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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission file number: 0-21528
BELL MICROPRODUCTS INC.
(Exact name of registrant as specified in its charter)
California 94-3057566
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1941 Ringwood Avenue, San Jose, California 95131-1721
(Address of principal executive office, including zip code)
Registrant's telephone number, including area code: (408) 451-9400
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of March 15, 2000, was approximately $119,432,070 based upon
the last sale price reported for such date on the Nasdaq National Market. For
purposes of this disclosure, shares of Common Stock held by officers and
directors of the Registrant have been excluded because such persons may be
deemed to be affiliates. This determination is not necessarily conclusive.
The number of shares of Registrant's Common Stock outstanding as of March
15, 2000 was 9,345,747.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement for the Company's Annual Meeting
of Shareholders to be held on May 11, 2000 are incorporated by reference into
Part III of this Form 10-K
Index of Exhibits appears on Pages 43, 44 and 45.
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<PAGE>
PART I
ITEM 1: Business
Founded in 1987, Bell Microproducts Inc. and its subsidiaries (the
"Company") markets and distributes a select group of semiconductor and computer
products to original equipment manufacturers ("OEMs") and value-added resellers
("VARs"). Semiconductor products include memory, logic, microprocessor,
peripheral and specialty components. Computer products include disk, tape and
optical drives and subsystems, drive controllers, storage systems, monitors,
board-level products and computers. The Company also provides a variety of
value-added services to its customers, including subsystem testing, software
loading, mass storage and computer systems integration, disk drive formatting
and testing, and the packaging of electronic component kits to customer
specifications.
When used in this report, the words "expects," "anticipates," "estimates,"
"intends" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A under the Securities Act of 1933
and Section 21E under the Securities Exchange Act of 1934. Such statements
include but are not limited to statements regarding the ability to obtain
favorable product allocations and the ability to increase gross profit while
controlling expenses. These statements are subject to risks and uncertainties
that could cause actual results to differ materially, including those risks
described under "Risk Factors" below.
Products and Services
Computer Products
While a substantial portion of the Company's sales of computer products in
1999 was attributable to hard disk drives, the Company's computer product sales
also included tape drives, optical disk drives, networking products, monitors,
computers, motherboards and value-added services and solution products. Based on
a comparison of its product lines with product lines offered by other major
industrial electronics distributors, the Company believes that its breadth of
product offerings for mass storage computer products is among the strongest in
the industry. The Company distributes these products primarily to industrial
OEMs, hardware integrators, VARs and other resellers.
Disk, Tape and Optical Drives. The Company sells floppy, hard and optical
disk and tape drives to a wide range of customers, including industrial OEMs
(some of which produce computer, office, medical and telecommunications
products), as well as integrators and manufacturers of computers based on the
UNIX, DOS/Windows, Linux and Macintosh operating systems and frequently markets
subsystems to integrators and VARs. To serve these customers, Bell Microproducts
offers a full range of products from the industry leaders in mass storage such
as IBM, Maxtor Corporation, Quantum Corporation, Seagate Technology, Sun
Microelectronics (a division of Sun Microsystems Inc.) and TEAC.
Networking Products. The Company sells specialized board-level mass storage
and memory systems products including full "plug and play" (ready for immediate
installation) tape, optical (including jukebox) and RAID (Redundant Array of
Inexpensive Disks) solutions for OEMs, VARs and sophisticated end users. These
solutions are configured using standard components from the Company's inventory.
The Company also offers one of the industries most complete lines of Fibre
Channel and interconnectivity products and believes it is one of the leading
resellers of these products.
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Computers. The Company delivers standard and custom configurations of
motherboards, computers and file servers to the VAR and OEM markets, including
medical, commercial and test system OEMs and vertical market integrators. The
principal motherboard supplier is Sun Microelectronics.
Semiconductor Products
The Company distributes a broad range of semiconductor, passive and
electromechanical products including memory, logic, microprocessor, peripheral
and specialty components. The products distributed primarily are advanced
integrated circuits, critical to the performance of the customer's products
utilizing these components. The Company's customer base for its semiconductor
products comprises primarily small and medium-sized OEMs, including
manufacturers of computer and office products, industrial equipment (including
machine tools, factory automation and robotic equipment), scientific and medical
instruments and telecommunications products. The Company's principal suppliers
of semiconductor products in 1999 included Cypress Semiconductor, IBM
Microelectronics, NEC Electronics, OKI Semiconductor, Quick Logic and Sony
Electronics.
Value-Added Services
The Company provides the following value-added services:
Systems Integration. Systems integration is a customer specific turnkey
solution provided by the Company which integrates such high technology products
as motherboards, disk, tape and optical drives with power supplies, enclosures,
interface electronics, cables and connectors to build a completed system.
Subsystem and Device Value-Added Services. The Company provides value-added
services to board and mass storage products to a customer's specification
delivering subsystems modified to meet the requirements of specific
applications.
Bellstor. The Company offers its own branded BellStor product line of disk
and tape subsystems and RAID products to OEMs, VARs, and integrators for
application in standard interface computer environments. The Bellstor product
family ranges from a subsystem to a complete RAID ready (JBOD) storage solution,
and extends to SAN systems and Fibre Channel products with assured
interoperability via Bellstor's SANPower program.
Trademark. The Company offers private-labeled personal computers and
servers that are sold to value-add resellers under the brand name Trademark.
These products are based on the Windows and Linux operating systems.
Kitting. Kitting of customer component product requirements is provided to
a select customer base. Kitting is a service whereby the Company purchases
materials according to the customer's specifications and assembles them into kit
form, ready for the assembly process.
Operations
The majority of the products sold by the Company are purchased pursuant to
authorized distributor agreements. These agreements generally establish
marketing relationships with product manufacturers, provide for joint sales and
marketing programs and generally provide the Company price protection and
limited inventory rotation rights. These agreements are typically for renewable
terms of one year, are non-exclusive, and authorize the Company to sell through
most or all of its sales and distribution centers all or a portion of the
products produced by that manufacturer.
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The Company manages the quality and quantity of its distribution inventory
through its asset management group, which seeks to maximize responsiveness to
customer requirements while optimizing inventory turns. Inventory management is
critical to a distributor's business. The Company's strategy is to focus on a
high number of resales or "turns" of existing inventory to reduce exposure to
product obsolescence, changing consumer demands and declining average selling
prices. The Company's computer system facilitates the control of purchasing and
inventory, accounts payable, shipping and receiving, and invoicing and
collection information for the Company's distribution business. Each of the
Company's sales centers is electronically linked to the Company's central
computer system which provides fully integrated on-line real-time data with
respect to the Company's inventory levels. Inventory turns are tracked by part
number or device type, and the Company's inventory management system provides
information to assist in making future purchasing and stock rotation decisions.
This system seeks to enable the Company to effectively manage its inventory so
as to respond quickly to customer requirements while minimizing inventory
levels. The asset management group also monitors supplier stock rotation
programs, inventory price protection opportunities, rejected material and other
factors related to inventory quality and quantity.
Backlog
The Company does not believe that information concerning backlog is
material to an understanding of its business, as the Company's objective is to
ship orders on the same day they are received unless the customer has requested
a specific future delivery date on an order. Additionally, it is common industry
practice for customers, in most cases, to be able to re-schedule or cancel
orders with future delivery dates without penalties.
Marketing and Sales
The semiconductor and computer products industries are characterized by
rapid technological advances and a constant flow of new products. The resulting
shorter product life cycles have necessitated compressed design and development
cycles, more rapid production build-up and quick response to major technological
shifts. To react to these factors, manufacturers are focusing on and devoting
significant resources to their core areas of expertise including research and
product design and development, and are increasingly outsourcing their marketing
and manufacturing requirements.
Over the past two decades the growth in the electronics distribution
industry reflects a gradual trend among electronics manufacturers towards the
use of distributors, particularly for servicing medium and smaller size OEMs and
VARs. As a result of these trends, distributors such as the Company have
expanded their customer lists and line cards and consequently achieved increased
revenues.
Strategy
The Company's business strategy is designed to benefit from the industry
trend toward increasing use of distributors. The Company's strategy includes the
following key elements:
Focus on Select Product Offerings. The Company's product strategy is to
focus its line card on a select group of semiconductor and computer products,
including a particularly strong line of mass storage products, with the goal of
achieving a leadership position in the major markets for such products. This
approach allows the Company to provide more knowledgeable service and technical
support to its customers than it could if it offered a more extensive array of
products. The Company also believes that this approach should allow it to
develop close working relationships with suppliers and to strengthen its ability
to obtain favorable product allocations in times of shortage of supply.
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Expand Operating Profit. The Company seeks to maximize its operating profit
primarily through two aspects of its sales, marketing and product strategies:
(i) increasing distribution of relatively high gross margin products, such as
semiconductors Fibre Channel, interconnectivity, storage systems and its value
added products and capabilities, and (ii) selling high volume products, thereby
enhancing productivity and allowing the Company to increase gross profit while
controlling operating expenses.
Provide Major Market Distribution. The Company focuses its marketing and
sales strategy on the major markets in the Americas with the goal of maximizing
productivity per sales office. With the July, 1999 acquisition of Miami-based
Future Tech, Inc., serving US customers who primarily re-sell in Latin America,
the Company has extended its sales coverage to include all of the Americas. The
Company addresses what it believes constitutes many of the largest sectors for
semiconductor and computer products throughout the Americas. The Company will
continue to evaluate potential expansion into additional markets.
Employees
At December 31, 1999, the Company had a total of 601 employees. None of the
Company's employees are represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees to
be good. The Company's future success will depend in part upon its continuing
ability to attract and retain highly qualified personnel. Competition for such
employees is intense and there can be no assurance that the Company will be
successful in attracting and retaining such personnel. Failure to attract and
retain highly qualified personnel could have a material adverse effect on the
Company's results of operations.
Risk Factors
Potential Fluctuations in Quarterly Operating Results
The Company's quarterly operating results have in the past and could in the
future fluctuate substantially. The Company's expense levels are based, in part,
on expectations of future sales. If sales in a particular quarter do not meet
expectations, operating results could be adversely affected. Factors affecting
quarterly operating results include the loss of key suppliers or customers,
price competition, problems incurred in managing inventories or receivables, the
timing or cancellation of orders from major customers, a change in the product
mix sold by the Company, customer demand, availability of products from
suppliers, management of growth, the Company's ability to collect accounts
receivable, price decreases on inventory that is not price protected, the timing
or cancellation of purchase orders with or from suppliers, the ability of the
Company to integrate recently acquired companies, managing foreign currency
exposure, changing economic conditions in North and South America, and the
timing of expenditures in anticipation of increased sales and customer product
delivery requirements. Price competition in the industries in which the Company
competes is intense and could result in gross margin declines, which could have
an adverse impact on the Company's profitability. Due in part to supplier rebate
programs and increased sales by the Company near the end of each quarter, a
significant portion of the Company's gross profit has historically been earned
by the Company in the third month of each quarter. Failure to receive products
from its suppliers in a timely manner or the discontinuance of rebate programs
and marketing development funds could have a material adverse effect on the
Company's results of operations in a particular quarter. In various periods in
the past, the Company's operating results have been affected by all of these
factors. In particular, price fluctuations in the disk drive and semiconductor
industries have affected the Company's gross margins in recent periods. The
Company's cash requirements will depend on numerous factors, including the rate
of growth of its sales. The Company believes that its working capital, including
its existing credit facility, will be sufficient to meet the Company's
short-term capital requirements. However, the Company may seek additional debt
or equity financing to fund continued growth as well as potential acquisitions.
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Management of Growth
The Company's growth in recent years has placed, and continues to place, a
strain on the Company's management, financial and operational resources. The
Company intends to continue to pursue its growth strategy through increasing
sales of existing and new product offerings, increasing geographical sales
coverage, and possibly through strategic acquisitions. In 1999, the Company
acquired Miami-based Future Tech, Inc. and in 1998, the Company acquired the
Computer Products Division of Philadelphia-based Almo Corporation and
Toronto-based Tenex Data, a division of Axidata Inc. The integration of newly
acquired companies involves the assimilation of operations and products, which
could divert the attention of the Company's management team and may have a
material adverse effect on the Company's operating results in future quarters.
The Company's strategy includes consideration of possible additional
acquisitions in the future. Such acquisitions entail numerous risks, including
an inability to assimilate acquired operations and products, diversion of
management's attention, difficulties and uncertainties in transitioning the
business relationships from the acquired entity to the Company, difficulty in
integrating new employees and loss of key employees of acquired companies. In
addition, future acquisitions by the Company may result in dilutive issuances of
equity securities, the incurrence of additional indebtedness, large one-time
expenses, and the creation of goodwill or other intangible assets that could
result in significant amortization expense. Continued growth may require
additional equipment, increased personnel, expanded information systems and
additional financial and administrative control procedures. There can be no
assurance that the Company will be able to attract and retain qualified
personnel, expand information systems, or further develop accounting and control
systems to successfully manage expanding operations, including an increasing
number of supplier and customer relationships and geographically dispersed
locations. Further, there can be no assurance that the Company will be able to
sustain its recent rate of growth or continue its profitable operations.
Dependence on Suppliers
Three suppliers provided products which represented 47% of the Company's
sales in 1999. Two suppliers provided products which represented 43% of the
Company's sales in 1998 and 1997. The Company's distribution agreements with
these suppliers are cancelable upon 90 days notice. In the past, distribution
arrangements with significant suppliers have been terminated and there can be no
assurance that, in the future, one or more of the Company's significant
distributor relationships will not be terminated. Three vendors accounted for
55% of the Company's inventory purchases during 1999. Two vendors accounted for
49% and 57% of the Company's distribution inventory purchases during 1998 and
1997, respectively. One of these vendors has obtained a second priority lien
against the Company's inventories to secure payment on the Company's purchase of
goods. The loss of any significant supplier or the shortage or loss of any
significant product line could materially adversely affect the Company. As the
Company enters into distribution arrangements with new suppliers, other
competitive suppliers may terminate their distribution arrangements with the
Company with minimal notice. To the extent that the Company is unable to enter
into or maintain distribution arrangements with leading suppliers of components,
the Company's sales and operating results could be materially adversely affected
Competition
The distribution industry is highly competitive. In the distribution of
semiconductor and computer products, the Company generally competes for both
supplier and customer relationships with numerous local, regional and national
authorized and unauthorized distributors and for customer relationships with
semiconductor and computer product manufacturers, including some of its own
suppliers. Many of the Company's distribution competitors are larger, more
established and have greater name recognition and financial and marketing
resources than the Company. The Company believes that competition for
distribution customers is based on product lines, customer service, product
availability, competitive pricing and technical information, as well as
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value-added services and kitting. The Company believes that it competes
favorably with respect to these factors. Recently, with the increased acceptance
of companies transacting business through the Internet, competition in the
distribution of semiconductors, computer products and related value-added
products is expected to increase. There can be no assurance that the Company
will be able to compete successfully with existing or new competitors. Failure
to do so would have a material adverse effect on the Company's results of
operations.
Value-added services are highly competitive and are based upon technology,
quality, service, price and the ability to deliver finished products on an
expeditious and reliable basis. The Company believes it competes favorably with
respect to such factors. The Company attempts to focus on markets where it has
advantages in flexibility, service and high component content of the total
price. In this area, the Company competes with many distributors, as well as
with the in-house manufacturing capabilities of its existing and potential
customers. Many of the Company's competitors are larger, more established and
have greater name recognition and financial and marketing resources than the
Company.
The distribution business is highly competitive, and there can be no
assurance that the Company will be able to compete successfully with existing or
new competitors. Failure to do so could have a material adverse effect on the
Company's operating results.
Risks Associated with Limited Price and Inventory Protection Rights
The Company's authorized distributor agreements may be canceled by either
party on short notice and generally provide for a return of the inventory to the
manufacturer upon cancellation. Such agreements also generally provide the
Company with limited price protection and inventory protection rights. There can
be no assurance that such agreements will not be canceled, or that price
protection and inventory rotation policies will provide complete protection or
will not be changed in the future. From time to time the Company purchases
significant amounts of products on terms that do not include effective price
protection or inventory rotation rights, the Company bears the risk of
obsolescence and price fluctuation for those products, which could have a
material adverse effect on the Company's results of operations.
Dependence on the Personal Computer Industry
Many of the products the Company sells are used in the manufacture or
configuration of personal computers. These products are characterized by rapid
technological change, short product life cycles and intense competition and
pricing pressures. The personal computer industry has experienced significant
unit volume growth over the past several years which has, in turn, increased
demand for many of the products distributed by the Company. However, any
slowdown in the growth of the personal computer industry, or growth at less than
expected rates, or significant reductions in gross margins earned by the
Company, could adversely affect the Company's ability to continue its revenue
growth and maintain or increase the Company's profitability. In addition, many
of the Company's customers in the personal computer industry are subject to the
risks of significant shifts in demand and severe price pressures to their
customers, which may increase the risk that the Company may not be able to
collect accounts receivable owed by some of its customers. To the extent the
Company is unable to collect its accounts receivable, the Company's results of
operations would be adversely affected.
The Company faces certain industry-related risks. To the extent that its
suppliers do not maintain their product leadership, the Company's operating
results could be materially adversely affected. Moreover, the increasingly short
product life cycles experienced in the electronics industry may increase the
Company's exposure to inventory obsolescence and the possibility of fluctuations
in operating results. Other factors adversely affecting the semiconductor or
computer industries in general, including trade barriers which may affect the
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Company's supply of products from its Japanese suppliers, could have a material
adverse effect on the Company's operating results.
Cyclical Nature of the Semiconductor and Disk Drive Industries
Semiconductors and disk drives have represented a significant portion of
the Company's sales and the Company believes they will continue to do so in
future periods. Both the semiconductor and the disk drive industries have
historically been characterized by fluctuations in product supply and demand
and, consequently, severe fluctuations in price. In the event of excess supply
of disk drives or semiconductors, the Company's gross margins may be adversely
affected. In the event of a shortage of supply of disk drives or semiconductors,
the Company's results of operations will depend on the amount of product
allocated to the Company by its suppliers and the timely receipt of such
allocations. Additionally, technological changes that affect the demand for and
prices of the products distributed by the Company may further affect the
Company's gross margins. Although the Company's agreements with its suppliers
provide the Company with limited price protection and certain rights of stock
rotation, rapid price declines or a shortfall in demand for disk drives or
semiconductor products could have an adverse effect on the Company's sales or
gross margins.
Debt
The Company has raised significant funding through debt which bears
interest at variable rates. The Company is also required to exceed certain
financial tests and other covenants on a quarterly basis. Changes in interest
rates may have a significant effect on the results of operations. Failure to
meet debt covenant requirements may result in the debt providers demanding
immediate repayment of amounts outstanding. The Company may not be able to find
alternative sources of finance and liquidity and failure to do so would have a
significant impact on the results of operations and the financial condition of
the Company.
Foreign Currency
Substantially all of the Company's revenue and capital expenditure is
transacted in US Dollars. Transactions in other currencies and the associated
risks of depreciation of value and volatility of cash flows have not been
material to date. The Company is subject to increased foreign currency
transactions and associated risks following the acquisition of Toronto-based
Tenex Data in November 1998 and Future Tech, Inc. in July, 1999. Future Tech
sells to Latin America based companies or through US affiliates for export and
to US companies that sell to their Latin America channels. The collection of a
substantial portion of Future Tech's receivables are susceptible to changes in
the Latin American economic and political environment. To the extent the Company
is unable to manage these risks, the Company's results and financial position
could be materially adversely affected.
Year 2000 Compliance
The Year 2000 issue relates to the way computer systems and programs define
calendar dates; they could fail or make miscalculations due to interpreting a
date including "00" to mean 1900, not 2000. This could result in system failures
causing disruptions in operations, including among other things, interruptions
in processing business transactions and other normal business operations. Also,
many systems and equipment that are not typically thought of as
"computer-related" (referred to as non-IT) contain embedded hardware or software
that may have a time element.
Thus far, the Company has not experienced any significant problems related
to year 2000 issues associated with products distributed, or with the Company's
internal computer systems. However, the Company cannot guarantee that the year
2000 problem will not adversely affect its business, operating results or
financial condition at some point in the future.
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ITEM 2: Properties
<TABLE>
<CAPTION>
Square
Location Type Principal Use Footage Ownership
- -------- ---- ------------- ------- ---------
<S> <C> <C> <C> <C>
San Jose, CA Office, warehouse Headquarters, 56,840 Leased until
distribution center December 2002.
(Bldg. One)
San Jose, CA Office Headquarters, 15,657 Leased until 2002 with five
(Bldg. Two) one-year options to extend.
San Jose, CA Warehouse Distribution center 37,797 Leased until June 2002.
New Castle, DE Warehouse Distribution center 51,677 Leased until May 2005.
Miami, FL Office, Distributon center 64,086 Leased until April 2002
warehouse with three two-year
options to extend.
Marlboro, MA Office, plant & Distribution center, 14,975 Leased until February
warehouse Manufacturing 2002.
Champlin, MN Office, plant & Distribution center, 26,330 Leased until April 2002.
warehouse Manufacturing
Markham, Ontario Office, Distribution center 17,628 Leased until March 2004
warehouse with option to extend
five years.
</TABLE>
The Company also leases sales and/or warehouse locations in Huntsville,
Alabama; Phoenix, Arizona; Agoura Hills, Irvine and San Diego, California;
Denver, Colorado; Altamonte Springs and Bonita Springs, Florida; Marietta,
Georgia; Chicago, Illinois; Columbia, Maryland; Woburn, Massachusetts; Eden
Prairie, Minnesota; Clifton and Pine Brook, New Jersey; Smithtown, New York;
Beaverton, Oregon; Strongsville, Ohio; Langhorne and Needmore, Pennsylvania;
Austin, Houston and Richardson, Texas; Centerville, Utah; Herndon, Virginia;
Bellevue, Washington; Buenos Aires, Argentina; Sao Paolo, Brazil; Vancouver,
British Columbia; Montreal, Quebec; Santiago, Chile; and Mexico City, Mexico.
