify the Borrower
and the Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each
LIBOR Advance shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be payable in arrears on the
applicable Payment Date and on the Maturity Date; provided, however,
that if the Interest Period for such LIBOR Advance exceeds three
months, interest shall also be due and payable in arrears on each
three-month anniversary of the commencement of such Interest Period
during such Interest Period.
(c) Interest After an Event of Default. (i) After an Event of
Default (other than an Event of Default specified in Section 8.1(e) or (f)
hereof) and during any continuance thereof,
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at the option of Determining Lenders upon notice to a Responsible Officer, and
(ii) after an Event of Default specified in Section 8.1(e) or (f) hereof and
during any continuance thereof, automatically and without any action by the
Administrative Agent or any Lender, the Obligations shall bear interest at a
rate per annum equal to the Default Rate. Such interest shall be payable on
the earlier of demand or the Maturity Date, and shall accrue until the earlier
of (i) waiver or cure (to the satisfaction of the Determining Lenders) of the
applicable Event of Default, (ii) agreement by the Determining Lenders to
rescind the charging of interest at the Default Rate, or (iii) payment in full
of the Obligations. The Lenders shall not be required to accelerate the
maturity of the Advances, to exercise any other rights or remedies under the
Loan Documents.
Section 2.4 Fees.
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrower
agrees to pay to the Administrative Agent, for the ratable account of the
Lenders, a commitment fee of 0.29% per annum on the daily average Unused
Portion during the period commencing on the Agreement Date and ending on the
Maturity Date. Such fee shall be (i) payable in arrears on each Quarterly Date
and on the Maturity Date, (ii) fully earned when due and, subject to Section
11.9 hereof, nonrefundable when paid and (iii) subject to Section 11.9 hereof,
computed on the basis of a year of 365 or 366 days, as appropriate, for the
actual number of days elapsed.
(b) Other Fees. Subject to Section 11.9 hereof, the Borrower
agrees to pay to the Administrative Agent, for the account of the
Administrative Agent, the fees on the dates and in the amounts specified in the
letter agreement (the "Fee Letter"), dated as of the Agreement Date, between
the Borrower and the Administrative Agent.
Section 2.5 Prepayments and Repayments.
(a) Voluntary Base Rate Advance Repayments. Base Rate Advances
may be voluntarily repaid upon telephonic notice (to be promptly followed by
written notice) by an Authorized Signatory to the Administrative Agent prior to
11:00 a.m., Dallas, Texas time, on the date of any such repayment.
(b) Voluntary LIBOR Advance Prepayments. Upon three Business
Days' prior telephonic notice (to be promptly followed by written notice) by an
Authorized Signatory to the Administrative Agent, LIBOR Advances may be
voluntarily prepaid but only so long as the Borrower concurrently reimburses
the Lenders in accordance with Section 2.9 hereof. Any notice of prepayment
shall be irrevocable.
(c) Mandatory Prepayment. On or before the date of any reduction
of the Commitment, the Borrower shall prepay applicable outstanding Advances in
an amount necessary to reduce the sum of outstanding Advances and Reimbursement
Obligations to an amount less than or equal to the Commitment as so reduced.
On any date that the aggregate principal amount of outstanding Advances and
Reimbursement Obligations exceed the Borrowing Base,
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the Borrower shall immediately prepay Advances in an amount equal to such
excess amount and all interest attributable to such excess amount. To the
extent required by the immediately preceding two sentences, the Borrower shall
first prepay all Base Rate Advances and shall thereafter prepay LIBOR Advances.
To the extent that any prepayment requires that a LIBOR Advance be repaid on a
date other than the last day of its Interest Period, the Borrower shall
reimburse each Lender in accordance with Section 2.9 hereof. To the extent
that (i) the sum of (A) outstanding Advances and (B) outstanding Reimbursement
Obligation exceeds the lesser of (A) the Commitment or (B) the Borrowing Base,
the Borrower shall repay any such excess amount and all accrued interest
attributable to such excess Advances.
(d) Payments, Generally. Any prepayment of any LIBOR Advance
shall be accompanied by interest accrued on the principal amount being prepaid.
Any voluntary partial payment of a Base Rate Advance shall be in a principal
amount which is at least $500,000 and which is an integral multiple of
$100,000. Any voluntary partial payment of a LIBOR Advance shall be in a
principal amount which is at least $2,000,000 and which is an integral multiple
of $100,000, and to the extent that any prepayment of a LIBOR Advance is made
on a date other than the last day of its Interest Period, the Borrower shall
reimburse each Lender in accordance with Section 2.9 hereof.
Section 2.6 Reduction of Commitment.
(a) Voluntary Reduction. The Borrower shall have the right, upon
not less than 5 Business Days' notice by an Authorized Signatory to the
Administrative Agent (if telephonic, to be confirmed by telex or in writing on
or before the date of reduction or termination), which shall promptly notify
the Lenders, to terminate or reduce the Commitment, in whole or in part,
without premium or penalty except as provided in the next sentence. Each
partial termination shall be in an aggregate amount which is at least
$2,000,000 and which is an integral multiple of $500,000, and no voluntary
reduction in the Commitment shall cause any LIBOR Advance to be repaid prior to
the last day of its Interest Period unless the Borrower shall reimburse each
Lender in accordance with Section 2.9 hereof.
(b) General Requirements. Upon any reduction of the Commitment
pursuant to this Section, the Borrower shall immediately make a repayment of
Advances in accordance with Section 2.5(c) hereof. The Borrower shall
reimburse each Lender in connection with any such payment in accordance with
Section 2.9 hereof to the extent applicable. The Borrower shall not have any
right to rescind any termination or reduction. Once reduced, the Commitment
may not be increased or reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Lender prior to
the date of any proposed Advance (which notice shall be effective upon receipt)
that such Lender does not intend to make the proceeds of such Advance available
to the Administrative Agent, the Administrative Agent may assume that such
Lender has made such proceeds available to the Administrative Agent on such
date, and the Administrative Agent may in reliance upon such assumption (but
shall not be
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required to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender, the Administrative Agent shall be entitled to recover such
amount on demand from such Lender (or, if such Lender fails to pay such amount
forthwith upon such demand, from the Borrower) together with interest thereon
in respect of each day during the period commencing on the date such amount was
available to the Borrower and ending on (but excluding) the date the
Administrative Agent receives such amount from the Lender, at a per annum rate
equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds
Rate. No Lender shall be liable for any other Lender's failure to fund an
Advance hereunder.
Section 2.8 Payment of Principal of Advances. To the extent not
otherwise required to be paid earlier as provided herein, the principal amount
of the Advances, all accrued interest and fees thereon, and all other
Obligations related thereto, shall be due and payable in full on the Maturity
Date.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or
incur (other than through a default by that Lender) any losses or reasonable
out-of-pocket expenses in connection with (a) failure by the Borrower to borrow
any LIBOR Advance after having given notice of its intention to borrow in
accordance with Section 2.2 hereof (whether by reason of the Borrower's
election not to proceed or the non-fulfillment of any of the conditions set
forth in Article 3 hereof), (b) any prepayment for any reason of any LIBOR
Advance in whole or in part (including a prepayment pursuant to Section 9.3(b)
hereof) on other than the last day of an Interest Period applicable to such
LIBOR Advance or (c) any prepayment (or failure to prepay) of any of its LIBOR
Advances that is not made on any date specified in a notice of prepayment given
by the Borrower, the Borrower agrees to pay to any such Lender, within 30 days
after demand by such Lender, an amount sufficient to compensate such Lender for
all such losses (excluding loss of anticipated profits) and out-of-pocket
expenses, subject to Section 11.9 hereof. Such losses shall include, without
limiting the generality of the foregoing, reasonable expenses incurred by such
Lender in connection with the re- employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon the
request by the Borrower, such Lender shall provide a certificate as to any
amounts payable to such Lender under this Section 2.9 certifying that such
amounts were actually incurred by such Lender and showing in reasonable detail
an accounting of the amount payable and the calculations used to determine in
good faith such amount and such certificate shall be conclusive absent manifest
or demonstrable error. Nothing in this Section 2.9 shall provide the Borrower
or any Subsidiary of the Borrower the right to inspect the records, files or
books of any Lender.
Section 2.10 Manner of Payment.
(a) Each payment (including prepayments) by the Borrower of the
principal of or interest on the Advances, fees, and any other amount owed under
this Agreement or any other Loan Document shall be made not later than 12:00
noon (Dallas, Texas time) on the date specified for payment under this
Agreement to the Administrative
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Agent at the Administrative Agent's office, in lawful money of the United
States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day, unless, with
respect to a payment due in respect of a LIBOR Advance, such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension of time shall in such case be included in
computing interest and fees, if any, in connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees and all
other amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are
received by the Administrative Agent, the Administrative Agent shall apply such
amounts in the following order of priority: (i) to the payment of the
Administrative Agent's expenses incurred on behalf of the Lenders then due and
payable, if any; (ii) to the payment of all other fees then due and payable;
(iii) to the payment of interest then due and payable on the Advances; (iv) to
the payment of all other amounts not otherwise referred to in this clause (d)
then due and payable under the Loan Documents; and (v) to the payment of
principal then due and payable on the Advances.
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR
Lending Office is set forth opposite its name in Schedule 1 attached hereto.
Each Lender shall have the right at any time and from time to time to designate
a different office of itself or of any Affiliate of such Lender as such
Lender's LIBOR Lending Office, and to transfer any outstanding LIBOR Advance to
such LIBOR Lending Office. No such designation or transfer shall result in any
liability on the part of the Borrower for increased costs or expenses resulting
solely from such designation or transfer (except any such transfer which is
made by a Lender pursuant to Section 9.2 or 9.3 hereof, or otherwise for the
purpose of complying with Applicable Law). Increased costs for expenses
resulting from a change in law occurring subsequent to any such designation or
transfer shall be deemed not to result solely from such designation or
transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of its Advances (other than pursuant to Sections
2.4(b), 2.14, 2.15(d), 9.3 or 9.5) in excess of its Specified Percentage of all
payments made by the Borrower with respect to Advances shall purchase from each
other Lender such participation in the Advances made by such other Lender as
shall be necessary to cause such purchasing Lender to share the excess payment
pro rata according to Specified Percentages with each other Lender; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section, to the fullest extent permitted by law, may
exercise all
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its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this
Agreement relating to calculation of the LIBOR Rate are included only for the
purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate, it being understood that each Lender
shall be entitled to fund and maintain its funding of all or any part of a
LIBOR Advance as it sees fit.
Section 2.14 Taxes.
(a) Any and all payments by the Borrower hereunder shall be made,
in accordance with Section 2.10, free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, (i) taxes imposed on, based upon
or measured by its overall net income, net worth or capital, and franchise
taxes, doing business taxes or minimum taxes imposed on it, (A) by the
jurisdiction under the laws of which such Lender or the Administrative Agent
(as the case may be) is organized or in which it has its applicable lending
office or any political subdivision thereof; (B) by any other jurisdiction, or
any political subdivision thereof, other than those imposed by reason of (1) an
asserted relation of such jurisdiction to the transactions contemplated by this
Agreement, (2) the activities of the Borrower in such jurisdiction or (3) the
activities in connection with the transactions contemplated by this Agreement
of a Lender or the Administrative Agent; (ii) taxes imposed by reason of
failure by the Lender or the Administrative Agent to comply with the
requirements of paragraph (e) of this Section 2.14; and (iii) in the case of
any Lender, any Taxes in the nature of transfer, stamp, recording or
documentary taxes resulting from a transfer (other than as a result of
foreclosure) by such Lender of all or any portion of its interest in this
Agreement, the Notes or any other Loan Documents (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by Law
to deduct or withhold any Taxes from or in respect of any sum payable hereunder
to any Lender or the Administrative Agent, (x) the sum payable shall be
increased as may be necessary so that after making all required deductions for
Taxes (including deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (y) the Borrower shall make such deductions and (z) the
Borrower shall pay the full amount of Taxes deducted to the relevant taxation
authority or other authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iii) of the first
sentence of Section 2.14(a)) that arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
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(c) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Administrative
Agent (as the case may be) and all liabilities (including penalties, additions
to tax, interest and reasonable expenses) arising therefrom or with respect
thereto whether or not such Taxes or Other Taxes were correctly or legally
asserted, other than penalties, additions to tax, interest and expenses arising
as a result of gross negligence or wilful misconduct on the part of such Lender
or the Administrative Agent, provided, however, that the Borrower shall have no
obligation to indemnify such Lender or the Administrative Agent unless and
until such Lender or the Administrative Agent shall have delivered to the
Borrower a certificate showing in reasonable detail an accounting of the amount
payable and the calculations used to determine in good faith such amount, which
certificate shall be conclusive absent manifest or demonstrable error. Nothing
in this Section 2.14 shall provide the Borrower or any Subsidiary of the
Borrower the right to inspect the records, files or books of any Lender or the
Administrative Agent. This indemnification shall be made within 30 days from
the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent the original or a certified
copy of a receipt evidencing payment thereof. If no Taxes are payable in
respect of any payment hereunder, the Borrower will furnish the Administrative
Agent a certificate from each appropriate taxing authority, or an opinion of
counsel acceptable to Administrative Agent, in either case, stating that such
payment is exempt from or not subject to Taxes; provided, however, that such
certificate or opinion need only be given if: (i) the Borrower makes any
payment from any account located outside the United States or (ii) the payment
is made by a payor that is not a United States Person. For purposes of this
Section 2.14 the terms "United States" and "United States Person" shall have
the meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees
that:
(i) it shall, no later than the Agreement Date (or, in
the case of a Lender which becomes a party hereto pursuant to Section
11.6after the Agreement Date, the date upon which such Lender becomes
a party hereto) and at such times as necessary in the reasonable
determination of the Borrower, deliver to the Borrower through the
Administrative Agent, with a copy to the Administrative Agent:
(A) if any lending office is located in the United States
of America, two (2) accurate and complete signed
originals of Internal Revenue Service Form 4224 or
any successor thereto ("Form 4224"),
(B) if any lending office is located outside the United
States of America, two (2) accurate and complete
signed originals of Internal Revenue Service Form
1001 or any successor thereto ("Form 1001"),
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in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such lending office or lending offices under this
Agreement free from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office
or lending offices or selects an additional lending office it shall,
at the same time or reasonably promptly thereafter but only to the
extent the forms previously delivered by it hereunder are no longer
effective, deliver to the Borrower through the Administrative Agent,
with a copy to the Administrative Agent, in replacement for the forms
previously delivered by it hereunder:
(A) if such changed or additional lending office is
located in the United States of America, two (2)
accurate and complete signed originals of Form 4224;
or
(B) otherwise, two (2) accurate and complete signed
originals of Form 1001,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional lending office under
this Agreement free from withholding of United States Federal income
tax;
(iii) it shall, before or promptly after the occurrence of
any event (including the passing of time but excluding any event
mentioned in clause (ii) above) requiring a change in the most recent
Form 4224 or Form 1001 previously delivered by such Lender and if the
delivery of the same be lawful, deliver to the Borrower through the
Administrative Agent with a copy to the Administrative Agent, two (2)
accurate and complete original signed copies of Form 4224 or Form 1001
in replacement for the forms previously delivered by such Lender; and
(iv) it shall, promptly upon the request of the Borrower
to that effect, deliver to the Borrower such other forms or similar
documentation as may be required from time to time by any applicable
law, treaty, rule or regulation in order to establish such Lender's
tax status for withholding purposes.
(f) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.14 shall survive the payment in full of principal
and interest hereunder.
(g) Each Lender (and the Administrative Agent with respect to
payments to the Administrative Agent for its own account) agrees that (i) it
will take all reasonable actions by all usual means to maintain all exemptions,
if any, available to it from United States withholding taxes (whether available
by treaty, existing administrative waiver or by virtue of the location of
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any Lender's lending office) and (ii) it will otherwise cooperate with the
Borrower to minimize amounts payable by the Borrower under this Section 2.14;
provided, however, the Lenders and the Administrative Agent shall not be
obligated by reason of this Section 2.14(g) to contest the payment of any Taxes
or Other Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Section 2.15 Letters of Credit.
(a) The Letter of Credit Facility. The Borrower may request the
Issuing Bank, on the terms and conditions hereinafter set forth, to issue, and
the Issuing Bank shall, if so requested, issue, letters of credit (the "Letters
of Credit") for the account of the Borrower from time to time on any Business
Day from the date of the initial Advance until the Maturity Date in an
aggregate maximum amount (assuming compliance with all conditions to drawing)
not to exceed, at any time outstanding, the lesser of (i) $5,000,000 (the
"Letter of Credit Facility"), and (ii) an amount equal to the lesser of (A) the
sum of the Commitment minus the aggregate principal amount of Advances and
Reimbursement Obligations then outstanding and (B) the sum of the Borrowing
Base minus the aggregate principal amount of Advances and Reimbursement
Obligations then outstanding. No Letter of Credit shall have an expiration
date (including all rights of renewal) later than the earlier of (i) the
Maturity Date or (ii) one year after the date of issuance thereof. Immediately
upon the issuance of each Letter of Credit, the Issuing Bank shall be deemed to
have sold and transferred to each Lender, and each Lender shall be deemed to
have purchased and received from the Issuing Bank, in each case irrevocably and
without any further action by any party, an undivided interest and
participation in such Letter of Credit, each drawing thereunder and the
obligations of the Borrower under this Agreement in respect thereof in an
amount equal to the product of (x) such Lender's Specified Percentage times (y)
the maximum amount available to be drawn under such Letter of Credit (assuming
compliance with all conditions to drawing). Within the limits of the Letter of
Credit Facility, and subject to the limits referred to above, the Borrower may
request the issuance of Letters of Credit under this Section 2.15(a), repay any
Advances resulting from drawings thereunder pursuant to Section 2.15(c) and
request the issuance of additional Letters of Credit under this Section
2.15(a).
(b) Request for Issuance. Each Letter of Credit shall be issued
upon notice, given not later than 11:00 a.m. (Dallas, Texas time) on the fourth
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank. Each Letter of Credit shall be
issued upon notice given in accordance with the terms of any separate agreement
between the Borrower and the Issuing Bank in form and substance reasonably
satisfactory to the Borrower and the Issuing Bank providing for the issuance of
Letters of Credit pursuant to this Agreement and containing terms and
conditions not inconsistent with this Agreement (a "Letter of Credit
Agreement"), provided that if any such terms and conditions are inconsistent
with this Agreement, this Agreement shall control. Each such notice of
issuance of a Letter of Credit by the Borrower (a "Notice of Issuance") shall
be by telecopier, specifying therein, in the case of a Letter of Credit, the
requested (A) date of such issuance (which shall be a Business Day), (B)
maximum amount of such Letter of Credit, (C) expiration date of such
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Letter of Credit, (D) name and address of the beneficiary of such Letter of
Credit, (E) form of such Letter of Credit, and (F) such other information as
shall be required pursuant to the relevant Letter of Credit Agreement. If the
requested terms of such Letter of Credit are acceptable to the Issuing Bank in
its reasonable discretion, the Issuing Bank will, upon fulfillment of the
applicable conditions set forth in Article 3 hereof, make such Letter of Credit
available to the Borrower at its office referred to in Section 11.1 or as
otherwise agreed with the Borrower in connection with such issuance.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of
a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by the Issuing Bank of an Advance, which shall bear
interest at the Base Rate Basis, in the amount of such draft (but without any
requirement for compliance with the conditions set forth in Article 3 hereof).
In the event that a drawing under any Letter of Credit is not reimbursed by the
Borrower by 11:00 a.m. (Dallas, Texas time) on the first Business Day after
such drawing, the Issuing Bank shall promptly notify Administrative Agent and
each other Lender. Each such Lender shall, on the first Business Day following
such notification, make an Advance, which shall bear interest at the Base Rate
Basis, and shall be used to repay the applicable portion of the Issuing Bank's
Advance with respect to such Letter of Credit, in an amount equal to the amount
of its participation in such drawing for application to reimburse the Issuing
Bank (but without any requirement for compliance with the applicable conditions
set forth in Article 3 hereof) and shall make available to the Administrative
Agent for the account of the Issuing Bank, by deposit at the Administrative
Agent's office, in same day funds, the amount of such Advance. In the event
that any Lender fails to make available to the Administrative Agent for the
account of the Issuing Bank the amount of such Advance, the Issuing Bank shall
be entitled to recover such amount on demand from such Lender together with
interest thereon at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate or (ii) the Federal Funds Rate.
(d) Increased Costs. If any change in any Law 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 or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or any corporation controlling the
Issuing Bank or any Lender or (ii) impose on the Issuing Bank or any Lender or
any corporation controlling the Issuing Bank or any Lender any other condition
regarding this Agreement or any Letter of Credit, and the result of any event
referred to in the preceding clause (i) or (ii) shall be, in the reasonable
opinion of the Issuing Bank or any Lender, to increase the cost to the Issuing
Bank or any corporation controlling the Issuing Bank of issuing or maintaining
any Letter of Credit or to any Lender or any corporation controlling such
Lender of purchasing any participation therein or making any Advance pursuant
to Section 2.15(c), then, within thirty (30) days thereafter, the Borrower
shall, subject to Section 11.9 hereof, pay to the Issuing Bank or such Lender,
from time to time as specified by the Issuing Bank or such Lender, additional
amounts that shall be sufficient to compensate the Issuing Bank or such Lender
or any corporation controlling such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Borrower
by the Issuing Bank or such Lender, shall certify that such
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increased costs were actually incurred by the Issuing Bank or such Lender and
shall show in reasonable detail an accounting of the amount payable and the
calculation used to determine in good faith such amount and shall be conclusive
absent manifest or demonstrable error. Nothing in this Section 2.15(d) shall
provide the Borrower or any Subsidiary of the Borrower the right to inspect the
records, files or books of the Issuing Bank or any Lender. The obligations of
the Borrower under this Section 2.15(d) shall survive termination of this
Agreement. The Issuing Bank or any Lender claiming any additional compensation
under this Section 2.15(d) shall use reasonable efforts (consistent with legal
and regulatory restrictions) to reduce or eliminate any such additional
compensation which may thereafter accrue and which efforts would not, in the
reasonable judgment of the Issuing Bank or such Lender, be otherwise
disadvantageous.
(e) Obligations Absolute. The obligations of the Borrower under
this Agreement with respect to any Letter of Credit, any Letter of Credit
Agreement and any other agreement or instrument relating to any Letter of
Credit or any Advance pursuant to Section 2.15(c) shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without limitation, the
following circumstances:
(i) any lack of validity or enforceability of this
Agreement, any other Loan Document, any Letter of Credit Agreement,
any Letter of Credit or any other agreement or instrument relating
thereto (collectively, the "L/C Related Documents");
(ii) (A) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations of
the Borrower in respect of the Letters of Credit or any Advance
pursuant to Section 2.15(c) or (B) any other amendment or waiver of or
any consent to departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary
or any transferee of a Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), the Issuing
Bank, any Lender or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C Related
Documents or any unrelated transaction;
(iv) any statement or any other document presented under a
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;
(v) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not comply
with the terms of the Letter of Credit, except for any payment made
upon the Issuing Bank's gross negligence or wilful misconduct;
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(vi) any exchange, release or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations of the
Borrower in respect of the Letters of Credit or any Advance pursuant
to Section 2.15(c); or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor,
other than the Issuing's Bank gross negligence or wilful misconduct.
(f) Compensation for Letters of Credit.
(i) Credit Fee. Subject to Section 11.9 hereof, the
Borrower shall pay to the Administrative Agent for the ratable account
of each Lender a fee (which shall be payable quarterly in arrears on
each Quarterly Date and on the Maturity Date) equal to 1.25% per annum
of the average daily amount available for drawing under all
outstanding Letters of Credit. Subject to Section 11.9 hereof, such
fee shall be computed on the basis of a 360-day year for the actual
number of days elapsed.
(ii) Issuance Fee. Subject to Section 11.9 hereof, the
Borrower shall pay to the Administrative Agent for the account of the
Issuing Bank an issuance fee (which shall be payable on the date of
issuance of each Letter of Credit) in an amount equal to the product
of (a) 0.125% times (b) the face amount of the Letter of Credit being
issued.
(iii) Administrative Fee. Subject to Section 11.9 hereof,
the Borrower shall pay, with respect to each amendment, renewal or
transfer of each Letter of Credit and each drawing made thereunder,
reasonable documentary and processing charges in accordance with the
Issuing Bank's standard schedule for such charges in effect at the
time of such amendment, renewal, transfer or drawing, as the case may
be.
(g) L/C Cash Collateral Account.
(i) Upon the occurrence of an Event of Default and demand
by the Administrative Agent pursuant to Section 8.2(c), the Borrower
will promptly pay to the Administrative Agent in immediately available
funds an amount equal to the maximum amount then available to be drawn
under the Letters of Credit then outstanding. Any amounts so received
by the Administrative Agent shall be deposited by the Administrative
Agent in a deposit account maintained by the Issuing Bank (the "L/C
Cash Collateral Account").
(ii) As security for the payment of all Reimbursement
Obligations and for any other Obligations, the Borrower hereby grants,
conveys, assigns, pledges, sets over and transfers to the
Administrative Agent (for the benefit of the Issuing Bank and
Lenders), and creates in the Administrative Agent's favor (for the
benefit of the Issuing Bank and
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Lenders) a Lien in, all money, instruments and securities at any time
held in or acquired in connection with the L/C Cash Collateral
Account, together with all proceeds thereof. The L/C Cash Collateral
Account shall be under the sole dominion and control of the
Administrative Agent and the Borrower shall have no right to withdraw
or to cause the Administrative Agent to withdraw any funds deposited
in the L/C Cash Collateral Account. At any time and from time to
time, upon the Administrative Agent's request, the Borrower promptly
shall execute and deliver any and all such further instruments and
documents, including UCC financing statements, as may be necessary,
appropriate or desirable in the Administrative Agent's judgment to
obtain the full benefits (including perfection and priority) of the
security interest created or intended to be created by this paragraph
(ii) and of the rights and powers herein granted. The Borrower shall
not create or suffer to exist any Lien on any amounts or investments
held in the L/C Cash Collateral Account other than the Lien granted
under this paragraph (ii).
(iii) The Administrative Agent shall (A) apply any funds in
the L/C Cash Collateral Account on account of Reimbursement
Obligations when the same become due and payable, (B) after the
Maturity Date, apply any proceeds remaining in the L/C Cash Collateral
Account first to pay any unpaid Obligations then outstanding hereunder
and then to refund any remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar
month, may direct the Administrative Agent to invest the funds held in
the L/C Cash Collateral Account (so long as the aggregate amount of
such funds exceeds any relevant minimum investment requirement) in (A)
Cash and Cash Equivalents or direct obligations of the United States
or any agency thereof, or obligations guaranteed by the United States
or any agency thereof and (B) one or more other types of investments
permitted by the Determining Lenders, in each case with such
maturities as the Borrower, with the consent of the Determining
Lenders, may specify, pending application of such funds on account of
Reimbursement Obligations or on account of other Obligations, as the
case may be. In the absence of any such direction from the Borrower,
the Administrative Agent shall invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds
exceeds any relevant minimum investment requirement) in one or more
types of investments set forth in clause (A) above with the consent of
the Determining Lenders with such maturities as the Borrower, with the
consent of the Determining Lenders, may specify, pending application
of such funds on account of Reimbursement Obligations or on account of
other Obligations, as the case may be. All such investments shall be
made in the Administrative Agent's name for the account of the
Lenders, subject to the ownership interest therein of the Borrower.
The Borrower recognizes that any losses or taxes with respect to such
investments shall be borne solely by the Borrower, and the Borrower
agrees to hold the Administrative Agent and the Lenders harmless from
any and all such losses and taxes, except to the extent that such
losses or taxes are finally judicially determined by a court of
competent jurisdiction to be the result of gross negligence or wilful
misconduct of the Administrative Agent. Administrative Agent may
liquidate any investment held in the L/C Cash Collateral
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Account in order to apply the proceeds of such investment on account
of the Reimbursement Obligations as provided in Section 2.15(g)(iii)
hereof (or on account of any other Obligation then due and payable, as
the case may be) without regard to whether such investment has matured
and without liability for any penalty or other fee incurred (with
respect to which the Borrower hereby agrees to reimburse the
Administrative Agent to the extent the Administrative Agent is
required to pay the same) as a result of such application.
(v) After the establishment of the L/C Cash Collateral
Account pursuant to Section 2.15(g)(i) hereof, the Borrower shall pay
to the Administrative Agent the fees customarily charged by the
Issuing Bank with respect to the maintenance of accounts similar to
the L/C Cash Collateral Account.
(vi) At such time as any Event of Default is cured or
waived, the Administrative Agent shall, upon written instruction from
the Borrower, promptly distribute to the Borrower any funds held in
the L/C Cash Collateral Account.
Section 2.16 Extension of Maturity Date. The Borrower may notify
the Administrative Agent at any time during the period from ninety (90) days to
forty-five (45) days prior to each anniversary of the Agreement Date, of its
desire to extend the Maturity Date for an additional 12 months beyond the then
present Maturity Date. If such notice is given by the Borrower, the
Administrative Agent, within 20 Business Days thereafter will notify the
Borrower in writing of the Lenders' decision whether to extend the Maturity
Date. Extension of the Maturity Date shall be at the sole option and
discretion of the Lenders. If ever the Borrower or the Administrative Agent
fail to give notice within the time prescribed above, the Maturity Date shall
be the then present Maturity Date. An extension of the Maturity Date pursuant
to this Section 2.16 shall not require any renewal Note or amendment of or
supplement to this Agreement or any other Loan Document.
ARTICLE 3.
Conditions Precedent
Section 3.1 Conditions Precedent to the Initial Advance and the
Initial Issuance of Letters of Credit. The obligation of each Lender to make
any Advance and the obligation of the Issuing Bank to issue Letters of Credit
is subject to (i) receipt by the Administrative Agent of the following items
which are to be delivered, in form and substance satisfactory to each Lender,
with a copy (except for the Notes and this Agreement) for each Lender, and (ii)
satisfaction of the following conditions which are to be satisfied:
(a) A loan certificate of each Obligor certifying as to the
accuracy of its representations and warranties in the Loan Documents,
certifying that no Default has occurred, and including a certificate of
incumbency with respect to each Authorized Signatory, and
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including (i) a copy of the articles or certificate of incorporation of such
Obligor, certified to be true, complete and correct by the secretary of state
of its state of organization, and (ii) a copy of a certificate of good standing
and a certificate of existence for its state of organization and each state in
which it is qualified to do business;
(b) a duly executed Note payable to the order of each Lender and
in an amount for each Lender equal to its Specified Percentage of the
Commitment;
(c) UCC searches in appropriate jurisdictions where Collateral is
located;
(d) opinions of counsel to each Obligor addressed to the Lenders
and in form and substance satisfactory to the Lenders, dated the Agreement
Date, and covering certain of the matters set forth in Sections 4.1(a), (b),
(c), (m), (n) and (p) and such other matters incident to the transactions
contemplated hereby as the Administrative Agent or Special Counsel may
reasonably request;
(e) reimbursement for the Administrative Agent for Special
Counsel's reasonable and customary fees (on an hourly basis) and expenses
rendered through the date hereof, to the extent invoiced at least three (3)
Business Days prior to the Agreement Date;
(f) evidence that all proceedings of each Obligor taken in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to the
Lenders and Special Counsel; and the Lenders shall have received copies of all
documents or other evidence which the Administrative Agent, Special Counsel or
any Lender may reasonably request in connection with such transactions;
(g) any fees or expenses required to be paid pursuant to the Fee
Letter;
(h) duly executed and completed Security Agreements, dated as of
the Agreement Date, granting a Lien, in all Collateral covered thereby,
together with related financing statements, stock powers, stock certificates
evidencing ownership of (i) 100% of the issued and outstanding Capital Stock of
each Domestic Subsidiary and (ii) 65% of the issued and outstanding Capital
Stock of each Foreign Subsidiary, and insurance certificates listing
Administrative Agent as loss payee and additional insured and otherwise in a
form required by the Collateral Documents.
(i) simultaneously with the making of the initial Advance,
executed UCC-3 Termination Statements to be filed in appropriate jurisdictions
to terminate all Liens against assets of the Borrower and its Subsidiaries
other than Permitted Liens;
(j) there shall have occurred no material adverse change in the
business, assets or financial condition of the Borrower and its Subsidiaries,
taken as a whole, since the date of the financial statements referred to in
Section 4.1(j)(i) hereof;
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(k) each of the Guaranties, duly executed by the Guarantor party
thereto;
(l) each Lender shall be satisfied, in its sole judgment exercised
reasonably, with the corporate, capital, legal, management structure and tax
liabilities of the Borrower and its Subsidiaries;
(m) evidence that simultaneously with the making of the initial
Advance hereunder, all loan documentation with CIT Credit Group will be
terminated and all obligations thereunder will be paid; and
(n) in form and substance reasonably satisfactory to the Lenders
and Special Counsel, such other documents, instruments and certificates as the
Administrative Agent or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation, evidence of
the status, organization or authority of the Borrower or any Subsidiary of the
Borrower, and the enforceability of the Obligations.
Section 3.2 Conditions Precedent to All Advances and Letters of
Credit. The obligation of each Lender to make each Advance hereunder
(including the initial Advance) and the obligation of the Issuing Bank to issue
each Letter of Credit (including the initial Letter of Credit) is subject to
fulfillment of the following conditions immediately prior to or
contemporaneously with each such Advance or issuance:
(a) With respect to each Advance and each issuance of a Letter of
Credit, all of the representations and warranties of the Borrower under this
Agreement, which, pursuant to Section 4.2 hereof, are made at and as of the
time of each such Advance or issuance, shall be true and correct at such time
in all respects, both before and after giving effect to the application of the
proceeds of the Advance or Letter of Credit, except as otherwise expressly
provided in said Section 4.2 hereof.
(b) The incumbency of the Authorized Signatories shall be as
stated in the certificate of incumbency delivered in the Borrower's loan
certificate pursuant to Section 3.1(a) or as subsequently modified and
reflected in a certificate of incumbency delivered to the Administrative Agent.
The Lenders may, without waiving this condition, consider it fulfilled and a
representation by the Borrower made to such effect if no written notice to the
contrary, dated on or before the date of such Advance or Letter of Credit, is
received by the Administrative Agent from the Borrower prior to the making of
such Advance or issuance of such Letter of Credit;
(c) There shall not exist a Default or Event of Default hereunder;
(d) The aggregate Advances and Letters of Credit, after giving
effect to such proposed Advance or Letter of Credit, shall not exceed the
maximum principal amount then permitted to be outstanding hereunder;
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(e) No order, judgment, injunction or decree of any Tribunal shall
purport to enjoin or restrain any Lender or the Issuing Bank from making any
Advance or issuing any Letter of Credit;
(f) There shall not be pending, or to the knowledge of the
Borrower, threatened any Litigation against or affecting the Borrower or any
Subsidiary of the Borrower or any property of the Borrower or any Subsidiary of
the Borrower that is required to be disclosed but has not been disclosed in
writing by the Borrower pursuant to Section 4.1(h), 6.4(d) or 6.5(a) prior to
the making of the last preceding Advance or the issuance of the last preceding
Letter of Credit (or in the case of the initial Advances and Letters of Credit,
prior to the Agreement Date) and there shall have occurred no development not
so disclosed in any such Litigation that, in either event, would reasonably be
expected to have a Material Adverse Effect; and
(g) There shall have occurred no material adverse change in the
business, financial condition, results of operations or business prospects of
the Borrower and its Subsidiaries, taken as a whole, since September 30, 1996.
Section 3.3 Conditions Precedent to Conversions and
Continuations. The obligation of the Lenders to convert any existing Base Rate
Advance into a LIBOR Advance or to continue any existing LIBOR Advance is
subject to the condition precedent that on the date of such conversion or
continuation no Default or Event of Default shall have occurred and be
continuing or would result from the making of such conversion or continuation.
The acceptance of the benefits of each such conversion and continuation shall
constitute a representation and warranty by the Borrower to each of the Lenders
that no Default or Event of Default shall have occurred and be continuing or
would result from the making of such conversion or continuation.
ARTICLE 4.
Representations and Warranties
Section 4.1 Representations and Warranties. The Borrower hereby
represents and warrants to each Lender as follows:
(a) Organization; Power; Qualification. The respective
jurisdiction of organization or incorporation and percentage ownership by the
Borrower of the Subsidiaries listed on Schedule 4 are true and correct as of
the Agreement Date. Schedule 4 is a complete and accurate listing as of the
Agreement Date, showing with respect to the Borrower and each Subsidiary of the
Borrower (a) its mailing address, which is its principal place of business, (b)
the classes of its Capital Stock and the number of amount of its Capital Stock
authorized and outstanding, (c) each record and beneficial owner of its
outstanding Capital Stock, and (d) all outstanding options, rights, rights of
conversion, redemption, purchase or repurchase, rights of first refusal and
similar rights relating to the Capital Stock. All of the outstanding Capital
Stock of the Borrower and each Subsidiary of the Borrower is validly issued,
fully paid and non-
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assessable. Each of the Borrower and its Subsidiaries is a corporation or
other legal Person duly organized, validly existing and in good standing under
the laws of its state of incorporation or organization. As of the Agreement
Date, each of the Borrower and its Subsidiaries has the legal power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted. Each of the Borrower and its Subsidiaries
is authorized to do business, duly qualified and in good standing as set forth
in Schedule 7 and no qualification or authorization is necessary in any other
jurisdictions in which the character of its properties or the nature of its
business requires such qualification or authorization, except where the failure
to be so qualified or authorized could not reasonable be expected to have a
Material Adverse Effect.
(b) Authorization. The Borrower has legal power and has taken all
necessary legal action to authorize it to borrow Advances and request Letters
of Credit hereunder. Each of the Borrower and its Subsidiaries has legal power
and has taken all necessary legal action to execute, deliver and perform the
Loan Documents to which it is party in accordance with the terms thereof, and
to consummate the transactions contemplated thereby. Each Loan Document has
been duly executed and delivered by the Borrower or the Subsidiary of the
Borrower executing it. Each of the Loan Documents to which the Borrower or any
of its Subsidiaries is a party is a legal, valid and binding obligation of the
Borrower or such Subsidiary, as applicable, enforceable in accordance with its
terms, subject, to enforcement of remedies, to the following qualifications:
(i) equitable principles generally, and (ii) Debtor Relief Laws.
(c) Compliance with Other Loan Documents and Contemplated
Transactions. The execution, delivery and performance by the Borrower and its
Subsidiaries of the Loan Documents to which they are respectively a party, and
the consummation of the transactions contemplated thereby, do not and will not
(i) require any consent or approval necessary on or prior to the Agreement Date
not already obtained, (ii) violate any Applicable Law, (iii) conflict with,
result in a breach of, or constitute a default under the certificate of
incorporation or by-laws of the Borrower or any Subsidiary of the Borrower,
(iv) conflict with, result in a breach of, or constitute a default under any
Necessary Authorization, indenture, agreement or other instrument, to which the
Borrower or any Subsidiary of the Borrower is a party or by which they or their
respective properties may be bound, the result of which could reasonably be
expected to have a Material Adverse Effect, or (v) result in or require the
creation or imposition of any Lien (other than Liens in favor of the Lenders to
secure the Obligations hereunder) upon or with respect to any property now
owned or hereafter acquired by the Borrower or any Subsidiary of the Borrower.
(d) Business. The Borrower and its Subsidiaries are engaged
primarily in the business of the manufacture and distribution of software and
hardware for computer networking and activities directly related thereto.
(e) Licenses, etc. All Necessary Authorizations have been duly
obtained, and are in full force and effect without any known conflict with the
rights of others and free from any unduly burdensome restrictions. The
Borrower and its Subsidiaries are and will continue to be
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in compliance in all material respects with all provisions thereof. No
circumstance exists which could reasonably be expected to impair the utility of
any Necessary Authorization or the right to renew such Necessary Authorization.
No Necessary Authorization is the subject of any pending or, to the best of the
Borrower's knowledge, threatened challenge, suspension, cancellation or
revocation.
(f) Compliance with Law. The Borrower and its Subsidiaries are in
compliance in all respects with all Applicable Laws, except where the failure
to so comply could not reasonably be expected to have a Material Adverse
Effect.
(g) Title to Properties. The Borrower and its Subsidiaries have
good and indefeasible title to, or a valid leasehold interest in, all of their
material assets. None of their assets are subject to any Liens, except
Permitted Liens. No financing statement or other Lien filing (except relating
to Permitted Liens) is on file in any state or jurisdiction that names the
Borrower or any of its Subsidiaries as debtor or covers (or purports to cover)
any assets of the Borrower or any of its Subsidiaries. The Borrower and its
Subsidiaries have not signed any such financing statement or filing, nor any
security agreement authorizing any Person to file any such financing statement
or filing (except relating to Permitted Liens).
(h) Litigation. Except as reflected on Schedule 3 hereto, there
is no action, suit or proceeding pending against, or, to the best of the
Borrower's knowledge, threatened against the Borrower or any Subsidiary, or in
any other manner relating directly and materially adversely to the Borrower,
any Subsidiary, or any of their material properties, in any court or before any
arbitrator of any kind or before or by any governmental body the result of
which could reasonably be expected to require the payment of money by the
Borrower or any Subsidiary (in excess of applicable insurance) in an amount of
$250,000 or more in any one such action, suit or proceeding or $500,000 or more
in the aggregate for all such actions, suits or proceedings.
(i) Taxes. All federal, state and other tax returns of the
Borrower and its Subsidiaries required by law to be filed have been duly filed
or extensions have been timely filed, expect where the failure to file could
not reasonably be expected to have a Material Adverse Effect, and all federal,
state and other Taxes upon the Borrower, its Subsidiaries or any of their
properties, income, profits and assets, which are due and payable, have been
paid, unless the same are being diligently contested in accordance with Section
5.6 hereof and except where the failure to pay such Taxes could not reasonably
be expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of their
Taxes are, in the reasonable judgment of the Borrower, adequate.
(j) Financial Statements; Material Liabilities. The Borrower has
furnished or caused to be furnished to the Lenders copies of its audited
September 30, 1996, financial statements, which are prepared in good faith and
complete in all material respects and present fairly in accordance with GAAP
the financial position of the Borrower and its Subsidiaries as at such dates
and the results of operations for the periods then ended, subject to normal
year-end adjustments. Neither the Borrower nor any Subsidiary has any material
liabilities, contingent
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or otherwise, or material losses required to be disclosed in accordance with
GAAP but not reflected therein, except as disclosed in writing to the Lenders
prior to the Agreement Date.
(k) No Adverse Change. Since September 30, 1996, no event or
circumstance has occurred or arisen which could have a Material Adverse Effect.
(l) ERISA. None of the Borrower or its Controlled Group maintains
or contributes to any Plan subject to Title IV of ERISA other than those
disclosed to the Administrative Agent in writing. Each such Plan (other than
any Multiemployer Plan) is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and any other applicable Law, except
to the extent that failure to so comply would not reasonably be expected to
have a Material Adverse Effect. With respect to each Plan (other than any
Multiemployer Plan) of the Borrower and each member of its Controlled Group,
all reports required under ERISA or any other Applicable Law to be filed with
any Tribunal, the failure of which to file could reasonably be expected to
result in liability of the Borrower or any member of its Controlled Group in
excess of $250,000, have been duly filed. All such reports are true and
correct in all material respects as of the date given. No Plan of the Borrower
or any member of its Controlled Group has been terminated under Section 4041(c)
of ERISA nor has any accumulated funding deficiency (as defined in Section
412(a) of the Code) been incurred (without regard to any waiver granted under
Section 412 of the Code), nor has any funding waiver from the Internal Revenue
Service been received or requested the result of which could reasonably be
expected to have a Material Adverse Effect. None of the Borrower or any member
of its Controlled Group has failed to make any contribution or pay any amount
due or owing as required under the terms of any such Plan, or by Section 412 of
the Code or Section 302 of ERISA by the due date under Section 412 of the Code
and Section 302 of ERISA, the result of which could reasonably be expected to
have a Material Adverse Effect. There has been no ERISA Event or any event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with
respect to any Plan or its related trust of the Borrower or any member of its
Controlled Group since the effective date of ERISA. The present value of the
benefit liabilities, as defined in Title IV of ERISA, of each Plan subject to
Title IV of ERISA (other than a Multiemployer Plan) of the Borrower and each
member of its Controlled Group does not exceed by more than $500,000 the
present value of the assets of each such Plan as of the most recent valuation
date using each such Plan's actuarial assumptions at such date. There are no
pending, or to the Borrower's knowledge threatened, claims, lawsuits or actions
(other than routine claims for benefits in the ordinary course) asserted or
instituted against, and neither the Borrower nor any member of its Controlled
Group has knowledge of any threatened litigation or claims against, the assets
of any Plan or its related trust or against any fiduciary of a Plan with
respect to the operation of such Plan, the result of which could reasonably be
expected to have a Material Adverse Effect. None of the Borrower or, to the
Borrower's knowledge, any member of its Controlled Group has engaged in any
prohibited transactions, within the meaning of Section 406 of ERISA or Section
4975 of the Code, in connection with any Plan the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group has withdrawn from any Multiemployer
Plan, nor has incurred or reasonably expects to incur (A) any liability under
Title IV of ERISA (other than premiums due under Section 4007
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of ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred
which with the giving of notice under Section 4219 of ERISA would result in
such liability) under Section 4201 of ERISA as a result of a complete or
partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA. None of the
Borrower, any member of its Controlled Group, or any organization to which the
Borrower or any member of its Controlled Group is a successor or parent
corporation within the meaning of ERISA Section 4069(b), has engaged in a
transaction within the meaning of ERISA Section 4069, the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group maintains or has established any Plan,
which is a welfare benefit plan within the meaning of Section 3(1) of ERISA and
which provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment, except as may be required by any Applicable Law, the result of
which could reasonably be expected to have a Material Adverse Effect. Each of
Borrower and its Controlled Group which maintains a Plan which is a welfare
benefit plan within the meaning of Section 3(1) of ERISA has complied in all
material respects with any applicable notice and continuation requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations thereunder. None of the Borrower or any member of its Controlled
Group maintains, has established, or has ever participated in a multiemployer
welfare benefit arrangement within the meaning of Section 3(40)(A) of ERISA.
(m) Compliance with Regulations G, T, U and X. The Borrower is
not engaged principally or as one of its important activities in the business
of extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System, and no part of the proceeds of the Advances or
Letters of Credit will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. No more than 25% of the assets of the Borrower and its Subsidiaries are
margin stock. None of the Borrower and its Subsidiaries nor, to the knowledge
of the Borrower, any agent acting on their behalf, have taken or will knowingly
take any action which would cause this Agreement or any other Loan Documents to
violate any regulation of the Board of Governors of the Federal Reserve System
or to violate the Securities Exchange Act of 1934, in each case as in effect
now or as the same may hereafter be in effect.
(n) Governmental Regulation. The Borrower and its Subsidiaries
are not required to obtain any Necessary Authorization on or prior to the
Agreement Date that has not already been obtained from, or effect any material
filing or registration that has not already been effected with, any Tribunal in
connection with the execution and delivery of this Agreement or any other Loan
Document, or the performance thereof, in accordance with their respective
terms, including any borrowings hereunder, except for the filing of financing
statements (and other similar notices) containing a description of the
Collateral with certain Tribunals, including the United States Trademark and
Copyright Offices.
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(o) Absence of Default. The Borrower and its Subsidiaries are in
compliance in all material respects with all of the provisions of their
certificate of incorporation and by-laws, and no event has occurred or failed
to occur, which has not been remedied or waived, the occurrence or
non-occurrence of which constitutes, or which with the passage of time or
giving of notice or both would constitute, (i) an Event of Default or (ii) a
default by the Borrower or any of its Subsidiaries under any material
indenture, agreement or other instrument, or any judgment, decree or order to
which the Borrower or any of its Subsidiaries or by which they or any of their
respective properties is bound, the effect of which could reasonably be
expected to have a Material Adverse Effect.
(p) Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940. Neither the entering into or performance by
the Borrower of this Agreement nor the issuance of the Notes violates any
provision of such act or requires any consent, approval, or authorization of,
or registration with, the Securities and Exchange Commission or any other
Tribunal pursuant to any provisions of such act.
(q) Environmental Matters. Neither the Borrower nor any
Subsidiary has any current actual knowledge that any substance deemed hazardous
by any Applicable Environmental Law, has been installed (i) on any real
property fee title to which is now owned by the Borrower or any of its
Subsidiaries or (ii) by Borrower or any of its Subsidiaries on any real
property leased by the Borrower or any of its Subsidiaries, in either case in a
manner which does not comply with Applicable Environmental Laws, except to the
extent that the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries are not in
violation of or subject to any existing, pending or, to the best of the
Borrower's knowledge, threatened investigation or inquiry by any Tribunal or to
any remedial obligations under any Applicable Environmental Laws, the effect of
which could reasonably be expected to have a Material Adverse Effect. The
Borrower and its Subsidiaries have not obtained and are not required to obtain
any permits, licenses or similar authorizations other than certificates of
occupancy and building permits and other authorizations that have been obtained
to construct, occupy, operate or use any buildings, improvements, fixtures, and
equipment forming a part of any real property owned or leased by the Borrower
or any Subsidiary of the Borrower by reason of any Applicable Environmental
Laws, except to the extent that the failure to so obtain could not reasonably
be expected to have a Material Adverse Effect. The Borrower and its
Subsidiaries undertook, at the time of acquisition of fee title to any real
property, reasonable inquiry into the previous ownership and uses of such real
property consistent with good commercial or customary practice. The Borrower
and its Subsidiaries have taken reasonable steps to determine, and the Borrower
and its Subsidiaries have no current actual knowledge, that any hazardous
substances or solid wastes have been disposed of or otherwise released (i) on
or to the real property fee title to which is owned by the Borrower or any of
its Subsidiaries or (ii) by Borrower or any of its Subsidiaries on or to any
real property leased by Borrower or any of its Subsidiaries, all within the
meaning of the Applicable Environmental Laws, the effect of which could
reasonably be expected to have a Material Adverse Effect.
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(r) Certain Fees. No broker's, finder's or other fee or
commission will be payable by the Borrower (other than to the Lenders
hereunder) with respect to the making of the Commitment or the Advances
hereunder. The Borrower agrees to indemnify and hold harmless the
Administrative Agent and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising
in connection with any such fees or commissions.
(s) Patents, Etc. The Borrower and its Subsidiaries have
collectively obtained or applied for all patents, trademarks, service marks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their business as
presently conducted and as proposed to be conducted. Except as set forth on
Schedule 10 hereto, nothing has come to the knowledge of the Borrower or any of
its Subsidiaries to the effect that (i) any process, method, part or other
material presently contemplated to be employed by the Borrower or any
Subsidiary of the Borrower may infringe any patent, trademark, service mark,
trade name, copyright, license or other right owned by any other Person, the
effect of which could reasonably be expected to have a Material Adverse Effect,
or (ii) there is pending or overtly threatened any claim or litigation against
or affecting the Borrower or any Subsidiary of the Borrower contesting its
right to sell or use any such process, method, part or other material, the
effect of which could reasonably be expected to have a Material Adverse Effect.
(t) Disclosure. All factual information furnished by the Borrower
or any of its Subsidiaries in writing to the Administrative Agent or any Lender
in connection with this Agreement, the other Loan Documents or any transaction
contemplated herein or therein is, and all other factual information hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries in writing
to the Administrative Agent or any Lender in connection with this Agreement,
the other Loan Documents, or any transaction contemplated herein or therein,
will be, true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any fact necessary to make such information not materially misleading at such
time in light of the circumstances under which such information was provided.
There is no fact known to the Borrower and not known to the public generally
that could reasonably be expected to have a Material Adverse Effect, which has
not been set forth in this Agreement or in the documents, certificates and
statements furnished to the Lenders by or on behalf of the Borrower prior to
the Agreement Date in connection with the transaction contemplated hereby.
(u) Solvency. The Borrower is, and Borrower and its Subsidiaries
on a consolidated basis are, Solvent.
(v) Labor Relations. Except as provided on Schedule 8, neither
the Borrower nor any Subsidiary is a party to a collective bargaining agreement
or similar agreement, and the Borrower and each Subsidiary is in compliance in
all material respects with all Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours and other laws
related to the employment of its employees, and there are no arrears in the
payment of wages, withholding or social security taxes, unemployment insurance
premiums or
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other similar obligations of the Borrower or any Subsidiary or for which the
Borrower or any Subsidiary may be responsible other than in the ordinary course
of business. There is no strike, work stoppage or labor dispute with any union
or group of employees pending or overtly threatened involving Borrower or any
Subsidiary.
(w) Consolidated Business Entity. The Borrower and its
Subsidiaries are engaged in the businesses set forth in Section 4.1(d) hereof.
These operations require financing on a basis such that the credit supplied can
be made available from time to time to the Borrower and various of the
Subsidiaries, as required for the continued successful operation of the
Borrower and its Subsidiaries as a whole. The Borrower has requested Lenders
to make credit available hereunder primarily for the purposes of financing the
operations of the Borrower and its Subsidiaries. The Borrower and its
Subsidiaries expect to derive benefit (and the boards of directors of the
Borrower and its Subsidiaries have determined that the Subsidiaries may
reasonably be expected to derive benefit), directly or indirectly, from the
credit extended by Lenders hereunder, both in their separate capacities and as
members of the group of companies, since the successful operation and condition
of the Borrower and its Subsidiaries is dependent on the continued successful
performance of the functions of the group as a whole.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Advance and the date of issuance of each Letter of
Credit, and each shall be true and correct in all material respects when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) previously waived in writing by the Determining Lenders with
respect to any particular factual circumstance or permitted by the terms of
this Agreement, (c) such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties shall have
been true and correct in all material respects on and as of such date, or (d)
such representations and warranties with respect to Schedules 3 and 4 hereto or
Schedule 1 to the Security Agreement shall have been updated in accordance with
Section 5.11. All such representations and warranties shall survive, and not
be waived by, the execution hereof by any Lender, any investigation or inquiry
by any Lender, or by the making of any Advance or the issuance of any Letter of
Credit under this Agreement.
ARTICLE 5.
General Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. The
Borrower shall, and shall cause each Subsidiary of the Borrower to:
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(a) except as otherwise permitted pursuant to Section 7.4 hereof,
preserve and maintain, or timely obtain and thereafter preserve and maintain,
its existence, rights, franchises, licenses, authorizations, consents,
privileges, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect and all other Necessary Authorizations from
any Tribunal; and
(b) except as otherwise permitted pursuant to Section 7.4 hereof,
qualify and remain qualified and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its business requires
such qualification or authorization, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law. The
Borrower and its Subsidiaries shall (a) engage primarily in the businesses set
forth in Section 4.1(d) hereof, and (b) comply in all respects with the
requirements of all Applicable Law, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
Section 5.3 Maintenance of Properties. The Borrower shall, and
shall cause each Subsidiary of the Borrower to, maintain or cause to be
maintained all its properties (whether owned or held under lease) in reasonably
good repair, working order and condition, taken as a whole, ordinary wear and
tear and obsolescence excepted and from time to time make or cause to be made
all appropriate (in the reasonable judgment of the Borrower) repairs, renewals,
replacements, additions, betterments and improvements thereto.
Section 5.4 Accounting Methods and Financial Records. The
Borrower shall, and shall cause each Domestic Subsidiary of the Borrower to,
maintain a system of accounting established and administered in accordance with
GAAP, keep adequate records and books of account in which complete entries will
be made and all transactions reflected in accordance with GAAP, and keep
accurate and complete records of its respective assets. The Borrower and each
of its Subsidiaries shall maintain its Fiscal Year in the manner in existence
on the Agreement Date.
Section 5.5 Insurance. The Borrower shall, and shall cause each
Subsidiary of the Borrower to, maintain insurance from responsible companies in
such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability. Each insurance policy
shall (a) provide for at least 30 days' prior notice to the Administrative
Agent of any proposed termination or cancellation of such policy, whether on
account of default or otherwise and (b) otherwise contain the requirements for
insurance set forth in the Security Agreements.
Section 5.6 Payment of Taxes and Claims. The Borrower shall, and
shall cause each Subsidiary of the Borrower to, pay and discharge all material
Taxes to which they are subject prior to the date on which penalties attach
thereto, and all lawful material claims for labor, materials and supplies
which, if unpaid, might become a Lien upon any of its properties; except that
no such Tax or claim need be paid which is being diligently contested in good
faith by appropriate proceedings and for which adequate reserves shall have
been set aside on the
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appropriate books, but only so long as no Lien shall attach with respect
thereto and no foreclosure, distraint, sale or similar proceedings shall have
been commenced. The Borrower shall, and shall cause each Subsidiary of the
Borrower to, timely file all information returns (or extensions of such filing
deadlines) required by federal, state or local tax authorities.
Section 5.7 Visits and Inspections. The Borrower shall, and
shall cause each Subsidiary of the Borrower to, promptly permit representatives
of the Administrative Agent or any Lender from time to time after reasonable
notice by the Administrative Agent or any Lender to (a) visit and inspect the
properties of the Borrower and its Subsidiaries as often as the Administrative
Agent or any Lender shall reasonably deem advisable, (b) audit, inspect and
make extracts from and copies of the Borrower's and each such Subsidiary's
books and records, and (c) discuss with the Borrower's and each such
Subsidiary's directors, officers, employees and auditors its business, assets,
liabilities, financial positions, results of operations and business prospects.
The Borrower shall pay the reasonable expenses related to inspections and
audits performed by the Administrative Agent. Prior to the occurrence of an
Event of Default, all such visits and inspections shall be conducted during
normal business hours. Following the occurrence and during the continuance of
an Event of Default, such visits and inspections shall be conducted at any time
requested by the Administrative Agent or any Lender without any requirement for
reasonable notice.
Section 5.8 Use of Proceeds. The proceeds of Advances and
Letters of Credit shall be used for working capital and for other general
corporate purposes.
SECTION 5.9 INDEMNITY.
(A) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD
HARMLESS THE ADMINISTRATIVE AGENT, EACH LENDER, EACH OF THEIR RESPECTIVE
AFFILIATES, AND EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE
FOREGOING (COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, REASONABLE COSTS, REASONABLE EXPENSES AND REASONABLE
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES IN
CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING,
WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT
OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON
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CONTRACT, TORT OR OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT
OR FUTURE OPERATIONS OF THE BORROWER OR ANY SUBSIDIARY OF THE BORROWER OR THEIR
RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ANY SUBSIDIARY OF THE
BORROWER), RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR
TRANSACTION RELATING OR ATTENDANT THERETO, THE MANAGEMENT OF THE ADVANCES,
INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY
ORDINARY OR MERE NEGLIGENCE OF ADMINISTRATIVE AGENT OR ANY LENDER (OTHER THAN
THOSE MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE ADMINISTRATIVE
AGENT OR ANY LENDER AND NOT THE BORROWER), OR THE USE OR INTENDED USE OF THE
PROCEEDS OF THE ADVANCES HEREUNDER, OR IN CONNECTION WITH ANY INVESTIGATION OF
ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (I) ANY CLAIM OR LIABILITY
THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF ANY
INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, AND (II) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER LENDER OR
BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED
MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME
LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES
THAT CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(B) WITHOUT DUPLICATION, THE BORROWER SHALL PERIODICALLY, UPON
REQUEST, REIMBURSE EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL
REASONABLE EXPENSES (INCLUDING THE REASONABLE COST OF ANY INVESTIGATION AND
PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED MATTER. THE
REIMBURSEMENT, INDEMNITY AND CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL
BE IN ADDITION TO ANY LIABILITY WHICH THE BORROWER MAY OTHERWISE HAVE, SHALL
EXTEND UPON THE SAME TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE
BINDING UPON AND INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND
PERSONAL REPRESENTATIVES OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE LENDERS
AND ALL OTHER INDEMNITEES. THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS
AGREEMENT AND PAYMENT OF THE OBLIGATIONS.
Section 5.10 Environmental Law Compliance. The use which the
Borrower or any Subsidiary of the Borrower intends to make of any real property
which is owned or leased by it will not result in the disposal or other release
of any hazardous substance or solid waste on
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or to such real property which is in violation of Applicable Environmental
Laws, the effect of which could reasonably be expected to have a Material
Adverse Effect. As used herein, the terms "hazardous substance" and "release"
as used in this Section shall have the meanings specified in CERCLA (as defined
in the definition of Applicable Environmental Laws), and the terms "solid
waste" and "disposal" shall have the meanings specified in RCRA (as defined in
the definition of Applicable Environmental Laws); provided, however, that if
CERCLA or RCRA is amended so as to broaden or lessen the meaning of any term
defined thereby, such broader or lesser meaning shall apply subsequent to the
effective date of such amendment; and provided further, to the extent that any
other law applicable to the Borrower, any Subsidiary or any of their properties
establishes a meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader or lesser than that specified in either CERCLA or
RCRA, such broader or lesser meaning shall apply.
Section 5.11 Further Assurances. At any time or from time to time
upon request by the Administrative Agent, the Borrower or any Subsidiary of the
Borrower shall execute and deliver such further documents and do such other
acts and things as the Administrative Agent may reasonably request in order to
effect fully the purposes of this Agreement and the other Loan Documents and to
provide for payment of the Obligations in accordance with the terms of this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, the Borrower agrees to (a) update and deliver to the Administrative
Agent Schedules 3 and 4 hereto at the time of delivery of the financial
statements set forth in Sections 6.1 and 6.2 hereof if the information provided
therein is not complete and correct, and (b) update and deliver to the
Administrative Agent Schedule 1 to the Security Agreements promptly upon
discovery if the information provided therein is not complete and correct.
Section 5.12 Subsidiaries. (a) Within 5 Business Days following
the formation or Acquisition of any Domestic Subsidiary, (i) such Domestic
Subsidiary shall execute a Subsidiary Guaranty of the Obligations and a General
Security Agreement granting a first priority Lien in its Inventory, Accounts
and intellectual property, to secure the Obligations, (ii) 100% of such
Domestic Subsidiary's Capital Stock shall be pledged to secure the Obligations
and (iii) the Lenders shall receive such board resolutions, officer's
certificates and opinions of counsel as the Administrative Agent shall
reasonably request in connection with the actions described in clauses (i) and
(ii) above and (b) within 30 days following the formation or Acquisition of any
direct Foreign Subsidiary, (i) 65% of such Foreign Subsidiary's Capital Stock
shall be pledged to secure the Obligations and (ii) the Lenders shall receive
such board resolutions, officer's certificates and opinions of counsel as the
Administrative Agent shall reasonably request in connection with the actions
described in clause (b)(i) above.
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ARTICLE 6.
Information Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrower shall furnish or cause to be furnished to
each Lender:
Section 6.1 Quarterly Financial Statements and Information.
Within 45 days after the end of each fiscal quarter of each Fiscal Year, the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal quarter and the related consolidated
and consolidating statements of income for such fiscal quarter and for the
elapsed portion of the year ended with the last day of such fiscal quarter, and
consolidated and consolidating statements of cash flow for the elapsed portion
of the year ended with the last day of such fiscal quarter, all of which shall
be certified by the president or chief financial officer or other officer of
the Borrower acceptable to the Administrative Agent, to, in his or her opinion
acting solely in his or her capacity as an officer of the Borrower, present
fairly in all material respects, in accordance with GAAP (except for the
absence of footnotes), the financial position and results of operations of the
Borrower and its Subsidiaries as at the end of and for such fiscal quarter, and
for the elapsed portion of the year ended with the last day of such fiscal
quarter, subject only to normal year-end adjustments.
Section 6.2 Annual Financial Statements and Information;
Certificate of No Default.
(a) Within 90 days after the end of each Fiscal Year, a copy of
(i) the consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries, as of the end of the current and prior fiscal years and (ii) the
consolidated and consolidating statements of earnings and consolidated
statements of changes in shareholders' equity, and statements of cash flow as
of and through the end of such Fiscal Year, all of which are prepared in
accordance with GAAP, and (with respect to the consolidated statements)
certified by independent certified public accountants reasonably acceptable to
the Lenders (provided, however, any big six public accounting firm shall be
acceptable to the Lenders), whose opinion shall be in scope and substance in
accordance with generally accepted auditing standards and shall be unqualified
as to scope of audit and going concern.
(b) Simultaneously with the delivery of the statements required by
this Section 6.2, a letter from the Borrower's public accountants certifying
that no Default was detected during the examination of the Borrower and its
Subsidiaries.
(c) As soon as available, but in any event within 90 days
following the end of each fiscal year, a copy of the annual consolidated
operating budget of the Borrower and its Subsidiaries for the immediately
succeeding fiscal year.
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Section 6.3 Compliance Certificate.
(a) At the time financial statements are furnished pursuant to
Sections 6.1 and 6.2 hereof, the Compliance Certificate, completed as provided
therein.
(b) Within 10 days after the end of each month, the Compliance
Certificate, completed as provided therein.
Section 6.4 Copies of Other Reports and Notices.
(a) Promptly upon their becoming available, a copy of (i) all
material final reports or letters submitted to the Borrower or any Subsidiary
of the Borrower by accountants in connection with any annual, interim or
special audit, including without limitation any final report prepared in
connection with the annual audit referred to in Section 6.2 hereof, and, if
requested by the Administrative Agent, any other comment letter submitted to
management in connection with any such audit, (ii) each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders
generally, (iii) each regular, periodic or other report and any registration
statement (other than statements on Form S-8) or prospectus (or material
written communication in respect of any thereof) filed by the Borrower or any
Subsidiary of the Borrower with any securities exchange, with the Securities
and Exchange Commission or any successor agency, and (iv) all press releases
concerning material financial aspects of the Borrower or any Subsidiary of the
Borrower;
(b) Promptly upon becoming aware that (i) the holder(s) of any
note(s) or other evidence of indebtedness or other security of the Borrower or
any Subsidiary of the Borrower in excess of $250,000 in the aggregate has given
notice or taken any action with respect to a breach, failure to perform,
claimed default or event of default thereunder, (ii) any occurrence or
non-occurrence of any event which constitutes or which with the passage of time
or giving of notice or both could constitute a material breach by the Borrower
or any Subsidiary of the Borrower under any material agreement or instrument
other than this Agreement to which the Borrower or any Subsidiary of the
Borrower is a party or by which any of their properties may be bound, or (iii)
any event, circumstance or condition which could reasonably be expected to be
classified as a Material Adverse Effect, a written notice specifying the
details thereof (or the nature of any claimed default or event of default) and
what action is being taken or is proposed to be taken with respect thereto;
(c) Promptly upon becoming aware that any party to any Capitalized
Lease Obligations or Operating Lease, in each case, in excess of $250,000, has
given notice or taken any action with respect to a breach, failure to perform,
claimed default or event of default thereunder, a written notice specifying the
details thereof (or the nature of any claimed default or event of default) and
what action is being taken or is proposed to be taken with respect thereto;
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(d) Promptly upon receipt thereof, information with respect to and
copies of any notices received from any Tribunal relating to any order, ruling,
law, information or policy that relates to a breach of or noncompliance with
any Law, or could reasonably be expected to result in the payment of money by
the Borrower or any Subsidiary of the Borrower in an amount of $250,000 or more
in the aggregate, or otherwise have a Material Adverse Effect, or result in the
loss or suspension of any Necessary Authorization where such loss could
reasonably be expected to have a Material Adverse Effect; and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results of
operations or business prospects of the Borrower and its Subsidiaries, as the
Administrative Agent or any Lender may reasonably request.
Section 6.5 Notice of Litigation, Default and Other Matters.