ITEM 3: Legal Proceedings
The Company is subject to legal proceedings and claims that arise in the
normal course of business. Management believes that the ultimate resolution of
such matters will not have a material adverse affect on the Company's financial
position or results of operations. Such litigation could in the future result in
substantial costs and diversion of management resources. Such litigation could
also result in payment of substantial damages or prohibitions against
utilization of essential technologies, and could have a material adverse effect
on our business, financial condition and results of operations.
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During 1999, the Company filed suit against American Credit Indemnity
("ACI"), its former credit insurer, for recovery of amounts due under claim made
by the Company. ACI has counter sued for rescission of the credit insurance
contract for repayment of claims previously paid. Management has reviewed and
investigated the claims, and while no assurance can be given regarding the
outcome of this matter, management believes that the final outcome of the matter
will not have a material impact on consolidated financial position or results of
operations. However, because of the nature and inherent uncertainties of
litigation, should the outcome of this matter be unfavorable, the Company may be
required to pay damages and other expenses, which could have a material adverse
effect on its financial position and results of operations.
ITEM 4: Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5: Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "BELM." The following table sets forth for the periods indicated the
high and low sale prices of the Common Stock as reported by Nasdaq.
High Low
---- ---
Fiscal 1998
First quarter $ 8.75 $7.06
Second quarter 8.75 6.63
Third quarter 9.25 5.25
Fourth quarter 11.00 5.25
Fiscal 1999
First quarter $10.44 $5.50
Second quarter 8.25 5.69
Third quarter 10.31 6.56
Fourth quarter 11.00 6.44
Fiscal 2000
First quarter (through March 15, 2000) $16.50 $8.88
On March 15, 2000, the last sale price of the Common Stock as reported by
Nasdaq was $14.44 per share.
As of March 15, 2000, there were approximately 272 holders of record of the
Common Stock (not including shares held in street name).
To date, the Company has paid no cash dividends to its shareholders. The
Company has no plans to pay cash dividends in the near future. The Company's
line of credit agreement prohibits the Company's payment of dividends or other
distributions on any of its shares except dividends payable in the Company's
capital stock.
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ITEM 6: Selected Financial Data
The selected financial data of the Company set forth below should be read
in conjunction with the consolidated financial statements of the Company,
including the notes thereto, and Management's Discussion and Analysis included
elsewhere herein.
<TABLE>
<CAPTION>
(in thousands, except earnings per share data)
Year Ended December 31,
----------------------------------------------------------------
Statement of Income Data: 1999(1) 1998(2) 1997 1996 1995
---------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $1,058,275 $ 575,330 $ 460,516 $391,240 $ 296,633
Cost of sales 967,491 511,476 406,301 345,189 261,895
---------- --------- --------- -------- ---------
Gross profit 90,784 63,854 54,215 46,051 34,738
Selling, general and administrative expense 69,507 46,070 40,942 36,175 27,901
---------- --------- --------- -------- ---------
Income from continuing operations 21,277 17,784 13,273 9,876 6,837
Interest expense 6,413 3,168 2,451 3,192 3,143
Foreign currency remeasurement gain 647 -- -- -- --
---------- --------- --------- -------- ---------
Income from continuing operations before taxes 15,511 14,616 10,822 6,684 3,694
Provision for income taxes 6,581 6,139 4,545 2,807 1,515
---------- --------- --------- -------- ---------
Income from continuing operations 8,930 8,477 6,277 3,877 2,179
Income/(loss) from discontinued operations,
net of income taxes (2,946) (2,402) (1,588) 3,985 1,823
Gain on sale of contract manufacturing segment 1,054 -- -- -- --
---------- --------- --------- -------- ---------
Net income $ 7,038 $ 6,075 $ 4,689 $ 7,862 $ 4,002
========== ========= ========= ======== =========
Basic earnings per shares (3)
Continuing operations $ 0.99 $ 0.96 $ 0.73 $ 0.46 $ 0.27
Discontinued operations (0.21) (0.27) (0.18) 0.48 0.22
---------- --------- --------- -------- ---------
Total $ 0.78 $ 0.69 $ 0.55 $ 0.94 $ 0.49
========== ========= ========= ======== =========
Diluted earnings per share (3)
Continuing operations $ 0.98 $ 0.95 $ 0.70 $ 0.46 $ 0.26
Discontinued operations (0.21) (0.27) (0.18) 0.47 0.22
---------- --------- --------- -------- ---------
Total $ 0.77 $ 0.68 $ 0.53 $ 0.92 $ 0.48
========== ========= ========= ======== =========
Shares used in per share calculation
Basic 9,042 8,792 8,562 8,359 8,173
========== ========= ========= ======== =========
Diluted 9,123 8,881 8,906 8,511 8,350
========== ========= ========= ======== =========
Year Ended December 31,
----------------------------------------------------------------
1999(1) 1998(2) 1997 1996 1995
Balance Sheet Data: ---------- --------- --------- -------- ---------
Working capital $ 182,626 $ 167,109 $ 134,612 $ 105,958 $ 106,914
Total assets 360,351 285,580 205,420 175,680 157,277
Total long-term debt 110,638 106,963 74,460 50,885 59,453
Total shareholders' equity 96,273 86,476 77,667 71,127 62,462
</TABLE>
- ----------
(1) 1999 Statement of Income Data and Balance Sheet Data include the results of
operations of Future Tech, Inc. from the date of acquisition on July 21,
1999. See Note 3 of Notes to Consolidated Financial Statements.
10
<PAGE>
(2) 1998 Statement of Income Data and Balance Sheet Data include the results of
operations of the Computer Products Division of Almo Corporation since
acquisition on November 13, 1998 and Tenex Data Division of Axidata Inc. on
November 19, 1998. See Note 3 of Notes to Consolidated Financial
Statements.
(3) All per share amounts have been restated in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". See Note 2 of
Notes to Consolidated Financial Statements.
ITEM 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
For an understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and the
other information appearing elsewhere in this report.
When used in this report, the words "expects," "anticipates," "estimates,"
"intends" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A under the Securities Act of 1933
and Section 21E under the Securities Exchange Act of 1934. Such statements
include but are not limited to statements regarding the ability to obtain
favorable product allocations, the ability to increase gross profit while
controlling expenses, and the costs of Year 2000 compliance. These statements
are subject to risks and uncertainties that could cause actual results to differ
materially, including those risks described under "Risk Factors" in Item 1
hereof.
RESULTS OF OPERATIONS
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales were $1,058.3 million for the year ended December 31,1999, which
represented an increase of $483.0 million or 84% over 1998. Computer Product
sales increased by $440.5 million primarily due to the expansion of the customer
base related to the acquisitions of Future Tech International ("FTI") in July
1999, the Computer Products Division of Almo Corporation ("Almo CPD") and Tenex
Data Division of Axidata, Inc. ("Tenex Data") in November 1998, and to the
growth in unit sales in existing product lines and the addition of new lines.
Semiconductor sales increased by $42.5 million primarily due to the acquisition
of FTI, growth in unit sales in existing product lines and the addition of new
lines. FTI contributed net sales of $107.9 million, since acquisition on July
21, 1999.
The Company's gross profit for 1999 was $90.8 million, an increase of $26.9
million, or 42% over 1998. The increase in gross profit was primarily the result
of increased sales volume. As a percentage of sales, overall gross margins were
8.6% compared to 11.1% in 1998. This decrease was primarily due to increased
competitive pricing in the industry and the increase in the proportion of
computer product sales, which typically have lower margins than semiconductors
products.
Selling, general and administrative expenses increased 51% to $69.5 million
in 1999 from $46.1 million in 1998, but decreased as a percentage of sales to
6.6% from 8.0%. The increase in expenses was attributable to increased sales
volume, the acquisitions of FTI, Almo CPD and Tenex Data and the Company's
continuing effort to strengthen its financial and administrative support.
Interest expense increased in 1999 to $6.4 million from $3.2 million in
1998, or 100%. The increase in interest expense was due to increased bank
borrowings during 1999 to fund the Company's working capital needs and increases
in interest rates on outstanding borrowings. The average interest rate in 1999
was 7.3%, versus 7.0% in 1998. The average balance outstanding was $103.2
million in 1999, versus $73.6 million in 1998.
11
<PAGE>
In 1999, the Company recognized remeasurement gains of approximately
$647,000 relating to the retranslation of US dollar denominated debt of Tenex
Data.
The Company's effective income tax rate remained unchanged at 42% in 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales were $575.3 million for the year ended December 31,1998, which
represented an increase of $114.8 million or 25% over 1997. Computer products
sales increased from 1997 primarily due to the growth of unit sales in existing
product lines, the addition of new lines and expansion of the customer base
related to the acquisitions of Almo CPD and Tenex Data in November 1998. Almo
CPD and Tenex Data contributed net sales of $16.3 million and $8.3 million
respectively in the year ended December 31, 1998. The contribution to net income
was not material. Semiconductor sales decreased from 1997 primarily due to
industry-wide price declines.
The Company's gross profit for 1998 was $63.9 million, an increase of $9.6
million, or 18% over 1997. The increase in gross profit was primarily the result
of increased sales volume. As a percentage of sales, overall gross margins were
11.1% compared to 11.8% in 1997. This decrease was primarily due to increased
competitive pricing in the industry and the increase in the proportion of
computer product sales, which typically have lower margins than semiconductor
products.
Selling, general and administrative expenses increased 13% to $46.1 million
in 1998 from $40.9 million in 1997, but decreased as a percentage of sales to
8.0% from 8.9%. The increase in expenses was attributable to increased sales
volume, the acquisitions of Almo CPD and Tenex Data and the Company's continuing
effort to expand its sales and marketing organization. The Company also
increased its bad debt expenses due to increased sales volumes and changing
market conditions.
Interest expense increased in 1998 to $3.2 million from $2.5 million in
1997. The increase in interest expense was due to increased bank borrowings
during 1998 to fund the Company's working capital needs and the acquisitions of
Almo CPD and Tenex Data.
The Company's effective income tax rate remained unchanged at 42% in 1998.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, the Company has funded its working capital requirements
principally through borrowings under bank lines of credit. Working capital
requirements have included the financing of increases in inventory and accounts
receivable resulting from sales growth.
On December 8, 1999 and as further amended on December 31, 1999, the
Company entered into an amendment to the Third Amended and Restated Syndicated
Credit Agreement arranged by California Bank & Trust, as Agent. The amendment
increased the Company's $130 million revolving line of credit to $160 million
and extended the maturity date to May 31, 2001. At the Company's option, the
borrowings under the line of credit will bear interest at California Bank &
Trust's prime rate (8.5% at December 31, 1999) or the adjusted LIBOR rate plus a
maximum of 2.25%. The balance outstanding on the revolving line of credit at
December 31, 1999 was $110.6 million. Obligations of the Company under the
revolving line of credit are secured by substantially all of the Company's
assets. The revolving line of credit requires the Company to meet certain
financial tests and to comply with certain other covenants on a quarterly basis,
including restrictions on incurrence of debt and liens, restrictions on mergers,
acquisitions, asset dispositions, declaration of dividends, repurchases of
12
<PAGE>
stock, making investments and profitability. The Company was in compliance with
its bank covenants at December 31, 1999; however, there can be no assurance that
the Company will be in compliance with its bank covenants in the future. If the
Company does not remain in compliance with the covenants in its Amended and
Restated Syndicated Credit Agreement and is unable to obtain a waiver of
noncompliance from its banks, the Company's financial condition and results of
operations would be materially adversely affected. The Company intends to
utilize its revolving line of credit to fund future working capital
requirements. The Company evaluates potential acquisitions from time to time and
may utilize its line of credit to acquire complementary businesses, provided
consent from its banks is obtained.
On July 21, 1999, the Company acquired certain assets and assumed certain
liabilities of FTI for a purchase price of approximately $2.2 million in cash
including acquisition costs. The acquisition, which was accounted for as a
purchase, was funded through borrowings under the Company's revolving line of
credit. On June 8, 1999 the Company sold its Contract Manufacturing Division,
Quadrus, for a total cash consideration of $34.7 million. On November 13, 1998,
the Company acquired the Almo CPD for approximately $20.7 million in cash and a
stock warrant valued at $1.0 million. On November 19, 1998, the Company acquired
Tenex Data Inc. for a total consideration of approximately $5.8 million in cash.
Both the 1998 acquisitions were funded through the Company's revolving line of
credit.
The Company's accounts receivable and inventories increased to $168.9
million and $156.6 million at December 31, 1999, respectively, from $106.6
million and $105.3 million, respectively, as of December 31, 1998. Days sales
outstanding at December 31, 1999 were 47 days and inventory turns were 7.6 times
per year compared to DSO of 51 days and turns of 6.0 in 1998. These increases
were primarily the result of the Company's increased sales volume and the
purchase of accounts receivable and inventory through the Company's acquisition
of FTI in July 1999. The Company's accounts payable increased to $143.6 million
in 1999 from $72.0 million in 1998 due to increased inventory purchases and the
addition of accounts payable through the Company's acquisition in 1999.
Net cash provided by investing activities in 1999 totaled $27.4 million,
which was primarily related to the sale of Quadrus. The net amount of cash
provided by financing activities in 1999 was $10.6 million, principally from
utilization of the Company's revolving line of credit with its banks. The net
amount of cash used in continuing operating activities was $32.6 million in
1999.
Year 2000 Compliance
The Year 2000 issue relates to the way computer systems and programs define
calendar dates; they could fail or make miscalculations due to interpreting a
date including "00" to mean 1900, not 2000. This could result in system failures
causing disruptions in operations, including among other things, interruptions
in processing business transactions and other normal business operations. Also,
many systems and equipment that are not typically thought of as
"computer-related" (referred to as non-IT) contain embedded hardware or software
that may have a time element.
Thus far, the Company has not experienced any significant problems related
to year 2000 issues associated with products distributed, or with the Company's
internal computer systems. However, the Company cannot guarantee that the year
2000 problem will not adversely affect its business, operating results or
financial condition at some point in the future.
Recent Developments
On February 16, 2000, the Company entered into a non-binding letter of
intent with Rorke Data, Incorporated ("Rorke"), pursuant to which the Company
would acquire all the outstanding equity securities of Rorke for a total
purchase price of $5,350,000 payable cash, subject to certain post-closing net
worth adjustments.
13
<PAGE>
ITEM 7A: Quantitative and Qualitative Disclosures About Market Risk
The Company's line of credit has an interest rate that is based on
associated rates such as LIBOR and the Prime Rate that may fluctuate over time
based on changes in the economic environment. The Company is subject to interest
rate risk, and could be subjected to increased interest payments if market
interest rates fluctuate. An increase of 1% in such interest rate percentages
would increase the annual interest expense by $1.1 million, based on the
borrowings at December 31, 1999.
Substantially all of the Company's revenue and capital expenditure are
transacted in US Dollars. Transactions in other currencies and the associated
risks of depreciation of value and volatility of cashflows have not been
material to date. The Company is subject to increased foreign currency
transactions and associated risks following the acquisition of Toronto-based
Tenex Data in November 1998 and the acquisition of Future Tech, Inc. in July
1999. To the extent the Company is unable to manage these risks, the Company's
results and financial position could be materially adversely affected. The
Company does not engage in hedging activities such as foward currency exchange
contracts and does not invest in derivative financial instruments.
14
<PAGE>
ITEM 8: Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Form 10-K
Page Number
-----------
Report of Independent Accountants 16
Consolidated Balance Sheets at December 31, 1999 and 1998 17
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 18
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 20
Notes to Consolidated Financial Statements 21
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Bell Microproducts Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) (1) and (2) on page 36 present fairly, in all
material respects, the financial position of Bell Microproducts Inc. at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material mistatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
February 14, 2000
16
<PAGE>
BELL MICROPRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31,
----------------------
1999 1998
-------- --------
ASSETS
Current assets:
Cash $ 5,103 $ 4,082
Accounts receivable, net of allowance for doubtful
accounts of$4,986 and $3,374 168,857 106,609
Inventories 156,648 105,330
Prepaid expenses and other current assets 5,458 5,226
Assets of discontinued operations -- 47,790
-------- --------
Total current assets 336,066 269,037
Property and equipment, net 7,626 3,355
Goodwill and other intangibles, net of accumulated
amortization of $2,314 and $1,518 16,059 12,362
Other assets 600 826
-------- --------
Total assets $360,351 $285,580
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $143,632 $ 72,002
Other accrued liabilities 9,808 8,429
Liabilities relating to discontinued operations -- 16,240
-------- --------
Total current liabilities 153,440 96,671
Borrowings under the line of credit 110,600 102,400
Other long-term liabilities 38 33
-------- --------
Total liabilities 264,078 199,104
-------- --------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred Stock, $0.01 par value, 10,000 shares
authorized; none issued and outstanding -- --
Common Stock, $0.01 par value, 20,000 shares
authorized;9,251 and 8,914 shares issued and
outstanding 58,527 56,181
Comprehensive income:
Retained earnings 37,285 30,247
Cumulative translation adjustment 461 48
-------- --------
Total shareholders' equity 96,273 86,476
-------- --------
Total liabilities and shareholders' equity $360,351 $285,580
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
17
<PAGE>
BELL MICROPRODUCTS INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 1,058,275 $ 575,330 $ 460,516
Cost of sales 967,491 511,476 406,301
----------- ----------- -----------
Gross profit 90,784 63,854 54,215
Selling, general and administrative expenses 69,507 46,070 40,942
----------- ----------- -----------
Operating income from continuing operations 21,277 17,784 13,273
Interest expense 6,413 3,168 2,451
Foreign currency remeasurement gain 647 -- --
----------- ----------- -----------
Income from continuing operations before income taxes 15,511 14,616 10,822
Provision for income taxes 6,581 6,139 4,545
----------- ----------- -----------
Income from continuing operations 8,930 8,477 6,277
Discontinued operations:
Loss from operations, net of tax
benefit of $2,132, $1,739 and $1,150 (2,946) (2,402) (1,588)
Gain on sale, net of tax of $763 1,054 -- --
----------- ----------- -----------
Discontinued operations, net (1,892) (2,402) (1,588)
----------- ----------- -----------
Net income 7.038 6,075 4,689
----------- ----------- -----------
Other comprehensive income, net of tax:
Foreign currency translation adjustments 413 48 --
----------- ----------- -----------
Comprehensive income $ 7,451 $ 6,123 $ 4,689
=========== =========== ===========
Earnings per share (Note 2)
Basic
Continuing operations $ 0.99 $ 0.96 $ 0.73
Discontinued operations (0.21) (0.27) (0.18)
----------- ----------- -----------
Total $ 0.78 $ 0.69 $ 0.55
=========== =========== ===========
Earnings per share
Diluted
Continuing operations $ 0.98 $ 0.95 $ 0.71
Discontinued operations (0.21) (0.27) (0.18)
----------- ----------- -----------
Total $ 0.77 $ 0.68 $ 0.53
=========== =========== ===========
Shares used in per share calculation (Note 2)
Basic 9,042 8,792 8,562
=========== =========== ===========
Diluted 9,123 8,881 8,906
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
18
<PAGE>
BELL MICROPRODUCTS INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Comprehensive Income
Common Stock ---------------------
------------------- Retained
Shares Amount Earnings Other Total
------ ------ -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 8,445 $51,644 $19,483 $ -- $71,127
Exercise of stock options, including
related tax benefit of $225 147 1,117 -- -- 1,117
Issuance of Common Stock under
Stock Purchase Plan 104 734 -- -- 734
Net income -- -- 4,689 -- 4,689
------ ------- ------- ----- -------
Balance at December 31, 1997 8,696 53,495 24,172 -- 77,667
Exercise of stock options, including
related tax benefit of $86 111 943 -- -- 943
Issuance of Common Stock under
Stock Purchase Plan 107 700 -- -- 700
Issuance of stock warrant (Note 3) -- 1,043 -- -- 1,043
Foreign currency translation -- -- -- 48 48
Net income -- -- 6,075 -- 6,075
------ ------- ------- ----- -------
Balance at December 31, 1998 8,914 56,181 30,247 48 86,476
Exercise of stock options, including
related tax benefit of $72 235 1,743 -- -- 1,743
Issuance of Common Stock under
Stock Purchase Plan 102 603 -- -- 603
Foreign currency translation -- -- -- 413 413
Net income -- -- 7,038 -- 7,038
------ ------- ------- ----- -------
Balance at December 31, 1999 9,251 $58,527 $37,285 $ 461 $96,273
====== ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
19
<PAGE>
BELL MICROPRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Increase (decrease) in cash, in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing activities $ 8,930 $ 8,477 $ 6,277
Adjustments to reconcile net income to net
cash (used in)/provided by operating activities:
Depreciation and amortization 2,254 1,132 779
Change in allowance for doubtful accounts 1,113 2,099 (2,885)
Change in deferred and refundable income taxes (148) (1,477) 1,119
Changes in assets and liabilities:
Accounts receivable (50,785) (18,704) (6,888)
Inventories (48,679) (14,776) (22,034)
Prepaid expenses 2,721 (497) (299)
Other assets 226 (548) (38)
Accounts payable 50,641 23,995 (1,621)
Other accrued liabilities 1,175 1,289 481
-------- -------- --------
Net cash (used in)/provided by continuing
operating activities (32,552) 990 (25,109)
Net cash (used in)/provided by discontinued
operations (4,745) (9,261) 1,570
-------- -------- --------
Net cash used in operating activities (37,297) (8,271) (23,539)
-------- -------- --------
Cash flows from investing activities:
Acquisition of property and equipment, net (4,412) (1,308) (1,490)
Acquisitions of businesses (Note 3) (2,808) (26,770) --
Proceeds from sale of business (Note 3) 34,665 -- --
-------- -------- --------
Net cash provided by/(used in) investing activities 27,445 (28,078) (1,490)
-------- -------- --------
Cash flows from financing activities:
Net borrowings under line of credit 8,200 32,400 24,100
agreement
proceeds from issuance of Common Stock 2,346 1,643 1,851
Net payments/(borrowings) under long-term liabilities 5 15 (279)
-------- -------- --------
Net cash provided by financing activities 10,551 34,058 25,672
Effect of exchange rate changes on cash 322 48 --
-------- -------- --------
Net increase/(decrease) in cash 1,021 (2,243) 643
Cash at beginning of year 4,082 6,325 5,682
-------- -------- --------
Cash at end of year $ 5,103 $ 4,082 $ 6,325
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 7,523 $ 5,555 $ 4,641
Income taxes $ 5,606 $ 4,592 $ 2,695
Supplemental non-cash financing activities:
Obligations incurred under capital leases $ -- $ 2,519 $ 1,333
Stock warrant issued in connection with
acquisition (Note 3) $ -- $ 1,043 --
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
20
<PAGE>
BELL MICROPRODUCTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
The Company operates in one business segment, as a distributor of
semiconductor and computer products to original equipment manufacturers (OEMs),
value-added resellers (VARs) and dealers in the United States, Canada and Latin
America. Semiconductor products include memory, logic, microprocessor,
peripheral and specialty components. Computer products include disk, tape and
optical drives and subsystems, drive controllers, computers and board-level
products. The Company also provides a variety of value-added services to its
customers, including subsystem testing, software loading, mass storage and
computer systems integration, disk drive formatting and testing, and the
packaging of electronic component kits to customer specifications.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Basis of Preparation
The consolidated financial statements include the accounts of the parent
company and all of its wholly owned subsidiaries. All material intercompany
transactions and balances have been eliminated on consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized when products are shipped. Provisions for estimated
losses on returns and for expected warranty costs are recorded at the time of
sale and are adjusted periodically to reflect changes in experience and expected
obligations.
Concentration of Credit and Other Risks
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for estimated collection
losses. No customer accounts for more than 10% of sales in any of the three
years ended December 31, 1999, 1998 and 1997, or accounts receivable at December
31, 1999 and 1998.
Three vendors accounted for 55% of the Company's inventory purchases during
1999. Two vendors accounted for 49% and 57% of the Company's inventory purchases
during 1998 and 1997, respectively. One such vendor has obtained a second
priority lien against the Company's inventories to secure payment for the
Company's purchase of goods.
Inventories
Distribution inventories are stated at the lower of cost or market, cost
being determined by the first-in, first-out (FIFO) method. Market is based on
estimated net realizable value.
21
<PAGE>
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
is computed using the straight-line method based upon the estimated useful lives
of the assets which range from three to five years. Amortization of leasehold
improvements is computed using the straight-line method over the shorter of the
estimated life of the asset or the lease term.
Goodwill
Assets and liabilities acquired in connection with business combinations
accounted for under the purchase method are recorded at their respective fair
values. The excess of the purchase price over the fair value of the assets
acquired is recorded as goodwill and amortized on a straight-line basis over a
fifteen year period for 1999 and 1998 acquisitions and a twenty-five year period
for prior years' business combinations. The Company periodically reviews the
recoverability of goodwill.
Impairment of Long-Lived Assets
The Company continually monitors its long-lived assets to determine whether
any impairment of these assets has occurred. In making such determination, the
Company evaluates the performance of the underlying businesses, products and
product lines. The Company recognizes impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets. No material impairments have been
experienced.
Income Taxes
Deferred income taxes are provided for temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities as part of the income tax provisions.
Earnings Per Share
Basic EPS is computed by dividing net income available to common
shareholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period including stock
options, using the treasury stock method, and convertible preferred stock, using
the if-converted method. In computing Diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be purchased
from the exercise of stock options.
Following is a reconciliation of the numerators and denominators of the
Basic and Diluted EPS computations for the periods presented below (in
thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net income $7,038 $6,075 $4,689
====== ====== ======
Weighted average common shares outstanding (basic) 9,042 8,792 8,562
Effect of dilutive warrant and options 81 89 344
------ ------ ------
Weighted average common shares outstanding (diluted) 9,123 8,881 8,906
====== ====== ======
Earnings Per Share:
Basic $ 0.78 $ 0.69 $ 0.55
====== ====== ======
Diluted $ 0.77 $ 0.68 $ 0.53
====== ====== ======
</TABLE>
22
<PAGE>
Options and warrant to purchase 1,053,650 shares of common stock at a
weighted average price of $10.08 per share were outstanding at December 31, 1999
but were not included in the computation of Diluted EPS because the exercise
prices were greater than the average market price of the common shares. At
December 31, 1998, there were 1,129,100 options and warrant outstanding to
purchase common stock at a weighted average price of $9.97 per share excluded
from the Diluted EPS computation due to their anti-dilution. At December 31,
1997, there were 478,200 options and warrant outstanding to purchase common
stock at a weighted average price of $9.98 per share excluded from the Diluted
EPS computation due to their anti-dilution.
Foreign Currency Translation and Transactions
The financial statements of the Company's foreign subsidiary are measured
using the local currency as the functional currency. Assets and liabilities of
this subsidiary are translated at the rate of exchange at the balance sheet
date. Income and expense items are translated at average quarterly rates of
exchange prevailing during the year. The resulting translation adjustments are
included in accumulated other comprehensive income as a separate component of
stockholders' equity. Gains and losses from foreign currency transactions are
included in the statement of income.
Comprehensive Income
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the Company, comprehensive income consists of its
reported net income or loss and the change in the foreign currency translation
adjustment during a period.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." The Company's policy is to grant
options with an exercise price equal to the quoted market price of the Company's
stock on the date of the grant. Accordingly, no compensation cost has been
recognized in the Company's Statements of Income. The Company provides
additional proforma disclosures as required under Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation."
Segment Reporting
Financial Accounting Standards Board Statement No.131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") requires that
companies report separately in the financial statements certain financial and
descriptive information about operating segments profit or loss, certain
specific revenue and expense items and segment assets. Additionally, companies
are required to report information about the revenues derived from their
products and service groups, about geographic areas in which the Company earns
revenues and holds assets, and about major customers (see Note 11).
Recently Issued Accounting Standards
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133." SFAS 137 amends Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," to defer its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS 133 establishes
accounting and reporting standards for derivative instruments including
standalone instruments, such as forward currency exchange contracts and interest
rate swaps or embedded derivatives and requires that these instruments be
marked-to-market on an ongoing basis. These market value adjustments are to be
included either in the income statement or stockholders' equity, depending on
the nature of the transaction. The Company is required to adopt SFAS 133 in the
first quarter of its fiscal year 2001. The effect of SFAS 133 is not expected to
be material to the Company's financial statements.
23
<PAGE>
NOTE 3 - ACQUISITIONS AND DIVESTITURES:
On July 8, 1999 the Company completed the sale of its Contract
Manufacturing Division, Quadrus, for a total consideration of approximately
$34.7 million. The sale resulted in an after tax gain of $1.1 million or $0.11
per share. The results of Quadrus have been reported separately as discontinued
operations in the Consolidated Statements of Income and prior year consolidated
financial statements have been restated.
On July 21, 1999, the Company acquired certain assets and assumed certain
liabilities of Future Tech International, Inc., a privately held company located
in Miami. Prior to its reorganization in bankruptcy and subsequent acquisition
of the Company, FTI was a leading value-added distributor of computer components
to the markets of Latin America and the Caribbean. FTI distributes products
manufactured by AMD, Canon, Maxtor, NEC, Quantum and other leading
manufacturers, and manufactures and markets its proprietary Markvision-branded
products.
The FTI assets acquired were primarily accounts receivable, inventory and
fixed assets. As consideration for the assets purchased, the Company paid $2.2
million in cash, including acquisition costs and assumed certain liabilities,
primarily trade accounts payable. The Company is obligated to pay up to an
additional $4.5 million in cash within 21 months of the closing date as a
contingent incentive payment to be based upon earnings achieved up to the first
anniversary of the acquisition.
The FTI purchase price was allocated to the acquired assets and liabilities
assumed based upon management's estimate of their fair market values as of the
acquisition date as follows (in thousands):
Restricted cash $ 23
Accounts receivable 12,576
Inventories 2,639
Equipment and other assets 3,947
Goodwill 4,227
Accounts payable (20,989)
Other accrued liabilities (204)
--------
Total consideration $ 2,219
========
On November 19, 1998, the Company acquired certain assets and assumed
certain liabilities of Tenex Data Division of Axidata, Inc., for a purchase
price of approximately $5.8 million in cash including acquisition costs.
On November 13, 1998, the Company acquired certain assets and assumed
certain liabilities of the Computer Products Division of Almo Corporation, for a
total consideration of approximately $21.7 million including acquisition costs.
The Company issued to Almo a fully vested warrant to purchase 350,000 shares of
the Company's Common Stock at $12.00 per share, in consideration for a covenant
not to compete. The warrant may be exercised at any date for a period up to five
years from the date of acquisition. The warrant was independently valued at
$1,043,000; significant assumptions used were a risk free rate of 4.89%, fair
value of Common Stock of $5.88 and an expected life of five years. The warrant
was recorded as a component of equity and as a covenant not to compete. The
related charge will be amortized over a period of five years.
24
<PAGE>
The Almo CPD and Tenex Data purchase prices were allocated to the acquired
assets and liabilities assumed based upon management's estimate of their fair
market values as of the acquisition dates as follows (in thousands):
Almo CPD Tenex Data Total
-------- ---------- --------
Accounts receivable $ 15,525 $ 5,365 $ 20,890
Inventories 5,991 2,737 8,728
Equipment and other assets 517 177 694
Intangibles-covenant not to compete 1,043 -- 1,043
Goodwill 3,645 1,373 5,018
Accounts payable (4,135) (3,645) (7,780)
Other accrued liabilities (929) (186) (1,115)
-------- ------- --------
Total consideration $ 21,657 $ 5,821 $ 27,478
======== ======= ========
All acquisitions have been accounted for under the purchase method and were
funded through borrowings under the Company's revolving line of credit. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition.
The following unaudited pro forma combined summary of operations of the
Company give effect to the acquisitions of FTI, Almo CPD, and Tenex Data, as
though these acquisitions had occurred on January 1, 1998.
Year Ended December 31,
------------------------
(unaudited)
1999 1998
--------- --------
(in thousands)
Pro forma net sales $1,131,003 $913,551
Pro forma net income/(loss) $ 3,908 $ (7,642)
Pro forma earnings per share - continuing
operations
Basic $ 0.43 $ (0.87)
Diluted $ 0.42 $ (0.86)
Shares used in per share calculation
Basic 9,190 8,792
Diluted 9,289 8,881
The pro forma loss for 1998 includes charges incurred by FTI for $13.3
million of unrecoverable related party receivables due from the former
controlling shareholder and $3.1 million of legal and professional fees.
Excluding these charges, the pro forma income for 1998 would have been $1.9
million and pro forma earnings per share would have been $0.21 per share.
The unaudited pro forma combined summary of operations assumes: 1) the
amortization of goodwill over a fifteen year period, 2) the amortization of the
covenant not to compete over the five year period, and 3) the additional
interest expense on debt incurred in connection with the acquisitions as if the
debt had been outstanding from January 1, 1998.
The unaudited pro forma combined summary of operations does not purport to
be indicative of the results which actually would have been obtained if the
acquisitions had been made at the beginning of 1998 or of those results which
may be obtained in the future.
25
<PAGE>
NOTE 4 - BALANCE SHEET COMPONENTS:
December 31,
------------------------
1999 1998
-------- -------
(in thousands)
Property and equipment:
Computer and other equipment $ 6,753 $ 3,121
Furniture and fixtures 2,354 1,761
Leasehold improvements 899 476
Warehouse equipment 1,412 484
-------- -------
11,418 5,842
Less: accumulated depreciation (3,792) (2,487)
-------- -------
$ 7,626 $ 3,355
======== =======
NOTE 5 - LINE OF CREDIT AND TERM LOAN:
On December 8, 1999 and as further amended on December 31,1999, the Company
entered into an amendment to the Third Amended and Restated Syndicated Credit
Agreement, arranged by California Bank & Trust, as agent. The amendment
increased the Company's $130 million revolving line of credit to $160 million,
and extended its maturity date to May 31, 2001. At the Company's option, the
borrowings under the line of credit will bear interest at California Bank &
Trust's prime rate (8.50% at December 31, 1999) or the adjusted LIBOR rate plus
a maximum of 2.25%. The balance outstanding on the revolving line of credit at
December 31, 1999 was $110.6 million. Obligations of the Company under the
revolving line of credit are secured by substantially all of the Company's
assets. The revolving line of credit requires the Company to meet certain
financial tests and to comply with certain other covenants on a quarterly basis,
including restrictions on incurrence of debt and liens, restrictions on mergers,
acquisitions, asset dispositions, declaration of dividends, repurchases of
stock, making investments and profitability. The Company was in compliance with
its bank covenants at December 31, 1999; however, there can be no assurance that
the Company will be in compliance in the future.
NOTE 6 - STOCK-BASED COMPENSATION PLANS:
Stock Option Plans
In May of 1998, the Company adopted the 1998 Stock Plan (the "Plan") which
replaced the 1988 Amended and Restated Incentive Stock Plan (the "1988 Plan")
and the 1993 Director Stock Option Plan (the "Director Plan"). All options
granted after May 1998 are granted under the 1998 Stock Plan.
The Plan provides for the grant of stock options and stock purchase rights
to employees, directors and consultants of the Company at prices not less than
the fair value of the Company's Common Stock at the date of grant for incentive
stock options and prices not less than 85% of the fair value of the Company's
Common Stock for nonstatutory stock options and stock purchase rights. Under the
Plan, the Company has reserved for issuance a total of 856,569 shares of Common
Stock plus 181,672 shares of Common Stock which were reserved but unissued under
the 1988 Plan and 35,000 shares of Common Stock which were reserved but unissued
under the Director Plan. The maximum aggregate number of shares of Common Stock
which may be optioned and sold under the Plan is 1,073,241 shares, plus an
annual increase to be added on January 1 of each year beginning in 1999, equal
to the lesser of (i) 400,000 shares, (ii) 4% of the outstanding shares on such
date, or (iii) a lesser amount determined by the Board of Directors, subject to
adjustment upon changes in capitalization of the Company. Since inception, the
Company has reserved 3,895,322 shares of Common Stock for issuance under the
aggregate of all stock option plans.
The stock options become exercisable over a vesting period as determined by
the Board of Directors and expire over terms not exceeding ten years from the
date of grant. If an optionee ceases to be employed by the Company, the optionee
may, within one month (or such other period of time, as determined by the Board
of Directors, but not exceeding three months) exercise options to the extent
vested.
26
<PAGE>
As part of the Plan, the Board of Directors adopted a Management Incentive
Program (the "Program") for key employees. Under this Program, options for
140,000, 40,500 and 130,000 shares of Common Stock were granted in 1999, 1998
and 1997, respectively. The Program provides for ten-year option terms with
vesting at the rate of one tenth per year, with potential for accelerated
vesting based upon attainment of certain performance objectives. The options
lapse ten years after the date of grant or such shorter period as may be
provided for in the stock option agreement.
Options granted under the Director Plan prior to May 1998 and outstanding
at December 31, 1999 total 90,000. Under the Director Plan, 75,000 options were
granted in 1993 at an exercise price of $8.00 per share, and 20,000 options were
granted in 1996 at an exercise price of $7.00 per share. In 1997, 20,000 options
were granted at an exercise price of $12.63 per share. In 1998, 15,000 options
were granted at an exercise price of $7.50 per share. On August 5, 1999, the
Board of Directors approved the vesting in full of all options currently held by
the Directors and modified the Plan to immediately vest all future Board of
Directors options at the time they are granted.
The following table presents activity under all Stock Plans:
Options Outstanding
------------------------
Options Weighted
Available for Average
Grant Shares Exercise Price
---------- ------ --------------
Balance at December 31, 1996 246,843 1,304,000 $ 7.10
Increase in options available for grant 300,000 -- --
Options canceled 280,729 (280,729) $ 7.11
Options granted (649,500) 649,500 $ 9.64
Options exercised -- (147,312) $ 6.48
---------- ---------- ------
Balance at December 31, 1997 178,072 1,525,459 $ 8.24
Increase in options available for grant 500,000 -- --
Options canceled 491,050 (491,050) $ 8.33
Options granted (770,800) 770,800 $ 8.14
Options exercised -- (110,796) $ 7.14
---------- ---------- ------
Balance at December 31, 1998 398,322 1,694,413 $ 8.24
========== ========== ======
Increase in options available for grant 356,569 -- --
Options canceled 444,588 (444,588) $ 8.41
Canceled options not available for grant (408,238) -- $ 8.37
Options granted (715,200) 715,200 $ 6.99
Options exercised (234,877) $ 7.11
---------- ---------- ------
Balance at December 31, 1999 76,041 1,730,138 $ 8.25
========== ========== ======
At December 31, 1999, 555,475 options were exercisable under these Plans.
Upon the adoption of the 1998 Stock Plan, canceled options under the 1988 Plan
are not available for future grants.
27
<PAGE>
The following table summarizes information about stock options outstanding
for all plans at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- ----------------------------------
Number of
Options Weighted
Outstanding Average
As of Remaining Weighted Number of Shares Weighted
Range of Exercise December 31, Contractual Life Average Exercisable As of Average
Prices 1999 In Years Exercise Price December 31, 1999 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 6.44 - $ 6.50 292,788 4.70 $6.48 87,600 $6.50
$ 6.63 - $ 7.00 211,200 5.41 6.65 47,250 6.75
$ 7.25 - $ 7.25 378,000 4.80 7.25 26,250 7.25
$ 7.50 - $ 7.88 232,500 4.66 7.67 109,825 7.69
$ 8.00 - $ 8.75 138,750 2.47 8.37 96,750 8.32
$ 8.81 - $ 8.81 235,000 3.33 8.81 70,000 8.81
$ 9.00 - $11.13 226,400 3.41 10.16 102,300 10.19
$11.50 - $12.63 15,500 6.98 12.59 15,500 12.59
--------- ---- ----- ------- -----
1,730,138 4.29 $7.83 555,475 $8.25
========= ==== ===== ======= =====
</TABLE>
Employee Stock Purchase Plan
The Employee Stock Purchase Plan ("ESPP") provides for automatic annual
increases in the number of shares reserved for issuance on January 1 of each
year beginning in 1999 by a number of shares equal to the lesser of (i) 150,000
shares, (ii) 1.5% of the outstanding shares on such date, or (iii) a lesser
amount determined by the Board of Directors, subject to adjustment upon changes
in capitalization of the Company.
The Company has reserved 763,714 shares of Common Stock for issuance to all
eligible employees under its ESPP. Sales made through this plan will be at the
lower of 85% of market price at the date of purchase or on the first day of each
six-month offering period in the prior two years. A total of 537,949 shares have
been issued under this plan as of December 31, 1999.
Fair Value Disclosures
At December 31, 1999, the Company had two stock-based compensation plans as
described above. The Company applies APB Opinion 25 and related interpretations
in accounting for its plans. Accordingly, no compensation cost has been
recognized for its plans, all of which are fixed plans. The fair value of each
option grant used for calculating pro forma net income is estimated on the date
of grant using the Black-Scholes multiple option-pricing model with the
following weighted average assumptions used for grants in 1999, 1998 and 1997,
respectively; expected volatility of 35%; risk free interest rate of 4.9%, 5.0%
and 5.9% and expected lives of 3.85, 3.79 and 3.92 years. The Company has not
paid dividends and assumed no dividend yield. The weighted average fair value of
those stock options granted in 1999, 1998 and 1997 was $2.26, $2.64 and $3.35
per option, respectively. The fair value of each ESPP purchase right is
estimated on the beginning of the offering period using the Black-Scholes
option-pricing model with the following weighted average assumptions used in
1999, 1998 and 1997, respectively; expected volatility of 35%; risk free
interest rate of 4.98%, 4.91% and 5.56% and expected lives of 0.5 years. The
Company has not paid dividends and assumed no dividend yield. The weighted
average fair value of those purchase rights granted in 1999, 1998 and 1997 as
defined by SFAS 123, was $2.04, $1.97 and $2.43 per right, respectively. Had
compensation cost for the Company's two stock-based compensation plans been
determined based on the fair value at the grant dates for awards in 1999, 1998
and 1997 under those plans consistent with the provisions of Financial
28
<PAGE>
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the
Company's net income and earnings per share would have been reduced as presented
below (in thousands, except per share data):
1999 1998 1997
------ ------ ------
Net income:
As reported $8,930 $6,075 $4,689
Pro forma 8,126 5,499 4,015
Earnings per share
As reported
Basic 0.99 0.69 0.55
Diluted 0.98 0.68 0.53
Pro forma
Basic 0.90 0.63 0.47
Diluted 0.89 0.62 0.47
Because additional stock options and stock purchase rights are expected to
be granted each year and this pro forma presentation includes only the effect of
options granted subsequent to December 31, 1994, the above pro forma disclosures
are not considered by management to be representative of pro forma effects on
reported financial results for future years.