Prompt notice of the following events after a Responsible Officer has knowledge
or notice thereof:
(a) The commencement of all Litigation and investigations by or
before any Tribunal, and all actions and proceedings in any court or before any
arbitrator involving claims for damages (including punitive damages) in excess
of $500,000 (after deducting the amount with respect to the Borrower or any
Subsidiary of the Borrower is insured), against or in any other way relating
directly to the Borrower, any Subsidiary of the Borrower, or any of their
respective properties or businesses; and
(b) Promptly upon the happening of any condition or event of which
a Responsible Officer has actual knowledge which constitutes a Default, a
written notice specifying the nature and period of existence thereof and what
action is being taken or is proposed to be taken with respect thereto.
Section 6.6 ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after the
Borrower or any member of its Controlled Group has current actual knowledge
that any ERISA Event described in clause (a) of the definition of ERISA Event
or any event described in Section 4063(a) of ERISA with respect to any Plan of
the Borrower or any member of its Controlled Group has occurred, and (ii)
within 10 days after a Responsible Officer or any member of its Controlled
Group has current actual knowledge that any other ERISA Event with respect to
any Plan of the Borrower or any member of its Controlled Group has occurred or
a request for a minimum funding waiver under Section 412 of the Code has been
made with respect to any Plan of the Borrower or any member of its Controlled
Group, a written notice describing such event and describing what action is
being taken or is proposed to be taken with respect thereto, together with a
copy of any notice of such event that is given to the PBGC;
(b) Promptly and in any event within three Business Days after
receipt thereof by a Responsible Officer or any member of its Controlled Group
from the PBGC, copies of each
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notice received by the Borrower or any member of its Controlled Group of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(c) Promptly and in any event within 30 days after the filing
thereof by the Borrower or any member of its Controlled Group with the United
States Department of Labor or the Internal Revenue Service, copies of each
annual report (including Schedule B thereto, if applicable) with respect to
each Plan subject to Title IV of ERISA of which Borrower or any member of its
Controlled Group is the "plan sponsor";
(d) Promptly, and in any event within 10 Business Days after
receipt thereof by a Responsible Officer, a copy of any correspondence the
Borrower or any member of its Controlled Group receives from the Plan Sponsor
(as defined by Section 4001(a)(10) of ERISA) of any Plan concerning potential
withdrawal liability pursuant to Section 4219 or 4202 of ERISA, and a statement
from the chief financial officer of the Borrower or such member of its
Controlled Group setting forth details as to the events giving rise to such
potential withdrawal liability and the action which the Borrower or such member
of its Controlled Group is taking or proposes to take with respect thereto;
(e) Notification within 30 days of any material increases in the
benefits provided under any existing Plan which is not a Multiemployer Plan, or
the establishment of any new Plans, or the commencement of contributions to any
Plan to which the Borrower or any member of its Controlled Group was not
previously contributing, which could reasonably be expected in any such case to
result in an additional material liability to the Borrower;
(f) Notification within three Business Days after a Responsible
Officer or any member of its Controlled Group knows that the Borrower or any
such member of its Controlled Group has filed or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(g) Within three Business Days after receipt by a Responsible
Officer of written notice of commencement thereof, notice of all actions, suits
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower
or any member of its Controlled Group with respect to any Plan, except those
which, in the aggregate, if adversely determined could not reasonably be
expected to have a Material Adverse Effect.
ARTICLE 7.
Negative Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
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Section 7.1 Indebtedness. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, create, assume, incur or otherwise
become or remain obligated in respect of, or permit to be outstanding, or
suffer to exist any Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable and accrued liabilities incurred in the
ordinary course of business;
(c) Indebtedness, including in respect of Capitalized Lease
Obligations, incurred to purchase, or to finance the purchase of, assets which
constitute property, plant and equipment, in an aggregate principal amount not
in excess of $2,500,000 minus the aggregate amount of Indebtedness outstanding
pursuant to Section 7.1(j) hereof;
(d) Interest hedging obligations under Interest Hedge Agreements
entered into with any Lender;
(e) Indebtedness existing on the Agreement Date, or permitted to
be incurred under agreements existing on the Agreement Date, which is described
on Schedule 6 hereto, including renewals, replacements and refinancings (but no
increases) thereof;
(f) Indebtedness in respect of endorsement of negotiable
instruments in the ordinary course of business;
(g) Indebtedness owing to the Borrower or any Domestic Subsidiary
which has complied with Section 7.3(f) hereof by any Subsidiary of the
Borrower, which Indebtedness is evidenced by an entry on the financial records
of the Borrower and any such Subsidiary of the Borrower;
(h) Guaranties by Subsidiaries of the Borrower of Indebtedness of
the Borrower or other Subsidiaries of the Borrower (excluding, however,
Guaranties by the Borrower and its Domestic Subsidiaries of Indebtedness of
Foreign Subsidiaries), to the extent such underlying Indebtedness is permitted
hereunder;
(i) Indebtedness owed by Malaysian Subsidiary not to exceed
$15,000,000 in aggregate principal amount outstanding at any time (excluding
Indebtedness otherwise permitted pursuant to clause (e) above); and
(j) Other Indebtedness of the Borrower and its Subsidiaries
(excluding Malaysian Subsidiary) not to exceed $2,500,000 minus the aggregate
amount of Indebtedness outstanding pursuant to Section 7.1(c) hereof.
Section 7.2 Liens. The Borrower shall not, and shall not permit
any Subsidiary of Borrower to, create, assume, incur, permit or suffer to
exist, directly or indirectly, any Lien on
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any of its assets, whether now owned or hereafter acquired, except Permitted
Liens. The Borrower shall not, and shall not permit any Subsidiary to, agree
with any other Person that it shall not create, assume, incur, permit or suffer
to exist or to be created, assumed, incurred or permitted to exist, directly or
indirectly, any Lien on any of its assets, except in favor of the
Administrative Agent and/or the Lenders pursuant to the Loan Documents.
Section 7.3 Investments. The Borrower shall not, and shall not
permit any Subsidiary of Borrower to, make any Investment, except that the
Borrower and any Subsidiary of the Borrower may purchase or otherwise acquire
and own:
(a) Cash and Cash Equivalents;
(b) Accounts receivable and notes receivable that arise in the
ordinary course of business and are payable on standard terms;
(c) Investments in existence on the Agreement Date which are
described on Schedule 5 hereto;
(d) Investments in the form of Interest Hedge Agreements permitted
by Section 7.1(d) hereof;
(e) Investments consisting of advances to employees in the
ordinary course of business;
(f) Investments in Domestic Subsidiaries of the Borrower (i) which
have executed a Subsidiary Guaranty and a General Security Agreement granting a
first priority Lien in its assets subject thereto to secure the Obligations,
(ii) 100% of whose Capital Stock shall be pledged to secure the Obligations,
and (iii) which have delivered to the Lenders such board resolutions, officer's
certificates and opinions of counsel as the Administrative Agent shall
reasonably request;
(g) Investments in Foreign Subsidiaries of the Borrower (i) 65% of
whose Capital Stock shall be pledged to secure the Obligations, and (ii) which
have delivered to the Lenders such board resolutions, officer's certificates
and opinions of counsel as the Administrative Agent shall reasonably request;
provided, however, notwithstanding any provision of this Agreement to the
contrary, in no event shall Investments in, and expenditures of Non-Equity
Consideration in respect of Acquisitions of, Foreign Subsidiaries after the
Agreement Date exceed $5,000,000 during the term of this Agreement; and
(h) Other Investments not to exceed $1,000,000 aggregate amount
outstanding at any time.
Section 7.4 Liquidation, Merger. The Borrower shall not, and
shall not permit any Subsidiary of Borrower to, at any time:
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(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, except that (i) a Subsidiary of the Borrower
may liquidate or dissolve into the Borrower, (ii) a Subsidiary of the Borrower
may liquidate or dissolve into a Domestic Subsidiary (which has complied with
Section 7.3(f) hereof), (iii) a Foreign Subsidiary of the Borrower may
liquidate or dissolve into another direct Foreign Subsidiary of the Borrower or
a Domestic Subsidiary; or
(b) enter into any merger or consolidation unless (i) with respect
to a merger or consolidation involving the Borrower, the Borrower shall be the
surviving corporation, or if the merger or consolidation involves a Subsidiary
of the Borrower and not the Borrower, such Subsidiary shall be the surviving
corporation, in each case other than solely to effect a change of the
jurisdiction of incorporation of the Borrower or any of its Subsidiaries, (ii)
such transaction shall not be utilized to circumvent compliance with any term
or provision herein, (iii) no Default or Event of Default shall then be in
existence or occur as a result of such transaction, and (iv) no Domestic
Subsidiary shall be permitted to enter into any merger or consolidation with a
Foreign Subsidiary unless such Domestic Subsidiary shall be the surviving
corporation.
Section 7.5 Sales of Assets. The Borrower shall not, and shall
not permit any Subsidiary of the Borrower to, sell, lease, transfer or
otherwise dispose of, any of its assets except (a) inventory in the ordinary
course of business, (b) obsolete or worn-out assets, and (c) provided that no
Default or Event of Default exists or would exist immediately prior to or after
giving effect to any such sales, sales of other assets the fair market value of
which shall not exceed $1,000,000 in aggregate amount during any fiscal year.
Section 7.6 Acquisitions. The Borrower shall not, and shall not
permit any Subsidiary of Borrower to, make any Acquisitions; provided, however,
if (a) immediately prior to and after giving effect to the proposed Acquisition
there shall not exist a Default or Event of Default and (b) immediately after
giving effect to the proposed transaction the Unused Portion shall be no less
than $12,500,000, the Borrower or any Subsidiary of the Borrower may make
Acquisitions so long as (i) such Acquisition shall not be opposed by the board
of the directors of the Person being acquired, (ii) the Lenders shall have
received written notice at least 30 Business Days prior to the date of such
Acquisition, (iii) if the Acquisition Consideration for such Acquisition is
greater than $25,000,000, the Administrative Agent shall have received at least
15 Business Days prior to the date of such Acquisition a Compliance Certificate
setting forth the covenant calculations both immediately prior to and after
giving effect to the proposed Acquisition, (iv) if the Acquisition
Consideration for such Acquisition is greater than $50,000,000, the Determining
Lenders shall have approved such Acquisition in writing, (v) the assets,
property or business acquired shall be in the business described in Section
4.1(d) hereof and the Administrative Agent for the benefit of the Lenders shall
have obtained a first priority Lien in the Inventory, Accounts and intellectual
property acquired in such Acquisition, (vi) if such Acquisition results in a
Domestic Subsidiary, within 5 Business Days of such Acquisition, (A) such
Subsidiary shall execute a Subsidiary Guaranty of the Obligations and
Collateral Documents granting a first priority Lien in the Inventory, Accounts
and intellectual property acquired in such Acquisition,
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to secure the Obligations, (B) 100% of such Subsidiary's Capital Stock shall be
pledged to secure the Obligations and (C) the Lenders receive such board
resolutions, officer's certificates and opinions of counsel as the
Administrative Agent shall reasonably request in connection with the actions
described in clauses (A) and (B) above, and (vii) if such Acquisition results
in a Foreign Subsidiary, within 30 days of such Acquisition, (A) 65% of such
Subsidiary's Capital Stock shall be pledged to secure the Obligations and (B)
the Lenders receive such board resolutions, officer's certificates and opinions
of counsel as the Administrative Agent shall reasonably request in connection
with clause (A) immediately preceding. Notwithstanding anything in this
Section 7.6 or any other provision of this Agreement to the contrary, (a) the
aggregate Acquisition Consideration consisting of Non-Equity Consideration paid
in respect of Acquisitions during the term of this Agreement shall not exceed
$15,000,000, and (b) the aggregate amount of Acquisition Consideration
consisting of Non-Equity Consideration paid in respect of Acquisitions of
Foreign Subsidiaries by the Borrower during the term of this Agreement,
together with Investments in Foreign Subsidiaries after the Agreement Date
pursuant to Section 7.3(g) hereof, shall not exceed $5,000,000.
Section 7.7 Restricted Payments. The Borrower shall not, and
shall not permit any Subsidiary of the Borrower to, directly or indirectly
declare, pay or make any Restricted Payments except for (a) Dividends payable
by a Subsidiary to the Borrower or to a Domestic Subsidiary and (b) provided
that no Default or Event of Default exists or will exist immediately prior to
or after giving effect to such Restricted Payment, acquisition of shares of
Capital Stock pursuant to employee stock purchase plans or agreements to
repurchase directors' qualifying shares not to exceed $1,000,000 in aggregate
amount during any fiscal year.
Section 7.8 Affiliate Transactions. Except as otherwise provided
herein, the Borrower shall not, and shall not permit any Subsidiary of the
Borrower to, at any time engage in any transaction with an Affiliate, except on
terms no less favorable than could be obtained on an arm's length basis with a
Person that is a non-Affiliate.
Section 7.9 Compliance with ERISA. The Borrower shall not, and
shall not permit any Subsidiary to, directly or indirectly, or permit any
member of its Controlled Group to directly or indirectly, (a) terminate any
Plan so as likely to result in any material liability to the Borrower or any
member of its Controlled Group taken as a whole, (b) permit to exist any ERISA
Event, or any other event which presents the risk of any material liability to
the Borrower or any member of its Controlled Group, (c) make a complete or
partial withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan so as likely to result in any material liability to the
Borrower or any member of its Controlled Group taken as a whole, (d) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder which could result in any material liability to the Borrower or any
member of its Controlled Group, or (e) permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, under any Plan (other than a
Multiemployer Plan) of the Borrower or any member of its Controlled Group that
is subject to Title IV of ERISA (using the actuarial assumptions utilized by
each such Plan) to exceed the fair market value of Plan assets allocable to
such
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benefits by more than $500,000, all determined as of the most recent valuation
date for such Plan.
Section 7.10 Maximum Leverage Ratio. At the end of each fiscal
quarter, the Borrower shall not permit the Leverage Ratio to be greater than
1.50 to 1.
Section 7.11 Minimum Interest Coverage Ratio. At the end of each
fiscal quarter, the Borrower shall not permit the Interest Coverage Ratio to be
less than 3.50 to 1.
Section 7.12 Minimum Tangible Net Worth. At the end of each
fiscal quarter, the Borrower shall not permit the Tangible Net Worth to be less
than an amount equal to the sum of (a) $59,000,000 plus (b) the product of 75%
of the Net Income (excluding from such calculation any fiscal quarter in which
Net Income was a negative number) of the Borrower and its Subsidiaries on a
consolidated basis after September 30, 1996 plus (c) the product of 75% of Net
Equity Proceeds received after the Agreement Date.
Section 7.13 Minimum Quick Ratio. At the end of each fiscal
quarter, the Borrower will not permit the Quick Ratio to be less than 1.0 to 1.
Section 7.14 Sale or Discount of Receivables. The Borrower shall
not, and shall not permit any Subsidiary of the Borrower to, directly or
indirectly, sell, with or without recourse, for discount or otherwise, any
notes or accounts receivable other than in the ordinary course of business
consistent with such practices prior to the Agreement Date.
Section 7.15 Capital Stock. The Borrower shall not, and shall not
permit any Subsidiary of the Borrower to, issue, sell or otherwise dispose of
any Capital Stock in any Subsidiary of the Borrower or any options or any
rights to acquire such Capital Stock.
Section 7.16 Business. Neither the Borrower nor any Subsidiary of
the Borrower shall conduct any business other than the business described in
Section 4.1(d) hereof.
Section 7.17 Fiscal Year. Neither the Borrower nor any Subsidiary
of the Borrower shall change its Fiscal Year.
Section 7.18 Amendment of Organizational Documents. The Borrower
shall not, and shall not permit any Subsidiary of the Borrower to, amend its
articles of incorporation or bylaws in any manner that could reasonably be
expected to (a) result in a Material Adverse Effect or (b) impair or affect the
Rights of the Administrative Agent or any Lender under any Loan Documents or in
respect of any Collateral.
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ARTICLE 8.
Default
Section 8.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event, and whether
voluntary, involuntary, or effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made under any Loan Document
shall prove to have been incorrect or misleading in any material respect when
made;
(b) The Borrower shall fail to pay any (i) principal under any
Note when due or (ii) interest under any Note or any fees payable hereunder or
any other costs, fees, expenses or other amounts payable hereunder or under any
other Loan Document with respect to (ii) above within two Business Days after
the date due;
(c) The Borrower or any Subsidiary of the Borrower shall default
in the performance or observance of any agreement or covenant contained in
Article 7 hereof;
(d) The Borrower or any Subsidiary of the Borrower shall default
in the performance or observance of any agreement or covenant contained in
Section 5.1 hereof, and such default shall not be cured within a period of
fifteen days after the earlier of notice from the Administrative Agent thereof
or actual notice thereof by an officer of the Borrower or such Subsidiary, as
applicable.
(e) The Borrower or any Subsidiary of the Borrower shall default
in the performance or observance of any other agreement or covenant contained
in this Agreement or any other Loan Document not specifically referred to
elsewhere in this Section 8.1, and such default shall not be cured within a
period of thirty days after the earlier of notice from the Administrative Agent
thereof or actual notice thereof by an officer of the Borrower or such
Subsidiary, as applicable;
(f) There shall be commenced an involuntary proceeding or an
involuntary proceeding shall be filed in a court having competent jurisdiction
seeking (i) relief in respect of any Obligor or a substantial part of the
assets of such Obligor under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy law or other similar law, (ii) the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar
official of any Obligor, or of any substantial part of their respective
properties, or (iii) the winding-up or liquidation of the affairs of any
Obligor, and any such proceeding or petition shall continue unstayed and in
effect for a period of forty-five consecutive days;
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(g) Any Obligor shall (i) file a petition, answer or consent
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal, state or foreign bankruptcy
law or other similar law, (ii) consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or
taking of possession of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of any Obligor or of substantially all
of its properties, (iii) file an answer admitting the material allegations
filed against it in any such proceeding, (iv) make a general assignment for the
benefit of creditors, (v) become unable, admit in writing its inability or fail
generally to pay its debts as they become due, or (vi) take any corporate
action in furtherance of any such action;
(h) A final judgment or judgments shall be entered by any court
against any Obligor for the payment of money which exceeds $300,000 in the
aggregate, or a warrant of attachment or execution or similar process shall be
issued or levied against property of any Obligor which, together with all other
such property of the Borrower and its Subsidiaries subject to other such
process, exceeds in value $300,000 in the aggregate, and if such judgment or
award is not insured or, within 30 days after the entry, issue or levy thereof,
such judgment, warrant or process shall not have been paid or discharged or
stayed pending appeal, or if, after the expiration of any such stay, such
judgment, warrant or process shall not have been paid or discharged;
(i) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other
party-in-interest or disqualified person (other than any Lender) shall engage
in transactions which in the aggregate would reasonably be expected to result
in a direct or indirect liability to the Borrower or any member of its
Controlled Group under Section 409 or 502 of ERISA or Section 4975 of the Code;
(ii) the Borrower or any member of its Controlled Group shall incur any
accumulated funding deficiency, as defined in Section 412 of the Code, or
request a funding waiver from the Internal Revenue Service for contributions;
(iii) the Borrower or any member of its Controlled Group shall incur any
withdrawal liability as a result of a complete or partial withdrawal within the
meaning of Section 4203 or 4205 of ERISA, or any other liability with respect
to a Plan, unless the amount of such liability has been funded within the Plan
or pursuant to one or more insurance contracts; (iv) the Borrower or any member
of its Controlled Group shall fail to make a required contribution by the due
date under Section 412 of the Code or Section 302 of ERISA which would result
in the imposition of a lien under Section 412 of the Code or Section 302 of
ERISA; (v) the Borrower, any member of its Controlled Group or any Plan sponsor
shall notify the PBGC of an intent to terminate, or the PBGC shall institute
proceedings to terminate, or the PBGC shall institute proceedings to terminate,
any Plan subject to Title IV of ERISA; (vi) a Reportable Event shall occur with
respect to a Plan subject to Title IV of ERISA, and within 15 days after the
reporting of such Reportable Event to the Administrative Agent, the
Administrative Agent shall have notified the Borrower in writing that the
Determining Lenders have made a determination that, on the basis of such
Reportable Event, there are reasonable grounds for the termination of such Plan
by the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Plan and as a result thereof an Event of
Default shall have occurred hereunder; (vii) a trustee shall be appointed by a
court of
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competent jurisdiction to administer any Plan or the assets thereof; or (viii)
any ERISA Event with respect to a Plan subject to Title IV of ERISA shall have
occurred, and 30 days thereafter (A) such ERISA Event, other than such event
described in clause (f) of the definition of ERISA Event herein, (if
correctable) shall not have been corrected and (B) the then present value of
such Plan's benefit liabilities, as defined in Title IV of ERISA, shall exceed
the then current value of assets accumulated in such Plan; provided, however,
that the events listed in subsections (i) - (viii) above shall constitute
Events of Default only if the maximum aggregate liability which the Borrower or
any member of its Controlled Group has a reasonable likelihood of incurring
under the applicable provisions of ERISA resulting from an event or events
exceeds $500,000.
(j) The Borrower or any Subsidiary of the Borrower shall default
in the payment of any Indebtedness or any lease obligations in an aggregate
amount of $300,000 or more beyond any grace period provided with respect
thereto, or shall default in the performance of any agreement or instrument
under which such Indebtedness or lease obligation is created or evidenced
beyond any applicable grace period or an event or condition shall occur in
respect of such Indebtedness or lease obligation, if the effect of such
default, event or condition is to permit or cause the holder of such
Indebtedness or lease obligation (or a trustee on behalf of any such holder) to
(i) cause such Indebtedness or lease obligation to become due prior to its date
of maturity or (ii) require the Borrower or any Subsidiary of the Borrower to
purchase, prepay or redeem such Indebtedness or lease obligation;
(k) Any Loan Document or any material provision thereof shall for
any reason cease to be valid and binding on or enforceable against any party to
it (other than the Administrative Agent or any Lender) other than in accordance
with its terms, or any such party (other than the Administrative Agent or any
Lender) shall so assert in writing;
(l) Any one or more Collateral Documents shall for any reason
(other than pursuant to the terms thereof) cease to create a valid and
perfected first priority Lien in Collateral having a fair market value of
$500,000 or more in aggregate amount; or
(m) A Change of Control shall occur.
Section 8.2 Remedies. If an Event of Default shall have occurred
and shall be continuing:
(a) With the exception of an Event of Default specified in Section
8.1(e) or (f) hereof, the Administrative Agent shall, upon the direction of the
Determining Lenders, terminate the Commitment and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
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(b) Upon the occurrence of an Event of Default specified in
Section 8.1(e) or (f) hereof, such principal, interest and other amounts shall
thereupon and concurrently therewith become due and payable and the Commitment
shall forthwith terminate, all without any action by the Administrative Agent,
any Lender or any holders of the Notes and without presentment, demand, protest
or other notice of any kind, all of which are expressly waived, anything in the
Loan Documents to the contrary notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the
Administrative Agent may, and upon the direction of the Determining Lenders
shall, demand upon the Borrower to, and forthwith upon such demand, the
Borrower shall, pay to the Administrative Agent in same day funds at the office
of the Administrative Agent for deposit in the L/C Cash Collateral Account, an
amount equal to the maximum amount available to be drawn under the Letters of
Credit then outstanding.
(d) The Administrative Agent and the Lenders may exercise all of
the Rights granted to them under the Loan Documents or under Applicable Law.
(e) The Rights of the Administrative Agent and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9.
Changes in Circumstances
Section 9.1 LIBOR Basis Determination Inadequate. If with
respect to any proposed LIBOR Advance for any Interest Period, (i) any Lender
determines that deposits in dollars (in the applicable amount) are not being
offered to that Lender in the relevant market for such Interest Period or (ii)
the Determining Lenders determine that the LIBOR Rate for such proposed LIBOR
Advance does not adequately cover the cost to such Lenders of making and
maintaining such proposed LIBOR Advance for such Interest Period, such Lender
or Determining Lenders, as the case may be, shall forthwith give notice thereof
to the Borrower, whereupon until such Lender or Determining Lenders, as the
case may be, notify the Borrower that the circumstances giving rise to such
situation no longer exist, the obligation of such Lender to make LIBOR Advances
shall be suspended, and any Advance to be made by such Lender shall instead be
made as a Base Rate Advance.
Section 9.2 Illegality. If any change in applicable law, rule or
regulation, or adoption thereof, or any change in any interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its LIBOR Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency, shall make it unlawful or impossible for
such Lender (or its LIBOR Lending Office) to make, maintain or fund its LIBOR
Advances, such Lender shall so notify the
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Borrower and the Administrative Agent. Before giving any notice to the
Borrower pursuant to this Section, the notifying Lender shall designate a
different LIBOR Lending Office or other lending office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of the
Lender, be materially disadvantageous to the Lender. Upon receipt of such
notice, notwithstanding anything contained in Article 2 hereof, the Borrower
shall repay in full the then outstanding principal amount of each LIBOR Advance
owing to the notifying Lender, together with accrued interest thereon and any
reimbursement required under Section 2.9 hereof, on either (a) the last day of
the Interest Period applicable to such Advance, if the Lender may lawfully
continue to maintain and fund such Advance to such day, or (b) immediately, if
the Lender may not lawfully continue to fund and maintain such Advance to such
day or if the Borrower so elects. Concurrently with repaying each affected
LIBOR Advance owing to such Lender, notwithstanding anything contained in
Article 2 hereof, the Borrower shall borrow a Base Rate Advance from such
Lender, and such Lender shall make such Base Rate Advance, in an amount such
that the outstanding principal amount of the Advances owing to such Lender
shall equal the outstanding principal amount of the Advances owing immediately
prior to such repayment.
Section 9.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change in or
adoption of any law, rule or regulation, or any interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof or
compliance by any Lender (or its LIBOR Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office)
to any Tax (net of any tax benefit engendered thereby) with
respect to its LIBOR Advances or its obligation to make such Advances,
or shall change the basis of taxation of payments to a Lender (or to
its LIBOR Lending Office) of the principal of or interest on its LIBOR
Advances or in respect of any other amounts due under this Agreement,
as the case may be, or its obligation to make such Advances (except
for changes in the rate of tax on the overall net income, net worth or
capital of the Lender and franchise taxes, doing business taxes or
minimum taxes imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, a Lender's LIBOR Lending Office or shall impose on the
Lender (or its LIBOR Lending Office) or on the London interbank market
any other condition affecting its LIBOR Advances or its obligation to
make such Advances (but excluding any reserves or deposits that are
included in the calculation of LIBOR Basis);
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum
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received or receivable by a Lender (or its LIBOR Lending Office) with respect
thereto, by an amount deemed by a Lender to be material, then, within 30 days
after demand by a Lender, the Borrower agrees to pay to such Lender such
additional amount as will compensate such Lender for such increased costs or
reduced amounts, subject to Section 11.9 hereof. The affected Lender will as
soon as practicable notify the Borrower of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to compensation
pursuant to this Section and will designate a different LIBOR Lending Office or
other lending office if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the reasonable judgment of the
affected Lender made in good faith, be disadvantageous to such Lender.
(b) A certificate of any Lender claiming compensation under this
Section and setting forth the additional amounts to be paid to it hereunder
shall certify that such amounts or costs were actually incurred by such Lender
and shall show in reasonable detail an accounting of the amount payable and the
calculations used to determine in good faith such amount and shall be
conclusive absent manifest or demonstrable error. In determining such amount,
a Lender may use any reasonable averaging and attribution methods. Nothing in
this Section 9.3 shall provide the Borrower or any Subsidiary of the Borrower
the right to inspect the records, files or books of any Lender. If a Lender
demands compensation under this Section, the Borrower may at any time, upon at
least five Business Days' prior notice to the Lender, after reimbursement to
the Lender by the Borrower in accordance with this Section of all costs
incurred, prepay in full the then outstanding LIBOR Advances of the Lender,
together with accrued interest thereon to the date of prepayment, along with
any reimbursement required under Section 2.9 hereof. Concurrently with
prepaying such LIBOR Advances, the Borrower shall borrow a Base Rate Advance
from the Lender, and the Lender shall make such Base Rate Advance, in an amount
such that the outstanding principal amount of the Advances owing to such Lender
shall equal the outstanding principal amount of the Advances owing immediately
prior to such prepayment.
Section 9.4 Effect On Base Rate Advances. If notice has been
given pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of a
Lender to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be
repaid or prepaid, then, unless and until the Lender notifies the Borrower that
the circumstances giving rise to such repayment no longer apply, all Advances
which would otherwise be made by such Lender as LIBOR Advances shall be made
instead as Base Rate Advances.
Section 9.5 Capital Adequacy. If either (a) the introduction of
or any change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule 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 a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances
hereunder and other commitments or advances of such Lender of this type, then,
upon demand by such Lender, subject to Section 11.9, the Borrower shall, within
30 days after demand, pay to such Lender, from time
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to time as specified by such Lender, additional amounts sufficient to
compensate such Lender with respect to such circumstances, to the extent that
such Lender reasonably determines in good faith such increase in capital to be
allocable to the existence of such Lender's Commitment hereunder. A
certificate as to any additional amounts payable to any Lender under this
Section 9.5 submitted to the Borrower by such Lender shall certify that such
amounts were actually incurred by such Lender or corporation controlling such
Lender and shall show in reasonable detail an accounting of the amount payable
and the calculations used to determine in good faith such amount and shall be
conclusive absent manifest or demonstrable error. In determining such amount,
such Lender or a corporation controlling such Lender may use any reasonable
averaging and attribution methods. Notwithstanding the foregoing, nothing in
this Section 9.5 shall provide the Borrower or any Subsidiary of the Borrower
the right to inspect the records, files or books of any Lender or any
corporation controlling such Lender.
ARTICLE 10.
Agreement Among Lenders
Section 10.1 Agreement Among Lenders. The Lenders agree among
themselves that:
(a) Administrative Agent. Each Lender hereby appoints the
Administrative Agent as its nominee in its name and on its behalf, to receive
all documents and items to be furnished hereunder; to act as nominee for and on
behalf of all Lenders under the Loan Documents; to, except as otherwise
expressly set forth herein, take such action as may be requested by the
Determining Lenders, provided that, (i) unless and until the Administrative
Agent shall have received such requests, the Administrative Agent may take such
administrative action, or refrain from taking such administrative action, as it
may deem advisable and in the best interests of the Lenders, and (ii) the
Administrative Agent shall not be required to take any action that exposes the
Administrative Agent to personal liability or that is contrary to any Loan
Document or Applicable Law; to arrange the means whereby the proceeds of the
Advances of the Lenders are to be made available to the Borrower; to distribute
promptly to each Lender information, requests and documents received from the
Borrower, and each payment (in like funds received) with respect to any of such
Lender's Advances, or the ratable amount of fees or other amounts; and to
deliver to the Borrower requests, demands, approvals and consents received from
the Lenders. Administrative Agent agrees to promptly distribute to each
Lender, at such Lender's address set forth below information, requests,
documents and payments received from the Borrower. The Administrative Agent
shall have no fiduciary relationship in respect of any Lender by reason of this
Agreement or any other Loan Document. The Administrative Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Administrative Agent are mechanical and administrative in
nature.
(b) Replacement of Administrative Agent. Should the
Administrative Agent or any successor Administrative Agent ever cease to be a
Lender hereunder, or should the Administrative
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Agent or any successor Administrative Agent ever resign as Administrative
Agent, or should the Administrative Agent or any successor Administrative Agent
ever be removed with cause or without cause by the action of all Lenders (other
than the Administrative Agent), then the Lender appointed by the other Lenders
(with the consent of the Borrower, which consent shall not be unreasonably
withheld) shall forthwith become the Administrative Agent, and the Borrower and
the Lenders shall execute such documents as any Lender may reasonably request
to reflect such change at no cost to the Borrower. Any resignation or removal
of the Administrative Agent or any successor Administrative Agent shall become
effective upon the appointment by the Lenders of a successor Administrative
Agent; provided, however, if no successor Administrative Agent shall have been
so appointed and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized under the Laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least $500,000,000 (which bank shall have been approved by the Borrower such
approval not to be unreasonably withheld). Upon the acceptance of any
appointment as the Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations under the Loan Documents, provided that if the retiring
or removed Administrative Agent is unable to appoint a successor Administrative
Agent, the Administrative Agent shall, after the expiration of a 60 day period
from the date of notice, be relieved of all obligations as Administrative Agent
hereunder. Notwithstanding any Administrative Agent's resignation or removal
hereunder, the provisions of this Article shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement.
(c) Expenses. Each Lender shall pay its pro rata share, based on
its Specified Percentage, of any expenses paid by the Administrative Agent
directly and solely in connection with any of the Loan Documents if
Administrative Agent does not receive reimbursement therefor from other sources
within 60 days after the date incurred. Any amount so paid by the Lenders to
the Administrative Agent shall be returned by the Administrative Agent pro rata
to each paying Lender to the extent later paid by the Borrower or any other
Person on the Borrower's behalf to the Administrative Agent.
(d) Delegation of Duties. The Administrative Agent may execute
any of its duties hereunder by or through officers, directors, employees,
attorneys or agents, and shall be entitled to (and shall be protected in
relying upon) advice of counsel concerning all matters pertaining to its duties
hereunder.
(e) Reliance by Administrative Agent. The Administrative Agent
and its officers, directors, employees, attorneys and agents shall be entitled
to rely and shall be fully protected in relying on any writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telex or
teletype message, statement, order, or other document or conversation
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reasonably believed by it or them in good faith to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinions of counsel selected by the Administrative Agent. The
Administrative Agent may, in its reasonable judgment, deem and treat the payee
of any Note as the owner thereof for all purposes hereof.