NOTE 7 - INCOME TAXES:
The provision for income taxes consists of the following (in thousands):
1999 1998 1997
------- ------- -------
Current:
Federal $ 4,264 $ 5,070 $ 1,880
State 747 790 396
Foreign 349 17 --
------- ------- -------
5,360 5,877 2,276
Deferred:
Federal (697) (1,195) 968
State 256 (282) 151
Foreign 293 -- --
------- ------- -------
$ 5,212 $ 4,400 $ 3,395
======= ======= =======
Deferred tax assets (liabilities) comprise the following (in thousands):
1999 1998 1997
------ ------ ------
Bad debt, sales and warranty reserves $1,914 $1,598 $ 637
Inventory reserves and basis differences 1,860 2,347 1,605
Compensation accruals and reserves 228 261 254
State taxes, net of federal benefit 265 198 70
Unrealized foreign gain (298) -- --
Other 322 600 805
------ ------ ------
Gross deferred tax assets 4,291 5,004 3,371
------ ------ ------
Basis differential in assets -- (89) (98)
Depreciation (71) (843) (678)
------ ------ ------
Gross deferred tax liabilities (71) (932) (776)
------ ------ ------
Net deferred tax asset $4,220 $4,072 $2,595
====== ====== ======
29
<PAGE>
The net deferred tax asset represents temporary differences for future tax
deductions which can generally be realized by carryback to taxable income in
prior years. Net deferred tax assets are included in prepaid expenses and other
assets at December 31, 1999 and 1998.
A reconciliation of the Federal statutory tax rate to the effective tax
rate follows:
1999 1998 1997
---- ---- ----
Federal statutory rate 35.0% 35.0% 34.0%
State income taxes, net of Federal tax
benefit and credits 4.6% 4.1% 4.2%
Foreign tax net of FTC 0.5% 0.0% 0.0%
Other 2.3% 2.9% 3.8%
---- ---- ----
42.4% 42.0% 42.0%
==== ==== ====
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
The Company leases its facilities under cancelable and noncancelable
operating lease agreements. The leases expire at various times through 2006 and
contain renewal options. Certain of the leases require the Company to pay
property taxes, insurance, and maintenance costs.
The following is a summary of commitments under leases:
Operating
Year Ending December 31, Leases
------------------------ ------
(in thousands)
2000 $2,753
2001 2,372
2002 1,841
2003 861
2004 546
2005 and beyond 135
------
Total minimum lease payments $8,508
======
Total operating lease expense was $2,797,000, $2,920,000 and $2,508,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
The Company is subject to legal proceedings and claims that arise in the
normal course of business. Management believes that the ultimate resolution of
such matters will not have a material adverse effect on the Company's financial
position or results of operations.
During 1999, the Company filed suit against American Credit Indemnity
("ACI"), its former credit insurer, for recovery of amounts due under claim made
by the Company. ACI has counter sued for rescission of the credit insurance
contract for repayment of claims previously paid. Management has reviewed and
investigated the claims, and while no assurance can be given regarding the
outcome of this matter, management believes that the final outcome of the matter
will not have a material impact on consolidated financial position or results of
operations. However, because of the nature and inherent uncertainties of
litigation, should the outcome of this matter be unfavorable, the Company may be
required to pay damages and other expenses, which could have a material adverse
effect on its financial position and results of operations.
30
<PAGE>
NOTE 9 - TRANSACTIONS WITH RELATED PARTIES:
The Company's manufacturing segment, which was disposed of in June 1999,
had entered into manufacturing agreements providing for the performance of
value-added turnkey services for Pinnacle Systems, Inc. ("Pinnacle"), Reply
Corporation ("Reply"), and Network Peripherals Inc., ("NPI"). Sales to these
parties and purchases of inventory from these parties for the three years ended
December 31, 1999 and accounts receivable and inventory on hand at December 31,
1999 and 1998 are summarized below:
(In thousands)
-------------------------------
1999 1998 1997
Sales: ---- ---- ----
Pinnacle $3,645 $9,590 $2,840
Reply - - 262
NPI 1,446 8,241 -
Accounts receivable:
Pinnacle - 1,828
Reply - -
NPI - 984
Inventory purchased:
Pinnacle 1,150 2,169 1,532
Reply - - 123
NPI - 546 -
Inventory on hand:
Pinnacle - 1,564
Reply - -
NPI - 737
The agreements were entered into in the ordinary course of business and the
Company believes that there were terms no less favorable than reasonably could
have been obtained from unaffiliated parties. The agreement with NPI commenced
in May 1998. The agreement with Reply terminated in 1997. Glenn E. Penisten, a
director of the Company, is a director of Pinnacle, Reply and NPI. Gordon A.
Campbell, a director of the Company, is a director of Reply.
The Company purchased approximately $0 and $858,000 of inventory from 3DFX
Interactive, Inc. ("3DFX") in 1999 and 1998 respectively. The inventory on hand,
purchased from 3DFX, totaled $0 at December 31, 1999 and $139,000 at December
31, 1998, respectively. Gordon A. Campbell, a director of the Company, is a
director of 3DFX. The Company sold $0 and $1,528,000 to 3Com Corporation
("3Com") in 1999 and 1998, respectively. The accounts receivable balance from
3Com was $0 and $469,000 at December 31, 1999 and 1998, respectively. Gordon A.
Campbell, a director of the Company, is a director of 3Com. The Company believes
that terms of these transactions were no less favorable than reasonable could be
expected to be obtained from unaffiliated parties.
NOTE 10 - SALARY SAVINGS PLAN:
The Company has a Section 401(k) Plan (the Plan) which provides
participating employees an opportunity to accumulate funds for retirement and
hardship. Participants may contribute up to 15% of their eligible earnings to
the Plan. The Company may elect to make matching contributions equal to a
discretionary percentage of participants' contributions up to the statutory
maximum of participants' eligible earnings. The Company has not made any
contributions to the Plan.
31
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA FROM CONTINUING OPERATIONS (UNAUDITED):
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Quarter Ended
-------------------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales .............. $116,658 $124,402 $148,815 $185,455 $219,599 $231,627 $283,359 $323,690
Cost of ................ 102,069 109,666 133,085 166,656 200,177 210,826 259,384 297,104
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit ........... 14,589 14,736 15,730 18,799 19,422 20,801 23,975 26,586
Selling, general and
administrative
expenses .............. 10,991 10,847 11,373 12,859 14,955 15,926 18,253 20,373
-------- -------- -------- -------- -------- -------- -------- --------
Income from continuing
operations ............ 3,598 3,889 4,357 5,940 4,467 4,875 5,722 6,213
Interest ............... 781 595 748 1,044 1,224 1,556 1,676 1,957
Remeasurement gain ..... -- -- -- -- -- (358) (123) (166)
-------- -------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before
income taxes .......... 2,817 3,294 3,609 4,896 3,243 3,677 4,169 4,422
Provision for income
taxes ................. (1,183) (1,383) (1,516) (2,057) (1,362) (1,544) (1,813) (1,862)
-------- -------- -------- -------- -------- -------- -------- --------
Income from continuing
operations ............ $ 1,634 $ 1,911 $ 2,093 $ 2,839 $ 1,881 $ 2,133 $ 2,356 $ 2,560
======== ======== ======== ======== ======== ======== ======== ========
Earnings per share
Basic ................ $ 0.19 $ 0.22 $ 0.24 $ 0.32 $ 0.21 $ 0.24 $ 0.26 $ 0.28
Diluted .............. $ 0.19 $ 0.22 $ 0.24 $ 0.32 $ 0.21 $ 0.24 $ 0.26 $ 0.28
======== ======== ======== ======== ======== ======== ======== ========
Shares used in per share
calculation
Basic ................ 8,723 8,767 8,831 8,848 8,932 8,945 9,096 9,196
======== ======== ======== ======== ======== ======== ======== ========
Diluted .............. 8,795 8,855 8,874 8,998 9,010 8,982 9,211 9,289
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
ITEM 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
32
<PAGE>
PART III
Pursuant to Paragraph G(3) of the General Instructions to Form 10-K,
portions of the information required by Part III of Form 10-K are incorporated
by reference from the Company's Proxy Statement to be filed with the Commission
in connection with the 2000 Annual Meeting of Shareholders (the "Proxy
Statement").
ITEM 10: Directors and Executive Officers of the Registrant
(a) Information concerning directors of the Company appears in the
Company's Proxy Statement, under Item 1 "Election of Directors." This
portion of the Proxy Statement is incorporated herein by reference.
(b) Executive Officers Of The Registrant
The following table and descriptions identify and set forth
information regarding the Company's six executive officers:
Name Age Position
---- --- --------
W. Donald Bell ........ 62 President, Chief Executive Officer
and Chairman of the Board
Remo E Canessa ....... 42 Vice President of Finance and Chief
Financial Officer
Brian J Clark ........ 46 Senior Vice President of Industrial
Sales
Gary Gammon ........... 35 Senior Vice President of Computer
Products Sales
Philip M Roussey ..... 57 Senior Vice President of Computer
Products Marketing
Robert J Sturgeon .... 46 Vice President of Operations
W. Donald Bell has been President, Chief Executive Officer and
Chairman of the Board of the Company since its inception in 1987. Mr.
Bell has over thirty years of experience in the electronics industry.
Mr. Bell was formerly the President of Ducommun Inc. and its
subsidiary, Kierulff Electronics Inc., as well as Electronic Arrays
Inc. He has also held senior management positions at Texas Instruments
Incorporated, American Microsystems and other electronics companies.
He is a member of the Board of Directors of Control Data Systems Inc.
Remo E. Canessa has been Vice President of Finance and Chief
Financial Officer since November of 1998. Mr. Canessa was formerly
Vice President of Finance and Chief Financial Officer of Infoseek
Corporation. From 1993 to 1998 he was a part of Bell Microproducts'
management team, serving first as Corporate Controller, then as Vice
President of Finance and as its Acting Chief Financial Officer. He has
held senior management positions at Ampex Corporation, Raster Graphics
Inc. and Geoworks Corporation.
Brian J. Clark has been Senior Vice President of Industrial Sales
since September of 1997. Mr. Clark has over twenty-three years in the
electronic business. Mr. Clark was formerly the Vice President of the
Northern California Region of Arrow Electronics, and prior to Arrow,
he held senior management positions at Kierulff and Wyle Electronics
33
<PAGE>
Gary Gammon has been Senior Vice President of Computer Products
Sales since June of 1999. Before joining Bell Microproducts, Mr.
Gammon was Vice President of Sales for Gates/Arrow Distributing, a
distributor of computer systems, peripherals and software. While at
Gates/Arrow, he also served as Vice President for the enterprise
computing business and Vice President of technical sales. Prior to
that time, Mr. Gammon was a Sales Executive with Data General.
Philip M. Roussey has been Senior Vice President of Computer
Products Marketing since March 1993. Prior to that time, he was the
Company's Vice President of Marketing since its inception in 1987.
Prior to joining the Company, Mr. Roussey was Corporate Vice President
of Marketing of Kierulff Electronics during 1987, and from 1982 to
1986, Mr. Roussey held the position of Vice President of Computer
Products at Kierulff Electronics.
Robert J. Sturgeon has been Vice President of Operations since
1992. Mr. Sturgeon was formerly Director of Information Services for
Disney Home Video from January 1991 to February 1992. Prior to that
time, Mr. Sturgeon served as Management Information Services ("MIS")
Director for Paramount Pictures, Home Video Division from June 1989 to
January 1991 and as a Marketing Manager for MTI Systems, a division of
Arrow Electronics Inc., from January 1988 to June 1989. Other
positions Mr. Sturgeon has held include Executive Director of MIS for
Ducommun where he was responsible for ten divisions, including
Kierulff Electronics.
(c) Information concerning Compliance with Section 16(a) of the Securities
Exchange Act of 1934 appears in the Company's Proxy Statement, under
the heading "Compliance with Section 16(a) of the Securities Exchange
Act of 1934," and is incorporated herein by reference.
34
<PAGE>
ITEM 11: Executive Compensation
Information concerning executive compensation appears in the Company's
Proxy Statement, under the caption "Executive Compensation," and is incorporated
herein by reference.
ITEM 12: Security Ownership of Certain Beneficial Owners and Management
Information concerning the security ownership of certain beneficial owners
and management appears in the Company's Proxy Statement, under Item 1 "Election
of Directors," and is incorporated herein by reference.
ITEM 13: Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions
appears in the Company's Proxy Statement, under Item 1 "Election of Directors,"
and is incorporated herein by reference.
PART IV
ITEM 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this Form 10-K:
(1) Consolidated Financial Statements
The financial statements (including the notes thereto) listed in
the Index to Consolidated Financial Statement Schedule (set forth in
Item 8 of Part II of this form 10-K) are filed as part of this Annual
Report on Form 10-K.
(2) Consolidated financial Statement Schedule
II - Valuation and Qualifying Accounts and Reserves page 42
Schedules not listed above have been omitted because they are not required
or the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements.
35
<PAGE>
(3) Exhibits
Number Description of Document
3.1 Amended and Restated Articles of Incorporation of Registrant (2)
3.2 Amended and Restated Bylaws of Registrant (3)
4.1 Specimen Common Stock Certificate of the Registrant (3)
4.2 Amended and Restated Registration Rights Agreement dated June
11, 1992 between Registrant and certain investors named therein,
as amended (1)
4.3 Warrant issued to Almo Corporation (7)
10.1 1998 Stock Plan (9)
10.2 The form of Option Agreement used under the 1998 Stock Plan (9)
10.3 Employee Stock Purchase Plan, as amended through May 21, 1998
(9)
10.4 The form of Option Agreement used under the Employee Stock
Purchase Plan (4)
10.5 Registrant's 401(k) Plan (3)
10.6 Lease dated March 17, 1992 for Registrant's facilities at 1941
Ringwood Avenue, Suite 100, San Jose, California (3)
10.7 Lease dated April 15, 1993 for Registrant's facilities at 2350
Lundy Place, San Jose, California (1)
10.8 Standard Distributor Agreement dated June 1, 1990 by and between
Quantum Corporation and Registrant (3)
10.9 Form of Indemnification Agreement (3)
10.10 IBM Authorized Distributor Agreement dated May 17, 1993 between
IBM Corporation and Registrant (3)
10.11 Sublease dated November 12, 1996 for the Registrant's facilities
at 2020 South Tenth Street, San Jose, California, and related
exhibits (8)
10.12* Employment Agreement dated as of December 10, 1996 between the
Registrant and W. Donald Bell, the Registrant's Chief Executive
Officer (8)
10.13 Form of Management Retention Agreement between the Registrant
and the following executive officers of the Registrant: W.
Donald Bell, Bruce M. Jaffe, Ronald H. Mabry, Philip M. Roussey
and Robert J. Sturgeon (8)
10.14 Third Amendment and Restated Credit Agreement dated as of
November 12, 1998 by and among the Registrant, the Banks named
therein and California Bank & Trust, as Agent for the Banks (7)
36
<PAGE>
10.15 Asset Purchase Agreement dated as of November 5, 1998 by and
between the Company, Almo Corporation, Almo Distributing
Pennsylvania, Inc., Almo Distributing Maryland, Inc., Almo
Distributing Minnesota, Inc., Almo Distributing Wisconson, Inc.
and Almo Distributing, Inc.
10.16 Fourth Amendment to Third Amended and Restated Credit Agreement
dated December 8, 1999 by and among the Registrant, the Banks
named therein and California Bank & Trust, as agent for the
Banks (10)
10.17 Fifth Amendment to Third Amended and Restated Credit Agreement
dated December 31, 1999 by and among the Registrant, the Banks
named therein and California Bank & Trust, as agent for the
Banks (10)
10.18 Lease dated August 1, 1999 for Registrant's facilities at 1941
Ringwood Avenue, Suite 200, San Jose, California (10)
21.1 Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
24.1 Power of Attorney (contained on page 21)
- ----------
* Confidential treatment has been granted for portions of this document.
(1) Incorporated by reference to exhibit filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1993 filed
on March 31, 1994.
(2) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-66580) filed on
July 29, 1993.
(3) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-1 (File No. 33-60954) filed on April
14, 1993 and which became effective on June 14, 1993.
(4) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-83398) filed on
August 29, 1994.
(5) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-10837) filed on
August 26, 1996.
(6) Incorporated by reference to exhibit filed with the Registrant's
Report on Form 10Q for the quarter ended June 30, 1996.
(7) Incorporated by reference to exhibit filed with the Registrant's
Report on Form 8-K (File No. 000-21528) filed on December 4, 1998.
(8) Incorporated by reference to exhibit filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1996 filed
on March 31, 1997.
(9) Incorporated by reference to exhibit filed with the Registrant's
Report on Form S-8 (File No. 333-58053) filed on June 30, 1998.
(10) Incorporated by reference to exhibit filed with the Registrant's
Report on Form 10K for the fiscal year ended December 31, 1999 filed
on March 30, 2000.
(b) Reports on Form 8-K. Filed on October 4, 1999.
(c) Exhibits. See Item 14(a) above.
(d) Financial Statements Schedules. See Item 14(a) above.
37
<PAGE>
SCHEDULE II
<TABLE>
BELL MICROPRODUCTS INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(in thousands)
<CAPTION>
Additions
Balance at Charged to
Beginning of Costs and Deductions- Balance at End
Year Ended December 31, Period Expenses Write-offs of Period
- ----------------------- ------ -------- ---------- ---------
<S> <C> <C> <C> <C>
1999 $3,486 $6,896 $(5,396) $4,986
1998 1,331 4,630 (2,475) 3,486
1997 4,228 1,763 (4,660) 1,331
</TABLE>
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 30, 2000.
BELL MICROPRODUCTS INC.
By: /s/ Remo E. Canessa
-----------------------------------------------------
Remo E. Canessa
Chief Financial Officer and Vice President of Finance
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W. Donald Bell and Remo E. Canessa and each of
them, jointly and severally, his attorneys-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ W. Donald Bell Chairman of the Board, President and Chief March 30, 2000
- ----------------------------- Executive Officer (Principal Executive Officer)
(W. Donald Bell)
/s/ Remo E. Canessa Vice President of Finance and Chief Financial Officer March 30, 2000
- ----------------------------- (Principal Financial and Accounting Officer)
(Remo E. Canessa)
/s/ Gordon A. Campbell Director March 30, 2000
- -----------------------------
(Gordon A. Campbell)
/s/ Eugene Chaiken Director March 30, 2000
- -----------------------------
(Eugene Chaiken)
/s/ Edward L. Gelbach Director March 30, 2000
- -----------------------------
(Edward L. Gelbach)
/s/ James E. Ousley Director March 30, 2000
- -----------------------------
(James E. Ousley)
/s/ Glenn E. Penisten Director March 30, 2000
- -----------------------------
(Glenn E. Penisten)
</TABLE>
39
<PAGE>
INDEX TO EXHIBITS
Number Description of Document
- ------ -----------------------
3.1 Amended and Restated Articles of Incorporation of Registrant (2)
3.2 Amended and Restated Bylaws of Registrant (3)
4.1 Specimen Common Stock Certificate of the Registrant (3)
4.2 Amended and Restated Registration Rights Agreement dated June 11, 1992
between Registrant and certain investors named therein, as amended (1)
4.3 Warrant issued to Almo Corporation (7)
10.1 1998 Stock Plan (9)
10.2 The form of Option Agreement used under the 1998 Stock Plan (9)
10.3 Employee Stock Purchase Plan, as amended through May 21, 1998 (9)
10.4 The form of Option Agreement used under the Employee Stock Purchase
Plan (4)
10.5 Registrant's 401(k) Plan (3)
10.6 Lease dated March 17, 1992 for Registrant's facilities at 1941 Ringwood
Avenue, Suite 100, San Jose, California (3)
10.7 Lease dated April 15, 1993 for Registrant's facilities at 2350 Lundy
Place, San Jose, California (1)
10.8 Standard Distributor Agreement dated June 1, 1990 by and between
Quantum Corporation and Registrant (3)
10.9 Form of Indemnification Agreement (3)
10.10 IBM Authorized Distributor Agreement dated May 17, 1993 between IBM
Corporation and Registrant (3)
10.11 Sublease dated November 12, 1996 for the Registrant's facilities at
2020 South Tenth Street, San Jose, California, and related exhibits (8)
10.12* Employment Agreement dated as of December 10, 1996 between the
Registrant and W. Donald Bell, the Registrant's Chief Executive Officer
(8)
10.13 Form of Management Retention Agreement between the Registrant and the
following executive officers of the Registrant: W. Donald Bell, Bruce
M. Jaffe, Ronald H. Mabry, Philip M. Roussey and Robert J. Sturgeon (8)
10.14 Third Amendment and Restated Credit Agreement dated as of November 12,
1998 by and among the Registrant, the Banks named therein and
California Bank & Trust, as Agent for the Banks (7)
10.15 Asset Purchase Agreement dated as of November 5, 1998 by and between
the Company, Almo Corporation, Almo Distributing Pennsylvania, Inc.,
Almo Distributing Maryland, Inc., Almo Distributing Minnesota, Inc.,
Almo Distributing Wisconson, Inc. and Almo Distributing, Inc.
40
<PAGE>
10.16 Fourth Amendment to Third Amended and Restated Credit Agreement dated
December 8, 1999 by and among the Registrant, the Banks named therein
and California Bank & Trust, as agent for the Banks (10)
10.17 Fifth Amendment to Third Amended and Restated Credit Agreement dated
December 31, 1999 by and among the Registrant, the Banks named therein
and California Bank & Trust, as agent for the Banks (10)
10.18 Lease dated August 1, 1999 for Registrant's facilities at 1941 Ringwood
Avenue, Suite 200, San Jose, California (10)
21.1 Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
24.1 Power of Attorney (contained on page 21)
27 Financial Data Schedule
- ----------
* Confidential treatment has been granted for portions of this document.
(1) Incorporated by reference to exhibit filed with the Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1993 filed on March 31,
1994.
(2) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-66580) filed on July 29,
1993.
(3) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-1 (File No. 33-60954) filed on April 14,
1993 and which became effective on June 14, 1993.
(4) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 33-83398) filed on August 29,
1994.
(5) Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-8 (File No. 333-10837) filed on August 26,
1996.
(6) Incorporated by reference to exhibit filed with the Registrant's Report on
Form 10Q for the quarter ended June 30, 1996.
(7) Incorporated by reference to exhibit filed with the Registrant's Report on
Form 8-K (File No. 000-21528) filed on December 4, 1998.
(8) Incorporated by reference to exhibit filed with the Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1996 filed on March 31,
1997.
(9) Incorporated by reference to exhibit filed with the Registrant's Report on
Form S-8 (File No. 333-58053) filed on June 30, 1998.
(10) Incorporated by reference to exhibit filed with the Registrant's Report on
Form 10K for the fiscal year ended December 31, 1999 filed on March 30,
2000.
EXECUTION VERSION
FOURTH AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment"), dated as of December 8 1999, is entered into by and among:
(1) BELL MICROPRODUCTS INC., a California corporation
("Borrower");
(2) Each of the financial institutions listed in Schedule I to
the Restated Credit Agreement referred to in Recital A below (such
financial institutions to be referred to herein collectively as the
"Existing Banks");
(3) CALIFORNIA BANK & TRUST, a California banking corporation,
as administrative agent for the Banks (in such capacity,
"Administrative Agent");
(4) UNION BANK OF CALIFORNIA, N.A., a national banking
association ("UBOC"), as collateral agent thereunder (in such capacity,
"Collateral Agent"); and
(5) IBM CREDIT CORPORATION, a Delaware corporation, that will
become a Bank (as defined in the Restated Credit Agreement) under the
Restated Credit Agreement pursuant to this Amendment (the "New Bank").
RECITALS
A. Borrower, the Existing Banks, Administrative Agent and Collateral
Agent are parties to a Third Amended and Restated Credit Agreement dated as of
November 12, 1998, as amended by (i) that certain First Amendment to Third
Amended and Restated Credit Agreement dated as of May 13, 1999, (ii) that
certain Second Amendment to Third Amended and Restated Credit Agreement dated as
of July 21, 1999 and (iii) that certain Third Amendment to Third Amended and
Restated Credit Agreement dated as of October 15, 1999 (as amended, the
"Restated Credit Agreement").
B. Borrower has requested Administrative Agent, Collateral Agent and
the Existing Banks to increase the Total Revolving Loan Commitment and to
restructure and amend the Restated Credit Agreement in certain other respects.
C. In addition, Borrower has requested that the New Bank become a party
to the Restated Credit Agreement upon the terms and subject to the conditions
set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower,
<PAGE>
the Collateral Agent, the Administrative Agent, the Existing Banks and the New
Bank hereby agree as follows:
1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Restated Credit Agreement, as
amended by this Amendment. The rules of construction set forth in Section I of
the Restated Credit Agreement shall, to the extent not inconsistent with the
terms of this Amendment, apply to this Amendment and are hereby incorporated by
reference.
2. Allocation of Outstanding Revolving Loans Among Existing Banks and
New Bank. Subject to the conditions set forth in paragraph 5 below, Borrower,
the Existing Banks, the New Bank, Collateral Agent and Administrative Agent
hereby agree that on and after the Fourth Amendment Effective Date (as defined
herein), each Existing Bank and the New Bank shall be a Bank under the Restated
Credit Agreement and the other Credit Documents with Revolving Loan Commitments
as set forth on Schedule I of the Restated Credit Agreement (as amended pursuant
to this Amendment), with the rights, duties and obligations of such a Bank under
the Restated Credit Agreement and the other Credit Documents. To effectuate the
foregoing, on the Fourth Amendment Effective Date Administrative Agent shall
calculate the Proportionate Share of each Existing Bank and the New Bank in each
Revolving Loan Borrowing then outstanding. Based upon such calculation, the New
Bank shall purchase from the Existing Banks such shares in the outstanding
Revolving Loans as Administrative Agent determines is necessary to cause each
Existing Bank and the New Bank to hold Revolving Loans in each outstanding
Revolving Loan Borrowing in a principal amount equal to such Existing Bank's and
such New Bank's Proportionate Share of such Revolving Loan Borrowings.
3. Amendments to Restated Credit Agreement. Subject to the conditions
set forth in paragraph 5 below, the Restated Credit Agreement is hereby amended
as follows:
(a) Paragraph 1.09 is hereby amended by adding a new sentence
to the end thereof to read as follows:
Notwithstanding references herein and in the other Credit
Documents to each of the financial institutions listed from
time to time on Schedule I hereto as a "Bank," such references
are not intended to indicate, and should not be construed to
mean, that each of such financial institutions is in fact a
federally regulated "bank".
(b) Subparagraph 2.01(a) is hereby amended by changing the
definition of "Revolving Loan Maturity Date" set forth therein from
"October 31, 2000" to "May 31, 2001."
(c) Clause (i) of Subparagraph 2.01(e) is hereby amended by
deleting the text "one (1), two (2), three (3) or six (6) months" set
forth therein and replacing it with the following text: "thirty (30),
sixty (60), ninety (90), one-hundred twenty (120), one-hundred fifty
(150) or one-hundred eighty (180) days."
(d) Subparagraph 2.01(f) is hereby amended to read in its
entirety as follows:
2
<PAGE>
(f) Scheduled Revolving Loan Payments.
Borrower shall repay to each Bank on the Revolving
Loan Maturity Date the unpaid principal amount of
each Revolving Loan made by such Bank. Borrower shall
pay accrued interest on the unpaid principal amount
of each Revolving Loan on the last Business Day in
each month and upon prepayment (to the extent
thereof) and at maturity.
(e) Clause (i) of Subparagraph 2.02(a) is hereby amended to
read in its entirety as follows:
(i) The aggregate principal amount of all Revolving
Loans outstanding at any time shall not exceed an amount (the
"Borrowing Base") equal to the lesser of:
(A) The Total Revolving Loan Commitment at such
time; and
(B) The sum at such time of:
(1) eighty percent (80%) of Eligible
Accounts; and
(2) The lesser of (y) forty percent (40%) of
Eligible Inventory and (z) $60,000,000.
(f) Clause (iv) of Subparagraph 5.01(a) is hereby amended by
deleting the text "fifteen (15) days" and substituting therefor the
text "twenty (20) days."
(g) Subparagraph 5.01(c) is hereby amended to read in its
entirety as follows:
(c) Inspections. Borrower and its Subsidiaries shall
permit any Person designated by Collateral Agent in its sole
discretion (including without limitation any Bank that so
requests, which request shall not be unreasonably denied),
upon reasonable notice and during normal business hours, to
visit and inspect any of the properties and offices of
Borrower and its Subsidiaries, to conduct audits of any or all
of the Collateral at Borrower's expense, to examine the books
of account of Borrower and its Subsidiaries and to discuss the
affairs, finances and accounts of Borrower and its
Subsidiaries with, and to be advised as to the same by, their
officers, auditors and accountants, all at such times and
intervals as Collateral Agent may reasonably request,
including, without limitation, an annual audit of the accounts
and inventory of Borrower and its Subsidiaries, the fees and
expenses of which shall be payable by Borrower pursuant to
Subparagraph 8.02(b). Audit fees payable by Borrower in
connection with audits of all or any portion of the Collateral
shall be charged at a rate of $750 per day per person plus
direct costs of travel, lodging and out-of-pocket expenses.
(h) Paragraph 5.01 is hereby amended by adding thereto,
immediately following clause (j) thereof, a new clause (k) to read in
its entirety as follows:
3
<PAGE>
(k) Inventory Appraisal. Borrower covenants that it
will complete and deliver to the Collateral Agent and the
Banks an inventory appraisal, in form and substance
satisfactory to the Collateral Agent and the Banks, within 90
days of the Fourth Amendment Effective Date.
(i) Subparagraph 5.02(m) is hereby amended to read in its
entirety as follows:
(m) Financial Covenants. Borrower shall not permit:
(i) Its Quick Ratio to be less than 0.50 to 1.00 for
any fiscal quarter;
(ii) Its Working Capital to be less than $60,000,000
for any fiscal quarter;
(iii) Its Tangible Net Worth, for any fiscal quarter,
to be less than the sum of (1) $70,000,000 plus (2) fifty
percent (50%) of the sum of Borrower's Net Income After Tax
for each quarter (excluding any quarter in which such amount
was negative) beginning with the quarter ending June 30, 1998
plus (3) one hundred percent (100%) of the Net Proceeds
derived from any issuance by Borrower of Equity Securities
minus (4) the net book value assigned to the Almo Warrants in
accordance with GAAP;
(iv) Its Leverage Ratio to be greater than 3.50 to
1.00 for any fiscal quarter;
(v) Its Interest Coverage Ratio (A) for the three
quarter period beginning on April 1, 1998 and ending on
December 31, 1998 to be less than 2.00 to 1.00; and (B) for
any consecutive four-quarter period thereafter to be less than
2:00 to 1:00; or
(vi) Its Net Operating Income or Net Income After Tax
to be (1) a loss in excess of $350,000 for any quarter or (2)
a loss of any amount for any consecutive two-quarter period.
(j) Section 7 is hereby amended by adding thereto, immediately
following Paragraph 7.09, a new Paragraph 7.10 to read in its entirety
as follows:
7.10 Assignment and Delegation. Collateral Agent may
from time to time (i) assign or transfer all or any portion of
its rights, benefits or privileges as "collateral agent"
hereunder or under any of the other Credit Documents to one or
more Banks and/or (ii) delegate to or subcontract with, or
authorize or appoint one or more Banks to perform all or any
portion of the duties, covenants or obligations to be
performed by Collateral Agent in its capacity as "collateral
agent" hereunder or under any of the other Credit Documents.
Any such other Bank shall be entitled to all of the
indemnities, immunities and other protective provisions that
Collateral Agent is entitled to hereunder as if such other
Bank were named as "Collateral Agent" hereunder. Collateral
Agent shall not be responsible to any other Agent or Bank for
the negligence or misconduct of any
4
<PAGE>
such other Bank.
(k) Each of Subparagraph 8.05(b), Subparagraph 8.05(c) and
Subparagraph 8.05(d) are hereby amended by deleting the text contained
in the first sentences thereof "in the ordinary course of its
commercial banking business" and substituting therefor the text "in the
ordinary course of its commercial lending business."
(l) Subparagraph 8.05(g) is hereby amended by deleting the
text contained therein "safe and sound banking practices" and
substituting therefor the text "safe and sound lending practices."
(m) Schedule I is hereby amended to read in its entirety as
set forth on Attachment 1 hereto.
(n) Schedule II is hereby amended to read in its entirety as
set forth on Attachment 2 hereto.
(o) Schedule 1.01 of the Restated Credit Agreement is hereby
amended by changing the definition of "Agent's Fee Letter" set forth
therein to read in its entirety as follows:
"Agent's Fee Letter" shall mean the letter agreement
dated as of the Fourth Amendment Effective Date among
Borrower, Administrative Agent, Collateral Agent and Comerica
Bank - California.
(p) Schedule 1.01 of the Restated Credit Agreement is hereby
amended by adding thereto, in the appropriate alphabetical order, the
following definition:
"Fourth Amendment Effective Date" shall mean December 8, 1999.
(q) Schedule 1.01 of the Restated Credit Agreement is hereby
further amended by deleting therefrom the definitions of the terms
"Increased Commitment Period," "Senior Leverage Ratio" and "Capital
Event."
(r) Schedule 1.01 of the Restated Credit Agreement is hereby
amended by changing clause (g) of the definition of "Eligible Accounts"
set forth therein to read in its entirety as follows:
(g) Any account payable by (i) the United States
government or any department, agency or other subdivision
thereof (except to the extent Borrower complies with the
Federal Assignment of Claims Act of 1940, as amended), (ii) a
Person located in any jurisdiction outside the United States
or Canada (excluding the provinces of Newfoundland, Nova
Scotia, Prince Edward Island, New Brunswick, Nunavut,
Manitoba, Saskatchewan, Alberta and the Yukon Territory),
except to the extent secured by a letter of credit acceptable
to Collateral Agent, or (iii) an Affiliate of Borrower;
5
<PAGE>
(s) Schedule 1.01 of the Restated Credit Agreement is hereby
also amended by further changing the definition of "Eligible Accounts"
by (i) deleting the word "and" at the end of clause (i) thereof, (ii)
adding thereto, immediately following clause (i), a new clause (j) to
read in its entirety as follows, (iii) changing the designation of the
current clause (j) to "(k)" and (iv) amending the parenthetical at the
end of the definition thereof to reflect such new designation:
(j) Any account payable by an account debtor in which
the total accounts payable from such account debtor exceeds
twenty five percent (25%) of the total amount of all Eligible
Accounts, to the extent of such excess (except as approved
from time to time by Collateral Agent); and
(t) Schedule 1.01 of the Restated Credit Agreement is hereby
further amended by changing the definition of "Revolving Loan
Commitment" set forth therein to read in its entirety as follows:
"Revolving Loan Commitment" shall mean, with respect
to each Bank, the amount set forth opposite the name of such
Bank in Schedule I under the column entitled "Revolving Loan
Commitment" or as reduced from time to time pursuant to
Paragraph 2.02 hereof.
(u) Schedule 1.01 of the Restated Credit Agreement is hereby
further amended by changing the definition of "Total Revolving Loan
Commitment" set forth therein to read in its entirety as follows:
"Total Revolving Loan Commitment" shall mean
One Hundred Sixty Million Dollars ($160,000,000) or,
if such amount is reduced pursuant to Subparagraph
2.02(b), the amount to which so reduced and in effect
at such time.
(v) Subparagraph 2(c) of Exhibit A is hereby amended by
deleting the term "months" set forth therein with replacing it with the
term "days".
(w) Subparagraph 2(c) of Exhibit B is hereby amended by
deleting the term "months" set forth therein and replacing it with the
term "days".
(x) Subparagraph 2(c) of Exhibit C is hereby amended by
deleting the term "months" set forth therein and replacing it with the
term "days".
4. Representations and Warranties. Borrower hereby represents and
warrants to Administrative Agent, Collateral Agent, the Existing Banks and the
New Bank that, on the date of this Amendment and after giving effect to the
amendments set forth in paragraph 3 above on the Fourth Amendment Effective Date
(as defined below), the following are and shall be true and correct on each such
date:
(a) The representations and warranties set forth in Paragraph
4.01 of the Restated Credit Agreement are true and correct in all
material respects;
6
<PAGE>
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents is in full force and effect.
5. Effective Date. The addition of the New Bank as a party to the
Restated Credit Agreement effected by paragraph 2 above and the amendments to
the Restated Credit Agreement effected by paragraph 3 above shall become
effective on December 8, 1999 (the "Fourth Amendment Effective Date"), subject
to receipt by the Existing Banks, the New Bank, Collateral Agent and
Administrative Agent, as applicable, on or prior to the Fourth Amendment
Effective Date of the following, each in form and substance satisfactory to the
Existing Banks, the New Bank, Collateral Agent and Administrative Agent and
their respective counsel, as applicable:
(a) This Amendment duly executed by Borrower, each Existing
Bank, the New Bank, Collateral Agent and Administrative Agent;
(b) The Assignment and Delegation Agreement substantially in
the form attached hereto as Attachment 3 duly executed by Collateral
Agent and IBM Credit Corporation and acknowledged and agreed to by
Administrative Agent, each Bank and Borrower;
(c) An Agent's Fee Letter, in form and substance satisfactory
to the Agents, duly executed by Borrower and the Agents;
(d) New Revolving Loan Notes, appropriately completed and duly
executed by Borrower, payable to the New Bank and, to the extent
required by changes in the Revolving Loan Commitments of the Existing
Banks, the Existing Banks;
(e) A Certificate of the Secretary or an Assistant Secretary
of Borrower, dated the Fourth Amendment Effective Date, certifying that
(i) the Articles of Incorporation and Bylaws of Borrower, in the form
delivered to Administrative Agent on the Closing Date, are in full
force and effect and have not been amended, supplemented, revoked or
repealed since such date, (ii) that the resolution of Borrower, in the
form delivered to Administrative Agent on the Closing Date, is in full
force and effect and has not been amended, supplemented, revoked or
repealed since such date, and (iii) the incumbency, signatures and
authority of the officers of Borrower authorized to execute, deliver
and perform the Restated Credit Agreement, this Amendment, the other
Credit Documents and all other documents, instruments or agreements
relating thereto executed or to be executed by Borrower;
(f) A letter in the form of Attachment 4 hereto appropriately
completed, dated the Fourth Amendment Effective Date and duly executed
by each Guarantor;
(g) An renewal fee of $60,000 to be shared among the Existing
Banks and New Bank pro rata in accordance with such Existing Banks' and
New Bank's respective Proportionate Shares;
(h) A favorable written opinion of Wilson, Sonsini, Goodrich &
Rosati, counsel to Borrower, dated the Fourth Amendment Effective Date,
addressed to
7
<PAGE>
Administrative Agent, the Existing Banks and the New Bank and covering
such matters as are set forth on Attachment 5; and
(i) Such other evidence as Administrative Agent, Collateral
Agent, any Existing Bank or the New Bank may reasonably request to
establish the accuracy and completeness of the representations and
warranties and the compliance with the terms and conditions contained
in this Amendment.
6. Effect of this Amendment. On and after the Fourth Amendment
Effective Date, each reference in the Restated Credit Agreement and the other
Credit Documents to the Restated Credit Agreement shall mean the Restated Credit
Agreement as amended hereby. Except as specifically amended above, (a) the
Restated Credit Agreement and the other Credit Documents shall remain in full
force and effect and are hereby ratified and confirmed and (b) the execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power, or remedy of the
Banks, Collateral Agent or Administrative Agent, nor constitute a waiver of any
provision of the Restated Credit Agreement or any other Credit Document.
7. Miscellaneous.
(a) Counterparts. This Amendment may be executed in any number
of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience
of reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
8
<PAGE>
IN WITNESS WHEREOF, Borrower, Collateral Agent, Administrative Agent,
the Existing Banks and the New Bank have caused this Amendment to be executed as
of the day and year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By: /s/ W. Don Bell
------------------------------------
Name: W. DON BELL
Title: CHAIRMAN, PRESIDENT, & CEO
By: /s/ Remo E. Canessa
------------------------------------
Name: REMO E. CANESSA
Title: VICE PRESIDENT OF FINANCE
& CFO
ADMINISTRATIVE AGENT: CALIFORNIA BANK & TRUST,
As Administrative Agent
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
COLLATERAL AGENT: UNION BANK OF CALIFORNIA, N.A.,
As Collateral Agent
By:
------------------------------------
Name:
Title:
9
<PAGE>
EXISTING BANKS: CALIFORNIA BANK & TRUST,
As a Bank
By: /s/ S. C. Bellicini
------------------------------------
Name: S. C. BELLICINI
Title: SENIOR VICE PRESIDENT
By: /s/ Carmen Sanz
------------------------------------
Name: Carmen Sanz
Title: AVP
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By:
------------------------------------
Name:
Title:
SANWA BANK CALIFORNIA,
As a Bank
By:
------------------------------------
Name:
Title:
COMERICA BANK - CALIFORNIA,
As a Bank
By:
------------------------------------
Name:
Title:
10
<PAGE>
U.S. BANK NATIONAL ASSOCIATION,
As a Bank
By: /s/ Michael Powell
------------------------------------
Name: Michael Powell
Title: Vice President
NEW BANK: IBM CREDIT CORPORATION,
As a Bank
By:
------------------------------------
Name:
Title:
11
<PAGE>
ATTACHMENT 1
SCHEDULE I
BANKS
Bank Revolving Loan Commitment
CALIFORNIA BANK & TRUST $30,000,000
Applicable Lending Office:
465 California Street, First Floor
San Francisco, CA 94104
Address for Notices:
465 California Street, First Floor
San Francisco, CA 94104
Attn: Relationship Manager
Bell Microproducts
Telephone: (415) 875-1445
Facsimile (415) 875-1456
UNION BANK OF CALIFORNIA, N.A. $30,000,000
Applicable Lending Office:
99 Almaden Boulevard, 2nd Floor
San Jose, CA 95133
Address for Notices:
Northern California Commercial
Banking Group
350 California Street, 10th Floor
San Francisco, CA 94104
Attention: William Hinch
Vice President
Telephone: (415) 705-7028
Facsimile (415) 705-7111
1-1
<PAGE>
COMERICA BANK - CALIFORNIA $30,000,000
Applicable Lending Office:
California Corporate Banking
155 Grand Avenue, Suite 402
Oakland, CA 94612
Address for Notices:
California Corporate Banking
155 Grand Avenue, Suite 402
Oakland, CA 94612
Attn: Scott Smith
Telephone: (510) 645-2202
Facsimile (510) 645-2220
SANWA BANK CALIFORNIA $20,000,000
Applicable Lending Office:
San Jose CBC
220 Almaden Boulevard
San Jose, CA 95113-2003
Address for Notices:
220 Almaden Boulevard
San Jose, CA 95113-2003
Attn: Clifford M. Wallace
Telephone: (408) 297-6500
Facsimile (408) 292-4092
1-2
<PAGE>
U.S. BANK NATIONAL ASSOCIATION $20,000,000
Applicable Lending Office:
U.S. Bank National Association
Corporate Banking Center
2890 North Main Street
Walnut Creek, CA 94596
Address for Notices:
U.S. Bank National Association
California Corporate Banking
2890 North Main Street
Walnut Creek, CA 94596
Attn: Michael Powell
Telephone: (925) 942-9489
Facsimile (925) 945-6919
IBM CREDIT CORPORATION $30,000,000
Applicable Lending Office:
IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA 94583
Address for Notices:
IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA 94583
Attn: Region Manager, West
Telephone: (925) 277-5600
Facsimile: (925) 277-5675
1-3
<PAGE>
ATTACHMENT 2
SCHEDULE II
PRICING GRID
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
PERIOD PERIOD PERIOD PERIOD PERIOD
APPLICABLE
MARGINS: 1.45% 1.65% 1.85% 2.05% 2.25%
EXPLANATION
1. The Applicable Margin for each Revolving LIBOR Loan will be set for
each Pricing Period and will vary depending upon whether such period is
a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period
or a Level 5 Period.