(f) Limitation of Administrative Agent's Liability. Neither the
Administrative Agent nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Agent shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Agent
shall not be compelled to do any act hereunder or to take any action towards
the execution or enforcement of the powers hereby created or to prosecute or
defend any suit in respect hereof, unless indemnified to its reasonable
satisfaction against loss, cost, liability and expense. The Administrative
Agent shall not be responsible in any manner to any Lender for the
effectiveness, enforceability, genuineness, validity or due execution of any of
the Loan Documents, or for any representation, warranty, document, certificate,
report or statement made herein or furnished in connection with any Loan
Documents, or be under any obligation to any Lender to ascertain or to inquire
as to the performance or observation of any of the terms, covenants or
conditions of any Loan Documents on the part of the Borrower. TO THE EXTENT
NOT REIMBURSED BY THE BORROWER, EACH LENDER HEREBY SEVERALLY INDEMNIFIES AND
HOLDS HARMLESS THE ADMINISTRATIVE AGENT, PRO RATA ACCORDING TO ITS SPECIFIED
PERCENTAGE, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND/OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
ASSERTED AGAINST, OR INCURRED BY THE ADMINISTRATIVE AGENT (IN SUCH CAPACITY) IN
ANY WAY WITH RESPECT TO ANY LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY
THE ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS (INCLUDING ANY NEGLIGENT
ACTION OF THE ADMINISTRATIVE AGENT), EXCEPT TO THE EXTENT THE SAME ARE FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM GROSS NEGLIGENCE
OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE AGENT. THE INDEMNITY PROVIDED IN
THIS SECTION 10.1(f) SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
(g) Liability Among Lenders. No Lender shall incur any liability
(other than the sharing of expenses and other matters specifically set forth
herein and in the other Loan Documents) to any other Lender, except for acts or
omissions in bad faith.
(h) Rights as Lender. With respect to its commitment hereunder,
the Advances made by it and the Notes issued to it, the Administrative Agent
shall have the same rights as a Lender and may exercise the same as though it
were not the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative
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<PAGE> 73
Agent in its individual capacity. The Administrative Agent or any Lender may
accept deposits from, act as trustee under indentures of, and generally engage
in any kind of business with, the Borrower and any of its Affiliates, and any
Person who may do business with or own securities of the Borrower or any of its
Affiliates, all as if the Administrative Agent were not the Administrative
Agent hereunder and without any duty to account therefor to the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent
or any other Lender and based upon the financial statements referred to in
Sections 4.1(j), 6.1, and 6.2 hereof, and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender and based upon 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 the other Loan Documents. Each
Lender also acknowledges that its decision to fund the initial Advance shall
constitute evidence to the Administrative Agent that such Lender has deemed all
of the conditions set forth in Section 3.1 to have been satisfied.
Section 10.3 Benefits of Article. None of the provisions of this
Article shall inure to the benefit of any Person other than Lenders and, with
respect to Section 10.1(b), the Borrower; consequently, no such other Person
shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Agent or any Lender to comply
with such provisions.
ARTICLE 11.
Miscellaneous
Section 11.1 Notices.
(a) All notices and other communications under this Agreement
shall be in writing (except in those cases where giving notice by telephone is
expressly permitted) and shall be deemed to have been given on the date
personally delivered or sent by telecopy (answerback received), or three days
after deposit in the mail, designated as certified mail, return receipt
requested, postage-prepaid, or one day after being entrusted to a reputable
commercial overnight delivery service, addressed to the party to which such
notice is directed at its address determined as provided in this Section. All
notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:
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<PAGE> 74
(i) If to the Borrower, at:
XIRCOM, INC.
2300 Corporate Center Drive
Thousand Oaks, California 91320
Attn: Chief Financial Officer
(ii) If to the Administrative Agent, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Stan W. Reynolds
(iii) If to a Lender, at its address shown below its name
on the signature pages hereof, or if applicable, set
forth in its Assignment Agreement.
(b) Any party hereto may change the address to which notices shall
be directed by giving 10 days' written notice of such change to the other
parties.
Section 11.2 Expenses. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative
Agent in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Loan Documents, the transactions contemplated
hereunder and thereunder, and the making of Advances hereunder, including
without limitation the reasonable fees and disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and reasonable
attorneys' fees of the Administrative Agent in connection with the
administration of the transactions contemplated in this Agreement and the other
Loan Documents and the preparation, negotiation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent relating to this
Agreement or the other Loan Documents; and
(c) all costs, out-of-pocket expenses and reasonable attorneys'
fees of the Administrative Agent and each Lender incurred for enforcement,
collection, restructuring, refinancing and "work-out", or otherwise incurred in
obtaining performance under the Loan Documents, which in each case shall
include without limitation fees and expenses of consultants, counsel for the
Administrative Agent and any Lender, and administrative fees for the
Administrative Agent.
Section 11.3 Waivers. The rights and remedies of the Lenders
under this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which they would otherwise have. No
failure or delay by the Administrative Agent or any
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<PAGE> 75
Lender in exercising any right shall operate as a waiver of such right. The
Lenders expressly reserve the right to require strict compliance with the terms
of this Agreement in connection with any funding of a request for an Advance.
In the event that any Lender decides to fund an Advance at a time when the
Borrower is not in strict compliance with the terms of this Agreement, such
decision by such Lender shall not be deemed to constitute an undertaking by the
Lender to fund any further requests for Advances or preclude the Lenders from
exercising any rights available under the Loan Documents or at law or equity.
Any waiver or indulgence granted by the Lenders shall not constitute a
modification of this Agreement, except to the extent expressly provided in such
waiver or indulgence, or constitute a course of dealing by the Lenders at
variance with the terms of the Agreement such as to require further notice by
the Lenders of the Lenders' intent to require strict adherence to the terms of
the Agreement in the future. Any such actions shall not in any way affect the
ability of the Administrative Agent or the Lenders, in their discretion, to
exercise any rights available to them under this Agreement or under any other
agreement, whether or not the Administrative Agent or any of the Lenders are a
party thereto, relating to the Borrower.
Section 11.4 Calculation by the Lenders Conclusive and Binding.
Any mathematical calculation required or expressly permitted to be made by the
Administrative Agent or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be controlling.
Section 11.5 Set-Off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of an Event of Default, each
Lender and any subsequent holder of any Note, and any assignee of any Note is
hereby authorized by the Borrower at any time or from time to time, without
notice to the Borrower or any other Person, any such notice being hereby
expressly waived, to set-off, appropriate and apply any deposits (general or
special (except trust and escrow accounts), time or demand, including without
limitation Indebtedness evidenced by certificates of deposit, in each case
whether matured or unmatured) and any other Indebtedness at any time held or
owing by such Lender or holder to or for the credit or the account of the
Borrower, against and on account of the Obligations and other liabilities of
the Borrower to such Lender or holder, irrespective of whether or not (a) the
Lender or holder shall have made any demand hereunder, or (b) the Lender or
holder shall have declared the principal of and interest on the Advances and
other amounts due hereunder to be due and payable as permitted by Section 8.2.
Any sums obtained by any Lender or by any assignee or subsequent holder of any
Note shall be subject to pro rata treatment of all Obligations and other
liabilities hereunder.
Section 11.6 Assignment.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign or grant a participation
in its interest in this Agreement, its Notes or its Advances, except as
hereinafter set forth.
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<PAGE> 76
(c) Without the consent of the Borrower, any Lender may at any
time sell participations in all or any part of its Advances and Reimbursement
Obligations (collectively, "Participations") to any banks or other financial
institutions ("Participants") provided that neither such Participation nor any
agreement relating thereto shall confer on any Person (other than the parties
hereto) any right to vote on, approve or sign amendments or waivers, or any
other independent benefit or any legal or equitable right, remedy or other
claim under this Agreement or any other Loan Documents, other than the right to
vote on, approve, or sign amendments or waivers or consents with respect to
items that would result in (i) any increase in the commitment of any
Participant; or (ii)(A) the extension of the date of maturity of, or (B) the
extension of the due date for any payment of principal, interest or fees, or
(C) the reduction of the amount of any installment of principal or interest on
or the change or reduction of any mandatory reduction required hereunder, or
(D) a reduction of the rate of interest on, the Advances, the Letters of
Credit, or the Reimbursement Obligations to which such Participant is entitled;
or (iii) the release of security for the Obligations, including without
limitation any guarantee, except pursuant to this Agreement; or (iv) the
reduction of any fees payable hereunder to which such Participant is entitled.
Notwithstanding the foregoing, subject to Section 11.6(i), the Borrower agrees
that the Participants shall be entitled to the benefits of Article 9 hereof as
though they were Lenders and the Lenders may, subject to Section 11.14 hereof,
provide copies of all financial information received from the Borrower to such
Participants.
(d) Each Lender may assign to one or more financial institutions
organized under the laws of the United States, or any state thereof, or under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country,
which is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business (each, an "Assignee") its rights
and obligations under this Agreement and the other Loan Documents; provided,
however, that (i) each such assignment shall be subject to the prior written
consent of the Administrative Agent and Borrower, which consent shall not be
unreasonably withheld (provided, however, notwithstanding anything herein to
the contrary, no consent of the Borrower is required for any assignment during
any time that an Event of Default has occurred and is continuing), (ii) no such
assignment shall be in an amount of the Commitment less than $5,000,000, (iii)
the applicable Lender, Administrative Agent and applicable Assignee shall
execute and deliver to the Administrative Agent an Assignment and Acceptance
Agreement (an "Assignment Agreement") in substantially the form of Exhibit E
hereto, together with the Notes subject to such assignment and (iv) the
Assignee executing the Assignment, shall deliver to the Administrative Agent a
processing fee of $3,500. Upon such execution, delivery and acceptance from
and after the effective date specified in each Assignment, which effective date
shall be at least three Business Days after the execution thereof, (A) the
Assignee thereunder shall be party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment,
have the rights and obligations of a Lender hereunder and (B) the applicable
Lender shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment, relinquish such rights and be
released from such obligations under this Agreement.
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<PAGE> 77
(e) Notwithstanding anything in clause (d) above to the contrary,
any Lender may assign and pledge all or any portion of its Advances and Note to
any Federal Reserve Bank as collateral security pursuant to Regulation A of
F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank;
provided, however, that no such assignment under this clause (e) shall release
the assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a
Lender and an Assignee, and any Note subject to such assignment, the Borrower
shall, within five Business Days after its receipt of such Assignment
Agreement, at no expense to the Borrower, execute and deliver to the
Administrative Agent in exchange for the surrendered Note new Note payable to
the order of such Assignee in an amount equal to the portion of the Advances
and Commitment assigned to it pursuant to such Assignment Agreement and a new
Note to the order of the assignor Lender in an amount equal to the portion of
the Advances and Commitment retained by it hereunder. Such new Note shall be
in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note, shall be dated the effective date of such Assignment
Agreement and shall otherwise be in substantially the form of Exhibit A hereto.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.6, disclose to the assignee or Participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower, provided such Person agrees to handle such
information in accordance with the standards set forth in Section 11.14 hereof.
(h) Except as specifically set forth in this Section 11.6, nothing
in this Agreement or any other Loan Documents, expressed or implied, is
intended to or shall confer on any Person other than the respective parties
hereto and thereto and their successors and assignees permitted hereunder and
thereunder any benefit or any legal or equitable right, remedy or other claim
under this Agreement or any other Loan Documents.
(i) Notwithstanding anything in this Section 11.6 to the contrary,
no Assignee or Participant (nor the assigning or participating Lender) shall be
entitled to receive (whether individually or collectively) any greater payment
under Section 2.14 or Section 9.3 or Section 9.5 than such assigning or
participating Lender would have been entitled to receive with respect to the
interest assigned or participated to such Assignee or Participant.
Section 11.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all such separate counterparts shall together constitute but one and the same
instrument.
Section 11.8 Severability. Any provision of this Agreement or any
other Loan Document which is for any reason prohibited or found or held invalid
or unenforceable by any court or governmental agency shall be ineffective to
the extent of such prohibition or invalidity or unenforceability without
invalidating the remaining provisions hereof or thereof in such jurisdiction or
affecting the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE> 78
Section 11.9 Interest and Charges. It is not the intention of any
parties to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Highest Lawful
Amount. If any Lender or participant ever receives, collects or applies, as
interest, any such excess, such amount which would be excessive interest shall
be deemed a partial repayment of principal and treated hereunder as such; and
if principal is paid in full, any remaining excess shall be paid to the
Borrower. In determining whether or not the interest paid or payable, under
any specific contingency, exceeds the Highest Lawful Rate, the Borrower and the
Lenders shall, to the maximum extent permitted under Applicable Law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effect thereof, and (c)
amortize, prorate, allocate and spread in equal parts, the total amount of
interest throughout the entire contemplated term of the Obligations so that the
interest rate is uniform throughout the entire term of the Obligations;
provided, however, that if the Obligations are paid and performed in full prior
to the end of the full contemplated term thereof, and if the interest received
for the actual period of existence thereof exceeds the Highest Lawful Rate, the
Lenders shall refund to the Borrower the amount of such excess or credit the
amount of such excess against the total principal amount of the Obligations
owing, and, in such event, the Lenders shall not be subject to any penalties
provided by any laws for contracting for, charging or receiving interest in
excess of the Highest Lawful Rate. This Section shall control every other
provision of all agreements pertaining to the transactions contemplated by or
contained in the Loan Documents.
Section 11.10 Headings. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this
Agreement may not be amended, modified or waived except by the written
agreement of the Borrower and the Determining Lenders; provided, however, that
no such amendment, modification or waiver shall be made (a) without the consent
of all Lenders, if it would (i) increase the Specified Percentage or commitment
of any Lender, or (ii) extend or postpone the date of maturity of, extend the
due date for any payment of principal or interest on, reduce the amount of any
installment of principal or interest on, or reduce the rate of interest on, any
Advance, the Reimbursement Obligations or other amount owing under any Loan
Documents to which such Lender is entitled, or (iii) release any security for
or guaranty of the Obligations (except pursuant to this Agreement or the other
Loan Documents), or (iv) reduce the fees payable hereunder to which such Lender
is entitled, or (v) revise this Section 11.11, or (vi) waive the date for
payment of any principal, interest or fees hereunder or (vii) amend the
definition of Determining Lenders or Borrowing Base; (b) without the consent of
the Administrative Agent, if it, would alter the rights, duties or obligations
of the Administrative Agent; or (c) without the consent of the Issuing Bank, if
it would alter the rights, duties or obligations of the Issuing Bank. Neither
this Agreement nor any term hereof may be amended orally, nor may any provision
hereof be waived orally but only by an instrument in writing signed by the
Administrative Agent and, in the case of an amendment, by the Borrower.
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<PAGE> 79
Section 11.12 Exception to Covenants. Neither the Borrower nor any
Subsidiary of the Borrower shall be deemed to be permitted to take any action
or fail to take any action which is permitted as an exception to any of the
covenants contained herein or which is within the permissible limits of any of
the covenants contained herein if such action or omission would result in the
breach of any other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any Lender nor any of their respective officers or directors
shall be liable or responsible for: (a) the use that may be made of any Letter
of Credit or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Issuing Bank against presentation of documents that do not
comply with the terms of a Letter of Credit, including failure of any documents
to bear any reference or adequate reference to the Letter of Credit, except for
any payment made upon the Issuing Bank's gross negligence or wilful misconduct;
or (d) any other circumstances whatsoever in making or failing to make payment
under any Letter of Credit, except that the Borrower shall have a claim against
the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the
extent of any direct, but not consequential, damages suffered by the Borrower
that a court of competent jurisdiction determines were caused by the Issuing
Bank's wilful misconduct or gross negligence. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 11.14 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS) AND THE
UNITED STATES OF AMERICA. THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS, TEXAS,
AND BORROWER AND EACH SURETY, GUARANTOR, ENDORSER AND ANY OTHER PARTY EVER
LIABLE FOR PAYMENT OF ANY MONEY PAYABLE WITH RESPECT TO THE LOAN DOCUMENTS,
JOINTLY AND SEVERALLY WAIVE THE RIGHT TO BE SUED ELSEWHERE. WITHOUT EXCLUDING
ANY OTHER JURISDICTION, THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER
EACH AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS,
TEXAS, SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND HEREBY SUBMITS WITH RESPECT TO
ITSELF AND ITS PROPERTY TO THE JURISDICTION OF ANY SUCH COURT FOR THE PURPOSE
OF ANY SUIT, ACTION, PROCEEDING OR JUDGMENT RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
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<PAGE> 80
SECTION 11.15 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.16 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 81
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date
first set forth above.
BORROWER: XIRCOM, INC.
By: [SIG]
------------------------------
Name: Randall H. Holliday
------------------------
Title: Secretary
------------------------
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<PAGE> 82
ADMINISTRATIVE AGENT: NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
By: [SIG]
----------------------------
William C. Collins
Sr. Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender and Issuing Bank
Specified Percentage:
60%
By: [SIG]
----------------------------
William C. Collins
Sr. Vice President
901 Main Street
Dallas, Texas 75202
SUMITOMO BANK OF CALIFORNIA
Specified Percentage:
40%
By: [SIG]
----------------------------
Name: Steven N. Sloan
---------------------
Title: Vice President
---------------------
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<PAGE> 1
EXHIBIT 10.30a
================================================================================
SECURITY AGREEMENT
Between
XIRCOM, INC.
as Debtor
and
NATIONSBANK OF TEXAS, N.A.
as Administrative Agent
December 30, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
I. GRANT
<S> <C> <C>
1.01. Assignment and Grant of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Description of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.03. Debtor Remains Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.04. Delivery of Security and Instrument Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. COVENANTS
---------
3.01. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.04. Place of Perfection; Records; Collection of Receivables, chattel paper and Instruments . . . . . . . 8
3.05. Transfers and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.06. Rights to Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.07. Right of Administrative Agent to Notify Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.08. Administrative Agent Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . . 10
IV. RIGHTS AND POWERS OF Administrative Agent
-----------------------------------------
4.01. Administrative Agent May Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.02. Administrative Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.03. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.04. Further Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.05. Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
V. MISCELLANEOUS
-------------
5.01. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.02. Modifications; Amendments; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.03. Continuing Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.04. GOVERNING LAW; TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.05. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.06. Administrative Agent's Right to Use Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.07. No Interference, Compensation or Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.08. Waivers of Rights Inhibiting Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.09. Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Manner of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11. Loan Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.13. Consent to Jurisdiction; Waiver of Immunities . . . . . . . . . . . . . . . . . . . . . . . 18
5.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15. Obligations Not Affected 18
5.16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
- ii -
<PAGE> 4
SCHEDULES:
Schedule 1 - Inventory Locations
Schedule 2 - Trade Names
Schedule 3 - Restricted Accounts
Schedule 4 - Securities Collateral
- iii -
<PAGE> 5
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of December 30, 1996,
made by Xircom, Inc., a California corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., a national banking association, as Administrative
Agent ("Administrative Agent") for itself and each other lender a party to the
Credit Agreement described below (singly, a "Secured Party", and collectively,
the "Secured Parties").
BACKGROUND:
(1) Debtor, Administrative Agent and Secured Parties entered into
the Credit Agreement dated as of December 30, 1996 (as the same has been and
may hereafter be supplemented, amended and modified from time to time, being
the "Credit Agreement").
(2) It is the intention of the parties hereto that this Agreement
create a first priority security interest securing the payment of the
obligations set forth in Section 1.02 hereof.
(3) It is a condition precedent to the obligation of the Secured
Parties to make the Advances, and issue, or participate in the issuance of,
Letters of Credit under the Credit Agreement that Debtor shall have executed
and delivered this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to make the
Advances and issue, or participate in the issuance of, Letters of Credit under
the Credit Agreement, Debtor hereby agrees with Administrative Agent for its
benefit and the ratable benefit of Secured Parties, as hereinafter set forth.
I. GRANT
1.01. Assignment and Grant of Security. Debtor hereby assigns,
pledges, hypothecates and transfers to Administrative Agent, for its benefit
and the ratable benefit of Secured Parties, and hereby grants to Administrative
Agent, for its benefit and the ratable benefit of Secured Parties, a security
interest in, the entire right, title and interest of Debtor, in and to the
following assets of Debtor, whether now owned or hereafter acquired
("Collateral"):
(a) all trade secrets, inventions, processes, production methods,
proprietary information and know-how; and all licenses or other agreements
granted to Debtor with respect
<PAGE> 6
to any of the foregoing (except to the extent the agreements granting such
licenses prohibit the grant of security interests therein); all information,
advertising lists, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, telephone numbers and telephone listings,
catalogs, books, records, computer and automatic machinery software and
programs, and the like pertaining to operations by or the business of Debtor;
all field accounting information and all media in which or on which any of the
information or knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data; all licenses, consents, permits, variances,
certifications and approvals of all Tribunals now or hereafter held by Debtor
pertaining to operations or business now or hereafter conducted; all rights to
receive return of deposits and trust payments; all rights to payment under
letters of credit and similar agreements; and all causes of action, rights,
claims and warranties now or hereafter owned or acquired by Debtor ("General
Intangibles");
(b) all inventory in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, (i) all raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, (ii) goods in which Debtor
has an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which Debtor has an interest or right
as consignee but only to the extent of Debtor's interest therein and then only
to the extent the grant of a security interest therein is not prohibited by the
agreement granting such interest or right), and (iii) goods which are returned
to or repossessed by Debtor, and all accessions thereto and products thereof
and documents therefor (any and all such inventory, accessions, products and
documents being the "Inventory");
(c) all accounts, contract rights, chattel paper, documents,
instruments, deposit accounts, general intangibles, tax refunds (including,
without limitation, all federal and state income tax refunds and benefits of
net operating loss carry forwards) and other obligations of any kind owing to
Debtor, now or hereafter existing, arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, deposit accounts, general intangibles or
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, deposit accounts, general intangibles and obligations
being the "Receivables");
(d) all agreements with each manufacturer, vendor, sales agent,
sales representative and each other Person pursuant to which Debtor receives,
maintains, sells, leases or otherwise disposes of Inventory, including all
agreements permitting the use of each such Person's name, logo, trademarks,
tradenames and advertising and then only to the extent the grant of a security
interest therein is not prohibited by the agreement granting such interest or
right ("Vendor Agreements");
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<PAGE> 7
(e) all right, title and interest of Debtor in, to and under each
contract and other agreement relating to the lease, sale or other disposition
of Collateral;
(f) all rights, claims and benefits of Debtor against any Person
arising out of, relating to or in connection with Collateral purchased by
Debtor, including, without limitation, any such rights, claims or benefits
against any Person storing or transporting such Collateral;
(g) the balance of every deposit account of Debtor under control
of Administrative Agent and each other Secured Party and each of their
respective Affiliates and any other claim of Debtor against Administrative
Agent and each other Secured Party, now or hereafter existing, liquidated or
unliquidated, and all money, instruments, securities, documents, chattel paper,
credits, claims, demands, income, and any other property, rights and interests
of Debtor which at any time shall come into the possession or custody or under
the control of Administrative Agent or any Secured Party or any of its agents,
affiliates or correspondents, for any purpose, and the proceeds of any thereof
(Administrative Agent and each other Secured Party shall be deemed to have
possession of any of the Collateral in transit to or set apart for it or any of
its agents, affiliates or correspondents).
(h) 100% of the issued and outstanding capital stock of each
Domestic Subsidiary of the Pledgor, together with all Dividends, cash,
proceeds, profits, instruments, distributions and other property from time to
time distributed in respect thereof, and any subscription rights or warrants to
acquire any interest in such Subsidiary;
(i) 65% of the issued and outstanding capital stock of each
Foreign Subsidiary of the Pledgor, together with all Dividends, cash, proceeds,
profits, instruments, distributions and other property from time to time
distributed in respect thereof and any subscription rights or warrants to
acquire any interest in such Subsidiary;
(j) all insurance policies and bonds and claims and payments
under any Collateral; and
(k) all accessions to, substitutions for and replacements,
proceeds and products of any and all of the foregoing Collateral (including,
without limitation, proceeds which constitute property of the types described
in this Section 1.01) and, to the extent not otherwise included, all (i)
payments under insurance (whether or not Administrative Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral and (ii)
cash.
1.02. Description of Obligations. This Agreement creates a first
priority security interest in the Collateral to secure the payment and
performance of any and all obligations now or hereafter existing of Debtor,
each Obligor and any other Person under the Credit Agreement and the other Loan
Documents, including any extensions, modifications, substitutions, amendments
and renewals thereof, whether for principal, interest, fees, premium, expenses,
reimbursement obligations, indemnification or otherwise (all such obligations
of Debtor, each
- 3 -
<PAGE> 8
Obligor and each other Person being the "Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by Debtor, each
other Obligor and any other Person to Administrative Agent or any Secured Party
under any Loan Document, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding under any Debtor Relief Law involving Debtor, any Obligor or any
other Person (including all such amounts which would become due or would be
secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of Debtor, any other
Obligor or any other Person under any Debtor Relief Law).
1.03. Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Administrative Agent
of any of the rights hereunder shall not release Debtor from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (c) neither Administrative Agent nor any Secured Party shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Administrative Agent or any
Secured Party be obligated to perform any of the obligations or duties of
Debtor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
1.04. Delivery of Security and Instrument Collateral. All
certificates or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of Administrative Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form
and substance satisfactory to Administrative Agent. Administrative Agent shall
have the right, as provided in Section 3.06, after the occurrence of an Event
of Default and acceleration of the Obligations, and with prior written notice
to Debtor, to transfer to or to register in the name of Administrative Agent or
any of its nominees any or all of such Collateral. In addition, Administrative
Agent shall have the right at any time after the occurrence of an Event of
Default to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
Except as provided in Section 3.08(d), Debtor maintains the voting rights in
the Securities Collateral (as defined below) which was granted in the
Securities Collateral pursuant to Section 1.01(h) and (i).
II. REPRESENTATIONS AND WARRANTIES
2.01. Representations and Warranties. Debtor represents and
warrants to Administrative Agent and each Secured Party, with respect to itself
and the Collateral, as follows:
(a) As of the date hereof, all of the Inventory pledged by Debtor
hereunder is located at the places specified on Schedule 1 hereto (as
supplemented from time to time by Debtor by written notice to Administrative
Agent) or in transit to a place specified on Schedule 1 hereto
- 4 -
<PAGE> 9
(as supplemented from time to time by Debtor by written notice to
Administrative Agent) (other than Inventory used for demonstration purposes) or
in transit for sale to a third-party purchaser that upon such sale will become
the obligor under a Receivable. The chief place of business and chief
executive office of Debtor and the office where Debtor keeps all of its records
concerning the Receivables, are located at the place specified on Schedule 1
hereto. As of the date hereof, Schedule 1 is a complete and correct list of,
as to any leased property on which any Collateral is located, the lease or
other agreement (and all amendments thereto) pursuant to which Debtor has use
of such property (complete and correct copies of which have been provided to
Administrative Agent), the lessor pursuant to such agreement, the recording
information for such agreement, the description of such property sufficient for
recording and the name of the record owner of such property. All chattel
paper, promissory notes or other instruments evidencing the Receivables
(excluding checks) have been delivered and pledged to Administrative Agent duly
endorsed and accompanied by such duly executed instruments of transfer or
assignment as are necessary for such pledge, to be held as pledged collateral.
(b) Debtor is the legal and beneficial owner of the Collateral
pledged by it free and clear of any Lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement and permitted pursuant to Section 7.2 of the Credit Agreement and any
other Lien permitted by the Credit Agreement. No effective financing statement
or other similar document used to perfect and preserve a security interest
under the laws of any jurisdiction covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in favor
of Administrative Agent relating to this Agreement and with respect to any Lien
permitted by the Credit Agreement. As of the date hereof, Debtor has the trade
names set forth on Schedule 2 (and no others). To the best of Debtor's
knowledge, Debtor (including any corporate or partnership predecessor) has not
existed or operated under any name other than as stated on Schedule 2 since the
date three years preceding the date of this Agreement.
(c) This Agreement and the pledge of the Collateral pursuant
hereto, together with the filing of financing statements containing the
description of the Collateral with the Secretary of the State of California and
New Hampshire, which will be made immediately following the date of closing,
creates a valid and perfected first priority security interest in the
Collateral in which a security interest can be perfected by filing a UCC
financing statement, securing the payment of the Obligations; provided that
additional actions may be required with respect to the perfection of proceeds
of the Collateral; further provided that Secured Party retains physical
possession of any Collateral, the possession of which is required for
perfection.
(d) No consent of any Person and no authorization, approval or
other action by, and no notice to or filing with, any Tribunal is required (i)
for the pledge by Debtor of the Collateral pledged by it hereunder, for the
grant by Debtor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by Debtor, (ii) for the perfection or
maintenance of the pledge, assignment and security interest created hereby
(including the first priority nature of such pledge, assignment and security
interest) or (iii) for the exercise by
- 5 -
<PAGE> 10
Administrative Agent of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement.
(e) Debtor possesses all licenses and permits required for the
operations of its business, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(f) None of the Collateral described in Sections 1.01(h) and
1.01(i) ("Securities Collateral") is subject to any unpaid capital call or
dispute, any buy-sell, voting trust, transfer restriction, preferential right
to purchase or similar agreement or any option, warrant, put or call or similar
agreement. All of the Securities Collateral (i) are duly authorized, validly
issued and non-assessable and were not issued in violation of the Rights of any
Person and (ii) existing as of the date hereof are described on Schedule 4
hereto.
(g) All Inventory produced in the United States of America has
been produced in substantial compliance with the Fair Labor Standards Act.
III. COVENANTS
3.01. Further Assurances. (a) Debtor agrees that where any
agreement existing as of the date hereof or hereafter to which Debtor is a
party contains any restriction that could reasonably be expected to prohibit
Debtor from granting any security interest under this Agreement, Debtor will
use its best efforts to obtain the necessary consent to or waiver of such
restriction from any Person so as to enable Debtor to effectively grant to
Administrative Agent such security interest under this Agreement.
(b) Debtor agrees that from time to time, at the expense of
Debtor, Debtor will promptly execute and deliver all further instruments and
documents (including supplements to all schedules), and take all further
action, that may be necessary or desirable, or that Administrative Agent may
reasonably request, in order to perfect and protect any pledge, assignment or
security interest granted or purported to be granted hereby, and the priority
thereof, or to enable Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, upon reasonable written request by Administrative
Agent, Debtor will: (i) mark conspicuously each chattel paper or instrument
included in Receivables, and, at the reasonable request of Administrative
Agent, each of its records pertaining to the Collateral with the following
legend:
THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO
A SECURITY AGREEMENT DATED DECEMBER 30, 1996 (AS THE SAME HAS BEEN AND
MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED) MADE BY XIRCOM, INC.
IN FAVOR OF NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT FOR
CERTAIN LENDERS, AND PURSUANT
- 6 -
<PAGE> 11
TO A CREDIT AGREEMENT DATED AS OF DECEMBER 30, 1996 (AS THE SAME HAS
BEEN AND MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED)
or such other legend, in form and substance reasonably satisfactory to and as
specified by Administrative Agent, indicating that such chattel paper,
instrument or Collateral is subject to the pledge, assignment and security
interest granted hereby; (ii) if any Collateral shall be evidenced by a
promissory note or other instrument or be chattel paper, deliver and pledge to
Administrative Agent hereunder such note, instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance reasonably satisfactory to Administrative
Agent; and (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Administrative Agent may reasonably request, in order to
perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
(c) In addition to such other information as shall be specifically
provided for herein, Debtor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other lists, documents, reports, and product, service and sales documents
in connection with the Collateral as Secured Party may reasonably request, all
in reasonable detail. In connection with its enforcement of the security
interest, Administrative Agent may use such information or transfer it to any
assignee or sublicensee permitted hereunder for such assignee's or
sublicensee's use.
(d) Debtor hereby authorizes Administrative Agent to file one or
more financing or continuation statements relating to all or any part of the
Collateral without the signature of Debtor where permitted by law provided
Administrative Agent shall give reasonably prompt notice of any such filings to
Debtor. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(e) Debtor will not, and will not permit any Person to, materially
revise, modify, amend or restate the articles of incorporation of any
corporation the stock or other interest in which is Collateral or the
partnership, joint venture or other organizational document of any partnership
or joint venture any interest in which is Collateral or terminate, cancel or
dissolve any such Person, except as permitted under the Credit Agreement.
3.02. Inventory.
(a) Debtor shall not keep the Inventory pledged by it hereunder
(other than Inventory sold in the ordinary course of business) in any location
unless the Debtor has delivered to Administrative Agent a financing statement
for such Inventory kept by Debtor at such location.
- 7 -
<PAGE> 12
(b) Debtor shall pay promptly when due all material property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral pledged by it hereunder, except such taxes and claims as are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, except where the failure to file
such returns, pay such taxes or establish such reserves does not involve unpaid
or allegedly unpaid amounts, in aggregate, in excess of $100,000 for any fiscal
year. Debtor shall comply with all requirements of the Fair Labor Standards
Act.
3.03. Insurance. Debtor shall, at its own expense, maintain
insurance with respect to the Collateral in accordance with the terms set forth
in Section 5.5 of the Credit Agreement. Debtor further covenants and agrees to
keep the Collateral which is Inventory insured in such amounts, against such
risks and with such insurers as is consistent with customary industry practice,
provided that none of such insurance shall be in amounts less than the greater
of (i) the replacement value and (ii) the original cost of the covered property
(less any deduction standard in the industry for such type of property),
subject in the case of any property damage insurance to normal and customary
rights granted in the ordinary course of business to any landlord (with respect
to the property covered by any lease). All such policies of insurance shall be
written for the benefit of Administrative Agent and Debtor, as their interests
may appear, and shall provide for at least thirty Business Days' prior written
notice of cancellation to Administrative Agent. Debtor shall promptly furnish
to Administrative Agent evidence of such insurance in form and content
satisfactory to Administrative Agent. If Debtor fails to perform or observe
any applicable covenants as to insurance on any of such Collateral,
Administrative Agent may at its own option obtain insurance on only
Administrative Agent's interest in such Collateral, any premium thereby paid by
Administrative Agent to become part of the Obligations, bear interest prior to
the existence of an Event of Default, at the then applicable Base Rate Basis,
and during the existence of an Event of Default, at the Default Rate. In the
event Administrative Agent maintains such substitute insurance, the additional
premium for such insurance shall be due on demand and payable by Debtor to
Administrative Agent in accordance with any notice delivered to Debtor by
Administrative Agent. Debtor hereby grants Administrative Agent a security
interest in any refunds of unearned premiums in connection with any
cancellation, adjustment or termination of any policy of insurance required by
Administrative Agent and in all proceeds of such insurance and hereby appoints
Administrative Agent its attorney-in-fact (exercisable from and after the
occurrence of an Event of Default which is continuing) to endorse any check or
draft that may be payable to Debtor in order to collect such refunds or
proceeds. Any such sums collected by Administrative Agent shall be credited,
except to the extent applied to the purchase by Administrative Agent of similar
insurance, to any amounts then owing on the Obligations in accordance with the
Credit Agreement.