2. The first Pricing Period, which commences on the November 12, 1998 and
ends on February 28, 1999, will be a Level 3 Period.
3. Each Pricing Period thereafter will be a Level 1 Period, a Level 2
Period, a Level 3 Period, a Level 4 Period or a Level 5 Period
depending upon Borrower's Leverage Ratio (as calculated pursuant to the
definition of "Leverage Ratio" set forth in Schedule 1.01) for the most
recent fiscal quarter period ending prior to the first day of such
Pricing Period as follows:
(a) If, during any Pricing Period, Borrower's Leverage Ratio is
less than 2.00 to 1.00, Borrower's pricing will be a Level 1
Period.
(b) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than or equal to 2.00 to 1.00 but less than or equal
to 2.50 to 1.00, Borrower's pricing will be a Level 2 Period.
(c) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 2.50 to 1.00 but less than or equal to 3.00 to
1.00, Borrower's pricing will be a Level 3 Period.
(d) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 3.00 to 1.00 but less than or equal to 3.25 to
1.00, Borrower's pricing will be a Level 4 Period.
(e) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 3.25 to 1.00, Borrower's pricing will be a Level
5 Period.
2-1
<PAGE>
ATTACHMENT 3
FORM OF ASSIGNMENT AND DELEGATION AGREEMENT
THIS ASSIGNMENT AND DELEGATION AGREEMENT (this "Agreement"), dated as
of December 8, 1999, is entered into by and between UNION BANK OF CALIFORNIA,
N.A., a national banking association, in its capacity as collateral agent under
the Restated Credit Agreement referred to in Recital A below (in such capacity,
"Collateral Agent") and IBM CREDIT CORPORATION, a Delaware corporation ("IBM
Credit").
RECITALS
A. Each of Collateral Agent and IBM Credit is a party to that certain
Third Amended and Restated Credit Agreement dated as of November 12, 1998 (as
amended, the "Restated Credit Agreement") among Bell Microproducts Inc., a
California corporation ("Borrower"), the financial institutions from time to
time listed in Schedule I thereto (the "Banks"), California Bank & Trust, a
California banking association, as administrative agent for the Banks (in such
capacity, "Administrative Agent") and Collateral Agent.
B. Pursuant to Paragraph 7.10 of the Restated Credit Agreement,
Collateral Agent is authorized from time to time to (i) assign or transfer all
or any portion of its rights, benefits or privileges as "collateral agent" under
the Restated Credit Agreement or under any of the other Credit Documents to one
or more Banks and/or (ii) delegate to or subcontract with, or authorize or
appoint any other Bank to perform all or any portion of the duties, covenants or
obligations to be performed by Collateral Agent under the Restated Credit
Agreement or under any of the other Credit Documents.
C. In order to authorize IBM Credit to assume certain of Collateral
Agent's duties and responsibilities with respect to that portion of the
Collateral consisting of or related to Inventory, Collateral Agent has decided
to delegate, subcontract with, authorize and appoint IBM Credit to perform a
portion of the duties, covenants or obligations to be performed by Collateral
Agent under the Restated Credit Agreement and the other Credit Documents with
respect to such Collateral upon the terms and conditions herein set forth.
D. In order to enable IBM Credit to assume certain of Collateral
Agent's duties and responsibilities with respect to that portion of the
Collateral consisting of or relating to inventory, IBM Credit has agreed, upon
the authorization, direction and delegation of the Collateral Agent, to perform
a portion of the duties, covenants or obligations to be performed by the
Collateral Agent under the Restated Credit Agreement and the other Credit
Documents with respect to such Collateral upon the terms and conditions herein
set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Collateral Agent and IBM Credit hereby agree as follows:
3-1
<PAGE>
1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Agreement shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Restated Credit Agreement, as
amended. The rules of construction set forth in Section I of the Restated Credit
Agreement shall, to the extent not inconsistent with the terms of this
Agreement, apply to this Agreement and are hereby incorporated by reference.
2. Assignment and Delegation. Collateral Agent hereby assigns and
transfers to IBM Credit, and delegates to, subcontracts with, authorizes and
appoints IBM Credit, and IBM Credit hereby accepts and agrees, to perform each
of the specific duties and responsibilities set forth on Attachment 1 hereto
that Collateral Agent is otherwise required and/or authorized to perform
pursuant to the Restated Credit Agreement and the other Credit Documents,
together with all such duties and responsibilities as may be reasonably
incidental thereto. In connection with the performance by IBM Credit of such
duties and responsibilities, IBM Credit shall be entitled to receive in the way
of reimbursement any amounts that Collateral Agent is otherwise entitled to
receive under the Restated Credit Agreement and the other Credit Documents,
including without limitation (i) amounts that Collateral Agent is otherwise
entitled to receive pursuant to Paragraph 5.01(c) of the Restated Credit
Agreement (but only to the extent that IBM Credit in fact performs such
inspections and audits provided for therein) and (ii) one-half of the annual
agent's fee that Collateral Agent is otherwise entitled to receive pursuant to
the Agent's Fee Letter.
3. Rights of IBM Credit. Without limiting the scope of any other
provision contained in the Restated Credit Agreement or the other Credit
Documents, the undersigned acknowledge and agree that both Collateral Agent and
IBM Credit shall be entitled to the benefit of all of the indemnities,
immunities and other protective rights that any Bank acting as "Collateral
Agent" is entitled to receive under the Restated Credit Agreement and the other
Credit Documents as if IBM Credit were named as "Collateral Agent" thereunder,
including by way of example but not by limitation, those set forth in Paragraph
7.04 of the Restated Credit Agreement.
4. Limitation on Liability. Neither IBM Credit nor any of its
directors, officers, employees or agents shall be responsible to the Banks, the
Collateral Agent or the Administrative Agent for any action taken or omitted to
be taken by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, except for its or their own gross negligence
or willful misconduct.
5. Actions by IBM Credit. As to any matters not expressly provided for
by this Assignment and Delegation Agreement, IBM Credit shall not be required to
take any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions (i) of the Collateral Agent (if the
Collateral Agent has been so instructed by the Required Banks) or (ii) of the
Required Banks, and shall in all cases be fully protected by the Banks in
acting, or in refraining from acting, hereunder or under any other Credit
Document in accordance with any such instructions, and such instructions and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Banks.
3-2
<PAGE>
6. Re-Assignment or Re-Delegation of Duties and Responsibilities.
Unless otherwise agreed to between Collateral Agent and IBM Credit, IBM Credit
may re-assign and re-delegate to Collateral Agent all or any portion of the
duties and obligations assigned and delegated to it by Collateral Agent pursuant
to this Agreement at any time by giving thirty (30) days prior written notice
thereof to Administrative Agent, Collateral Agent and the Banks. In addition, at
any time the Required Banks may, in their sole discretion, re-assign and
re-delegate all or any portion of the duties and obligations assigned and
delegated to IBM Credit hereunder to Collateral Agent or such other Bank as
Required Banks may designate. Upon any such re-assignment and re-delegation, all
of the rights, duties and obligations of IBM Credit hereunder shall immediately
and without further action be re-assumed by the Collateral Agent or such other
Bank as Required Banks may designate except that the benefit of all of the
indemnities, immunities and other protective provisions shall continue to apply
to any actions taken by IBM Credit prior to any such re-assignment and
re-delegation.
7. Miscellaneous.
(a) Counterparts. This Agreement may be executed in any number
of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Agreement are for convenience
of reference only and are not part of the substance hereof.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
(d) Notices. All notices, requests, demands, consents,
instructions or other communications to or upon Collateral Agent or IBM
Credit under this Agreement shall be given in the manner set forth in
Paragraph 8.01 of the Restated Credit Agreement.
3-3
<PAGE>
IN WITNESS WHEREOF, Collateral Agent and IBM Credit have caused this
Agreement to be executed as of the day and year first above written.
UNION BANK OF CALIFORNIA, N.A., in its
capacity as Collateral Agent
By:
------------------------------------
Name:
Title:
IBM CREDIT CORPORATION
By:
------------------------------------
Name:
Title:
Acknowledged and Agreed:
CALIFORNIA BANK & TRUST,
as Administrative Agent
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
3-4
<PAGE>
CALIFORNIA BANK& TRUST,
As a Bank
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By:
------------------------------------
Name:
Title:
SANWA BANK CALIFORNIA,
As a Bank
By:
------------------------------------
Name:
Title:
COMERICA BANK - CALIFORNIA,
As a Bank
By:
------------------------------------
Name:
Title:
3-5
<PAGE>
U.S. BANK NATIONAL ASSOCIATION,
As a Bank
By:
------------------------------------
Name:
Title:
IBM CREDIT CORPORATION,
As a Bank
By:
------------------------------------
Name:
Title:
BELL MICROPRODUCTS INC.
By:
------------------------------------
Name:
Title:
3-6
<PAGE>
Attachment 1 to Assignment and Delegation Agreement
Duties and Responsibilities of IBM Credit
IBM Credit shall, at the direction and request of Collateral Agent,
upon proper notice and during normal business hours visit and inspect specific
properties and offices of Borrower and its Subsidiaries, to conduct an audit of
any or all inventory. Each such audit shall include by way of example, but not
limitation performing a physical count of inventory, requesting a complete
inventory report from Borrower, selecting and testing eligibility of a random
sample of inventory, and reviewing and testing discrepancies.
FREQUENCY: Each inventory audit shall take place at such times and
intervals as Collateral Agent may reasonably request, including without
limitation, an annual audit of the inventory of Borrower and its Subsidiaries.
FEES: As set forth in Section 5.01(c) of the Third Amended and Restated
Credit Agreement, as it may be modified from time to time.
SUMMARY: At the completion of each inventory audit IBM Credit shall
provide Collateral Agent with a written summary of such audit. If after review
of the summary and Collateral Agent concludes that additional inventory audit
processes or sampling are required then Collateral Agent, upon 5 business days
prior notice, shall give specific and detailed direction to IBM Credit to
conduct such additional processes or sampling.
3-7
<PAGE>
ATTACHMENT 4
FORM OF GUARANTOR CONSENT LETTER
December 8, 1999
TO: ADMINISTRATIVE AGENT,
As Administrative Agent for the Banks
and the Agents under the
Restated Credit Agreement referred to below
1. Reference is made to the following:
(a) The Third Amended and Restated Credit Agreement dated as
of November 12, 1998, among Borrower, the Banks, Administrative Agent
and Collateral Agent, as amended by that certain First Amendment to
Third Amended and Restated Credit Agreement dated as of May 13, 1999,
that certain Second Amendment to Third Amended and Restated Credit
Agreement dated as of July 21, 1999 and that certain Third Amendment to
Third Amended and Restated Credit Agreement dated as of October 15,
1999 (as amended, the "Restated Credit Agreement");
(b) [The Bell Canada Guaranty, dated as of November 12, 1998
(the " Bell Canada Guaranty"),] [The Bell-Tenex Guaranty, dated as of
November 20, 1998 (the "Bell-Tenex Guaranty"),] [The Bell-Future Tech
Guaranty, dated as of November ____, 1999 (the "Bell-Future Tech
Guaranty"),] executed by the undersigned ("Guarantor") in favor of the
Banks and Collateral Agent; and
(c) The Fourth Amendment to Third Amended and Restated Credit
Agreement, dated as of December 8, 1999, among Borrower, the Banks,
Administrative Agent and Collateral Agent (the " Fourth Amendment");
2. Guarantor hereby confirms that it is a wholly-owned subsidiary of
[Bell Microproducts Inc., a California corporation] [Bell Microproducts Canada
Inc., a California corporation ("Bell Canada") and that Bell Canada is a
wholly-owned subsidiary of Bell Microproducts Inc., a California corporation].
3. Guarantor hereby consents to the Fourth Amendment, including without
limitation, the extension of the Revolving Loan Maturity Date from October 31,
2000 to May 31, 2001 and the increase in the Total Revolving Loan Commitment
from One Hundred Thirty Million Dollars ($130,000,000) to One Hundred Sixty
Million Dollars ($160,000,000). Guarantor expressly agrees that the Fourth
Amendment shall in no way affect or alter the rights, duties, or obligations of
Guarantor, the Banks or Collateral Agent under the [Bell Canada Guaranty]
[Bell-Tenex Guaranty] [Bell-Future Tech Guaranty].
4. Pursuant to the [Bell Canada Guaranty] [Bell-Tenex Guaranty]
[Bell-Future Tech Guaranty], Guarantor continues to guaranty the payment when
due of, inter alia, all loans, advances, debts, liabilities and obligations,
however arising, owed by the Borrower to any Agent
4-1
<PAGE>
or any Bank of every kind and description now existing or hereafter arising
pursuant to the terms of the Restated Credit Agreement as amended by the Fourth
Amendment or any of the other Credit Documents.
5. The [Pledge] [Security] Agreement, dated as of [November 20,
1998][November ___, 1999] executed by Guarantor in favor of Collateral Agent
(the "[Pledge] [Security] Agreement") and any other security granted to any
Agent or any of the Banks from time to time as security for the obligations of
Guarantor under the [Bell Canada Guaranty] [Bell-Tenex Guaranty] [Bell-Future
Tech Guaranty] remains in full force and effect and unamended, and the security
interests, mortgages, charges, liens, assignments, transfers and pledges granted
by Guarantor pursuant to the [Pledge] [Security] Agreement and such other
documents (if any) continue to extend to all debts, liabilities and obligations,
present or future, direct or indirect, absolute or contingent, matured or
unmatured, at any time due or accruing due, of Guarantor to any of the Banks and
any Agent arising under, in connection with or pursuant to the Restated Credit
Agreement and the other Credit Documents, as acknowledged and confirmed by this
Guarantor Consent Letter, notwithstanding the amendment of the Restated Credit
Agreement by the Fourth Amendment.
6. From and after the date hereof, the term "Restated Credit Agreement"
as used in the [Bell-Canada Guaranty] [Bell-Tenex Guaranty] [Bell-Future Tech
Guaranty] shall mean the Restated Credit Agreement, as amended by the Fourth
Amendment.
7. Guarantor's consent to the Fourth Amendment shall not be construed
(i) to have been required by the terms of the [Bell Canada Guaranty] [Bell-Tenex
Guaranty] [Bell-Future Tech Guaranty], any other Credit Document or any other
document, instrument or agreement relating thereto or (ii) to require the
consent of Guarantor in connection with any future amendment of the Restated
Credit Agreement or any other Credit Document.
4-2
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guarantor Consent
Letter as of the day and year first written above.
[BELL/MICROPRODUCTS CANADA-TENEX DATA ULC]
[BELL MICROPRODUCTS CANADA INC.]
[BELL MICROPRODUCTS - FUTURE TECH, INC.]
By:
----------------------------
Name:
-----------------------
Title:
----------------------
4-3
<PAGE>
ATTACHMENT 5
MATTERS TO BE COVERED BY LEGAL OPINION
1. Borrower (a) is a corporation duly incorporated and validly existing in
good standing under the laws of its jurisdiction of incorporation and
(b) has the requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now conducted.
2. Borrower has the requisite corporate power and authority to enter into
the Amendment and to carry out the transactions contemplated thereby,
and by the Restated Credit Agreement as amended by the Amendment.
3. The Amendment has been duly authorized, executed and delivered by
Borrower, and the Amendment and the Restated Credit Agreement as
amended by the Amendment, each constitutes a legally valid and binding
obligation of Borrower, enforceable against Borrower in accordance with
its terms.
4. The performance by Borrower of its obligations under the Amendment, and
the Restated Credit Agreement as amended by the Amendment, will not (a)
violate any provision of the Certificate of Incorporation or the bylaws
of Borrower, (b) to our knowledge, violate any provision of any law,
rule, regulation, order, writ, judgement, injunction, decree,
determination by a court having jurisdiction over Borrower, (c) result
in a breach of, constitute a default under, or permit the acceleration
of any obligation owed under any Reviewed Agreement listed on Annex A
hereto binding upon Borrower, or (d) to our knowledge, result in the
attachment of a Lien (other than a Permitted Lien) upon any assets of
Borrower.
5-1
EXECUTION VERSION
FIFTH AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment"), dated as of December 31, 1999, is entered into by and among:
(1) BELL MICROPRODUCTS INC., a California corporation
("Borrower");
(2) Each of the financial institutions listed in Schedule I to
the Restated Credit Agreement referred to in Recital A below (the
"Banks");
(3) CALIFORNIA BANK & TRUST, a California banking corporation,
as administrative agent for the Banks (in such capacity,
"Administrative Agent"); and
(4) UNION BANK OF CALIFORNIA, N.A., a national banking
association, as collateral agent for the Banks (in such capacity,
"Collateral Agent").
RECITALS
A. Borrower, the Banks, Administrative Agent and Collateral Agent are
parties to a Third Amended and Restated Credit Agreement dated as of November
12, 1998, as amended by (i) that certain First Amendment to Third Amended and
Restated Credit Agreement dated as of May 13, 1999, (ii) that certain Second
Amendment to Third Amended and Restated Credit Agreement dated as of July 21,
1999, (iii) that certain Third Amendment to Third Amended and Restated Credit
Agreement dated as of October 15, 1999 and (iv) that certain Fourth Amendment to
Third Amended and Restated Credit Agreement dated as of December 8, 1999 (as
amended, the "Restated Credit Agreement").
B. Borrower has requested the Banks, Administrative Agent and
Collateral Agent to amend the Restated Credit Agreement in certain respects.
C. The Banks, Administrative Agent and Collateral Agent are willing so
to amend the Restated Credit Agreement upon the terms and subject to the
conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, the Banks, Administrative Agent and Collateral Agent
hereby agree as follows:
1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Restated Credit Agreement, as
amended by this Amendment. The rules of construction set forth
1
<PAGE>
in Section I of the Restated Credit Agreement shall, to the extent not
inconsistent with the terms of this Amendment, apply to this Amendment and are
hereby incorporated by reference.
2. Amendment to Credit Agreement. Subject to the conditions set forth
in paragraph 4 below, the Restated Credit Agreement is hereby amended so as to
incorporate all of the changes set forth in the marked version of the Restated
Credit Agreement attached hereto as Attachment A.
3. Representations and Warranties. Borrower hereby represents and
warrants to Administrative Agent, Collateral Agent and the Banks that, on the
date of this Amendment and after giving effect to the amendment set forth in
paragraph 2 above, the following are and shall be true and correct on the
Effective Date (as defined below):
(a) The representations and warranties set forth in Paragraph
4.01 of the Restated Credit Agreement are true and correct in all
material respects;
(b) No Default or Event of Default has occurred and is
continuing; and
(c) Each of the Credit Documents is in full force and effect.
4. Effective Date. The amendment to the Restated Credit Agreement
effected by paragraph 2 above shall become effective on December 31, 1999 (the
"Effective Date"), subject to receipt by the Banks, Administrative Agent and
Collateral Agent on or prior to the Effective Date of the following, each in
form and substance satisfactory to the Banks, Administrative Agent, Collateral
Agent and their respective counsel:
(a) This Amendment duly executed by Borrower, the Banks,
Administrative Agent and Collateral Agent;
(b) A letter in the form of Attachment B hereto appropriately
completed, dated the Effective Date and duly executed by each
Guarantor;
(c) A Certificate of the Secretary or an Assistant Secretary
of Borrower, dated the Effective Date, certifying that (i) the Articles
of Incorporation and Bylaws of Borrower, in the form delivered to
Administrative Agent on the Closing Date, are in full force and effect
and have not been amended, supplemented, revoked or repealed since such
date, (ii) that the resolution of Borrower, in the form delivered to
Administrative Agent on the Closing Date, is in full force and effect
and has not been amended, supplemented, revoked or repealed since such
date, and (iii) the incumbency, signatures and authority of the
officers of Borrower authorized to execute, deliver and perform the
Credit Agreement, this Amendment, the other Credit Documents and all
other documents, instruments or agreements relating thereto executed or
to be executed by Borrower; and
(d) Such other evidence as Administrative Agent, Collateral
Agent or any Bank may reasonably request to establish the accuracy and
completeness of the
2
<PAGE>
representations and warranties and the compliance with the terms and
conditions contained in this Amendment.
5. Effect of this Amendment. On and after the Effective Date, each
reference in the Restated Credit Agreement and the other Credit Documents to the
Restated Credit Agreement shall mean the Restated Credit Agreement as amended
hereby. Except as specifically amended above, (a) the Restated Credit Agreement
and the other Credit Documents shall remain in full force and effect and are
hereby ratified and confirmed and (b) the execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power, or remedy of the Banks, Administrative Agent or
Collateral Agent, nor constitute a waiver of any provision of the Restated
Credit Agreement or any other Credit Document.
6. Miscellaneous.
(a) Counterparts. This Amendment may be executed in any number
of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience
of reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
3
<PAGE>
IN WITNESS WHEREOF, Borrower, the Banks, Administrative Agent and
Collateral Agent have caused this Amendment to be executed as of the day and
year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By: /s/ Remo E. Canessa
------------------------------------
Name: Remo E. Canessa
Title: Vice President of Finance
and CFO
By: /s/ W. Don Bell
------------------------------------
Name: W. Don Bell
Title: President & CEO
ADMINISTRATIVE AGENT: CALIFORNIA BANK & TRUST,
As Administrative Agent
By: /s/ Stephen C. Bellicini
------------------------------------
Name: Stephen C. Bellicini
Title: Senior Vice President
By: /s/ Carmen Sanz
------------------------------------
Name: Carmen Sanz
Title: Assistant Vice President
COLLATERAL AGENT: UNION BANK OF CALIFORNIA, N.A.,
As Collateral Agent
By: /s/ William E. Hinch
------------------------------------
Name: William E. Hinch
Title: Vice President
By:
------------------------------------
Name:
Title:
4
<PAGE>
BANKS: CALIFORNIA BANK & TRUST,
As a Bank
By: /s/ Stephen C. Bellicini
------------------------------------
Name: Stephen C. Bellicini
Title: Senior Vice President
By: /s/ Carmen Sanz
------------------------------------
Name: Carmen Sanz
Title: Assistant Vice President
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By: /s/ William E. Hinch
------------------------------------
Name: William E. Hinch
Title: Vice President
By:
------------------------------------
Name:
Title:
SANWA BANK CALIFORNIA,
As a Bank
By: /s/ Clifford M. Wallace
------------------------------------
Name: Clifford M. Wallace
Title: Vice President
COMERICA BANK - CALIFORNIA,
As a Bank
By: /s/ Scott T. Smith
------------------------------------
Name: SCOTT T. SMITH
Title: VICE PRESIDENT
5
<PAGE>
U.S. BANK NATIONAL ASSOCIATION,
As a Bank
By: /s/ Michael Powell
------------------------------------
Name: Michael Powell
Title: Vice President
By:
------------------------------------
Name:
Title:
IBM CREDIT CORPORATION,
As a Bank
By: /s/ Thomas S. Curcid
------------------------------------
Name: Thomas S. Curcid
Title: Manager of Credit
6
<PAGE>
ATTACHMENT A
MARKED VERSION OF RESTATED CREDIT AGREEMENT
7
<PAGE>
DRAFT CONFORMED COPY
(Through 5th Amendment)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
among
BELL MICROPRODUCTS INC.
and
THE BANKS NAMED HEREIN
and
CALIFORNIA BANK & TRUST,
as Administrative Agent for the Banks
November 12, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
CREDIT AGREEMENT
Table Of Contents
<CAPTION>
Page
<S> <C> <C>
SECTION I. INTERPRETATION.............................................................................2
1.01. Definitions....................................................................................2
1.02. GAAP...........................................................................................2
1.03. Headings.......................................................................................2
1.04. Plural Terms...................................................................................2
1.05. Time...........................................................................................2
1.06. Governing Law..................................................................................2
1.07. Construction...................................................................................2
1.08. Calculation of Interest and Fees...............................................................2
1.09. Other Interpretive Provisions..................................................................3
SECTION II. CREDIT FACILITIES..........................................................................3
2.01. Revolving Loan Facility........................................................................3
2.02. Amount Limitations, Commitment Reductions, Etc.................................................6
2.03. Fees...........................................................................................7
2.04. Prepayments....................................................................................8
2.05. Other Payment Terms............................................................................9
2.06. Notes and Interest Account....................................................................10
2.07. Loan Funding..................................................................................10
2.08. Pro Rata Treatment............................................................................11
2.09. Change of Circumstances.......................................................................12
2.10. Taxes on Payments.............................................................................14
2.11. Funding Loss Indemnification..................................................................16
2.12. Security......................................................................................16
SECTION III. CONDITIONS PRECEDENT......................................................................17
3.01. Conditions Precedent to Initial Revolving Loans...............................................17
3.02. Conditions Precedent to Each Credit Event.....................................................17
3.03. Covenant to Deliver...........................................................................18
SECTION IV. REPRESENTATIONS AND WARRANTIES............................................................18
4.01. Borrower's Representations and Warranties.....................................................18
4.02. Reaffirmation.................................................................................23
SECTION V. COVENANTS.................................................................................23
5.01. Affirmative Covenants.........................................................................23
5.02. Negative Covenants............................................................................26
SECTION VI. DEFAULT...................................................................................29
6.01. Events of Default.............................................................................29
6.02. Remedies......................................................................................30
SECTION VII. THE AGENTS AND RELATIONS AMONG BANKS......................................................31
-i-
<PAGE>
Table Of Contents
(continued)
Page
7.01. Appointment, Powers and Immunities............................................................31
7.02. Reliance by Agents............................................................................31
7.03. Defaults......................................................................................32
7.04. Indemnification...............................................................................32
7.05. Non-Reliance..................................................................................32
7.06. Resignation or Removal of Administrative Agent................................................33
7.07. Resignation or Removal of Collateral Agent....................................................33
7.08. Agents in their Individual Capacity...........................................................34
7.09. Co-Agents.....................................................................................34
SECTION VIII. MISCELLANEOUS.............................................................................34
8.01. Notices.......................................................................................34
8.02. Expenses......................................................................................35
8.03. Indemnification...............................................................................36
8.04. Waivers; Amendments...........................................................................36
8.05. Successors and Assigns........................................................................37
8.06. Setoff; Security Interest.....................................................................40
8.07. No Third Party Rights.........................................................................40
8.08. Partial Invalidity............................................................................40
8.09. Arbitration...................................................................................41
8.10. Jury Trial....................................................................................42
8.11. Counterparts..................................................................................42
SECTION IX. EFFECTIVE DATE OF RESTATED CREDIT AGREEMENT...............................................43
9.01. Effective Date................................................................................43
9.02. Loans Under Existing Credit Agreement.........................................................43
9.03. Effect........................................................................................43
-ii-
<PAGE>
Table Of Contents
(continued)
Page
SCHEDULES
I Banks (Preamble)
II Pricing Grid
1.01 Definitions (1.01)
3.01 Effective Date Conditions Precedent
4.01(g) Material Litigation
4.01(q) Subsidiaries
5.01(j) Documents to be Delivered by Borrower on or Prior
to the Tenex Data Acquisition Effective Date
EXHIBITS
A Notice of Revolving Loan Borrowing (2.01(b))
B Notice of Revolving Loan Conversion (2.01(d))
C Notice of Revolving Loan Interest Period Selection (2.01(e))
D Revolving Loan Note (2.07(a))
E Third Amended and Restated Security Agreement (2.13(a), 9.03)
F Third Amended and Restated Pledge Agreement (2.13(a), 9.03)
G Bell Canada Guaranty (2.13(a))
H Bell Canadian Pledge Agreement (2.13(b))
I Bell Tenex/Bell Future-Tech Guaranty (2.13(b), 2.13(c))
J Bell-Tenex/Bell Future-Tech Security Agreement (2.13(b),
2.13(c))
K Borrowing Base Certificate (5.01(a))
L Assignment Agreement (8.05(c))
</TABLE>
-iii-
<PAGE>
CONFORMED COPY
THROUGH 5TH AMENDMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "Restated Credit
Agreement"), dated as of November 12, 1998, is entered into by and among:
(1) BELL MICROPRODUCTS INC., a California corporation
("Borrower");
(2) Each of the financial institutions from time to time
listed in Schedule I hereto, as amended from time to time (such
financial institutions to be referred to herein collectively as the
"Banks");
(3) CALIFORNIA BANK & TRUST (formerly known as Sumitomo Bank
of California), a California banking corporation ("CB&T"), as
administrative agent for the Banks (in such capacity, "Administrative
Agent");
(4) Prior to the First Amendment Effective Date,
Administrative Agent, as collateral agent for the Banks (in such
capacity, "Collateral Agent"), and on and after the First Amendment
Effective Date, UNION BANK OF CALIFORNIA, N.A., a national banking
association, as Collateral Agent; and
(5) COMERICA BANK-CALIFORNIA, a California banking
corporation, as co-agent for the Banks.
RECITALS
A. Borrower, Administrative Agent and the Banks are parties to a Second
Amended and Restated Credit Agreement dated as of May 23, 1995 (as amended to
the date hereof, the "Existing Credit Agreement"), pursuant to which the Banks
have provided to Borrower (i) a revolving line of credit facility in the
principal amount of $100,000,000 and (ii) a letter of credit sub-facility in the
amount of $10,000,000 (collectively, the "Existing Credit Facility").
B. Borrower has requested Administrative Agent and the Banks to amend
the Existing Credit Agreement so as to make certain changes.
C. Administrative Agent and the Banks are willing so to amend the
Existing Credit Agreement upon the terms and subject to the conditions set forth
herein. For convenience of reference, the parties hereto wish to restate the
Existing Credit Agreement as so amended in its entirety.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants contained herein, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated as of the date hereof to read in
its entirety as follows:
SECTION I. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Restated Credit
Agreement or any other Credit Document, each term set forth in Schedule 1.01,
when used in this Restated Credit Agreement or any other Credit Document, shall
have the respective meaning given to that term in Schedule 1.01 or in the
provision of this Restated Credit Agreement or other Credit Document referenced
in Schedule 1.01.
1.02. GAAP. Unless otherwise indicated in this Restated Credit
Agreement or any other Credit Document, all accounting terms used in this
Restated Credit Agreement or any other Credit Document shall be construed, and
all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with GAAP. If GAAP changes during the term of this
Restated Credit Agreement such that any covenants contained herein would then be
calculated in a different manner or with different components, Borrower, the
Banks and the Agents agree to negotiate in good faith to amend this Restated
Credit Agreement in such respects as are necessary to conform those covenants as
criteria for evaluating Borrower's financial condition to substantially the same
criteria as were effective prior to such change in GAAP; provided, however,
that, until Borrower, the Banks and the Agents so amend this Restated Credit
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.
1.03. Headings. Headings in this Restated Credit Agreement and each of
the other Credit Documents are for convenience of reference only and are not
part of the substance hereof or thereof.
1.04. Plural Terms. All terms defined in this Restated Credit Agreement
or any other Credit Document in the singular form shall have comparable meanings
when used in the plural form and vice versa.
1.05. Time. All references in this Restated Credit Agreement and each
of the other Credit Documents to a time of day shall mean San Francisco,
California time, unless otherwise indicated.
1.06. Governing Law. This Restated Credit Agreement and each of the
other Credit Documents shall be governed by and construed in accordance with the
laws of the State of California without reference to conflicts of law rules.
1.07. Construction. This Restated Credit Agreement is the result of
negotiations among, and has been reviewed by, Borrower, each Bank, each Agent
and their respective counsel. Accordingly, this Restated Credit Agreement shall
be deemed to be the product of all
2
<PAGE>
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower, any Bank or any Agent.
1.08. Calculation of Interest and Fees. All calculations of interest
and fees under this Restated Credit Agreement and the other Credit Documents for
any period (a) shall include the first day of such period and exclude the last
day of such period and (b) shall be calculated on the basis of a year of 360
days for actual days elapsed.
1.09. Other Interpretive Provisions. References in this Restated Credit
Agreement to "Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits"
and "Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits
and schedules herein and hereto unless otherwise indicated. References in this
Restated Credit Agreement and each of the other Credit Documents to any
document, instrument or agreement (a) shall include all exhibits, schedules and
other attachments thereto, (b) shall include all documents, instruments or
agreements issued or executed in replacement thereof, and (c) shall mean such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at any given
time. The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Restated Credit Agreement or any other Credit Document shall
refer to this Restated Credit Agreement or such other Credit Document, as the
case may be, as a whole and not to any particular provision of this Restated
Credit Agreement or such other Credit Document, as the case may be. The words
"include" and "including" and words of similar import when used in this Restated
Credit Agreement or any other Credit Document shall not be construed to be
limiting or exclusive. Notwithstanding references herein and in the other Credit
Documents to each of the financial institutions listed from time to time on
Schedule I hereto as a "Bank," such references are not intended to indicate, and
should not be construed to mean, that each of such financial institutions is in
fact a federally regulated "bank".
SECTION II. CREDIT FACILITIES.
2.01. Revolving Loan Facility.
(a) Revolving Loan Availability. Subject to the terms and
conditions of this Restated Credit Agreement (including the amount
limitations set forth in Paragraph 2.03 and the conditions set forth in
Section III), each Bank severally agrees to advance to Borrower from
time to time during the period beginning on the Effective Date and
ending on May 31, 2001 (the "Revolving Loan Maturity Date") such loans
as Borrower may request under this Paragraph 2.01 (individually, a
"Revolving Loan"); provided, however, that the (i) aggregate principal
amount of all Revolving Loans made by such Bank at any time outstanding
shall not exceed such Bank's Revolving Loan Commitment at such time and
(ii) the aggregate principal amount of all Revolving Loans made by all
Banks at any time outstanding shall not exceed the Total Revolving Loan
Commitment at such time. All Revolving Loans shall be made on a pro
rata basis by the Banks in accordance with their respective
Proportionate Shares, with each Revolving Loan Borrowing to be
comprised of a Revolving Loan by each Bank equal to such Bank's
Proportionate Share
3
<PAGE>
of such Revolving Loan Borrowing. Except as otherwise provided herein,
Borrower may borrow, repay and reborrow Revolving Loans until the
Revolving Loan Maturity Date.
(b) Notice of Revolving Loan Borrowing. Borrower shall request
each Revolving Loan Borrowing by delivering to Administrative Agent an
irrevocable written notice in the form of Exhibit A, appropriately
completed (a "Notice of Revolving Loan Borrowing"), which specifies,
among other things:
(i) The principal amount of the requested Revolving
Loan Borrowing;
(ii) Whether the requested Revolving Loan Borrowing
is to consist of (A) Revolving Loans which bear interest as
provided in clause (i) of Subparagraph 2.01(c) (individually,
a "Revolving Prime Rate Loan") or (B) Revolving Loans which
bear interest as provided in clause (ii) of Subparagraph
2.01(c) (individually, a "Revolving LIBOR Loan");
(iii) If the requested Revolving Loan Borrowing is to
consist of Revolving LIBOR Loans, the initial Interest Period
selected by Borrower for such Revolving Loans in accordance
with Subparagraph 2.01(e); and
(iv) The date of the requested Revolving Loan
Borrowing, which shall be a Business Day.
Borrower shall give each Notice of Revolving Loan Borrowing to
Administrative Agent at least three (3) Business Days before the date
of the requested Revolving Loan Borrowing in the case of a Revolving
Loan Borrowing consisting of Revolving LIBOR Loans and at least one (1)
Business Day before the date of the requested Revolving Loan Borrowing
in the case of a Revolving Loan Borrowing consisting of Revolving Prime
Rate Loans. Each Notice of Revolving Loan Borrowing shall be delivered
by first-class mail or facsimile to Administrative Agent at the office
or facsimile number and during the hours specified in Paragraph 8.01;
provided, however, that Borrower shall promptly deliver to
Administrative Agent the original of any Notice of Revolving Loan
Borrowing initially delivered by facsimile. Each Revolving Loan
Borrowing consisting of Revolving Prime Rate Loans shall be in the
minimum amount of $100,000 or an integral multiple of $100,000 in
excess thereof. Each Revolving Loan Borrowing consisting of Revolving
LIBOR Loans shall be in the minimum amount of $500,000 or an integral
multiple of $100,000 in excess thereof. Administrative Agent shall
notify each Bank no later than 5:00 p.m. California time on the date of
receipt of each such Notice of Revolving Loan Borrowing of the contents
thereof and of the amount and Type of each Revolving Loan to be made by
such Bank as part of the requested Revolving Loan Borrowing.
(c) Revolving Loan Interest Rates. Borrower shall pay interest
on the unpaid principal amount of each Revolving Loan from the date of
such Revolving Loan until the maturity thereof, at one of the following
rates per annum:
4
<PAGE>
(i) During such periods as such Revolving Loan is a
Revolving Prime Rate Loan, at a rate per annum equal to the
Prime Rate, such rate to change from time to time as the Prime
Rate shall change; and
(ii) During such periods as such Revolving Loan is a
Revolving LIBOR Loan, at a rate per annum equal at all times
during each Interest Period for such Revolving Loan to the
LIBO Rate for such Interest Period plus the Applicable Margin
therefor, such rate to change from time to time during such
Interest Period as the Applicable Margin shall change;
provided, however, that each of the rates set forth in clauses (i) and
(ii) of this Subparagraph 2.01(c) shall be increased by one percent
(1.00%) per annum on the date an Event of Default occurs and shall
continue at such increased rate unless and until such Event of Default
is waived in accordance with this Restated Credit Agreement. All
Revolving Loans in each Revolving Loan Borrowing shall, at any given
time prior to maturity, bear interest at one, and only one, of the
above rates.
(d) Conversion of Revolving Loans. Borrower may convert all
Revolving Loans in any Revolving Loan Borrowing consisting of Revolving
Prime Rate Loans into Revolving LIBOR Loans and all Revolving Loans in
any Revolving Loan Borrowing consisting of Revolving LIBOR Loans into
Revolving Prime Rate Loans; provided, however, that any conversion of
Revolving LIBOR Loans into Revolving Prime Rate Loans shall be made on,
and only on, the last day of an Interest Period for such Revolving
LIBOR Loans. Borrower shall request such a conversion by an irrevocable
written notice to Administrative Agent in the form of Exhibit B,
appropriately completed (a "Notice of Revolving Loan Conversion"),
which specifies, among other things:
(i) The Revolving Loan Borrowing which is to be
converted;
(ii) The Type of Loans into which such Revolving
Loans are to be converted;
(iii) If such Revolving Loans are to be converted
into Revolving LIBOR Loans, the initial Interest Period
selected by Borrower for such Revolving Loans in accordance
with Subparagraph 2.01(e); and
(iv) The date of the requested conversion, which
shall be a Business Day.
Borrower shall give each Notice of Revolving Loan Conversion to
Administrative Agent at least three (3) Business Days before the date
of the requested conversion in the case of a conversion into Revolving
LIBOR Loans and at least one (1) Business Day before the date of the
requested conversion in the case of a conversion into Revolving Prime
Rate Loans. Each Notice of Revolving Loan Conversion shall be delivered
by first-class mail or facsimile to Administrative Agent at the office
or to the facsimile number and during the hours specified in Paragraph
8.01; provided, however, that Borrower shall promptly.
5
<PAGE>
deliver to Administrative Agent the original of any Notice of Revolving
Loan Conversion initially delivered by facsimile. Administrative Agent
shall notify each Bank no later than 5:00 p.m. California time on the
date of receipt of each such Notice of Revolving Loan Conversion of the
contents thereof and of the amount and Type of each Revolving Loan to
be converted by such Bank as part of the requested Revolving Loan
Conversion.
(e) Revolving LIBOR Loan Interest Periods.
(i) The initial and each subsequent Interest Period
selected by Borrower for a Revolving LIBOR Loan shall be
thirty (30), sixty (60), ninety (90), one-hundred twenty
(120), one-hundred fifty (150) or one-hundred eighty (180)
days; provided, however, that (A) any Interest Period which
would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day unless such
next Business Day falls in another calendar month, in which
case such Interest Period shall end on the immediately
preceding Business Day; (B) any Interest Period which 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; and (C) no
Interest Period shall end after the Revolving Loan Maturity
Date.
(ii) Borrower shall notify Administrative Agent by an
irrevocable written notice in the form of Exhibit C,
appropriately completed (a "Notice of Revolving Loan Interest
Period Selection"), at least three (3) Business Days prior to
the last day of each Interest Period for Revolving LIBOR Loans
of the Interest Period selected by Borrower for the next
succeeding Interest Period for such Revolving LIBOR Loans.
Each Notice of Revolving Loan Interest Period Selection shall
be given by first-class mail or facsimile to the office or the
facsimile number and during the hours specified in Paragraph
8.01; provided, however, that Borrower shall promptly deliver
to Administrative Agent the original of any Notice of
Revolving Loan Interest Period Selection initially delivered
by facsimile. If Borrower fails to notify Administrative Agent
of the next Interest Period for Revolving LIBOR Loans in
accordance with this Subparagraph 2.01(e), such Revolving
Loans shall automatically convert to Revolving Prime Rate
Loans on the last day of the current Interest Period therefor.
Administrative Agent shall notify each Bank no later than 5:00
p.m. California time on the date of receipt of each such
Notice of Revolving Loan Interest Period Selection of the
contents thereof and of the Interest Period selected for each
Revolving Loan.
(f) Scheduled Revolving Loan Payments. Scheduled Revolving
Loan Payments. Borrower shall repay to each Bank on the Revolving Loan
Maturity Date the unpaid principal amount of each Revolving Loan made
by such Bank. Borrower shall pay accrued interest on the unpaid
principal amount of each Revolving Loan on the last Business Day in
each month and upon prepayment (to the extent thereof) and at maturity.
6
<PAGE>
(g) Purpose. Borrower shall use the proceeds of the Revolving
Loans made by the Banks on or after the Effective Date (i) to refinance
the loans outstanding under the Existing Credit Agreement on the
Effective Date and (ii) for Borrower's working capital and general
corporate needs (including acquisitions approved by the Banks from time
to time in their sole discretion).
2.02. Letter of Credit Sub-facility.
(a) Letter of Credit Availability. Subject to the terms and
conditions of this Restated Credit Agreement (including the amount
limitations set forth in Paragraph 2.03), Issuing Bank shall issue on
behalf of Borrower from time to time during the period beginning on the
Fifth Amendment Effective Date and ending on the date which is fifteen
(15) days prior to the Revolving Loan Maturity Date (the "LC Facility
Expiration Date") such letters of credit as Borrower may request under
this Paragraph 2.02 (individually, a "Letter of Credit"); provided,
however, as follows:
(i) The aggregate amount available for drawing under
all Letters of Credit at any time outstanding shall not exceed
Ten Million Dollars ($10,000,000) (such amount, as reduced
from time to time pursuant to this Restated Credit Agreement,
to be referred to herein as the "LC Commitment").