3.04. Place of Perfection; Records; Collection of Receivables,
chattel paper and Instruments.
(a) Debtor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the originals of all chattel
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<PAGE> 13
paper and instruments included in Receivables, at the location therefor
specified in Section 2.01(a). Debtor will hold and preserve such records and
chattel paper and instruments and will permit representatives of Administrative
Agent at any time during normal business hours and after reasonable notice to
inspect and make abstracts from and copies of such records and chattel paper
and instruments.
(b) Except as otherwise provided in this Section 3.04(b), Debtor
shall continue to collect, at its own expense, all amounts due or to become due
Debtor under the Receivables. In connection with such collections, Debtor may
take (and, upon the occurrence and during the continuance of an Event of
Default at Administrative Agent's direction, shall take) such action as Debtor
may deem necessary or advisable or, after the occurrence and during the
continuance of an Event of Default, Administrative Agent, may reasonably deem
necessary or advisable to enforce collection of the Receivables; provided,
however, that Administrative Agent shall have the right (upon an Event of
Default which is continuing) to notify the account debtors or obligors under
any Receivables of the assignment of such Receivables to Administrative Agent
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Debtor thereunder directly to Administrative Agent and,
upon such notification at the expense of Debtor, to enforce collection of any
such Receivables and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor might have done or
as Administrative Agent deems appropriate. Upon the occurrence and during the
continuance of an Event of Default, all amounts and proceeds (including
Instruments) received by Debtor in respect of the Receivables shall be received
in trust for the benefit of Administrative Agent hereunder, shall be segregated
from other funds of Debtor and, after receipt of notice from Administrative
Agent, shall be forthwith paid over to Administrative Agent in the same form as
so received (with any necessary indorsement) to be applied as provided in the
Credit Agreement. Debtor shall not adjust, settle or compromise the amount or
payment of any Receivable, release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon other than those made
in the ordinary course of business.
3.05. Transfers and Other Liens. Debtor shall not (i) sell,
transfer, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, except as permitted
under the Credit Agreement or (ii) create or permit to exist any Lien, security
interest, option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the security interest under this Agreement (and
except as provided for in the Credit Agreement).
3.06. Rights to Dividends and Distributions. With respect to any
certificates, bonds, or other instruments or securities constituting a part of
the Collateral, Administrative Agent shall have authority during the
continuance of an Event of Default, upon written notice to Debtor of its
intention to do so, either to have the same registered in Administrative
Agent's name or in the name of a nominee, and, with or without such
registration, upon such notification to demand of the issuer thereof, and to
receive and receipt for, any and all Dividends (including any stock or similar
dividend or distribution) payable in respect thereof, whether they be ordinary
or extraordinary. If Debtor shall become entitled to receive or shall receive
any interest in or
- 9 -
<PAGE> 14
certificate (including, without limitation, any interest in or certificate
representing a Dividend or a distribution in connection with any
reclassification, increase, or reduction of capital, or issued in connection
with any reorganization), or any option or rights arising from or relating to
any of the Collateral, whether as an addition to, in substitution of, as a
conversion of, or in exchange for any of the Collateral, or otherwise, Debtor
agrees after receipt by Debtor of the notice referred to above, to accept the
same as Administrative Agent's agent and to hold the same in trust on behalf of
and for the benefit of Administrative Agent, and to deliver the same
immediately to Administrative Agent in the exact form received, with
appropriate undated stock or similar powers, duly executed in blank, to be held
by Administrative Agent, subject to the terms hereof, as Collateral. Unless an
Event of Default is in existence, Debtor shall be entitled to receive all cash
Dividends paid in respect of any of the Collateral (subject to the restrictions
of any other Loan Document). Upon the occurrence and continuance of an Event
of Default, Administrative Agent shall receive all cash Dividends paid in
respect of any Collateral. Administrative Agent shall be entitled to all
Dividends, and to any sums paid upon or in respect of any Collateral, upon the
liquidation, dissolution, or reorganization of the issuer thereof which shall
be paid to Administrative Agent to be held by it as additional collateral
security for the Obligations and application to the Obligations at the
discretion of Administrative Agent. All Dividends paid or distributed in
respect of the Collateral which are received by Debtor in violation of this
Agreement shall, until paid or delivered to Administrative Agent, be held by
Debtor in trust as additional Collateral for the Obligations.
3.07. Right of Administrative Agent to Notify Issuers. At any time
during the continuance of an Event of Default and at such other times as
Administrative Agent is entitled to receive Dividends and other property in
respect of the Securities Collateral, Administrative Agent may notify issuers
of the Securities Collateral to make payments of all Dividends directly to
Administrative Agent and Administrative Agent may take control of all proceeds
of any Securities Collateral. Until Administrative Agent elects to exercise
such rights, during the continuance of an Event of Default, Debtor, as agent of
Administrative Agent, shall collect and segregate all Dividends and other
amounts paid or distributed with respect to the Securities Collateral.
3.08. Administrative Agent Appointed Attorney-in-Fact. Debtor
hereby irrevocably appoints Administrative Agent Debtor's attorney-in-fact
(exercisable from and after the occurrence of an Event of Default which is
continuing), with full authority in the place and stead of Debtor and in the
name of Debtor or otherwise to take any action and to execute any instrument
which Administrative Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to
Administrative Agent in accordance with Section 3.03,
(b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral,
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<PAGE> 15
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper included in Receivables, in connection
therewith, and
(d) to file any claims or take any action or institute any
proceedings which Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with the
terms and conditions of any Collateral or the rights of Administrative Agent
with respect to any of the Collateral. DEBTOR HEREBY IRREVOCABLY GRANTS TO
ADMINISTRATIVE AGENT DEBTOR'S PROXY TO VOTE ANY SECURITIES COLLATERAL AND
APPOINTS ADMINISTRATIVE AGENT DEBTOR'S ATTORNEY-IN-FACT TO PERFORM ALL
OBLIGATIONS OF DEBTOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF
ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER, IN EACH CASE EXERCISABLE ONLY UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. THE PROXY AND
EACH POWER OF ATTORNEY HEREIN GRANTED ARE COUPLED WITH AN INTEREST AND ARE
IRREVOCABLE PRIOR TO FINAL PAYMENT IN FULL OF THE OBLIGATIONS.
Secured Party shall not exercise any powers granted pursuant to this
appointment as attorney-in-fact at any time that Debtor is fully performing its
obligations hereunder. This appointment as attorney-in-fact shall terminate
upon the termination of this Agreement pursuant to Section 5.03 hereof.
IV. RIGHTS AND POWERS OF Administrative Agent
4.01. Administrative Agent May Perform. If Debtor fails to perform
any agreement contained herein, Administrative Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of
Administrative Agent incurred in connection therewith shall be payable by
Debtor under Section 4.05.
4.02. Administrative Agent's Duties. The powers conferred on
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Administrative Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Administrative Agent has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Administrative Agent accords its own
property, except to the extent of any gross negligence or willful misconduct of
the Administrative Agent. Except as provided in this Section 4.02,
Administrative Agent shall not have any duty or liability to protect or
preserve any Collateral or to preserve rights pertaining thereto. Nothing
contained in this Agreement shall be construed
- 11 -
<PAGE> 16
as requiring or obligating Administrative Agent, and Administrative Agent shall
not be required or obligated, to (i) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(ii) notify Debtor of any decline in the value of any Collateral.
4.03. Remedies. If any Event of Default shall be continuing and,
with respect to subparagraphs (a), (b) and (d) below, the Obligations shall
have been accelerated:
(a) Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas at
that time (the "UCC") (whether or not the Uniform Commercial Code applies to
the affected Collateral), and also may (i) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Administrative Agent
forthwith, assemble all or part of the Collateral which is capable of being
assembled as directed by Administrative Agent and make it available to
Administrative Agent at a place to be designated by Administrative Agent which
is reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Collateral or any portion thereof in one or more
parcels at public or private sale, at any of Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable. Debtor agrees
that, to the extent notice of sale shall be required by law, ten days' written
notice to Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Administrative Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) All cash proceeds received by Administrative Agent upon any
sale of, collection of, or other realization upon, all or any part of the
Collateral shall be applied as follows:
First: To the payment of all reasonable out-of-pocket costs and
expenses incurred in connection with the sale of, collection of or
other realization upon Collateral, including reasonable attorneys'
fees and disbursements;
Second: To the payment of the Obligations as provided in the Credit
Agreement and in such order and in such manner consistent with
Applicable Laws as Administrative Agent in its discretion shall decide
(with Debtor remaining liable for any deficiency); and
Third: To the extent of the balance (if any) of such proceeds, to
Debtor or other Person legally entitled thereto.
(c) All payments received by Debtor under or in connection with
any Collateral shall be received in trust for the benefit of Administrative
Agent, shall be segregated from other funds
- 12 -
<PAGE> 17
of Debtor and shall be forthwith paid over to Administrative Agent in the same
form as so received (with any necessary indorsement).
(d) Because of the Securities Act of 1933, as amended ("Securities
Act"), and other laws, including without limitation state "blue sky" laws, or
contractual restrictions or agreements, there may be legal restrictions or
limitations affecting Administrative Agent in any attempts to dispose of the
Collateral and the enforcement of its rights hereunder. For these reasons,
Administrative Agent is hereby authorized by Debtor, but not obligated, during
the continuance of any Event of Default, to sell or otherwise dispose of any of
the Collateral at private sale, subject to an investment letter, or in any
other manner which will not require the Collateral, or any part thereof, to be
registered in accordance with the Securities Act, or the rules and regulations
promulgated thereunder, or any other law. Debtor clearly understands that
Administrative Agent may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower
price for the Collateral than would otherwise be obtainable if same were
registered and sold in the open market. No sale so made in good faith by
Administrative Agent shall be deemed to be not "commercially reasonable"
because so made. Debtor agrees that in the event Administrative Agent shall,
during the continuance of an Event of Default, sell the Collateral or any
portion thereof at any private sale or sales, Administrative Agent shall have
the right to rely upon the advice and opinion of appraisers and other Persons,
which appraisers and other Persons are reasonably acceptable to Administrative
Agent, as to the best price reasonably obtainable upon such a private sale
thereof. In the absence of actual fraud, such reasonable reliance shall be
conclusive evidence that Administrative Agent handled such matter in a
commercially reasonable manner under Applicable Law.
(e) (i) Debtor will maintain the accounts listed as
restricted and blocked accounts on Schedule 3 (the "Restricted
Accounts") with Administrative Agent, in the name of Debtor, but such
Restricted Accounts shall be under the sole control and dominion of
Administrative Agent.
(ii) It shall be a term and condition of each
Restricted Account, notwithstanding any term or condition to the
contrary in any other agreement relating to such Restricted Account,
that no amount (including interest and other proceeds of the cash and
other property in the Restricted Account) shall be paid or released to
or for the account of, or withdrawn by or for the account of, Debtor
or any other Person from such Restricted Account.
(iii) During the continuance of an Event of
Default, upon notice from Administrative Agent, Debtor will promptly
instruct each account debtor in respect of Receivables arising from
any sale of Inventory in the ordinary course of business to make
payment to the Restricted Accounts.
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<PAGE> 18
Debtor understands and acknowledges that Administrative Agent may and permits
Administrative Agent, during the continuance of an Event of Default, to remove
amounts from the Restricted Accounts from time to time and use the amounts to
reduce the Obligations.
4.04. Further Approvals Required.
(a) In connection with the exercise by Administrative Agent of its
rights hereunder that effects the disposition of or use of any Collateral, it
may be necessary to obtain the prior consent or approval of Tribunals and other
Persons to a transfer or assignment of Collateral.
(b) Debtor hereby agrees to execute, deliver, and file, and hereby
appoints Administrative Agent as its attorney-in-fact to execute, deliver, and
file on Debtor's behalf and in Debtor's name, all applications, certificates,
filings, instruments, and other documents (including without limitation any
application for an assignment or transfer of control or ownership) that may be
reasonably necessary or appropriate, in Administrative Agent's opinion, to
obtain such consents, waivers, or approvals. Upon request of Administrative
Agent, Debtor further agrees to use reasonable efforts to obtain the foregoing
consents, waivers, and approvals, including receipt of consents, waivers, and
approvals under applicable agreements prior to a Default or Event of Default.
Debtor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 4.04 and that such failure would
not be adequately compensable in damages, and therefore agrees that this
Section 4.04 may be specifically enforced. Secured Party shall not exercise
any powers granted pursuant to this appointment as attorney-in-fact at any time
that Debtor is fully performing its obligations hereunder. This appointment as
attorney-in-fact shall terminate upon the termination of this Agreement
pursuant to Section 5.03 hereof.
4.05. Indemnity and Expenses. (a) Debtor agrees to indemnify
Administrative Agent and each Secured Party from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) growing
out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), expressly including such claims, losses or
liabilities arising out of mere negligence of Administrative Agent or any
Secured Party, except claims, losses or liabilities resulting from
Administrative Agent's or any Secured Party's gross negligence or willful
misconduct.
(b) Debtor will upon demand pay to Administrative Agent and each
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which Administrative Agent and each Secured Party may incur in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights
of Administrative Agent or any Secured Party hereunder or (iv) the failure by
Debtor to perform or observe any of the provisions hereof.
- 14 -
<PAGE> 19
V. MISCELLANEOUS
5.01. Cumulative Rights. All rights of Administrative Agent and
each other Secured Party under the Loan Documents are cumulative of each other
and of every other right which Administrative Agent and each other Secured
Party may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligations. The exercise of one or more rights shall not
prejudice or impair the concurrent or subsequent exercise of other rights.
5.02. Modifications; Amendments; Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Debtor here
from, shall in any event be effective unless the same shall be in writing and
signed by Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
5.03. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the later of (i) the final payment in full of the
Obligations and all amounts payable under this Agreement (other than
Obligations which are contingent and unliquidated and not due and owing on such
date and which pursuant to the provisions of the Credit Agreement, the Letters
of Credit or the Collateral Documents survive the termination of the Credit
Agreement, the termination of the Commitments, or the expiration or
cancellation of the Letters of Credit) and (ii) the expiration or termination
of the obligation of all Secured Parties to extend credit to Debtor and the
expiration of all Letters of Credit, (b) be binding upon Debtor, its successors
and assigns, and (c) inure to the benefit of, and be enforceable by,
Administrative Agent and its successors, transferees and assigns. Upon any
such termination, Administrative Agent will, at Debtor's expense, execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
such termination. Debtor agrees that to the extent that Administrative Agent
or any Secured Party receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a trustee,
receiver, or any other party under any Debtor Relief Law, common law or
equitable cause, then to the extent of such payment or benefit, the Obligations
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment or benefit had not been made and, further,
any such repayment by Administrative Agent or any Secured Party, to the extent
that Administrative Agent or any Secured Party did not directly receive a
corresponding cash payment, shall be added to and be additional Obligations
payable upon demand by Administrative Agent or any Secured Party and secured
hereby, and, if the lien and security interest hereof shall have been released,
such lien and security interest shall be reinstated with the same effect and
priority as on the date of execution hereof all as if no release of such lien
or security interest had ever occurred.
5.04. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW) AND THE
- 15 -
<PAGE> 20
UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF TEXAS. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT,
TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS THEREIN DEFINED.
5.05. WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT AND DEBTOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
5.06. Administrative Agent's Right to Use Agents. Administrative
Agent may exercise its rights under this Agreement through an agent or other
designee.
5.07. No Interference, Compensation or Expense. Administrative
Agent may exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.
5.08. Waivers of Rights Inhibiting Enforcement. Debtor waives (a)
any claim that, as to any part of the Collateral, a public sale, should
Administrative Agent elect so to proceed, is, in and of itself, not a
commercially reasonable method of sale for such Collateral, (b) except as
otherwise provided in this Agreement, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH ADMINISTRATIVE AGENT'S
DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT DEBTOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF
SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF ADMINISTRATIVE
AGENT'S RIGHTS HEREUNDER and (c) all rights of redemption, appraisal, valuation
or to the marshalling of assets.
5.09. Notices and Deliveries.
(a) Manner of Delivery. All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by reputable overnight delivery service or by hand, if to the Debtor, addressed
to it at its address specified on the signature pages hereof, if to the
Administrative Agent, addressed to it at its address specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section 5.09.
- 16 -
<PAGE> 21
(b) Addresses. All notices, communications and materials to be
given or delivered pursuant to this Agreement shall be given or delivered at
the following respective addresses and telecopier and telephone numbers and to
the attention of the following individuals or departments:
(i) if to Debtor, to it at:
Xircom, Inc.
2300 Corporate Center Drive
Thousand Oaks, California 91320
Telecopier No.: (805) 376-9120
Telephone No.: (805) 376-9300
Attention: Chief Financial Officer
(ii) if to Administrative Agent, to it at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Telecopier No.: (214) 508-0980
Telephone No.: (214) 508-3399
Attention: Stan W. Reynolds
or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".
(c) Effectiveness. All notices and other communications under
this Agreement shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after
deposit in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, addressed to the party to which such notice is
directed at its address determined as provided in this Section 5.09.
5.10. Successors and Assigns. All of the provisions of this
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
5.11. Loan Document. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
- 17 -
<PAGE> 22
5.12. Definitions. Capitalized terms not otherwise defined herein
have the meaning specified in the Credit Agreement and, to the extent of any
conflict, terms as defined in the Credit Agreement shall control (provided,
that a more expansive or explanatory definition shall not be deemed a
conflict).
5.13. Consent to Jurisdiction; Waiver of Immunities.
(a) Debtor hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or Texas State courts sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, and Debtor hereby irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such court or that such court is an inconvenient forum.
(b) Nothing in this section shall limit the right of
Administrative Agent or any Secured Party to bring any action or proceeding
against Debtor or its property in the courts of any other jurisdictions.
(c) Any judicial proceeding by Debtor against Administrative Agent
or any Secured Party involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with this Agreement shall be brought
only in a court in Dallas, Texas to the extent that jurisdiction may be
effected against such Person in Dallas, Texas.
5.14. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws during the
term thereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible.
5.15. Obligations Not Affected. To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
(a) any amendment or modification or addition or supplement to any
Loan Document, any instrument delivered in connection therewith or any
assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by Administrative Agent
or any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty, any collateral or the Collateral or
any part thereof provided pursuant to, this Agreement or any other Loan
Document;
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<PAGE> 23
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement or any other Loan Document or any
assignment or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor, any Obligor or
any other Person, whether or not Debtor shall have notice or knowledge of any
of the foregoing.
5.16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
5.17. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers or members
as of the date first above written.
DEBTOR:
XIRCOM, INC.
By: [SIG]
-------------------------------
Name: Randall H. Holliday
------------------------
Title: Secretary
------------------------
ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, N.A.
By: [SIG]
------------------------------
Name: William C. Collins
Title: Sr. Vice President
- 20 -
<PAGE> 1
EXHIBIT 10.30b
================================================================================
SECURITY AGREEMENT
Between
NETACCESS, INC.
as Debtor
and
NATIONSBANK OF TEXAS, N.A.
as Administrative Agent
December 30, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. GRANT
-----
1.01. Assignment and Grant of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Description of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.03. Debtor Remains Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.04. Delivery of Security and Instrument Collateral . . . . . . . . . . . . . . . . . . . . . . . . 4
II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. COVENANTS
---------
3.01. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.04. Place of Perfection; Records; Collection of Receivables, chattel paper and Instruments . . . . 8
3.05. Transfers and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.06. Rights to Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.07. Right of Administrative Agent to Notify Issuers . . . . . . . . . . . . . . . . . . . . . . . 10
3.08. Administrative Agent Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . . . . . . . . 10
IV. RIGHTS AND POWERS OF Administrative Agent
-----------------------------------------
4.01. Administrative Agent May Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.02. Administrative Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.03. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.04. Further Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.05. Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
V. MISCELLANEOUS
-------------
5.01. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.02. Modifications; Amendments; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.03. Continuing Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.04. GOVERNING LAW; TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.05. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.06. Administrative Agent's Right to Use Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.07. No Interference, Compensation or Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.08. Waivers of Rights Inhibiting Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.09. Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Manner of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.11. Loan Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.12. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.13. Consent to Jurisdiction; Waiver of Immunities . . . . . . . . . . . . . . . . . . . . . . . 18
5.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15. Obligations Not Affected 18
5.16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
- ii -
<PAGE> 4
SCHEDULES:
Schedule 1 - Inventory Locations
Schedule 2 - Trade Names
Schedule 3 - Restricted Accounts
Schedule 4 - Securities Collateral
- iii -
<PAGE> 5
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of December 30, 1996,
made by Netaccess, Inc., a California corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., a national banking association, as Administrative
Agent ("Administrative Agent") for itself and each other lender a party to the
Credit Agreement described below (singly, a "Secured Party", and collectively,
the "Secured Parties").
BACKGROUND:
(1) Xircom, Inc. ("Borrower") Administrative Agent and Secured
Parties entered into the Credit Agreement dated as of December 30, 1996 (as the
same has been and may hereafter be supplemented, amended and modified from time
to time, being the "Credit Agreement").
(2) It is the intention of the parties hereto that this Agreement
create a first priority security interest securing the payment of the
obligations set forth in Section 1.02 hereof.
(3) It is a condition precedent to the obligation of the Secured
Parties to make the Advances, and issue, or participate in the issuance of,
Letters of Credit under the Credit Agreement that Debtor shall have executed
and delivered this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to make the
Advances and issue, or participate in the issuance of, Letters of Credit under
the Credit Agreement, Debtor hereby agrees with Administrative Agent for its
benefit and the ratable benefit of Secured Parties, as hereinafter set forth.
I. GRANT
1.01. Assignment and Grant of Security. Debtor hereby assigns,
pledges, hypothecates and transfers to Administrative Agent, for its benefit
and the ratable benefit of Secured Parties, and hereby grants to Administrative
Agent, for its benefit and the ratable benefit of Secured Parties, a security
interest in, the entire right, title and interest of Debtor, in and to the
following assets of Debtor, whether now owned or hereafter acquired
("Collateral"):
(a) all trade secrets, inventions, processes, production methods,
proprietary information and know-how; and all licenses or other agreements
granted to Debtor with respect
<PAGE> 6
to any of the foregoing (except to the extent the agreements granting such
licenses prohibit the grant of security interests therein); all information,
advertising lists, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, telephone numbers and telephone listings,
catalogs, books, records, computer and automatic machinery software and
programs, and the like pertaining to operations by or the business of Debtor;
all field accounting information and all media in which or on which any of the
information or knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data; all licenses, consents, permits, variances,
certifications and approvals of all Tribunals now or hereafter held by Debtor
pertaining to operations or business now or hereafter conducted; all rights to
receive return of deposits and trust payments; all rights to payment under
letters of credit and similar agreements; and all causes of action, rights,
claims and warranties now or hereafter owned or acquired by Debtor ("General
Intangibles");
(b) all inventory in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, (i) all raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, (ii) goods in which Debtor
has an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which Debtor has an interest or right
as consignee but only to the extent of Debtor's interest therein and then only
to the extent the grant of a security interest therein is not prohibited by the
agreement granting such interest or right), and (iii) goods which are returned
to or repossessed by Debtor, and all accessions thereto and products thereof
and documents therefor (any and all such inventory, accessions, products and
documents being the "Inventory");
(c) all accounts, contract rights, chattel paper, documents,
instruments, deposit accounts, general intangibles, tax refunds (including,
without limitation, all federal and state income tax refunds and benefits of
net operating loss carry forwards) and other obligations of any kind owing to
Debtor, now or hereafter existing, arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, deposit accounts, general intangibles or
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, deposit accounts, general intangibles and obligations
being the "Receivables");
(d) all agreements with each manufacturer, vendor, sales agent,
sales representative and each other Person pursuant to which Debtor receives,
maintains, sells, leases or otherwise disposes of Inventory, including all
agreements permitting the use of each such Person's name, logo, trademarks,
tradenames and advertising and then only to the extent the grant of a security
interest therein is not prohibited by the agreement granting such interest or
right ("Vendor Agreements");
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<PAGE> 7
(e) all right, title and interest of Debtor in, to and under each
contract and other agreement relating to the lease, sale or other disposition
of Collateral;
(f) all rights, claims and benefits of Debtor against any Person
arising out of, relating to or in connection with Collateral purchased by
Debtor, including, without limitation, any such rights, claims or benefits
against any Person storing or transporting such Collateral;
(g) the balance of every deposit account of Debtor under control
of Administrative Agent and each other Secured Party and each of their
respective Affiliates and any other claim of Debtor against Administrative
Agent and each other Secured Party, now or hereafter existing, liquidated or
unliquidated, and all money, instruments, securities, documents, chattel paper,
credits, claims, demands, income, and any other property, rights and interests
of Debtor which at any time shall come into the possession or custody or under
the control of Administrative Agent or any Secured Party or any of its agents,
affiliates or correspondents, for any purpose, and the proceeds of any thereof
(Administrative Agent and each other Secured Party shall be deemed to have
possession of any of the Collateral in transit to or set apart for it or any of
its agents, affiliates or correspondents).
(h) 100% of the issued and outstanding capital stock of each
Domestic Subsidiary of the Pledgor, together with all Dividends, cash,
proceeds, profits, instruments, distributions and other property from time to
time distributed in respect thereof, and any subscription rights or warrants to
acquire any interest in such Subsidiary;
(i) 65% of the issued and outstanding capital stock of each
Foreign Subsidiary of the Pledgor, together with all Dividends, cash, proceeds,
profits, instruments, distributions and other property from time to time
distributed in respect thereof and any subscription rights or warrants to
acquire any interest in such Subsidiary;
(j) all insurance policies and bonds and claims and payments under
any Collateral; and
(k) all accessions to, substitutions for and replacements,
proceeds and products of any and all of the foregoing Collateral (including,
without limitation, proceeds which constitute property of the types described
in this Section 1.01) and, to the extent not otherwise included, all (i)
payments under insurance (whether or not Administrative Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral and (ii)
cash.
1.02. Description of Obligations. This Agreement creates a first
priority security interest in the Collateral to secure the payment and
performance of any and all obligations now or hereafter existing of Borrower
each Obligor and any other Person under the Credit Agreement and the other Loan
Documents, including any extensions, modifications, substitutions, amendments
and renewals thereof, whether for principal, interest, fees, premium, expenses,
reimbursement obligations, indemnification or otherwise (all such obligations
of Borrower, each
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<PAGE> 8
Obligor and each other Person being the "Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by Borrower, each
other Obligor and any other Person to Administrative Agent or any Secured Party
under any Loan Document, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding under any Debtor Relief Law involving Borrower, any Obligor or any
other Person (including all such amounts which would become due or would be
secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of Borrower, any other
Obligor or any other Person under any Debtor Relief Law).
1.03. Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Administrative Agent
of any of the rights hereunder shall not release Debtor from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (c) neither Administrative Agent nor any Secured Party shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Administrative Agent or any
Secured Party be obligated to perform any of the obligations or duties of
Debtor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
1.04. Delivery of Security and Instrument Collateral. All
certificates or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of Administrative Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form
and substance satisfactory to Administrative Agent. Administrative Agent shall
have the right, as provided in Section 3.06, after the occurrence of an Event
of Default and acceleration of the Obligations, and with prior written notice
to Debtor, to transfer to or to register in the name of Administrative Agent or
any of its nominees any or all of such Collateral. In addition, Administrative
Agent shall have the right at any time after the occurrence of an Event of
Default to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
Except as provided in Section 3.08(d), Debtor maintains the voting rights in
the Securities Collateral (as defined below) which was granted in the
Securities Collateral pursuant to Section 1.01(h) and (i).
II. REPRESENTATIONS AND WARRANTIES
2.01. Representations and Warranties. Debtor represents and
warrants to Administrative Agent and each Secured Party, with respect to itself
and the Collateral, as follows:
(a) As of the date hereof, all of the Inventory pledged by Debtor
hereunder is located at the places specified on Schedule 1 hereto (as
supplemented from time to time by Debtor by
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<PAGE> 9
written notice to Administrative Agent) or in transit to a place specified on
Schedule 1 hereto (as supplemented from time to time by Debtor by written
notice to Administrative Agent) (other than Inventory used for demonstration
purposes) or in transit for sale to a third-party purchaser that upon such sale
will become the obligor under a Receivable. The chief place of business and
chief executive office of Debtor and the office where Debtor keeps all of its
records concerning the Receivables, are located at the place specified on
Schedule 1 hereto. As of the date hereof, Schedule 1 is a complete and correct
list of, as to any leased property on which any Collateral is located, the
lease or other agreement (and all amendments thereto) pursuant to which Debtor
has use of such property (complete and correct copies of which have been
provided to Administrative Agent), the lessor pursuant to such agreement, the
recording information for such agreement, the description of such property
sufficient for recording and the name of the record owner of such property.
All chattel paper, promissory notes or other instruments evidencing the
Receivables (excluding checks) have been delivered and pledged to
Administrative Agent duly endorsed and accompanied by such duly executed
instruments of transfer or assignment as are necessary for such pledge, to be
held as pledged collateral.
(b) Debtor is the legal and beneficial owner of the Collateral
pledged by it free and clear of any Lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement and permitted pursuant to Section 7.2 of the Credit Agreement and any
other Lien permitted by the Credit Agreement. No effective financing statement
or other similar document used to perfect and preserve a security interest
under the laws of any jurisdiction covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in favor
of Administrative Agent relating to this Agreement and with respect to any Lien
permitted by the Credit Agreement. As of the date hereof, Debtor has the trade
names set forth on Schedule 2 (and no others). To the best of Debtor's
knowledge, Debtor (including any corporate or partnership predecessor) has not
existed or operated under any name other than as stated on Schedule 2 since the
date three years preceding the date of this Agreement.
(c) This Agreement and the pledge of the Collateral pursuant
hereto, together with the filing of financing statements containing the
description of the Collateral with the Secretary of the State of California and
New Hampshire, which will be made immediately following the date of closing,
creates a valid and perfected first priority security interest in the
Collateral in which a security interest can be perfected by filing a UCC
financing statement, securing the payment of the Obligations; provided that
additional actions may be required with respect to the perfection of proceeds
of the Collateral; further provided that Secured Party retains physical
possession of any Collateral, the possession of which is required for
perfection.
(d) No consent of any Person and no authorization, approval or
other action by, and no notice to or filing with, any Tribunal is required (i)
for the pledge by Debtor of the Collateral pledged by it hereunder, for the
grant by Debtor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by Debtor, (ii) for the perfection or
maintenance of the pledge, assignment and security interest created hereby
(including the first priority nature of such pledge, assignment and security
interest) or (iii) for the exercise by
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<PAGE> 10
Administrative Agent of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement.
(e) Debtor possesses all licenses and permits required for the
operations of its business, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(f) None of the Collateral described in Sections 1.01(h) and
1.01(i) ("Securities Collateral") is subject to any unpaid capital call or
dispute, any buy-sell, voting trust, transfer restriction, preferential right
to purchase or similar agreement or any option, warrant, put or call or similar
agreement. All of the Securities Collateral (i) are duly authorized, validly
issued and non-assessable and were not issued in violation of the Rights of any
Person and (ii) existing as of the date hereof are described on Schedule 4
hereto.
(g) All Inventory produced in the United States of America has
been produced in substantial compliance with the Fair Labor Standards Act.
III. COVENANTS
3.01. Further Assurances. (a) Debtor agrees that where any
agreement existing as of the date hereof or hereafter to which Debtor is a
party contains any restriction that could reasonably be expected to prohibit
Debtor from granting any security interest under this Agreement, Debtor will
use its best efforts to obtain the necessary consent to or waiver of such
restriction from any Person so as to enable Debtor to effectively grant to
Administrative Agent such security interest under this Agreement.
(b) Debtor agrees that from time to time, at the expense of
Debtor, Debtor will promptly execute and deliver all further instruments and
documents (including supplements to all schedules), and take all further
action, that may be necessary or desirable, or that Administrative Agent may
reasonably request, in order to perfect and protect any pledge, assignment or
security interest granted or purported to be granted hereby, and the priority
thereof, or to enable Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, upon reasonable written request by Administrative
Agent, Debtor will: (i) mark conspicuously each chattel paper or instrument
included in Receivables, and, at the reasonable request of Administrative
Agent, each of its records pertaining to the Collateral with the following
legend:
THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO
A SECURITY AGREEMENT DATED DECEMBER 30, 1996 (AS THE SAME HAS BEEN AND
MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED) MADE BY NETACCESS,
INC. IN FAVOR OF NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT
FOR CERTAIN LENDERS, AND PURSUANT
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<PAGE> 11
TO A CREDIT AGREEMENT DATED AS OF DECEMBER 30, 1996 (AS THE SAME HAS
BEEN AND MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED)
or such other legend, in form and substance reasonably satisfactory to and as
specified by Administrative Agent, indicating that such chattel paper,
instrument or Collateral is subject to the pledge, assignment and security
interest granted hereby; (ii) if any Collateral shall be evidenced by a
promissory note or other instrument or be chattel paper, deliver and pledge to
Administrative Agent hereunder such note, instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance reasonably satisfactory to Administrative
Agent; and (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Administrative Agent may reasonably request, in order to
perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
(c) In addition to such other information as shall be specifically
provided for herein, Debtor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other lists, documents, reports, and product, service and sales documents
in connection with the Collateral as Secured Party may reasonably request, all
in reasonable detail. In connection with its enforcement of the security
interest, Administrative Agent may use such information or transfer it to any
assignee or sublicensee permitted hereunder for such assignee's or
sublicensee's use.
(d) Debtor hereby authorizes Administrative Agent to file one or
more financing or continuation statements relating to all or any part of the
Collateral without the signature of Debtor where permitted by law provided
Administrative Agent shall give reasonably prompt notice of any such filings to
Debtor. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(e) Debtor will not, and will not permit any Person to, materially
revise, modify, amend or restate the articles of incorporation of any
corporation the stock or other interest in which is Collateral or the
partnership, joint venture or other organizational document of any partnership
or joint venture any interest in which is Collateral or terminate, cancel or
dissolve any such Person, except as permitted under the Credit Agreement.
3.02. Inventory.
(a) Debtor shall not keep the Inventory pledged by it hereunder
(other than Inventory sold in the ordinary course of business) in any location
unless the Debtor has delivered to Administrative Agent a financing statement
for such Inventory kept by Debtor at such location.
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<PAGE> 12
(b) Debtor shall pay promptly when due all material property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral pledged by it hereunder, except such taxes and claims as are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, except where the failure to file
such returns, pay such taxes or establish such reserves does not involve unpaid
or allegedly unpaid amounts, in aggregate, in excess of $100,000 for any fiscal
year. Debtor shall comply with all requirements of the Fair Labor Standards
Act.
3.03. Insurance. Debtor shall, at its own expense, maintain
insurance with respect to the Collateral in accordance with the terms set forth
in Section 5.5 of the Credit Agreement. Debtor further covenants and agrees to
keep the Collateral which is Inventory insured in such amounts, against such
risks and with such insurers as is consistent with customary industry practice,
provided that none of such insurance shall be in amounts less than the greater
of (i) the replacement value and (ii) the original cost of the covered property
(less any deduction standard in the industry for such type of property),
subject in the case of any property damage insurance to normal and customary
rights granted in the ordinary course of business to any landlord (with respect
to the property covered by any lease). All such policies of insurance shall be
written for the benefit of Administrative Agent and Debtor, as their interests
may appear, and shall provide for at least thirty Business Days' prior written
notice of cancellation to Administrative Agent. Debtor shall promptly furnish
to Administrative Agent evidence of such insurance in form and content
satisfactory to Administrative Agent. If Debtor fails to perform or observe
any applicable covenants as to insurance on any of such Collateral,
Administrative Agent may at its own option obtain insurance on only
Administrative Agent's interest in such Collateral, any premium thereby paid by
Administrative Agent to become part of the Obligations, bear interest prior to
the existence of an Event of Default, at the then applicable Base Rate Basis,
and during the existence of an Event of Default, at the Default Rate. In the
event Administrative Agent maintains such substitute insurance, the additional
premium for such insurance shall be due on demand and payable by Debtor to
Administrative Agent in accordance with any notice delivered to Debtor by
Administrative Agent. Debtor hereby grants Administrative Agent a security
interest in any refunds of unearned premiums in connection with any
cancellation, adjustment or termination of any policy of insurance required by
Administrative Agent and in all proceeds of such insurance and hereby appoints
Administrative Agent its attorney-in-fact (exercisable from and after the
occurrence of an Event of Default which is continuing) to endorse any check or
draft that may be payable to Debtor in order to collect such refunds or
proceeds. Any such sums collected by Administrative Agent shall be credited,
except to the extent applied to the purchase by Administrative Agent of similar
insurance, to any amounts then owing on the Obligations in accordance with the
Credit Agreement.
3.04. Place of Perfection; Records; Collection of Receivables,
chattel paper and Instruments.
(a) Debtor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the originals of all chattel
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<PAGE> 13
paper and instruments included in Receivables, at the location therefor
specified in Section 2.01(a). Debtor will hold and preserve such records and
chattel paper and instruments and will permit representatives of Administrative
Agent at any time during normal business hours and after reasonable notice to
inspect and make abstracts from and copies of such records and chattel paper
and instruments.
(b) Except as otherwise provided in this Section 3.04(b), Debtor
shall continue to collect, at its own expense, all amounts due or to become due
Debtor under the Receivables. In connection with such collections, Debtor may
take (and, upon the occurrence and during the continuance of an Event of
Default at Administrative Agent's direction, shall take) such action as Debtor
may deem necessary or advisable or, after the occurrence and during the
continuance of an Event of Default, Administrative Agent, may reasonably deem
necessary or advisable to enforce collection of the Receivables; provided,
however, that Administrative Agent shall have the right (upon an Event of
Default which is continuing) to notify the account debtors or obligors under
any Receivables of the assignment of such Receivables to Administrative Agent
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Debtor thereunder directly to Administrative Agent and,
upon such notification at the expense of Debtor, to enforce collection of any
such Receivables and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor might have done or
as Administrative Agent deems appropriate. Upon the occurrence and during the
continuance of an Event of Default, all amounts and proceeds (including
Instruments) received by Debtor in respect of the Receivables shall be received
in trust for the benefit of Administrative Agent hereunder, shall be segregated
from other funds of Debtor and, after receipt of notice from Administrative
Agent, shall be forthwith paid over to Administrative Agent in the same form as
so received (with any necessary indorsement) to be applied as provided in the
Credit Agreement. Debtor shall not adjust, settle or compromise the amount or
payment of any Receivable, release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon other than those made
in the ordinary course of business.
3.05. Transfers and Other Liens. Debtor shall not (i) sell,
transfer, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, except as permitted
under the Credit Agreement or (ii) create or permit to exist any Lien, security
interest, option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the security interest under this Agreement (and
except as provided for in the Credit Agreement).
3.06. Rights to Dividends and Distributions. With respect to any
certificates, bonds, or other instruments or securities constituting a part of
the Collateral, Administrative Agent shall have authority during the
continuance of an Event of Default, upon written notice to Debtor of its
intention to do so, either to have the same registered in Administrative
Agent's name or in the name of a nominee, and, with or without such
registration, upon such notification to demand of the issuer thereof, and to
receive and receipt for, any and all Dividends (including any stock or similar
dividend or distribution) payable in respect thereof, whether they be ordinary
or extraordinary. If Debtor shall become entitled to receive or shall receive
any interest in or
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<PAGE> 14
certificate (including, without limitation, any interest in or certificate
representing a Dividend or a distribution in connection with any
reclassification, increase, or reduction of capital, or issued in connection
with any reorganization), or any option or rights arising from or relating to
any of the Collateral, whether as an addition to, in substitution of, as a
conversion of, or in exchange for any of the Collateral, or otherwise, Debtor
agrees after receipt by Debtor of the notice referred to above, to accept the
same as Administrative Agent's agent and to hold the same in trust on behalf of
and for the benefit of Administrative Agent, and to deliver the same
immediately to Administrative Agent in the exact form received, with
appropriate undated stock or similar powers, duly executed in blank, to be held
by Administrative Agent, subject to the terms hereof, as Collateral. Unless an
Event of Default is in existence, Debtor shall be entitled to receive all cash
Dividends paid in respect of any of the Collateral (subject to the restrictions
of any other Loan Document). Upon the occurrence and continuance of an Event
of Default, Administrative Agent shall receive all cash Dividends paid in
respect of any Collateral. Administrative Agent shall be entitled to all
Dividends, and to any sums paid upon or in respect of any Collateral, upon the
liquidation, dissolution, or reorganization of the issuer thereof which shall
be paid to Administrative Agent to be held by it as additional collateral
security for the Obligations and application to the Obligations at the
discretion of Administrative Agent. All Dividends paid or distributed in
respect of the Collateral which are received by Debtor in violation of this
Agreement shall, until paid or delivered to Administrative Agent, be held by
Debtor in trust as additional Collateral for the Obligations.
3.07. Right of Administrative Agent to Notify Issuers. At any time
during the continuance of an Event of Default and at such other times as
Administrative Agent is entitled to receive Dividends and other property in
respect of the Securities Collateral, Administrative Agent may notify issuers
of the Securities Collateral to make payments of all Dividends directly to
Administrative Agent and Administrative Agent may take control of all proceeds
of any Securities Collateral. Until Administrative Agent elects to exercise
such rights, during the continuance of an Event of Default, Debtor, as agent of
Administrative Agent, shall collect and segregate all Dividends and other
amounts paid or distributed with respect to the Securities Collateral.
3.08. Administrative Agent Appointed Attorney-in-Fact. Debtor
hereby irrevocably appoints Administrative Agent Debtor's attorney-in-fact
(exercisable from and after the occurrence of an Event of Default which is
continuing), with full authority in the place and stead of Debtor and in the
name of Debtor or otherwise to take any action and to execute any instrument
which Administrative Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to
Administrative Agent in accordance with Section 3.03,
(b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral,
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<PAGE> 15
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper included in Receivables, in connection
therewith, and
(d) to file any claims or take any action or institute any
proceedings which Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with the
terms and conditions of any Collateral or the rights of Administrative Agent
with respect to any of the Collateral. DEBTOR HEREBY IRREVOCABLY GRANTS TO
ADMINISTRATIVE AGENT DEBTOR'S PROXY TO VOTE ANY SECURITIES COLLATERAL AND
APPOINTS ADMINISTRATIVE AGENT DEBTOR'S ATTORNEY-IN-FACT TO PERFORM ALL
OBLIGATIONS OF DEBTOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF
ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER, IN EACH CASE EXERCISABLE ONLY UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. THE PROXY AND
EACH POWER OF ATTORNEY HEREIN GRANTED ARE COUPLED WITH AN INTEREST AND ARE
IRREVOCABLE PRIOR TO FINAL PAYMENT IN FULL OF THE OBLIGATIONS.
Secured Party shall not exercise any powers granted pursuant to this
appointment as attorney-in-fact at any time that Debtor is fully performing its
obligations hereunder. This appointment as attorney-in-fact shall terminate
upon the termination of this Agreement pursuant to Section 5.03 hereof.
IV. RIGHTS AND POWERS OF Administrative Agent
4.01. Administrative Agent May Perform. If Debtor fails to perform
any agreement contained herein, Administrative Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of
Administrative Agent incurred in connection therewith shall be payable by
Debtor under Section 4.05.
4.02. Administrative Agent's Duties. The powers conferred on
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Administrative Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Administrative Agent has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Administrative Agent accords its own
property, except to the extent of any gross negligence or willful misconduct of
the Administrative Agent. Except as provided in this Section 4.02,
Administrative Agent shall not have any duty or liability to protect or
preserve any Collateral or to preserve rights pertaining thereto. Nothing
contained in this Agreement shall be construed
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<PAGE> 16
as requiring or obligating Administrative Agent, and Administrative Agent shall
not be required or obligated, to (i) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(ii) notify Debtor of any decline in the value of any Collateral.
4.03. Remedies. If any Event of Default shall be continuing and,
with respect to subparagraphs (a), (b) and (d) below, the Obligations shall
have been accelerated:
(a) Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas at
that time (the "UCC") (whether or not the Uniform Commercial Code applies to
the affected Collateral), and also may (i) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Administrative Agent
forthwith, assemble all or part of the Collateral which is capable of being
assembled as directed by Administrative Agent and make it available to
Administrative Agent at a place to be designated by Administrative Agent which
is reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Collateral or any portion thereof in one or more
parcels at public or private sale, at any of Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable. Debtor agrees
that, to the extent notice of sale shall be required by law, ten days' written
notice to Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Administrative Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) All cash proceeds received by Administrative Agent upon any
sale of, collection of, or other realization upon, all or any part of the
Collateral shall be applied as follows:
First: To the payment of all reasonable out-of-pocket costs and
expenses incurred in connection with the sale of, collection of or
other realization upon Collateral, including reasonable attorneys'
fees and disbursements;
Second: To the payment of the Obligations as provided in the Credit
Agreement and in such order and in such manner consistent with
Applicable Laws as Administrative Agent in its discretion shall decide
(with Debtor remaining liable for any deficiency); and
Third: To the extent of the balance (if any) of such proceeds, to
Debtor or other Person legally entitled thereto.
(c) All payments received by Debtor under or in connection with
any Collateral shall be received in trust for the benefit of Administrative
Agent, shall be segregated from other funds
- 12 -
<PAGE> 17
of Debtor and shall be forthwith paid over to Administrative Agent in the same
form as so received (with any necessary indorsement).
(d) Because of the Securities Act of 1933, as amended ("Securities
Act"), and other laws, including without limitation state "blue sky" laws, or
contractual restrictions or agreements, there may be legal restrictions or
limitations affecting Administrative Agent in any attempts to dispose of the
Collateral and the enforcement of its rights hereunder. For these reasons,
Administrative Agent is hereby authorized by Debtor, but not obligated, during
the continuance of any Event of Default, to sell or otherwise dispose of any of
the Collateral at private sale, subject to an investment letter, or in any
other manner which will not require the Collateral, or any part thereof, to be
registered in accordance with the Securities Act, or the rules and regulations
promulgated thereunder, or any other law. Debtor clearly understands that
Administrative Agent may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower
price for the Collateral than would otherwise be obtainable if same were
registered and sold in the open market. No sale so made in good faith by
Administrative Agent shall be deemed to be not "commercially reasonable"
because so made. Debtor agrees that in the event Administrative Agent shall,
during the continuance of an Event of Default, sell the Collateral or any
portion thereof at any private sale or sales, Administrative Agent shall have
the right to rely upon the advice and opinion of appraisers and other Persons,
which appraisers and other Persons are reasonably acceptable to Administrative
Agent, as to the best price reasonably obtainable upon such a private sale
thereof. In the absence of actual fraud, such reasonable reliance shall be
conclusive evidence that Administrative Agent handled such matter in a
commercially reasonable manner under Applicable Law.
(e) (i) Debtor will maintain the accounts listed as
restricted and blocked accounts on Schedule 3 (the "Restricted
Accounts") with Administrative Agent, in the name of Debtor, but such
Restricted Accounts shall be under the sole control and dominion of
Administrative Agent.
(ii) It shall be a term and condition of each
Restricted Account, notwithstanding any term or condition to the
contrary in any other agreement relating to such Restricted Account,
that no amount (including interest and other proceeds of the cash and
other property in the Restricted Account) shall be paid or released to
or for the account of, or withdrawn by or for the account of, Debtor
or any other Person from such Restricted Account.
(iii) During the continuance of an Event of
Default, upon notice from Administrative Agent, Debtor will promptly
instruct each account debtor in respect of Receivables arising from
any sale of Inventory in the ordinary course of business to make
payment to the Restricted Accounts.
- 13 -
<PAGE> 18
Debtor understands and acknowledges that Administrative Agent may and permits
Administrative Agent, during the continuance of an Event of Default, to remove
amounts from the Restricted Accounts from time to time and use the amounts to
reduce the Obligations.
4.04. Further Approvals Required.
(a) In connection with the exercise by Administrative Agent of its
rights hereunder that effects the disposition of or use of any Collateral, it
may be necessary to obtain the prior consent or approval of Tribunals and other
Persons to a transfer or assignment of Collateral.
(b) Debtor hereby agrees to execute, deliver, and file, and hereby
appoints Administrative Agent as its attorney-in-fact to execute, deliver, and
file on Debtor's behalf and in Debtor's name, all applications, certificates,
filings, instruments, and other documents (including without limitation any
application for an assignment or transfer of control or ownership) that may be
reasonably necessary or appropriate, in Administrative Agent's opinion, to
obtain such consents, waivers, or approvals. Upon request of Administrative
Agent, Debtor further agrees to use reasonable efforts to obtain the foregoing
consents, waivers, and approvals, including receipt of consents, waivers, and
approvals under applicable agreements prior to a Default or Event of Default.
Debtor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 4.04 and that such failure would
not be adequately compensable in damages, and therefore agrees that this
Section 4.04 may be specifically enforced. Secured Party shall not exercise
any powers granted pursuant to this appointment as attorney-in-fact at any time
that Debtor is fully performing its obligations hereunder. This appointment as
attorney-in-fact shall terminate upon the termination of this Agreement
pursuant to Section 5.03 hereof.
4.05. Indemnity and Expenses. (a) Debtor agrees to indemnify
Administrative Agent and each Secured Party from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) growing
out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), expressly including such claims, losses or
liabilities arising out of mere negligence of Administrative Agent or any
Secured Party, except claims, losses or liabilities resulting from
Administrative Agent's or any Secured Party's gross negligence or willful
misconduct.
(b) Debtor will upon demand pay to Administrative Agent and each
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which Administrative Agent and each Secured Party may incur in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights
of Administrative Agent or any Secured Party hereunder or (iv) the failure by
Debtor to perform or observe any of the provisions hereof.
- 14 -
<PAGE> 19
V. MISCELLANEOUS
5.01. Cumulative Rights. All rights of Administrative Agent and
each other Secured Party under the Loan Documents are cumulative of each other
and of every other right which Administrative Agent and each other Secured
Party may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligations. The exercise of one or more rights shall not
prejudice or impair the concurrent or subsequent exercise of other rights.
5.02. Modifications; Amendments; Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Debtor here
from, shall in any event be effective unless the same shall be in writing and
signed by Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
5.03. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the later of (i) the final payment in full of the
Obligations and all amounts payable under this Agreement (other than
Obligations which are contingent and unliquidated and not due and owing on such
date and which pursuant to the provisions of the Credit Agreement, the Letters
of Credit or the Collateral Documents survive the termination of the Credit
Agreement, the termination of the Commitments, or the expiration or
cancellation of the Letters of Credit) and (ii) the expiration or termination
of the obligation of all Secured Parties to extend credit to Debtor and the
expiration of all Letters of Credit, (b) be binding upon Debtor, its successors
and assigns, and (c) inure to the benefit of, and be enforceable by,
Administrative Agent and its successors, transferees and assigns. Upon any
such termination, Administrative Agent will, at Debtor's expense, execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
such termination. Debtor agrees that to the extent that Administrative Agent
or any Secured Party receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a trustee,
receiver, or any other party under any Debtor Relief Law, common law or
equitable cause, then to the extent of such payment or benefit, the Obligations
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment or benefit had not been made and, further,
any such repayment by Administrative Agent or any Secured Party, to the extent
that Administrative Agent or any Secured Party did not directly receive a
corresponding cash payment, shall be added to and be additional Obligations
payable upon demand by Administrative Agent or any Secured Party and secured
hereby, and, if the lien and security interest hereof shall have been released,
such lien and security interest shall be reinstated with the same effect and
priority as on the date of execution hereof all as if no release of such lien
or security interest had ever occurred.
5.04. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW) AND THE
- 15 -
<PAGE> 20
UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF TEXAS. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT,
TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS THEREIN DEFINED.
5.05. WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT AND DEBTOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
5.06. Administrative Agent's Right to Use Agents. Administrative
Agent may exercise its rights under this Agreement through an agent or other
designee.
5.07. No Interference, Compensation or Expense. Administrative
Agent may exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.
5.08. Waivers of Rights Inhibiting Enforcement. Debtor waives (a)
any claim that, as to any part of the Collateral, a public sale, should
Administrative Agent elect so to proceed, is, in and of itself, not a
commercially reasonable method of sale for such Collateral, (b) except as
otherwise provided in this Agreement, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH ADMINISTRATIVE AGENT'S
DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT DEBTOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF
SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF ADMINISTRATIVE
AGENT'S RIGHTS HEREUNDER and (c) all rights of redemption, appraisal, valuation
or to the marshalling of assets.
5.09. Notices and Deliveries.
(a) Manner of Delivery. All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by reputable overnight delivery service or by hand, if to the Debtor, addressed
to it at its address specified on the signature pages hereof, if to the
Administrative Agent, addressed to it at its address specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section 5.09.
- 16 -
<PAGE> 21
(b) Addresses. All notices, communications and materials to be
given or delivered pursuant to this Agreement shall be given or delivered at
the following respective addresses and telecopier and telephone numbers and to
the attention of the following individuals or departments:
(i) if to Debtor, to it at:
c/o Xircom, Inc.
2300 Corporate Center Drive
Thousand Oaks, California 91320
Telecopier No.: (805) 376-9120
Telephone No.: (805) 376-9300
Attention: Chief Financial Officer
(ii) if to Administrative Agent, to it at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Telecopier No.: (214) 508-0980
Telephone No.: (214) 508-3399
Attention: Stan W. Reynolds
or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".
(c) Effectiveness. All notices and other communications under
this Agreement shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after
deposit in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, addressed to the party to which such notice is
directed at its address determined as provided in this Section 5.09.
5.10. Successors and Assigns. All of the provisions of this
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
5.11. Loan Document. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
- 17 -
<PAGE> 22
5.12. Definitions. Capitalized terms not otherwise defined herein
have the meaning specified in the Credit Agreement and, to the extent of any
conflict, terms as defined in the Credit Agreement shall control (provided,
that a more expansive or explanatory definition shall not be deemed a
conflict).
5.13. Consent to Jurisdiction; Waiver of Immunities.
(a) Debtor hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or Texas State courts sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, and Debtor hereby irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such court or that such court is an inconvenient forum.
(b) Nothing in this section shall limit the right of
Administrative Agent or any Secured Party to bring any action or proceeding
against Debtor or its property in the courts of any other jurisdictions.
(c) Any judicial proceeding by Debtor against Administrative Agent
or any Secured Party involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with this Agreement shall be brought
only in a court in Dallas, Texas to the extent that jurisdiction may be
effected against such Person in Dallas, Texas.
5.14. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws during the
term thereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible.
5.15. Obligations Not Affected. To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
(a) any amendment or modification or addition or supplement to any
Loan Document, any instrument delivered in connection therewith or any
assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by Administrative Agent
or any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty, any collateral or the Collateral or
any part thereof provided pursuant to, this Agreement or any other Loan
Document;
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<PAGE> 23
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement or any other Loan Document or any
assignment or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor, any Obligor or
any other Person, whether or not Debtor shall have notice or knowledge of any
of the foregoing.
5.16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
5.17. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers or members
as of the date first above written.
DEBTOR:
NETACCESS, INC.
By: [SIG]
-------------------------------
Name: Randall H. Holliday
------------------------
Title: Secretary
------------------------
ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, N.A.
By: [SIG]
------------------------------
Name: William C. Collins
Title: Sr. Vice President
- 20 -
<PAGE> 1
EXHIBIT 10.30c
================================================================================
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Between
XIRCOM, INC.
as Debtor
and
NATIONSBANK OF TEXAS, N.A.
Administrative Agent
December 30, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. GRANT OF SECURITY INTEREST
--------------------------
1.01. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Validity and Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . 2
1.04. Maintenance of Status of Security Interest, Collateral and Rights . . . . . . . . . . 2
(a) Required Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Protection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Authorized Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.05. Debtor Remains Obligated; Administrative Agent and Secured Parties Not Obligated . . . 3
1.06. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.07. Security Interest Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01. Authorization; Enforceability; Required Consents; Absence of Conflicts . . . . . . . . 4
2.02. Rights of Debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03. Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.06. Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.07. Other Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. COVENANTS
---------
3.01. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.02. Preservation of Existence and Preservation of Enforceability . . . . . . . . . . . . . 5
3.03. Requested Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.04. No Disposition of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.05. Additional Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. EVENT OF DEFAULT
----------------
4.01. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.03. Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
V. INTERPRETATION
--------------
5.01. Definitional Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Certain Terms Defined by Reference . . . . . . . . . . . . . . . . . . . . . 8
(b) Other Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . 10
5.02. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
VI. MISCELLANEOUS
-------------
6.01. Expenses of Debtor's Agreements and Duties . . . . . . . . . . . . . . . . . . . . . . 10
6.02. Administrative Agent's Right to Perform on Debtor's Behalf . . . . . . . . . . . . . . 11
6.03. Administrative Agent's Right to Use Agents . . . . . . . . . . . . . . . . . . . . . . 11
6.04. No Interference, Compensation or Expense . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6.05. Limitation of Administrative Agent's Obligations With Respect to Collateral . . . . . . . 11
6.06. Rights of Administrative Agent under UCC and Applicable Law . . . . . . . . . . . . . . . 11
6.07. Waivers of Rights Inhibiting Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.08. Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.10. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.13. Consent to Jurisdiction; Waiver of Immunities . . . . . . . . . . . . . . . . . . . . . . 13
6.14. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.16. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.17. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.18. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.19. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
- ii -
<PAGE> 4
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of December 30,
1996, between Xircom, Inc., a California corporation ("Debtor"), and
NationsBank of Texas, N.A., a national banking association, as Administrative
Agent ("Administrative Agent"), for itself and each other lender a party to the
Credit Agreement described below (singly, a "Secured Party" and collectively,
the "Secured Parties").
RECITALS.
(1) Administrative Agent, Debtor, and Secured Parties entered into
the Credit Agreement dated as of December 30, 1996 (as the same has been and
may hereafter be supplemented, amended, amended and restated, extended or
modified from time to time, being the "Credit Agreement").
(2) It is the intention of the parties hereto that this Agreement
create a first priority security interest securing the payment of the
obligations set forth in Section 1.02 hereof.
(3) It is a condition precedent to the effectiveness of the Credit
Agreement that Debtor shall have executed and delivered this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to, among other
things, make Advances under the Credit Agreement, Debtor hereby agrees with
Administrative Agent for its benefit and the ratable benefit of Secured Parties
as hereinafter set forth.
I. GRANT OF SECURITY INTEREST
1.01. Grant of Security Interest. Debtor hereby pledges and grants
to Administrative Agent for its benefit and the ratable benefit of Secured
Parties a security interest in, the entire right, title and interest of Debtor,
in and to the Collateral.
1.02. Security for Obligations. This Agreement creates a first
priority security interest, securing the payment and performance of any and all
obligations now or hereafter existing of Debtor, each Obligor and any other
Person under the Credit Agreement and the other Loan Documents, including any
extensions, modifications, substitutions, amendments and renewals thereof,
whether for principal, interest, fees, expenses, indemnification or otherwise)
(all such obligations of Debtor, each Obligor and each other Person being the
"Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by Debtor, each other Obligor and any other
Person to Administrative Agent or any Secured Party under any Loan Document,
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding under any
Debtor Relief Law involving Debtor, any other Obligor or any other
<PAGE> 5
Person (including all such amounts which would become due or would be secured
but for the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding of Debtor, any other Obligor or
any other Person under any Debtor Relief Law).
1.03. Validity and Priority of Security Interest. Debtor agrees
that the Security Interest shall at all times be valid, perfected, continuing
and binding and enforceable against Debtor and all other Persons, in accordance
with the terms hereof, as security for the Obligations, and that the Collateral
shall not at any time be subject to any Lien, except as permitted in the Loan
Documents.
1.04. Maintenance of Status of Security Interest, Collateral and
Rights.
(a) Required Action. Debtor shall take all reasonable action that
may be necessary or that Administrative Agent may reasonably request, so as at
all times (i) to maintain the validity, perfection, enforceability and priority
of the Security Interest in the Collateral in conformity with the requirements
of Section 1.03, and (ii) to protect and preserve, and to enable the exercise
or enforcement of, the rights of Administrative Agent hereunder, including (A)
immediately discharging all Liens, except as permitted in the Loan Documents
and by any license entered into in the ordinary course of business and (B)
executing and delivering financing or continuation statements, instruments of
pledge, notices and instructions in each case in form and substance reasonably
satisfactory to Administrative Agent.
(b) Protection of Collateral. Debtor shall use its best efforts
to protect, preserve, renew and maintain, in each case in a manner consistent
with reasonably responsible business and legal practices all rights of Debtor
in the Collateral (except to the extent such Collateral is obsolete or no
longer useful to Debtor's business), including (i) prosecuting such suits,
proceedings or other actions for infringement, unfair competition, dilution or
other damage or (ii) appearing in and defending any action or proceeding that
may materially adversely affect Debtor's title to or Administrative Agent's
security interest in all or any material part of the Collateral, when such
action is in Debtor's reasonable business judgment necessary to protect
Debtor's Collateral. Any reasonable expenses incurred in protecting,
preserving, renewing and maintaining the Collateral shall be borne by Debtor.
To the maximum extent permitted by Laws, after a Default or Event of Default
shall have occurred and be continuing, Administrative Agent shall have the
right, without taking title to any Collateral, to bring suit to enforce any or
all Collateral or its Security Interest in any or all of the Collateral, in
which event Debtor shall, at the reasonable request of Administrative Agent, do
any and all lawful acts and execute any and all proper documents reasonably
required by Administrative Agent in aid of such enforcement. All reasonable
costs, reasonable expenses and other moneys reasonably advanced by
Administrative Agent in connection with the foregoing shall, whether or not
there are then outstanding any amounts under the Credit Agreement, be treated
as Obligations, but the making of any Advances by Administrative Agent or any
Secured Party shall not relieve Debtor of any default hereunder.
(c) Authorized Action. Administrative Agent is hereby authorized
to file one or more financing or continuation statements, amendments thereto
and instruments of pledge, notices and instructions without the signature of or
in the name of Debtor when permitted by Applicable Law provided that
Administrative Agent shall give reasonably prompt notice of any such filings to
Debtor. A carbon, photographic or other reproduction of this Agreement or of
any financing statement filed in connection with this Agreement shall be
sufficient as a financing statement.
(d) Registrations. Debtor shall renew or maintain, as specified
in any Applicable Law,
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and shall make any filings necessary to renew or maintain the Registrations,
except to the extent such Collateral is obsolete or no longer useful to
Debtor's business.
1.05. Debtor Remains Obligated; Administrative Agent and Secured
Parties Not Obligated. The grant by Debtor to Administrative Agent of the
Security Interest shall not relieve Debtor from the performance of any term,
covenant, condition or agreement on its part to be performed or observed
(including by virtue of the exercise by Administrative Agent of any of its
rights hereunder), or from any liability to any Person, under or in respect of
any of the Collateral or impose any obligation on Administrative Agent or any
Secured Party or impose any liability on Administrative Agent or any Secured
Party for any act or omission on the part of Debtor relative thereto.
1.06. Termination.
(a) In the event that the Obligations shall have been finally paid
in full, and all commitments by Secured Parties to extend credit shall have
been terminated and Administrative Agent shall have delivered to Debtor a
written termination agreement, then this Agreement shall also terminate and be
of no further force and effect (except as provided in Section 1.06(b)).
(b) Debtor agrees that, if at any time all or any part of any
payment theretofore applied by Administrative Agent and Secured Parties to any
of the Obligations is or must be rescinded or returned by any Person for any
reason whatsoever (including the insolvency, bankruptcy or reorganization of
Debtor or any other Person), such Obligations shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
Administrative Agent or any Secured Party, and the Security Interest granted
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such Obligations, all as though such application by Administrative Agent
or any Secured Party had not been made.
1.07. Security Interest Absolute. All rights of Administrative
Agent and Secured Parties and the Security Interest granted to Administrative
Agent hereunder, and all obligations of Debtor hereunder, shall, to the extent
permitted by Laws, be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of any Loan Documents;
(b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations or any
other amendment to or waiver of or any consent to departure from any Loan
Documents;
(c) any exchange, release or non-perfection of any collateral
(including the Collateral or any part thereof), or any release of or amendment
to or waiver of or consent to departure from any guaranty, for all or any of
the Obligations; or
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Debtor, any other Obligor or any other
Person.
II. REPRESENTATIONS AND WARRANTIES
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Debtor represents and warrants as follows:
2.01. Authorization; Enforceability; Required Consents; Absence of
Conflicts. Debtor has the power, and has taken all necessary action to
authorize it, to execute, deliver and perform in accordance with its terms this
Agreement and to execute and deliver all financing statements and other filings
contemplated hereby. This Agreement has been duly executed and delivered by
Debtor and is the legal, valid and binding obligation of Debtor, enforceable in
accordance with its terms subject to (i) equitable principles generally and
(ii) Debtor Relief Laws. The execution, delivery and performance in accordance
with its terms by Debtor of this Agreement does not and (absent any change in
any Law) will not (a) except for the filing and acceptance of financing
statements and continuation statements in connection therewith delivered to
Administrative Agent describing this Agreement and the Collateral under the
Code and the filing of this Agreement with the United States Patent and
Trademark Office and acceptance thereof to the extent permitted by Applicable
Law, require any Governmental Approval or any other consent or approval,
including any consent or approval of any shareholder of Debtor, (b) violate or
conflict with its articles or bylaws, or (c) violate or conflict with, result
in a breach of, constitute a default under, or result in or require the
creation of any Lien (other than the Security Interest) upon any assets of
Debtor under any contract or agreement or Applicable Laws.
2.02. Rights of Debtor. Debtor is the legal and beneficial owner of
the Collateral free and clear of any Lien or other charge or encumbrance,
including, without limitation, pledges, assignments, licenses, shop rights and
covenants by Debtor not to sue any Person, except for the security interests
and assignment created by this Agreement any other Liens permitted under the
Credit Agreement. No effective financing statement or other instrument similar
in effect naming Debtor as "debtor" covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in favor
of Administrative Agent relating to this Agreement.
2.03. Perfection. This Agreement, together with the filings
referred to in Section 2.01(a) above, will create in favor of Administrative
Agent valid and perfected security interests in the Collateral and such
security interests will be a first priority security interest; provided that
additional actions may be required with respect to the perfection of proceeds
of the Collateral held on the date hereof.
2.06. Registrations. Annexes A-1, A-2, B-1, B-2, C-1 and C-2, as
applicable, set forth a true and complete list of all Registrations in the
United States Patent and Trademark Office and related state filings owned by
Debtor as of the date hereof.
2.07. Other Property. On the date hereof, Debtor has no interest in
any Copyrights, which are registered or subject to any application for
registration and Debtor does not believe, after appropriate review of all
relevant facts and circumstances, that any registration or filing with respect
to any interest Debtor may have in any property which may constitute Copyrights
is material to the operation of Debtor's existing and anticipated business.
III. COVENANTS
3.01. Chief Executive Office. Debtor shall maintain its chief
executive office and the office where the books and records relating to the
Collateral are kept only at 2300 Corporate Center Drive, Thousand Oaks,
California 91320.
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<PAGE> 8
3.02. Preservation of Existence and Preservation of Enforceability.
Debtor shall, so long as any of the Obligations remain outstanding, (a)
preserve and maintain its existence and (b) take all reasonable action and
obtain all consents and Government Approvals reasonably required so that its
obligations under this Agreement will at all times be legal, valid and binding
and enforceable in accordance with its terms.
3.03. Requested Information. In addition to such other Information
as shall be specifically provided for herein, Debtor shall furnish to
Administrative Agent such other Information with respect to the Collateral as
Administrative Agent may reasonably request from time to time in connection
with the Collateral, or the protection, preservation, maintenance or
enforcement of the Security Interest or the Collateral. In connection with its
enforcement of the Security Interest, Administrative Agent may use such
Information or transfer it to any assignee or sublicensee permitted hereunder
for such assignee's or sublicensee's use.
3.04. No Disposition of Collateral. Debtor shall not sell, transfer
or otherwise dispose of any of the Collateral or any interest therein that is
material to Debtor's business, or grant any license thereunder, except in the
ordinary course of business and except to the extent the same is obsolete or no
longer useful to Debtor's business.
3.05. Additional Property. Prior to the application for, use or
acquisition or any interest in any property which is within the definition of
"Collateral" or modification, reformulation or other alteration to any such
interest that is material to Debtor's business, Debtor shall execute and
deliver to Administrative Agent all documents and instruments Administrative
Agent may require to grant to Administrative Agent a perfected first priority
Lien therein and to subject to all of such interest to this Agreement,
including but not limited to any new, supplementary or additional filings in
the form of Schedule 1.04(a)(ii)(B)-A, -B, or -C.
IV. EVENT OF DEFAULT
Upon the occurrence and during the continuance of an Event of Default:
4.01. Application of Proceeds. All cash proceeds received by
Administrative Agent upon any sale of, collection of, or other realization
upon, all or any part of the Collateral shall be applied as follows:
First: To the payment of all reasonable out-of-pocket costs and
expenses incurred in connection with the sale of, collection of or other
realization upon Collateral, including reasonable attorneys' fees and
disbursements;
Second: To the payment of the Obligations as provided in the Credit
Agreement (with Debtor remaining liable for any deficiency); and
Third: To the extent of the balance (if any) of such proceeds, to the
payment to Debtor or other Person entitled thereto.
4.02. Remedies.
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<PAGE> 9
(a) If an Event of Default has occurred and is continuing and the
Obligations have been accelerated, Administrative Agent may exercise in respect
of the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas at
that time (the "UCC") (whether or not the Uniform Commercial Code applies to
the affected Collateral), and also may (i) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Administrative Agent
forthwith, assemble all or part of the Collateral (to the extent capable of
being assembled) as directed by Administrative Agent and make it available to
Administrative Agent at a place to be designated by Administrative Agent, which
is reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Collateral or any portion thereof in one or more
parcels at public or private sale, at any of Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable. Debtor agrees
that, to the extent notice of sale shall be required by Applicable Law, ten
days' written notice to Debtor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification, provided that ten days' written notice does not violate any
Applicable Law. Administrative Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Administrative
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Upon written demand of Administrative Agent, Debtor shall
execute and deliver to Administrative Agent an assignment or assignments of the
Collateral and such other documents as are necessary and appropriate to carry
out the intent and purposes of this Agreement. Debtor agrees that such an
assignment and/or recording shall be applied to reduce the Obligations
outstanding only to the extent that Administrative Agent or any Lenders
receives cash proceeds in respect of the sale of, or realization upon, the
Collateral.
4.03. Indemnity and Expenses.
(A) DEBTOR AGREES TO INDEMNIFY (WHICH SHALL BE PAYABLE FROM TIME
TO TIME ON DEMAND) ADMINISTRATIVE AGENT AND SECURED PARTIES FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING FROM
THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), EXPRESSLY INCLUDING
SUCH CLAIMS, LOSSES, OR LIABILITIES ARISING OUT OF MERE NEGLIGENCE OF
ADMINISTRATIVE AGENT OR ANY SECURED PARTY, EXCEPT CLAIMS, LOSSES OR LIABILITIES
RESULTING SOLELY FROM ADMINISTRATIVE AGENT'S OR ANY SECURED PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Administrative Agent and
Secured Parties the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which Administrative Agent and Secured Parties may incur in connection with (i)
the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (ii) the exercise or
enforcement of any of the rights of Administrative Agent and Secured Parties
hereunder, or (iii) the failure by Debtor to perform or observe any of the
provisions hereof. Debtor will pay upon demand to Administrative Agent the
amount of any and all reasonable fees and disbursements of its counsel and of
any experts and agents, which Administrative Agent may incur in connection with
the administration of this
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Agreement.
V. INTERPRETATION
5.01. Definitional Provision.
(a) Certain Terms Defined by Reference. The terms "collateral",
"inventory", "rights", and "security interest" shall have the meanings ascribed
thereto in the UCC, or, when capitalized, the meanings specified in subsection
(b) below.
(b) Other Defined Terms. For purposes of this Agreement:
"Agreement" means this Agreement, including all schedules, annexes and
exhibits hereto.
"Collateral" means Debtor's rights, title and interests, (whatever
they may be) in each of the following, in each case whether now or hereafter
existing or now owned or hereafter acquired by Debtor and whether or not the
same is subject to Article 9 of the UCC, and wherever the same may be located:
(i) the Trademarks and Goodwill;
(ii) the Copyrights;
(iii) the Patents;
(iv) all registrations issued or applied for (now or hereafter) on
the Trademarks, Copyrights and Patents and renewals thereof in the United
States and any state thereof (the "Registrations");
(v) any renewal, reissue, re-examination certificate, extension or
the like with respect to the Trademarks, Patents, Copyrights;
(vi) all rights to use the Trademarks as trade names or assumed
names in all aspects of its business; and
(vii) all proceeds and products of the foregoing together with any
license in favor of or from Debtor of any of the foregoing in whatever form.
The inclusion of "proceeds" of Collateral in the definition of "Collateral"
shall not be deemed a consent by Administrative Agent to any sale or other
disposition of any Collateral not otherwise specifically permitted by the terms
hereof.
"Copyright" means any copyright, copyright registration and
applications for such registration, including but not limited to the copyrights
listed on Annex C-1 attached hereto, all subject matter related to such
copyrights, in any and all forms, and all copyrights and applications for
copyrights related to such copyrights, including those copyrights and
applications listed in Annex C-2 attached hereto.
"Credit Agreement" is defined in the recitals.
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<PAGE> 11
"Event of Default" means those events described as a "Default" or an
"Event of Default" in the Credit Agreement.
"Goodwill" means the goodwill of the businesses connected with the use
of (or associated with) and symbolized by the Trademarks, but not any other
goodwill.
"Governmental Approval" means any authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
any Tribunal.
"Information" means data, certificates, reports, statements (including
financial statements), documents and other information in form (including
electronic media) acceptable to Administrative Agent.
"Lien" means, with respect to any property or asset of any Person (in
each case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise) (i) any mortgage, lien,
pledge, attachment, levy, priority or other security interest or encumbrance of
any kind thereupon or in respect thereof and (ii) any arrangement, express or
implied, under which the same is subordinated, transferred, sequestered or
otherwise identified so as to subject the same, or make the same available for,
the payment or performance of any obligation in priority to the payment of the
ordinary, unsecured creditors of such Person.
"Loan Documents" means the Credit Agreement and each agreement,
certificate and other documents delivered to any Person pursuant to the Credit
Agreement.
"Obligations" is defined in Section 1.02.
"Patents" means all patents, all inventions and subject matter related
to such patents, in any and all forms, and all patents and applications for
patents related to such patents, including but not limited to the patents
listed on Annex A-1 attached hereto, all inventions and all subject matter
related to such patents, in any and all forms, and all patents and applications
for patents related to such patents, including those patents and applications
listed on Annex A-2 attached hereto.
"Person" means an individual, firm, corporation, partnership,
association, joint venture, trust or any other entity or organization or
Tribunal.
"Security Interest" means the continuing security interest of
Administrative Agent and assignment to Administrative Agent in the Collateral
intended to be effected by the terms of this Agreement or any financing and
continuation statements or other filings contemplated hereby.
"Trademarks" means all trademarks, all designs and logotypes related
to such trademarks, in any and all forms, and all trademark registrations and
applications for registration related to such trademarks, including but not
limited to the trademarks listed on Annex B-1 attached hereto, all designs and
logotypes related to such trademarks, in any and all forms, and all trademark
registrations and applications for registration related to such trademarks,
including those registrations and applications listed on Annex B-2 attached
hereto.
"UCC" means Article 9 of the Uniform Commercial Code as in effect from
time to time in the State of Texas.
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<PAGE> 12
(c) Other Definitional Provisions. (i) Except as otherwise
specified herein, all references herein (A) to any Person shall be deemed to
include such Person's successors and assigns, (B) to any Applicable Law
referred to herein shall be deemed references to such Applicable Law as the
same may have been or may be amended or supplemented from time to time and (C)
to this Agreement or other agreement defined or referred to herein shall be
deemed a reference to this Agreement or other agreement as the terms thereof
may have been or may be amended, supplemented, waived or otherwise modified
from time to time.
(ii) Whenever the context so requires, the neuter gender includes
the masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
(iii) Except as otherwise indicated, any reference herein to the
"Collateral", the "Obligations" or any other collective or plural term shall be
deemed to be a reference to each and every item included within the category
described by such collective or plural term, so that a reference to the
"Collateral" or the "Obligations" shall be deemed a reference to any or all of
the Collateral or the Obligations, as the case may be.
(iv) Capitalized Terms not otherwise defined herein have the
meaning specified in the Credit Agreement, and, to the extent of any conflict,
terms as defined in the Credit Agreement shall control (provided, that a more
expansive or explanatory definition shall not be deemed a conflict).
5.02. Power of Attorney. Each power of attorney, license and other
authorization in favor of Administrative Agent or any other Person granted by
or pursuant to this Agreement shall be deemed to be irrevocable and coupled
with an interest.
VI. MISCELLANEOUS
6.01. Expenses of Debtor's Agreements and Duties. Administrative
Agent and Secured Parties shall not be liable for the costs and expenses of
Debtor arising out of Debtor's performance or observance of the terms,
conditions, covenants and agreements to be observed or performed by Debtor
under this Agreement.
6.02. Administrative Agent's Right to Perform on Debtor's Behalf.
If Debtor shall fail to observe or perform any of the terms, conditions,
covenants and agreements to be observed or performed by it under this
Agreement, Secured Party may (but shall not be obligated to) do the same or
cause it to be done or performed or observed, either in its name or in the name
and on behalf of Debtor, and in the event that Debtor shall have failed to
observe or perform any of the terms, conditions, covenants and agreements to be
observed or performed by it under this Agreement, then Debtor hereby authorizes
Secured Party to do so, and Debtor hereby appoints the Secured Party, and any
other Person Secured Party may designate, as Debtor's attorney-in-fact
(exercisable from and after the occurrence of an Event of Default which is
continuing) to do, or cause to be done, in the name, place and stead of Debtor
in any way in which Debtor itself could do, or cause to be done, any or all
things necessary to observe or perform the terms, conditions, covenants and
agreements to be observed or performed by Debtor under this Agreement. In
addition, Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact (exercisable from and after the occurrence and during the
continuance of an Event of Default which is continuing) to execute and deliver
in Debtor's name and stead to any purchaser at any sale held
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under Section 4.02(b) hereof any and all documents and instruments of
assignment, transfer and conveyance necessary or appropriate to transfer to
such purchaser the Collateral sold at such sale. Secured Party shall not
exercise any powers granted pursuant to this appointment as attorney-in-fact at
any time that Debtor is fully performing its obligations hereunder. This
appointment as attorney-in-fact shall terminate upon the termination of this
Agreement.
6.03. Administrative Agent's Right to Use Agents. Administrative
Agent may exercise its rights under this Agreement through an agent or other
designee.
6.04. No Interference, Compensation or Expense. Administrative
Agent may exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.
6.05. Limitation of Administrative Agent's Obligations With Respect
to Collateral. (a) Administrative Agent shall not have any duty or liability
to protect or preserve any Collateral or to preserve rights pertaining thereto,
except to the extent of any gross negligence or willful misconduct of the
Administrative Agent.
(b) Nothing contained in this Agreement shall be construed as
requiring or obligating Administrative Agent, and Administrative Agent shall
not be required or obligated, to (i) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(ii) notify Debtor of any decline in the value of any Collateral.
6.06. Rights of Administrative Agent under UCC and Applicable Law.
Administrative Agent shall have, with respect to the Collateral, in addition to
all of their rights under this Agreement, (a) the rights of a secured party
under the UCC, whether or not the UCC would otherwise apply to the collateral
in question, and (b) the rights of a secured party under all other Applicable
Laws.
6.07. Waivers of Rights Inhibiting Enforcement. Debtor waives (a)
to the extent not prohibited by Applicable Law, any claim that, as to any part
of the Collateral, a public sale, should Administrative Agent elect so to
proceed, is, in and of itself, not a commercially reasonable method of sale for
such Collateral, (b) except as otherwise provided in this Agreement, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION
WITH ADMINISTRATIVE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT THAT DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO
THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE
ENFORCEMENT OF ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER and (c) all rights of
redemption, appraisement, or marshalling of assets.
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6.08. Notices and Deliveries. All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by reputable overnight delivery service or by hand, if to the Debtor, addressed
to it at its address specified on the signature pages hereof, if to the
Administrative Agent, addressed to it at its address specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section 6.08. All such notices and other communications
shall, when mailed, telecopied, or delivered, be effective three days after
being deposited in the mails, when telecopied with confirmation of receipt, or
when delivered by reputable overnight delivery service or by hand to the
addressee or its agent, respectively.
6.09. Rights and Remedies Cumulative. Each of Administrative
Agent's rights and remedies under this Agreement shall be in addition to all of
its other rights and remedies under this Agreement and Applicable Law, and
nothing herein shall be construed as limiting any such rights or remedies.
6.10. Amendments; Waivers. Any term, covenant, agreement or
condition of this Agreement may be amended, and any right under this Agreement
may be waived, if, but only if, such amendment or waiver is in writing and is
signed by Administrative Agent and, in the case of an amendment, by Debtor.
Unless otherwise specified in such waiver, a waiver of any right under this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No election not to exercise, failure to exercise or
delay in exercising any right, nor any course of dealing or performance, shall
operate as a waiver of any right of the Administrative Agent under this
Agreement or Applicable Law, 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 of Administrative Agent under this Agreement or Applicable Law.
6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
REFERENCE TO PRINCIPALS OF CONFLICTS OF LAWS) AND THE UNITED STATES OF AMERICA,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
REQUIRED TO BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.
6.12. WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT AND DEBTOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
6.13. Consent to Jurisdiction; Waiver of Immunities.
(a) Debtor hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or Texas State courts sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, and Debtor hereby irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such court or that such court is an inconvenient forum.
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(b) Nothing in this section shall limit the right of
Administrative Agent or any Secured Party to bring any action or proceeding
against Debtor or its property in the courts of any other jurisdictions.
(c) Any judicial proceeding by Debtor against Administrative Agent
or any Secured Party involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with this Agreement shall be brought
only in a court in Dallas, Texas to the extent that jurisdiction may be
effected against such Person in Dallas, Texas.
6.14. Severability of Provisions. Any provision of this Agreement
that 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 in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction. In the event that any change in Applicable Law would
render invalid or unenforceable any provision of this Agreement, Debtor agrees
to enter into such amendments or modifications to this Agreement to provide
Administrative Agent with benefits intended to be granted by such provision.
6.15. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.
6.16. Successors and Assigns. All of the provisions of this
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, Debtor may not
assign its rights or obligations under this Agreement without the prior written
consent of the Lenders.
6.17. Loan Documents. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
6.18. Obligations Not Affected. To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
(a) any amendment or modification or addition or supplement to any
Loan Documents or any instrument delivered in connection therewith or any
assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by Administrative Agent
or any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty or the Collateral or any part
thereof provided pursuant to, this Agreement or any Loan Documents;
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement, any Loan Documents or any assignment or
transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor or any other
Person, whether or not Debtor shall have notice or knowledge of any of the
foregoing.
- 12 -
<PAGE> 16
6.19. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL ARGUMENTS BETWEEN THE
PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- 13 -
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers or members all as of the date
first above written.
DEBTOR:
XIRCOM, INC.
2300 Corporate Center Drive
Thousand Oaks, California 91320
Telecopier No.: (805) 376-9120
Telephone No.: (805) 376-9300 By: [SIG]
-----------------------------
Name: Randall H. Holliday
----------------------
Attention: Chief Financial Officer Title: Secretary
----------------------
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent
By: [SIG]
-----------------------------
Name: William C. Collins
----------------------
Title: Sr. Vice President
----------------------
- 14 -
<PAGE> 1
EXHIBIT 10.30d
================================================================================
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Between
NETACCESS, INC.
as Debtor
and
NATIONSBANK OF TEXAS, N.A.
Administrative Agent
December 30, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. GRANT OF SECURITY INTEREST
--------------------------
1.01. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Validity and Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . 2
1.04. Maintenance of Status of Security Interest, Collateral and Rights . . . . . . . . . . 2
(a) Required Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Protection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Authorized Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.05. Debtor Remains Obligated; Administrative Agent and Secured Parties Not Obligated . . . 3
1.06. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.07. Security Interest Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.01. Authorization; Enforceability; Required Consents; Absence of Conflicts . . . . . . . . 4
2.02. Rights of Debtor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03. Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.06. Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.07. Other Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. COVENANTS
---------
3.01. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.02. Preservation of Existence and Preservation of Enforceability . . . . . . . . . . . . . 5
3.03. Requested Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.04. No Disposition of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.05. Additional Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. EVENT OF DEFAULT
----------------
4.01. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.03. Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
V. INTERPRETATION
--------------
5.01. Definitional Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Certain Terms Defined by Reference . . . . . . . . . . . . . . . . . . . . . 8
(b) Other Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . 10
5.02. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
VI. MISCELLANEOUS
-------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6.01. Expenses of Debtor's Agreements and Duties . . . . . . . . . . . . . . . . . . . . . . 10
6.02. Administrative Agent's Right to Perform on Debtor's Behalf 11
6.03. Administrative Agent's Right to Use Agents . . . . . . . . . . . . . . . . . . . . . . 11
6.04. No Interference, Compensation or Expense . . . . . . . . . . . . . . . . . . . . . . . 11
6.05. Limitation of Administrative Agent's Obligations With Respect to Collateral . . . . . 11
6.06. Rights of Administrative Agent under UCC and Applicable Law . . . . . . . . . . . . . 11
6.07. Waivers of Rights Inhibiting Enforcement . . . . . . . . . . . . . . . . . . . . . . . 12
6.08. Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.10. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.13. Consent to Jurisdiction; Waiver of Immunities . . . . . . . . . . . . . . . . . . . . 13
6.14. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.16. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.17. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.18. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.19. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
- ii -
<PAGE> 4
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT, dated as of December 30,
1996, between Netaccess, Inc., a California corporation ("Debtor"), and
NationsBank of Texas, N.A., a national banking association, as Administrative
Agent ("Administrative Agent"), for itself and each other lender a party to the
Credit Agreement described below (singly, a "Secured Party" and collectively,
the "Secured Parties").
RECITALS.
(1) Administrative Agent, Xircom, Inc. ("Borrower"), and Secured
Parties entered into the Credit Agreement dated as of December 30, 1996 (as the
same has been and may hereafter be supplemented, amended, amended and restated,
extended or modified from time to time, being the "Credit Agreement").
(2) It is the intention of the parties hereto that this Agreement
create a first priority security interest securing the payment of the
obligations set forth in Section 1.02 hereof.
(3) It is a condition precedent to the effectiveness of the Credit
Agreement that Debtor shall have executed and delivered this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to, among other
things, make Advances under the Credit Agreement, Debtor hereby agrees with
Administrative Agent for its benefit and the ratable benefit of Secured Parties
as hereinafter set forth.
I. GRANT OF SECURITY INTEREST
1.01. Grant of Security Interest. Debtor hereby pledges and grants
to Administrative Agent for its benefit and the ratable benefit of Secured
Parties a security interest in, the entire right, title and interest of Debtor,
in and to the Collateral.
1.02. Security for Obligations. This Agreement creates a first
priority security interest, securing the payment and performance of any and all
obligations now or hereafter existing of Borrower, each Obligor and any other
Person under the Credit Agreement and the other Loan Documents, including any
extensions, modifications, substitutions, amendments and renewals thereof,
whether for principal, interest, fees, expenses, indemnification or otherwise)
(all such obligations of Borrower, each Obligor and each other Person being the
"Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by Borrower, each other Obligor and any other
Person to Administrative Agent or any Secured Party under any Loan Document,
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding under any
Debtor Relief Law involving Borrower, any other
<PAGE> 5
Obligor or any other Person (including all such amounts which would become due
or would be secured but for the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding of Borrower,
any other Obligor or any other Person under any Debtor Relief Law).
1.03. Validity and Priority of Security Interest. Debtor agrees
that the Security Interest shall at all times be valid, perfected, continuing
and binding and enforceable against Debtor and all other Persons, in accordance
with the terms hereof, as security for the Obligations, and that the Collateral
shall not at any time be subject to any Lien, except as permitted in the Loan
Documents.
1.04. Maintenance of Status of Security Interest, Collateral and
Rights.
(a) Required Action. Debtor shall take all reasonable action that
may be necessary or that Administrative Agent may reasonably request, so as at
all times (i) to maintain the validity, perfection, enforceability and priority
of the Security Interest in the Collateral in conformity with the requirements
of Section 1.03, and (ii) to protect and preserve, and to enable the exercise
or enforcement of, the rights of Administrative Agent hereunder, including (A)
immediately discharging all Liens, except as permitted in the Loan Documents
and by any license entered into in the ordinary course of business and (B)
executing and delivering financing or continuation statements, instruments of
pledge, notices and instructions in each case in form and substance reasonably
satisfactory to Administrative Agent.
(b) Protection of Collateral. Debtor shall use its best efforts
to protect, preserve, renew and maintain, in each case in a manner consistent
with reasonably responsible business and legal practices all rights of Debtor
in the Collateral (except to the extent such Collateral is obsolete or no
longer useful to Debtor's business), including (i) prosecuting such suits,
proceedings or other actions for infringement, unfair competition, dilution or
other damage or (ii) appearing in and defending any action or proceeding that
may materially adversely affect Debtor's title to or Administrative Agent's
security interest in all or any material part of the Collateral, when such
action is in Debtor's reasonable business judgment necessary to protect
Debtor's Collateral. Any reasonable expenses incurred in protecting,
preserving, renewing and maintaining the Collateral shall be borne by Debtor.
To the maximum extent permitted by Laws, after a Default or Event of Default
shall have occurred and be continuing, Administrative Agent shall have the
right, without taking title to any Collateral, to bring suit to enforce any or
all Collateral or its Security Interest in any or all of the Collateral, in
which event Debtor shall, at the reasonable request of Administrative Agent, do
any and all lawful acts and execute any and all proper documents reasonably
required by Administrative Agent in aid of such enforcement. All reasonable
costs, reasonable expenses and other moneys reasonably advanced by
Administrative Agent in connection with the foregoing shall, whether or not
there are then outstanding any amounts under the Credit Agreement, be treated
as Obligations, but the making of any Advances by Administrative Agent or any
Secured Party shall not relieve Debtor of any default hereunder.
(c) Authorized Action. Administrative Agent is hereby authorized
to file one or more financing or continuation statements, amendments thereto
and instruments of pledge, notices and instructions without the signature of or
in the name of Debtor when permitted by Applicable Law provided that
Administrative Agent shall give reasonably prompt notice of any such filings to
Debtor. A carbon, photographic or other reproduction of this Agreement or of
any financing statement filed in connection with this Agreement shall be
sufficient as a financing statement.
- 2 -
<PAGE> 6
(d) Registrations. Debtor shall renew or maintain, as specified
in any Applicable Law, and shall make any filings necessary to renew or
maintain the Registrations, except to the extent such Collateral is obsolete or
no longer useful to Debtor's business.
1.05. Debtor Remains Obligated; Administrative Agent and Secured
Parties Not Obligated. The grant by Debtor to Administrative Agent of the
Security Interest shall not relieve Debtor from the performance of any term,
covenant, condition or agreement on its part to be performed or observed
(including by virtue of the exercise by Administrative Agent of any of its
rights hereunder), or from any liability to any Person, under or in respect of
any of the Collateral or impose any obligation on Administrative Agent or any
Secured Party or impose any liability on Administrative Agent or any Secured
Party for any act or omission on the part of Debtor relative thereto.
1.06. Termination.
(a) In the event that the Obligations shall have been finally paid
in full, and all commitments by Secured Parties to extend credit shall have
been terminated and Administrative Agent shall have delivered to Debtor a
written termination agreement, then this Agreement shall also terminate and be
of no further force and effect (except as provided in Section 1.06(b)).
(b) Debtor agrees that, if at any time all or any part of any
payment theretofore applied by Administrative Agent and Secured Parties to any
of the Obligations is or must be rescinded or returned by any Person for any
reason whatsoever (including the insolvency, bankruptcy or reorganization of
Debtor or any other Person), such Obligations shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
Administrative Agent or any Secured Party, and the Security Interest granted
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such Obligations, all as though such application by Administrative Agent
or any Secured Party had not been made.
1.07. Security Interest Absolute. All rights of Administrative
Agent and Secured Parties and the Security Interest granted to Administrative
Agent hereunder, and all obligations of Debtor hereunder, shall, to the extent
permitted by Laws, be absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of any Loan Documents;
(b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the Obligations or any
other amendment to or waiver of or any consent to departure from any Loan
Documents;
(c) any exchange, release or non-perfection of any collateral
(including the Collateral or any part thereof), or any release of or amendment
to or waiver of or consent to departure from any guaranty, for all or any of
the Obligations; or
(d) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Debtor, any other Obligor or any other
Person.
- 3 -
<PAGE> 7
II. REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants as follows:
2.01. Authorization; Enforceability; Required Consents; Absence of
Conflicts. Debtor has the power, and has taken all necessary action to
authorize it, to execute, deliver and perform in accordance with its terms this
Agreement and to execute and deliver all financing statements and other filings
contemplated hereby. This Agreement has been duly executed and delivered by
Debtor and is the legal, valid and binding obligation of Debtor, enforceable in
accordance with its terms subject to (i) equitable principles generally and
(ii) Debtor Relief Laws. The execution, delivery and performance in accordance
with its terms by Debtor of this Agreement does not and (absent any change in
any Law) will not (a) except for the filing and acceptance of financing
statements and continuation statements in connection therewith delivered to
Administrative Agent describing this Agreement and the Collateral under the
Code and the filing of this Agreement with the United States Patent and
Trademark Office and acceptance thereof to the extent permitted by Applicable
Law, require any Governmental Approval or any other consent or approval,
including any consent or approval of any shareholder of Debtor, (b) violate or
conflict with its articles or bylaws, or (c) violate or conflict with, result
in a breach of, constitute a default under, or result in or require the
creation of any Lien (other than the Security Interest) upon any assets of
Debtor under any contract or agreement or Applicable Laws.
2.02. Rights of Debtor. Debtor is the legal and beneficial owner of
the Collateral free and clear of any Lien or other charge or encumbrance,
including, without limitation, pledges, assignments, licenses, shop rights and
covenants by Debtor not to sue any Person, except for the security interests
and assignment created by this Agreement any other Liens permitted under the
Credit Agreement. No effective financing statement or other instrument similar
in effect naming Debtor as "debtor" covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in favor
of Administrative Agent relating to this Agreement.
2.03. Perfection. This Agreement, together with the filings
referred to in Section 2.01(a) above, will create in favor of Administrative
Agent valid and perfected security interests in the Collateral and such
security interests will be a first priority security interest; provided that
additional actions may be required with respect to the perfection of proceeds
of the Collateral held on the date hereof.
2.06. Registrations. Annexes A-1, A-2, B-1, B-2, C-1 and C-2, as
applicable, set forth a true and complete list of all Registrations in the
United States Patent and Trademark Office and related state filings owned by
Debtor as of the date hereof.
2.07. Other Property. On the date hereof, Debtor has no interest in
any Copyrights, which are registered or subject to any application for
registration and Debtor does not believe, after appropriate review of all
relevant facts and circumstances, that any registration or filing with respect
to any interest Debtor may have in any property which may constitute Copyrights
is material to the operation of Debtor's existing and anticipated business.
- 4 -
<PAGE> 8
III. COVENANTS
3.01. Chief Executive Office. Debtor shall maintain its chief
executive office and the office where the books and records relating to the
Collateral are kept only at 2300 Corporate Center Drive, Thousand Oaks,
California 91320 and 18 Keewaydin, Salem, New Hampshire 03079.
3.02. Preservation of Existence and Preservation of Enforceability.
Debtor shall, so long as any of the Obligations remain outstanding, (a)
preserve and maintain its existence and (b) take all reasonable action and
obtain all consents and Government Approvals reasonably required so that its
obligations under this Agreement will at all times be legal, valid and binding
and enforceable in accordance with its terms.
3.03. Requested Information. In addition to such other Information
as shall be specifically provided for herein, Debtor shall furnish to
Administrative Agent such other Information with respect to the Collateral as
Administrative Agent may reasonably request from time to time in connection
with the Collateral, or the protection, preservation, maintenance or
enforcement of the Security Interest or the Collateral. In connection with its
enforcement of the Security Interest, Administrative Agent may use such
Information or transfer it to any assignee or sublicensee permitted hereunder
for such assignee's or sublicensee's use.
3.04. No Disposition of Collateral. Debtor shall not sell, transfer
or otherwise dispose of any of the Collateral or any interest therein that is
material to Debtor's business, or grant any license thereunder, except in the
ordinary course of business and except to the extent the same is obsolete or no
longer useful to Debtor's business.
3.05. Additional Property. Prior to the application for, use or
acquisition or any interest in any property which is within the definition of
"Collateral" or modification, reformulation or other alteration to any such
interest that is material to Debtor's business, Debtor shall execute and
deliver to Administrative Agent all documents and instruments Administrative
Agent may require to grant to Administrative Agent a perfected first priority
Lien therein and to subject to all of such interest to this Agreement,
including but not limited to any new, supplementary or additional filings in
the form of Schedule 1.04(a)(ii)(B)-A, -B, or -C.
IV. EVENT OF DEFAULT
Upon the occurrence and during the continuance of an Event of Default:
4.01. Application of Proceeds. All cash proceeds received by
Administrative Agent upon any sale of, collection of, or other realization
upon, all or any part of the Collateral shall be applied as follows:
First: To the payment of all reasonable out-of-pocket costs and
expenses incurred in connection with the sale of, collection of or other
realization upon Collateral, including reasonable attorneys' fees and
disbursements;
Second: To the payment of the Obligations as provided in the Credit
Agreement (with Debtor remaining liable for any deficiency); and
- 5 -
<PAGE> 9
Third: To the extent of the balance (if any) of such proceeds, to the
payment to Debtor or other Person entitled thereto.
4.02. Remedies.
(a) If an Event of Default has occurred and is continuing and the
Obligations have been accelerated, Administrative Agent may exercise in respect
of the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas at
that time (the "UCC") (whether or not the Uniform Commercial Code applies to
the affected Collateral), and also may (i) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Administrative Agent
forthwith, assemble all or part of the Collateral (to the extent capable of
being assembled) as directed by Administrative Agent and make it available to
Administrative Agent at a place to be designated by Administrative Agent, which
is reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Collateral or any portion thereof in one or more
parcels at public or private sale, at any of Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable. Debtor agrees
that, to the extent notice of sale shall be required by Applicable Law, ten
days' written notice to Debtor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification, provided that ten days' written notice does not violate any
Applicable Law. Administrative Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Administrative
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) Upon written demand of Administrative Agent, Debtor shall
execute and deliver to Administrative Agent an assignment or assignments of the
Collateral and such other documents as are necessary and appropriate to carry
out the intent and purposes of this Agreement. Debtor agrees that such an
assignment and/or recording shall be applied to reduce the Obligations
outstanding only to the extent that Administrative Agent or any Lenders
receives cash proceeds in respect of the sale of, or realization upon, the
Collateral.
4.03. Indemnity and Expenses.
(A) DEBTOR AGREES TO INDEMNIFY (WHICH SHALL BE PAYABLE FROM TIME
TO TIME ON DEMAND) ADMINISTRATIVE AGENT AND SECURED PARTIES FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING FROM
THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), EXPRESSLY INCLUDING
SUCH CLAIMS, LOSSES, OR LIABILITIES ARISING OUT OF MERE NEGLIGENCE OF
ADMINISTRATIVE AGENT OR ANY SECURED PARTY, EXCEPT CLAIMS, LOSSES OR LIABILITIES
RESULTING SOLELY FROM ADMINISTRATIVE AGENT'S OR ANY SECURED PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Administrative Agent and
Secured Parties the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which Administrative Agent and Secured Parties may incur in connection with (i)
the custody, preservation, use or operation of, or the sale of, collection
from,
- 6 -
<PAGE> 10
or other realization upon, any of the Collateral, (ii) the exercise or
enforcement of any of the rights of Administrative Agent and Secured Parties
hereunder, or (iii) the failure by Debtor to perform or observe any of the
provisions hereof. Debtor will pay upon demand to Administrative Agent the
amount of any and all reasonable fees and disbursements of its counsel and of
any experts and agents, which Administrative Agent may incur in connection with
the administration of this Agreement.
V. INTERPRETATION
5.01. Definitional Provision.
(a) Certain Terms Defined by Reference. The terms "collateral",
"inventory", "rights", and "security interest" shall have the meanings ascribed
thereto in the UCC, or, when capitalized, the meanings specified in subsection
(b) below.
(b) Other Defined Terms. For purposes of this Agreement:
"Agreement" means this Agreement, including all schedules, annexes and
exhibits hereto.
"Collateral" means Debtor's rights, title and interests, (whatever
they may be) in each of the following, in each case whether now or hereafter
existing or now owned or hereafter acquired by Debtor and whether or not the
same is subject to Article 9 of the UCC, and wherever the same may be located:
(i) the Trademarks and Goodwill;
(ii) the Copyrights;
(iii) the Patents;
(iv) all registrations issued or applied for (now or hereafter) on
the Trademarks, Copyrights and Patents and renewals thereof in the United
States and any state thereof (the "Registrations");
(v) any renewal, reissue, re-examination certificate, extension or
the like with respect to the Trademarks, Patents, Copyrights;
(vi) all rights to use the Trademarks as trade names or assumed
names in all aspects of its business; and
(vii) all proceeds and products of the foregoing together with any
license in favor of or from Debtor of any of the foregoing in whatever form.
The inclusion of "proceeds" of Collateral in the definition of "Collateral"
shall not be deemed a consent by Administrative Agent to any sale or other
disposition of any Collateral not otherwise specifically permitted by the terms
hereof.
"Copyright" means any copyright, copyright registration and
applications for such registration, including but not limited to the copyrights
listed on Annex C-1 attached hereto, all subject matter related to such
copyrights, in any and all forms, and all copyrights and applications
- 7 -
<PAGE> 11
for copyrights related to such copyrights, including those copyrights and
applications listed in Annex C-2 attached hereto.
"Credit Agreement" is defined in the recitals.
"Event of Default" means those events described as a "Default" or an
"Event of Default" in the Credit Agreement.
"Goodwill" means the goodwill of the businesses connected with the use
of (or associated with) and symbolized by the Trademarks, but not any other
goodwill.
"Governmental Approval" means any authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
any Tribunal.
"Information" means data, certificates, reports, statements (including
financial statements), documents and other information in form (including
electronic media) acceptable to Administrative Agent.
"Lien" means, with respect to any property or asset of any Person (in
each case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise) (i) any mortgage, lien,
pledge, attachment, levy, priority or other security interest or encumbrance of
any kind thereupon or in respect thereof and (ii) any arrangement, express or
implied, under which the same is subordinated, transferred, sequestered or
otherwise identified so as to subject the same, or make the same available for,
the payment or performance of any obligation in priority to the payment of the
ordinary, unsecured creditors of such Person.
"Loan Documents" means the Credit Agreement and each agreement,
certificate and other documents delivered to any Person pursuant to the Credit
Agreement.
"Obligations" is defined in Section 1.02.
"Patents" means all patents, all inventions and subject matter related
to such patents, in any and all forms, and all patents and applications for
patents related to such patents, including but not limited to the patents
listed on Annex A-1 attached hereto, all inventions and all subject matter
related to such patents, in any and all forms, and all patents and applications
for patents related to such patents, including those patents and applications
listed on Annex A-2 attached hereto.
"Person" means an individual, firm, corporation, partnership,
association, joint venture, trust or any other entity or organization or
Tribunal.
"Security Interest" means the continuing security interest of
Administrative Agent and assignment to Administrative Agent in the Collateral
intended to be effected by the terms of this Agreement or any financing and
continuation statements or other filings contemplated hereby.
"Trademarks" means all trademarks, all designs and logotypes related
to such trademarks, in any and all forms, and all trademark registrations and
applications for registration related to such trademarks, including but not
limited to the trademarks listed on Annex B-1 attached hereto, all designs and
logotypes related to such trademarks, in any and all forms, and all trademark
registrations and applications for registration related to such trademarks,
including those
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<PAGE> 12
registrations and applications listed on Annex B-2 attached hereto.
"UCC" means Article 9 of the Uniform Commercial Code as in effect from
time to time in the State of Texas.
(c) Other Definitional Provisions. (i) Except as otherwise
specified herein, all references herein (A) to any Person shall be deemed to
include such Person's successors and assigns, (B) to any Applicable Law
referred to herein shall be deemed references to such Applicable Law as the
same may have been or may be amended or supplemented from time to time and (C)
to this Agreement or other agreement defined or referred to herein shall be
deemed a reference to this Agreement or other agreement as the terms thereof
may have been or may be amended, supplemented, waived or otherwise modified
from time to time.
(ii) Whenever the context so requires, the neuter gender includes
the masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
(iii) Except as otherwise indicated, any reference herein to the
"Collateral", the "Obligations" or any other collective or plural term shall be
deemed to be a reference to each and every item included within the category
described by such collective or plural term, so that a reference to the
"Collateral" or the "Obligations" shall be deemed a reference to any or all of
the Collateral or the Obligations, as the case may be.
(iv) Capitalized Terms not otherwise defined herein have the
meaning specified in the Credit Agreement, and, to the extent of any conflict,
terms as defined in the Credit Agreement shall control (provided, that a more
expansive or explanatory definition shall not be deemed a conflict).
5.02. Power of Attorney. Each power of attorney, license and other
authorization in favor of Administrative Agent or any other Person granted by
or pursuant to this Agreement shall be deemed to be irrevocable and coupled
with an interest.
VI. MISCELLANEOUS
6.01. Expenses of Debtor's Agreements and Duties. Administrative
Agent and Secured Parties shall not be liable for the costs and expenses of
Debtor arising out of Debtor's performance or observance of the terms,
conditions, covenants and agreements to be observed or performed by Debtor
under this Agreement.
6.02. Administrative Agent's Right to Perform on Debtor's Behalf.
If Debtor shall fail to observe or perform any of the terms, conditions,
covenants and agreements to be observed or performed by it under this
Agreement, Secured Party may (but shall not be obligated to) do the same or
cause it to be done or performed or observed, either in its name or in the name
and on behalf of Debtor, and in the event that Debtor shall have failed to
observe or perform any of the terms, conditions, covenants and agreements to be
observed or performed by it under this Agreement, then Debtor hereby authorizes
Secured Party to do so, and Debtor hereby appoints the Secured Party, and any
other Person Secured Party may designate, as Debtor's attorney-in-fact
(exercisable from and after the occurrence of an Event of Default which is
continuing) to do, or cause to be done, in the name, place and stead of Debtor
in any way in which Debtor itself could
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<PAGE> 13
do, or cause to be done, any or all things necessary to observe or perform the
terms, conditions, covenants and agreements to be observed or performed by
Debtor under this Agreement. In addition, Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact (exercisable from and after the
occurrence and during the continuance of an Event of Default which is
continuing) to execute and deliver in Debtor's name and stead to any purchaser
at any sale held under Section 4.02(b) hereof any and all documents and
instruments of assignment, transfer and conveyance necessary or appropriate to
transfer to such purchaser the Collateral sold at such sale. Secured Party
shall not exercise any powers granted pursuant to this appointment as
attorney-in-fact at any time that Debtor is fully performing its obligations
hereunder. This appointment as attorney-in-fact shall terminate upon the
termination of this Agreement.
6.03. Administrative Agent's Right to Use Agents. Administrative
Agent may exercise its rights under this Agreement through an agent or other
designee.
6.04. No Interference, Compensation or Expense. Administrative
Agent may exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.
6.05. Limitation of Administrative Agent's Obligations With Respect
to Collateral. (a) Administrative Agent shall not have any duty or liability
to protect or preserve any Collateral or to preserve rights pertaining thereto,
except to the extent of any gross negligence or willful misconduct of the
Administrative Agent.
(b) Nothing contained in this Agreement shall be construed as
requiring or obligating Administrative Agent, and Administrative Agent shall
not be required or obligated, to (i) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(ii) notify Debtor of any decline in the value of any Collateral.
6.06. Rights of Administrative Agent under UCC and Applicable Law.
Administrative Agent shall have, with respect to the Collateral, in addition to
all of their rights under this Agreement, (a) the rights of a secured party
under the UCC, whether or not the UCC would otherwise apply to the collateral
in question, and (b) the rights of a secured party under all other Applicable
Laws.
6.07. Waivers of Rights Inhibiting Enforcement. Debtor waives (a)
to the extent not prohibited by Applicable Law, any claim that, as to any part
of the Collateral, a public sale, should Administrative Agent elect so to
proceed, is, in and of itself, not a commercially reasonable method of sale for
such Collateral, (b) except as otherwise provided in this Agreement, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION
WITH ADMINISTRATIVE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT THAT DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO
THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE
ENFORCEMENT OF ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER and (c) all rights of
redemption, appraisement, or marshalling of assets.
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<PAGE> 14
6.08. Notices and Deliveries. All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by reputable overnight delivery service or by hand, if to the Debtor, addressed
to it at its address specified on the signature pages hereof, if to the
Administrative Agent, addressed to it at its address specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section 6.08. All such notices and other communications
shall, when mailed, telecopied, or delivered, be effective three days after
being deposited in the mails, when telecopied with confirmation of receipt, or
when delivered by reputable overnight delivery service or by hand to the
addressee or its agent, respectively.
6.09. Rights and Remedies Cumulative. Each of Administrative
Agent's rights and remedies under this Agreement shall be in addition to all of
its other rights and remedies under this Agreement and Applicable Law, and
nothing herein shall be construed as limiting any such rights or remedies.
6.10. Amendments; Waivers. Any term, covenant, agreement or
condition of this Agreement may be amended, and any right under this Agreement
may be waived, if, but only if, such amendment or waiver is in writing and is
signed by Administrative Agent and, in the case of an amendment, by Debtor.
Unless otherwise specified in such waiver, a waiver of any right under this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No election not to exercise, failure to exercise or
delay in exercising any right, nor any course of dealing or performance, shall
operate as a waiver of any right of the Administrative Agent under this
Agreement or Applicable Law, 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 of Administrative Agent under this Agreement or Applicable Law.
6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT
REFERENCE TO PRINCIPALS OF CONFLICTS OF LAWS) AND THE UNITED STATES OF AMERICA,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
REQUIRED TO BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.
6.12. WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT AND DEBTOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
6.13. Consent to Jurisdiction; Waiver of Immunities.
(a) Debtor hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or Texas State courts sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, and Debtor hereby irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such court or that such court is an inconvenient forum.
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<PAGE> 15
(b) Nothing in this section shall limit the right of
Administrative Agent or any Secured Party to bring any action or proceeding
against Debtor or its property in the courts of any other jurisdictions.
(c) Any judicial proceeding by Debtor against Administrative Agent
or any Secured Party involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with this Agreement shall be brought
only in a court in Dallas, Texas to the extent that jurisdiction may be
effected against such Person in Dallas, Texas.
6.14. Severability of Provisions. Any provision of this Agreement
that 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 in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction. In the event that any change in Applicable Law would
render invalid or unenforceable any provision of this Agreement, Debtor agrees
to enter into such amendments or modifications to this Agreement to provide
Administrative Agent with benefits intended to be granted by such provision.
6.15. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.
6.16. Successors and Assigns. All of the provisions of this
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, Debtor may not
assign its rights or obligations under this Agreement without the prior written
consent of the Lenders.
6.17. Loan Documents. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
6.18. Obligations Not Affected. To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:
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<PAGE> 16
(a) any amendment or modification or addition or supplement to any
Loan Documents or any instrument delivered in connection therewith or any
assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by Administrative Agent
or any Secured Party of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty or the Collateral or any part
thereof provided pursuant to, this Agreement or any Loan Documents;
(c) any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement, any Loan Documents or any assignment or
transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor or any other
Person, whether or not Debtor shall have notice or knowledge of any of the
foregoing.
6.19. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL ARGUMENTS BETWEEN THE
PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers or members all as of the date
first above written.
DEBTOR:
NETACCESS, INC.
2300 Corporate Center Drive
Thousand Oaks, California 91320
Telecopier No.: (805) 376-9120
Telephone No.: (805) 376-9300 By: [SIG]
------------------------------
Name: Randall H. Holliday
-----------------------
Title: Secretary
-----------------------
Attention: Chief Financial Officer
SECURED PARTY:
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent
By: [SIG]
------------------------------
Name: William C. Collins
-----------------------
Title: Sr. Vice President
-----------------------
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<PAGE> 1
EXHIBIT 10.30e
SUBSIDIARY GUARANTY
GUARANTY, dated December 30, 1996, made by each of the parties listed
on the signature pages hereof (collectively, the "Guarantors", and each, a
"Guarantors), in favor of the Guarantied Parties referred to below.
W I T N E S S E T H:
WHEREAS, Xircom, Inc., a California corporation (the "Borrower"), has
entered into a Credit Agreement, dated as of December 30, 1996, with the
financial institutions party thereto, and NationsBank of Texas, N.A., as
administrative agent for said financial institutions ("Administrative Agent")
(said Agreement, as it may be amended, supplemented or otherwise modified from
time to time, being the "Credit Agreement", and capitalized terms not defined
herein but defined therein being used herein as therein defined); and
WHEREAS, as of the date hereof, the Borrower, directly or indirectly,
owns beneficially and of record 100% of the capital stock of the Guarantors,
and the Borrower and each of the Guarantors are members of the same
consolidated group of companies and are engaged in related businesses, and the
Guarantors will derive direct and indirect economic benefit from the Advances;
and
WHEREAS, it is a condition precedent under the Credit Agreement to the
making of Advances and the issuance of Letters of Credit that the Guarantors
shall have executed and delivered this Guaranty; and
WHEREAS, the Lenders and the Administrative Agent are herein referred
to as the "Guarantied Parties";
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make Advances and issue Letters of Credit, the Guarantors hereby
agree as follows:
SECTION 1. Guaranty. Each Guarantor hereby unconditionally and
irrevocably guarantees the full and prompt payment when due, whether at stated
maturity, by acceleration or otherwise, of, and the performance of, the
Obligations, whether now or hereafter existing and whether for principal,
interest, fees, expenses or otherwise, and any and all expenses (including,
without limitation, reasonable counsel fees and expenses) incurred by any of
the Guarantied Parties in enforcing any rights under this Guaranty. This
Guaranty is an absolute guaranty of payment and performance and not a guaranty
of collection. Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be limited
to a maximum aggregate amount equal to the largest amount that would not render
its obligations hereunder 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
<PAGE> 2
(collectively the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Guarantor in respect of intercompany indebtedness to
the Borrower, other Affiliates of the Borrower or other Obligors to the extent
that such indebtedness would be discharged in an amount equal to the amount
paid by such Guarantor hereunder) and after giving effect as assets to the
value (as determined under the applicable provisions of Fraudulent Transfer
Laws) of any agreement providing for an equitable allocation among such
Guarantor and other Obligors of obligations arising under guaranties by such
parties.
SECTION 2. Guaranty Absolute. Each Guarantor guaranties that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes and the other Loan Documents, without set-off or
counterclaim, and regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of the
Guarantied Parties with respect thereto. The liability of each Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of any
other Loan Document or any other agreement or instrument relating to any Loan
Document, or avoidance or subordination of any of the Obligations;
(b) any change in the time, manner or place of payment of, or in
any other term of, or any increase in the amount of, all or any of the
Obligations, or any other amendment or waiver of any term of, or any consent to
departure from any requirement of, the Credit Agreement, the Notes or any of
the other Loan Documents;
(c) any exchange, release or non-perfection of any Lien on any
collateral for, or any release or amendment or waiver of any term of any other
guaranty of, or any consent to departure from any requirement of any other
guaranty of, all or any of the Obligations;
(d) the absence of any attempt to collect any of the Obligations
from the Borrower or from any other guarantor or any other action to enforce
the same or the election of any remedy by any of the Guarantied Parties;
(e) any waiver, consent, extension, forbearance or granting of any
indulgence by any of the Guarantied Parties with respect to any provision of
any other Loan Document;
(f) the election by any of the Guarantied Parties in any
proceeding under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code") of the application of section 1111(b)(2) of the Bankruptcy
Code;
(g) any borrowing or grant of a security interest by the Borrower,
as debtor-in-possession, under section 364 of the Bankruptcy Code;
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<PAGE> 3
(h) the disallowance, under section 502 of the Bankruptcy Code, of
all or any portion of the claims of any of the Guarantied Parties for payment
of any of the Obligations; or
(i) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a borrower or a guarantor.
SECTION 3. Waiver. (a) Each Guarantor hereby (i) waives (A)
promptness, diligence, notice of acceptance and any and all other notices with
respect to any of the Obligations or this Guaranty, except demand for payment
under this Guaranty, (B) any requirement that any of the Guarantied Parties
protect, secure, perfect or insure any security interest in or other Lien on
any property subject thereto or exhaust any right or take any action against
the Borrower or any other Person or any Collateral, (C) the filing of any claim
with a court in the event of receivership or bankruptcy of the Borrower, (D)
protest or notice with respect to nonpayment of all or any of the Obligations,
(E) the benefit of any statute of limitation, (F) all demands, except demand
for payment under this Guaranty, whatsoever (and any requirement that same be
made on the Borrower as a condition precedent to much Guarantor's obligations
hereunder), and (G) any right by which it might be entitled to require suit or
an accrued right of action in respect of any of the Obligations or require suit
against the Borrower or any other Person, whether arising pursuant to Section
34.02 of the Texas Business and Commerce Code, as amended, Section 17.000 of
the Texas Civil Practice and Remedies Code, as amended, Rule 31 of the Texas
Rules of Civil Procedure, as amended, or otherwise; and (ii) covenants and
agrees that, except as set forth in Section 11 hereof, this Guaranty will not
be discharged except by complete performance of the Obligations and any other
obligations of such Guarantor contained herein.
(b) If, in the exercise of any of its rights and remedies, any of
the Guarantied Parties shall forfeit any of its rights or remedies, including,
without limitation, its right to enter a deficiency judgment against the
Borrower or any other Person, whether because of any applicable law pertaining
to "election of remedies" or the like, each Guarantor hereby consents to such
action by such Guarantied Party and waives any claim based upon such action.
Any election of remedies which results in the denial or impairment of the right
of such Guarantied Party to seek a deficiency judgment against the Borrower
shall not impair the obligation of such Guarantor to pay the full amount of the
Obligations or any other obligation of such Guarantor contained herein.
(c) In the event any of the Guarantied Parties shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or under
any of the Loan Documents, such Guarantied Party may bid all or less than the
amount of the Obligations and the amount of such bid need not be paid by such
Guarantied Party but shall be credited against the Obligations. The amount of
the successful bid at any such sale, whether such Guarantied Party or any other
Person is the successful bidder, shall be conclusively deemed to be the fair
market value of the Collateral and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this Guaranty, notwithstanding that
any present or future law or court decision or ruling may
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<PAGE> 4
have the effect of reducing the amount of any deficiency claim to which any of
the Guarantied Parties might otherwise be entitled by reason of such bidding at
any such sale.
(d) Each Guarantor agrees that notwithstanding the foregoing and
without limiting the generality of the foregoing if, after the occurrence and
during the continuance of an Event of Default, the Guarantied Parties are
prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Obligations, to collect interest on the
Obligations, or to enforce or exercise any other right or remedy with respect
to the Obligations, or the Administrative Agent is prevented from taking any
action to realize on the Collateral, such Guarantor agrees to pay to the
Administrative Agent for the account of the Guarantied Parties, upon demand
therefor, the amount that would otherwise have been due and payable had such
rights and remedies been permitted to be exercised by the Guarantied Parties.
(e) Each Guarantor hereby assumes responsibility for keeping
itself informed of the financial condition of the Borrower and of each other
guarantor of all or any part of the Obligations, and of all other circumstances
bearing upon the risk of nonpayment of the Obligations or any part thereof,
that diligent inquiry would reveal. Each Guarantor hereby agrees that the
Guarantied Parties shall have no duty to advise any Guarantor of information
known to any of the Guarantied Parties regarding such condition or any such
circumstance. In the event that any of the Guarantied Parties in its sole
discretion undertakes at any time or from time to time to provide any such
information to any Guarantor, such Guarantied Party shall be under no
obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information which, pursuant to accepted
or reasonable banking or commercial finance practices, such Guarantied Party
wishes to maintain confidential, or (iii) to make any other or future
disclosures of such information or any other information to such Guarantor.
(f) Each Guarantor consents and agrees that the Guarantied Parties
shall be under no obligation to marshall any assets in favor of any Guarantor
or otherwise in connection with obtaining payment of any or all of the
Obligations from any Person or source.
SECTION 4. Representations and Warranties. Each Guarantor hereby
represents and warrants to the Guarantied Parties as follows:
(a) Such Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
(ii) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where the nature of its business or the character of
its properties requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect,
(iii) has all requisite corporate power and authority to own its properties, to
lease the property it operates under lease and to conduct its business as now
or currently proposed to be conducted, (iv) is in compliance with its
certificate of incorporation and by-laws, (v) is in compliance with all other
applicable requirements of Law, and (vi) has all necessary licenses, permits,
consents or approvals from or by, has made all necessary filings with, and has
given all necessary notices
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<PAGE> 5
to, each Tribunal having jurisdiction, to the extent required for such
ownership, operation and conduct.
(b) The execution, delivery and performance by such Guarantor of
this Guaranty and the other Loan Documents to which it is a party:
(i) are within its corporate powers;
(ii) have been duly authorized by all necessary corporate
action, including, without limitation, the consent of stockholders
where required; and
(iii) do not and will not (A) contravene its certificate of
incorporation or by-laws or other comparable governing documents, (B)
violate any other applicable requirement of Law (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), or any order or decree of any Tribunal or
arbitrator, (C) conflict with or result in the breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any of its agreements, (D) result in the creation or
imposition of any Lien upon any of its property other than those in
favor of the Administrative Agent on behalf of and for the ratable
benefit of the Secured Parties and Liens permitted by the Credit
Agreement, or (E) require the consent of, authorization by, approval
of, notice to, or filing or registration with, any Tribunal or any
other Person.
(c) This Guaranty has been duly executed and delivered by such
Guarantor and is the legal, valid and binding obligation of much Guarantor
enforceable against it in accordance with its terms, subject to Debtor Relief
Laws.
(d) There are no pending or, to the knowledge of such Guarantor,
threatened actions, investigations or proceedings to which such Guarantor or
any of its Subsidiaries is or could reasonably be expected to become a party
or, to such Guarantor's knowledge, affecting such Guarantor or any of its
Subsidiaries before any court, Tribunal or arbitrator with respect to which
there is a reasonable likelihood of an adverse determination that could
reasonably be expected to have a Material Adverse Effect. The performance by
such Guarantor under this Guaranty and under each of the other Loan Documents
to which it is a party is not restrained or enjoined (either temporarily,
preliminarily or permanently) and no material adverse conditions have been
imposed by any Tribunal or arbitrator upon any of the foregoing transactions.
SECTION 5. Amendments. Etc. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by any Guarantor herefrom shall
in any event be effective unless the same shall be in writing, approved by the
Determining Lenders (or by all the Lenders where the approval of each Lender is
required under the Credit Agreement) and signed by the Administrative Agent,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
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<PAGE> 6
SECTION 6. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and mailed,
telecopied or delivered by reputable overnight delivery service or by hand, if
to any Guarantor, addressed to it at its address specified on the signature
pages hereof, if to any Guarantied Party, addressed to it at the address of
such Guarantied Party specified in the Credit Agreement, or, as to each party,
at such other address as shall be designated by such party in a written notice
to each other party complying as to delivery with the terms of this Section 6.
All such notices and other communications shall, when mailed, telecopied, or
delivered, be effective three days after being deposited in the mail, when
telecopied with confirmation of receipt, or when delivered by reputable
overnight delivery service or by hand to the addressee or its agent,
respectively.
SECTION 7. No Waiver; Remedies. (a) No failure on the part of any
Guarantied Party to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder 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 or any of the other Loan
Documents.
(b) Failure by any of the Guarantied Parties at any time or times
hereafter to require strict performance by the Borrower, any Guarantor or any
other Person of any of the provisions, warranties, terms or conditions
contained in any of the Loan Documents now or at any time or times hereafter
executed by the Borrower, any Guarantor or such other Person and delivered to
any of the Guarantied Parties shall not waive, affect or diminish any right of
any of the Guarantied Parties at any time or times hereafter to demand strict
performance thereof, and such right shall not be deemed to have been modified
or waived by any course of conduct or knowledge of any of the Guarantied
Parties or any agent, officer, employee of any of the Guarantied Parties.
(c) No waiver by the Guarantied Parties of any default shall
operate as a waiver of any other default or the same default on a future
occasion, and no action by any of the Guarantied Parties permitted hereunder
shall in way affect or impair any of the rights of the Guarantied Parties or
the obligations of any Guarantor under this Guaranty or under any of the other
Loan Documents. Any determination by a court of competent jurisdiction of the
amount of any principal and/or interest or other amount constituting any of the
Obligations shall be conclusive and binding on each Guarantor irrespective of
whether such Guarantor was a party to the suit or action in which such
determination was made.
SECTION 8. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each of the Guarantied Parties is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, 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 Guarantied Party to or for the credit or the account of each
Guarantor against any and all of the obligations of each Guarantor now or
hereafter existing under this Guaranty, irrespective of whether or not such
Guarantied Party shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. Each of
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<PAGE> 7
the Guarantied Parties agrees promptly to notify each Guarantor after any such
set-off and application made by such Guarantied Party; provided, however, that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Guarantied Party under this Section 8 are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) which such Guarantied Party may have.
SECTION 9. Continuing Guaranty; Transfer of Notes. Subject to
Section 11, this Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until payment in full of the Obligations on or following the
Maturity Date and all other amounts payable under this Guaranty, (ii) be
binding upon each Guarantor, its successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Guarantied Parties and their respective
successors, transferees, and assigns. Without limiting the generality of the
foregoing clause (iii), each of the Guarantied Parties may assign or otherwise
transfer any Note held by it or Obligations owing to it to any other Person,
and such other Person shall thereupon become vested with all the rights in
respect thereof granted to such Guarantied Party herein or otherwise with
respect to such of the Notes and Obligations so transferred or assigned,
subject, however, to compliance with the provisions of Section 11.6 of the
Credit Agreement in respect of assignments.
SECTION 10. Reimbursement. To the extent that any Guarantor shall be
required to repay a portion of the Advances which shall exceed the greater of
(a) the amount of such Advances actually received by such Guarantor and (b) the
amount which such Guarantor would otherwise have paid if such Guarantor had
repaid the aggregate amount of such Advances (excluding the amount thereof
repaid by the Borrower) in the same proportion as such Guarantor's net worth
immediately after the later of the Agreement Date or the date such Guarantor
becomes a party to this Guaranty bears to the aggregate net worth of the
Guarantors (calculated for each Guarantor based on such Guarantor's net worth
immediately after the later of the Agreement Date or the date such Guarantor
becomes a party to this Guaranty), then such Guarantor shall be reimbursed by
the other Guarantors for the amount of such excess, pro rata, based on their
respective net worth immediately after the Agreement Date or the date such
Guarantor becomes a party to this Guaranty, as applicable. This Section 10 is
intended only to define the relative rights of the Guarantors, and nothing set
forth in this Section 10 is intended to or shall impair the obligations of the
Guarantors, jointly and severally, to pay to the Guarantied Parties the
Obligations as and when the same shall become due and payable in accordance
with the terms hereof.
SECTION 11. Reinstatement. This Guaranty shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Obligor for liquidation or reorganization, should any Obligor
become insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Obligor's assets, and shall, to the fullest extent permitted by law, continue
to be effective or be reinstated, as the case may be, if at any time payment
and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by any obligees of the Obligations or such part thereof, whether as
a "voidable preference," "fraudulent transfer," or otherwise, all as though
such
- 7 -
<PAGE> 8
payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall, to the fullest extent permitted by law, be reinstated and deemed reduced
only by such amount paid and not so rescinded, reduced, restored or returned.
SECTION 12. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND THE UNITED STATES OF
AMERICA. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER
APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH
PROHIBITION OR INVALIDITY AND WITHOUT INVALIDATING THE REMAINING PROVISIONS OF
THIS GUARANTY.
SECTION 13. Submission to Jurisdiction; Jury Trial. (a) Any legal
action or proceeding with respect to this Guaranty or any document related
thereto may be brought in the courts of the State of Texas or the United States
of America for Dallas, Texas, and, by execution and delivery of this Guaranty,
each Guarantor hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
Guarantor hereby irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions and consents to the
granting of such legal or equitable relief as is deemed appropriate by the
court.
(b) Each Guarantor irrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to such
Guarantor at its address provided herein, such service to become effective 30
days after such mailing.
(c) Nothing contained in this Section 13 shall affect the right of
any Guarantied Party to serve process in any other manner permitted by law or
commence legal proceedings or otherwise proceed against any Guarantor or any of
such Guarantor's property in any other jurisdiction.
(d) EACH GUARANTOR WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF ANY OBLIGOR OR ANY
GUARANTIED PARTY.
- 8 -
<PAGE> 9
SECTION 14. Section Titles. The Section titles contained in this
Guaranty are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of this Guaranty.
SECTION 15. Execution in Counterparts. This Guaranty 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 Guaranty.
SECTION 16. Miscellaneous. All references herein to the Borrower or
to any Guarantor shall include their respective successors and assigns,
including, without limitation, a receiver, trustee or debtor-in-possession of
or for the Borrower or such Guarantor. All references to the singular shall be
deemed to include the plural where the context so requires.
SECTION 17. Subrogation and Subordination.
(a) Notwithstanding any reference to subrogation
contained herein to the contrary, until payment in full of the Obligations and
termination of the Commitment, each Guarantor hereby irrevocably agrees not to
make any claims or enforce any other rights which it may have or hereafter
acquire against the Borrower that arise from the existence, payment,
performance or enforcement of such Guarantor's obligations under this Guaranty,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, any right to participate in any
claim or remedy of any Lender against the Borrower or any collateral which any
Lender now has or hereafter acquires, whether or not such claim, remedy or
right arises in equity, or under contract, statutes or common law, including
without limitation, the right to take or receive from the 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 or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Obligations shall not have been paid in full, such amount shall be deemed to
have been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Lenders, and shall forthwith be paid to the Administrative
Agent to be credited and applied upon the Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Agreement. Each
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Credit Agreement and that the
agreement set forth in this Section 17(a) is knowingly made in contemplation of
such benefits.
(b) All debt and other liabilities of the Borrower to any
Guarantor ("Borrower Debt") are expressly subordinate and junior to the
Obligations and any instruments evidencing the Borrower Debt shall contain
provisions acceptable to the Determining Lenders providing for such
subordination and shall be binding on all holders of such Borrower Debt.
SECTION 18. Guarantor Insolvency. Should any Guarantor voluntarily
seek, consent to, or acquiesce in the benefits of any Debtor Relief Law or
become a party to or be made the subject of any proceeding provided for by any
Debtor Relief Law (other than as a creditor or
- 9 -
<PAGE> 10
claimant) that could suspend or otherwise adversely affect the rights of any
Lender granted hereunder, then, the obligations of such Guarantor under this
Guaranty shall be, as between such Guarantor and such Lender, a fully-matured,
due, and payable obligation of such Guarantor to such Lender (without regard to
whether the Borrower is then in default under the Credit Agreement or whether
any part of the Obligations is then due and owing by the Borrower to such
Lender), payable in full by such Guarantor to such Lender upon demand, which
shall be the estimated amount owing in respect of the contingent claim created
hereunder.
SECTION 19. Rate Provision. It is not the intention of any Lender to
make an agreement violative of the laws of any applicable jurisdiction relating
to usury. Regardless of any provision in this Guaranty, no Lender shall ever
be entitled to contract, charge, receive, collect or apply, as interest on the
Obligations, any amount in excess of the Highest Lawful Rate. In no event
shall any Guarantor be obligated to pay any amount in excess of the Highest
Lawful Rate. If from any circumstance the Administrative Agent or any Lender
shall ever receive anything of value deemed excess interest under applicable
law, an amount equal to such excess shall be applied to the reduction of the
principal amount of outstanding Advances, and any remainder shall be promptly
refunded to the payor. In determining whether or not interest paid or payable
with respect to the Obligations, under any specified contingency, exceeds the
Highest Lawful Rate, the Guarantors and the Lenders shall, to the maximum
extent permitted by applicable law, (a) characterize any non-principal payment
as an expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, (c) amortize, prorate, allocate and spread
the total amount of interest throughout the full term of such Obligations so
that the interest paid on account of such Obligations does not exceed the
Highest Lawful Rate and/or (d) allocate interest between portions of such
Obligations; provided that if the Obligations are paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Highest Lawful
Rate, the Lenders shall refund to the payor the amount of such excess or credit
the amount of such excess against the total principal amount owing, and, in
such event, no Lender shall be subject to any penalties provided by any laws
for contracting for, charging or receiving interest in excess of the Highest
Lawful Rate.
Section 20. Severability. Any provision of this Guaranty which is
for any reason prohibited or found or held invalid or unenforceable by any
court or governmental agency shall be ineffective to the extent of such
prohibition or invalidity or unenforceability without invalidating the
remaining provisions hereof in such jurisdiction or affecting the validity or
enforceability of any such provision in any other jurisdiction.
SECTION 21. ENTIRE AGREEMENT. THIS GUARANTY REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT MATTER HEREIN AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE
- 10 -
<PAGE> 11
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its duly authorized officer on the date first above
written.
NETACCESS, INC.
By: [SIG]
------------------------------
Title: Secretary
----------------------
2300 Corporate Center Drive
Thousand Oaks, CA 91320
Accepted and Acknowledged:
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent
By: [SIG]
-----------------------------
Title: Sr. Vice President
----------------------
- 12 -
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 24,286
<SECURITIES> 0
<RECEIVABLES> 48,494
<ALLOWANCES> 3,370
<INVENTORY> 20,086
<CURRENT-ASSETS> 103,320
<PP&E> 39,784
<DEPRECIATION> 18,947
<TOTAL-ASSETS> 128,540
<CURRENT-LIABILITIES> 51,979
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 73,629
<TOTAL-LIABILITY-AND-EQUITY> 128,540
<SALES> 62,311
<TOTAL-REVENUES> 62,311
<CGS> 38,633
<TOTAL-COSTS> 38,633
<OTHER-EXPENSES> 17,361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,367
<INCOME-TAX> 1,910
<INCOME-CONTINUING> 4,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 4,457
<EPS-PRIMARY> .22
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