(ii) Each Letter of Credit shall be an irrevocable
standby Letter of Credit and the beneficiary or beneficiaries
under each the Letter of Credit shall be the lender or lenders
providing the Canadian dollar revolving line of credit
facility to be entered into by Bell-Tenex in a aggregate
principal amount not to exceed the equivalent of Ten Million
Dollars ($10,000,000).
(iii) Each Letter of Credit shall expire on or prior
to the LC Facility Expiration Date.
(iv) Each Letter of Credit shall be governed by the
Uniform Customs and Practices for Documentary Credits as most
recently published by the International Chamber of Commerce
(the "UCP") prior to the date of issuance of such Letter of
Credit and the terms of the UCP are hereby incorporated by
reference with respect to each Letter of Credit.
(v) Each Letter of Credit shall be in a form
reasonably acceptable to Issuing Bank.
Except as otherwise provided herein, Borrower may request Letters of
Credit, cause or allow Letters of Credit to expire and request
additional Letters of Credit until the LC Facility Expiration Date.
(b) LC Application. Borrower shall request each Letter of
Credit by delivering to Issuing Bank (with a copy to Administrative
Agent) an irrevocable written application in a form reasonably
acceptable to Issuing Bank (it being understood that
7
<PAGE>
such form shall not contain terms inconsistent with the terms set forth
in this Restated Credit Agreement), appropriately completed (an "LC
Application"), which specifies, among other things:
(i) The stated amount of the requested Letter of
Credit;
(ii) The name and address of the beneficiary of the
requested Letter of Credit;
(iii) The expiration date of the requested Letter of
Credit if such date is prior to the LC Facility Expiration
Date;
(iv) The documentary conditions for drawing under the
requested Letter of Credit;
(v) The date of issuance for the requested Letter of
Credit, which shall be a Business Day; and
(vi) The aggregate amount which will be available for
drawing under all outstanding Letters of Credit (including the
requested Letter of Credit), which amount shall not exceed the
LC Commitment.
Borrower shall give each LC Application to Issuing Bank at least three
(3) Business Days before the proposed date of issuance of the requested
Letter of Credit. Each LC Application shall be delivered by an
established express courier service, first-class mail or facsimile to
Issuing Bank with a copy thereof to Administrative Agent at their
respective offices or facsimile numbers and during the hours specified
in Paragraph 8.01; provided, however, that Borrower shall promptly
deliver to Issuing Bank the original of any LC Application initially
delivered by facsimile. Administrative Agent shall promptly notify each
Bank of the contents of each LC Application. In the event of any
conflict between the terms of this Restated Credit Agreement and the
terms of any LC Application, the terms of this Restated Credit
Agreement shall control.
(c) Disbursement and Reimbursement.
(i) Disbursement. Issuing Bank will notify Borrower
by facsimile forthwith upon receipt of the presentment of any
demand for payment under any Letter of Credit, together with
notice of the amount of such payment and the date such payment
shall be made; provided, however that Issuing Bank shall incur
no liability to Borrower or any third party for failure to so
notify. Subject to the terms and provisions of such Letter of
Credit, Issuing Bank shall make such payment (a "Drawing
Payment") to the appropriate beneficiary.
(ii) Time of Reimbursement. Not later than 11:00 a.m.
on the day each Drawing Payment is to be made by Issuing Bank,
Borrower shall make or cause to be made to Issuing Bank a
payment in the amount of such Drawing Payment (a
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"Reimbursement Payment"); provided, however, that Borrower
shall make such Reimbursement Payment to, or cause such
Reimbursement Payment to be made to, Administrative Agent for
the benefit of the Banks if, prior to the time such
Reimbursement Payment is made, Issuing Bank has notified
Borrower that it has requested the Banks pursuant to clause
(ii) of Subparagraph 2.02(d) to pay to Issuing Bank their
respective Proportionate Shares of the Drawing Payment made by
Issuing Bank. If any such Reimbursement Payment is made to
Administrative Agent, Administrative Agent shall promptly pay
to each Bank which has paid its Proportionate Share of the
Drawing Payment, such Bank's Proportionate Share of the
Reimbursement Payment and shall promptly pay to Issuing Bank
the balance of such Reimbursement Payment.
(iii) Reimbursement Obligation Absolute. The
obligation of Borrower to reimburse Issuing Bank or the Banks,
as the case may be, for Drawing Payments (such obligation to
be referred to herein as a "Reimbursement Obligation") shall
be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this
Restated Credit Agreement under and without regard to any
circumstances, including, without limitation (A) any lack of
validity or enforceability of any of the Credit Documents, (B)
the existence of any claim, setoff, defense or other right
which Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Persons for
whom any such beneficiary or transferee may be acting),
Issuing Bank, Administrative Agent, Collateral Agent, any Bank
or any other Person, whether in connection with this Restated
Credit Agreement, the transactions contemplated herein or in
the other Credit Documents, or in any unrelated transaction,
(C) any breach of contract or dispute between Borrower, any
beneficiary or any transferee of any Letter of Credit (or any
Persons for whom any such beneficiary or transferee may be
acting), Issuing Bank, Administrative Agent, Collateral Agent,
any Bank or any other Person, (D) any demand, statement or
other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect
or any statement therein proving to be untrue or inaccurate in
any respect, (E) payment by Issuing Bank under any Letter of
Credit against presentation of a demand for payment which does
not comply with the terms of such Letter of Credit provided
that Issuing Bank has used reasonable care in examining all
documents presented to it in connection with such demand in
accordance with the UCP, (F) any non-application or
misapplication by any beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary
or transferee may be acting) of the proceeds of any drawing
under such Letter of Credit or (G) any delay, extension of
time, renewal, compromise or other indulgence or modification
granted or agreed to by Issuing Bank, Administrative Agent,
Collateral Agent or any Bank, with or without notice to or
approval by Borrower (unless such notice or approval is
required by this Restated Credit Agreement or applicable law),
with respect to Borrower's indebtedness under this Restated
Credit Agreement; provided, that this Subparagraph 2.02(c)
shall not abrogate any
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right which Borrower may have to seek to enjoin any drawing
under any Letter of Credit or to recover damages from Issuing
Bank, Administrative Agent, Collateral Agent or any Bank
pursuant to Subparagraph 2.02(e).
(d) Bank Participations; Revolving Loan Funding.
(i) Participation Agreement. Each Bank severally,
unconditionally and irrevocably agrees with Issuing Bank to
participate in the extension of credit arising from the
issuance of each Letter of Credit in an amount equal to such
Bank's Proportionate Share of the stated amount of such Letter
of Credit from time to time, and the issuance of each Letter
of Credit shall be deemed a confirmation by each such Bank of
such participation in such amount.
(ii) Participation Funding. Issuing Bank may request
the Banks to fund their participations in Letters of Credit by
paying to Issuing Bank all or any portion of any Drawing
Payment made or to be made by Issuing Bank under any Letter of
Credit. Issuing Bank shall make such a request by delivering
to Administrative Agent (with a copy to Borrower), at any time
after the drawing for which such payment is requested has been
made upon Issuing Bank, a written request for such payment
which specifies the amount of such Drawing Payment and the
date on which such Drawing Payment is to be made or was made;
provided, however, that Issuing Bank shall not request the
Banks to make any payment under this Subparagraph 2.02(d) in
connection with any portion of a Drawing Payment for which
Issuing Bank has been reimbursed from a Reimbursement Payment
by Borrower unless such Reimbursement Payment has been
thereafter recovered by Borrower. Administrative Agent shall
promptly notify each Bank of the contents of each such request
and of such Bank's Proportionate Share of the applicable
portion of such Drawing Payment. Promptly following receipt of
such notice from Administrative Agent, each Bank shall pay to
Administrative Agent, for the benefit of Issuing Bank, such
Bank's Proportionate Share of the applicable portion of such
Drawing Payment.
(iii) Funding Through Revolving Loans. At any time
any Reimbursement Obligations are outstanding, Administrative
Agent may or, upon the written request of Issuing Bank (if
Borrower is not then the subject of a bankruptcy proceeding),
shall (subject to the terms and conditions of this
Subparagraph 2.02(d)), initiate a Revolving Loan Borrowing in
an amount not exceeding the aggregate amount of such
outstanding Reimbursement Obligations and use the proceeds of
such Loan to repay all or a portion of such Reimbursement
Obligations. Administrative Agent shall initiate such a
Revolving Loan Borrowing by delivering to each Bank (with a
copy to Borrower) a written notice which specifies the
aggregate amount of outstanding Reimbursement Obligations, the
amount of the Revolving Loan Borrowing, the date of such
Revolving Loan Borrowing and the amount of the Loan to be made
by such Bank as part of such Revolving Loan Borrowing. Each
Bank shall make
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available to Administrative Agent funds in the amount of its
Proportionate Share of such Loan as provided in Subparagraph
2.09(a). After receipt of such funds, Administrative Agent
shall promptly disburse such funds to Issuing Bank and the
Banks, as appropriate, in payment of the outstanding
Reimbursement Obligations.
(iv) Obligations Absolute. Each Bank's obligations to
fund its participations under this Subparagraph 2.02(d) shall
be absolute, unconditional and irrevocable and shall not be
affected by (A) the occurrence or existence of any Default or
Event of Default, (B) any failure to satisfy any condition set
forth in Section III, (C) any event or condition which might
have a Material Adverse Effect, (D) the failure of any other
Bank to make any payment under this Subparagraph 2.02(d), (E)
any right of offset, abatement, withholding or reduction which
such Bank may have against Issuing Bank, Administrative Agent,
Collateral Agent, any other Bank or Borrower, (F) any event,
circumstance or condition set forth in Subparagraph 2.02(c) or
Subparagraph 2.02(e), or (G) any other event, circumstance or
condition whatsoever, whether or not similar to any of the
foregoing; provided, that nothing in this Paragraph 2.02 shall
prejudice any right which any Bank may have against Issuing
Bank for any action by Issuing Bank which constitutes gross
negligence or willful misconduct.
(e) Liability of Issuing Bank, Etc. Borrower agrees that none
of Issuing Bank, Administrative Agent, Collateral Agent or any other
Bank (nor any of their respective directors, officers or employees)
shall be liable or responsible for (i) the use which may be made of any
Letter of Credit or the proceeds of any drawing thereunder or for any
acts or omissions of any beneficiary or transferee thereof in
connection therewith; (ii) any reference which may be made to this
Restated Credit Agreement or to any Letter of Credit in any agreements,
instruments or other documents relating to obligations secured by such
Letter of Credit; (iii) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such documents
should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged or any statement therein prove to be
untrue or inaccurate in any respect whatsoever; (iv) payment by Issuing
Bank against presentation of documents which do not comply with the
terms of any Letter of Credit, including failure of any documents to
bear any reference or adequate reference to any Letter of Credit,
provided that Issuing Bank has used reasonable care in examining all
documents presented to it in connection with a demand on any Letter of
Credit in accordance with the UCP; or (v) any other circumstances
whatsoever in making or failing to make payment under any Letter of
Credit, except only that Issuing Bank shall be liable to Borrower for
acts or events described in clauses (i) through (v) above, to the
extent, but only to the extent, of any damages suffered by Borrower
(excluding consequential damages) which Borrower proves were caused by
(A) Issuing Bank's willful misconduct, bad faith or gross negligence in
determining whether a drawing made under any Letter of Credit complies
with the terms and conditions therefor stated in such Letter of Credit
or (B) Issuing Bank's willful misconduct, bad faith or gross negligence
in failing to pay under any Letter of Credit after a drawing by the
beneficiary thereof strictly complying with the terms and conditions of
such Letter of Credit. Without limiting the foregoing,
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Issuing Bank may accept a drawing that appears on its face to be in
order, without responsibility for further investigation. The
determination of whether a drawing has been made under any Letter of
Credit prior to its expiration or whether a drawing made under any
Letter of Credit is in proper and sufficient form shall be made by
Issuing Bank in its sole discretion, which determination shall be
conclusive and binding upon Borrower to the extent permitted by law.
Borrower hereby waives any right to object to any payment made under
any Letter of Credit with regard to a drawing request that is in the
form provided in such Letter of Credit but which varies with respect to
punctuation, capitalization, spelling or similar matters of form.
(f) Reports of Issuing Bank. While any Letter of Credit is
outstanding, Issuing Bank shall on a monthly basis provide to
Administrative Agent or any Bank such information regarding the Letters
of Credit as Administrative Agent or such Bank may reasonably request,
including the Letters of Credit outstanding, the stated amounts of
outstanding Letters of Credit, the expiration dates of outstanding
Letters of Credit, the names of the beneficiaries of outstanding
Letters of Credit, the amounts of unpaid Reimbursement Obligations and
the amounts and times of Drawing Payments and Reimbursement Payments.
(g) Purpose. Borrower shall use the Letters of Credit solely
as provided in clause (ii) of Subparagraph 2.02(a).
2.03. Amount Limitations, Commitment Reductions, Etc.
(a) Borrowing Base.
(i) The aggregate principal amount of all Revolving
Loans outstanding at any time, the aggregate amount available
for drawing under all Letters of Credit then outstanding and
the aggregate amount of all Reimbursement Obligations then
outstanding (such sum to be referred to herein as the
"Outstanding Facilities Credit") shall not exceed an amount
(the "Borrowing Base") equal to the lesser of:
(A) The Total Revolving Loan Commitment at
such time; and
(B) The sum at such time of:
(1) eighty percent (80%) of
Eligible Accounts; and
(2) The lesser of (y) forty percent
(40%) of Eligible Inventory and (z)
$60,000,000.
(ii) For the purposes of this Restated Credit
Agreement, the Borrowing Base on any date of determination
shall be presumed to be the Borrowing Base determined pursuant
to the most recent of (A) the latest Borrowing Base
Certificate delivered by Borrower prior to such date of
determination and (B) the
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latest audit conducted by or on behalf of any Agent or any
Bank prior to such date of determination.
(b) Reduction or Cancellation of Commitments. Borrower may,
upon three (3) Business Days written notice to Administrative Agent
(and, in the case of the LC Commitment, to Issuing Bank), permanently
reduce the Total Revolving Loan Commitment or the LC Commitment by the
amount of One Million Dollars ($1,000,000) or an integral multiple of
One Million Dollars ($1,000,000) in excess thereof or cancel the Total
Revolving Loan Commitment or LC Commitment in its entirety; provided,
however, that:
(i) Borrower may not reduce the Total Revolving Loan
Commitment prior to the Revolving Loan Maturity Date, if,
after giving effect to such reduction, the Outstanding
Facilities Credit would exceed the Total Revolving Loan
Commitment; and
(ii) Borrower may not cancel the Total Revolving Loan
Commitment prior to the Revolving Loan Maturity Date, if,
after giving effect to such cancellation, any Revolving Loans
or Letters of Credit would then remain outstanding.
(c) Effect of Commitment Reductions. From the effective date
of any reduction of the Total Revolving Loan Commitment, the Revolving
Loan Commitment Fees payable pursuant to Subparagraph 2.03(b) shall be
computed on the basis of the Total Revolving Loan Commitment as so
reduced. Once reduced or cancelled, the Total Revolving Loan Commitment
may not be increased or reinstated without the prior written consent of
all Banks. Any reduction of the Total Revolving Loan Commitment
pursuant to this Paragraph 2.03 shall be applied to reduce the Banks'
respective Revolving Loan Commitments pro rata according to their
respective Proportionate Shares at the time of such reduction.
2.04. Fees.
(a) Agent's Fee. Borrower shall pay to Administrative Agent
and the co-agents, for their own account, agent's fees in the amounts
and at the times set forth in the Agent's Fee Letter.
(b) Revolving Loan Commitment Fees. Borrower shall pay to
Administrative Agent, for the benefit of the Banks as provided in
clause (iii) of Subparagraph 2.09(a), nonrefundable commitment fees
(the "Revolving Loan Commitment Fees") of seventeen and one-half basis
points (0.175%) per annum on the daily average Total Unused Revolving
Loan Commitment for the period beginning on the Effective Date and
ending on the Revolving Loan Maturity Date. Borrower shall pay the
Revolving Loan Commitment Fees in arrears on the last Business Day in
each February, May, August and November (commencing November 30, 1998)
and on the Revolving Loan Maturity Date
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(or if the Total Revolving Loan Commitment is cancelled on a date prior
to the Revolving Loan Maturity Date, on such prior date).
(c) Fee on Increased Commitment. Borrower shall pay to
Administrative Agent, for the benefit of the Banks as provided in
clause (iii) of Subparagraph 2.09(a), a one time nonrefundable fee on
the increased commitment of $75,000 (the "Fee on Increased
Commitment"). Borrower shall pay the Fee on Increased Commitment on the
Effective Date.
(d) Letter of Credit Fees.
(i) Letter of Credit Usage Fee. Borrower shall pay to
Administrative Agent, for the ratable benefit of the Banks as
provided in clause (iv) of Subparagraph 2.09(a), a
nonrefundable usage fee for the Letters of Credit (the "LC
Usage Fee") in an amount equal to $100,000.00 per year payable
on each anniversary of the issuance of the Letter of Credit,
$5,000 of which shall be the LC Issuance Fee for the sole
benefit of Issuing Bank as provided in clause (ii) of this
Subparagraph 2.04(d).
(ii) Letter of Credit Issuance Fees. Borrower shall
pay to Administrative Agent, for the sole benefit of Issuing
Bank, nonrefundable issuance fees for the Letters of Credit
(the "LC Issuance Fees") in an amount equal to $5,000 per year
payable on each anniversary of the issuance of the Letter of
Credit.
(iii) Other Letter of Credit Fees. In addition to the
LC Issuance Fees, Borrower shall pay to Agent, for the sole
benefit of Issuing Bank, other standard reasonable fees of
Issuing Bank for drawings under, transfers of and amendments
to any Letter of Credit and other administrative actions
performed by Issuing Bank in connection with any Letter of
Credit, payable at such times and in such amounts as are
consistent with Issuing Bank's standard fee policy at the time
of such amendment or other action.
2.05 . Prepayments.
(a) Terms of all Prepayments. Upon the prepayment of any
Revolving Loan (whether such prepayment is an optional prepayment under
Subparagraph 2.05(b), a mandatory prepayment required by Subparagraph
2.05(c) or a mandatory prepayment required by any other provision of
this Restated Credit Agreement or the other Credit Documents,
including, without limitation, a prepayment upon acceleration),
Borrower shall pay to the Bank which made such Revolving Loan (i) all
accrued interest to the date of such prepayment on the amount prepaid,
and (ii) if such prepayment is the prepayment of a Revolving LIBOR Loan
on a day other than the last day of an Interest Period for such
Revolving LIBOR Loan, all amounts payable to such Bank pursuant to
Paragraph 2.12.
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(b) Optional Prepayments. At its option, Borrower may, upon
one (1) Business Day notice to Administrative Agent, prepay the
Revolving Loans in any Revolving Loan Borrowing in part, in an
aggregate principal amount of $100,000 or more, or in whole.
(c) Mandatory Prepayments. If, at any time, the Outstanding
Facilities Credit exceeds the Borrowing Base at such time, Borrower
shall immediately prepay Revolving Loans and/or Reimbursement
Obligations then outstanding, and, to the extent necessary, provide to
Administrative Agent cash collateral for any then outstanding Letters
of Credit, in an aggregate amount equal to such excess.
(d) Application of Principal Prepayments. If no Event of
Default has occurred and is continuing, all prepayments which are
applied to reduce the principal amount of Revolving Loans shall be
applied to Revolving Loans as directed by Borrower. If Borrower fails
to direct the application of any such principal prepayments or if an
Event of Default has occurred and is continuing, such principal
prepayments shall be applied first to Revolving Loan Borrowings
consisting of Revolving Prime Rate Loans and then to Revolving Loan
Borrowings consisting of Revolving LIBOR in chronological order of
maturity.
2.06. Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due to
each Bank hereunder by payments to Administrative Agent, for the
account of such Bank and such Bank's Applicable Lending Office, at
Administrative Agent's office, located at the address specified in
Subparagraph 8.01(a), in lawful money of the United States and in same
day or immediately available funds not later than 10:00 a.m. on the
date due. Amounts received after 10:00 a.m. shall be deemed to have
been received on the next Business Day. Administrative Agent shall
promptly disburse to each Bank no later than 1:00 p.m. California time
on the date of such receipt each such payment received by
Administrative Agent for such Bank. Borrower hereby requests, directs
and authorizes Administrative Agent to effect the payment of all
regularly scheduled principal, interest and fee payments payable by
Borrower under this Restated Credit Agreement or any other Credit
Document and all fees and expenses payable by Borrower pursuant to
Paragraph 8.02 by debiting any deposit account maintained by Borrower
with CB&T for the amounts thereof when due.
(b) Date. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included
in the computation of interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by
Borrower under this Restated Credit Agreement or the other Credit
Documents (including, without limitation, principal or interest payable
on any Revolving Loan, any fees or other amounts) remain
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unpaid after such amounts are due, Borrower shall pay interest on the
aggregate, outstanding balance of such amounts from the date due until
those amounts are paid in full at a per annum rate equal to the Prime
Rate plus two percent (2.00%), such rate to change from time to time as
the Prime Rate shall change.
(d) Application of Payments. All payments hereunder shall be
applied first to unpaid fees, costs and expenses then due and payable
under this Restated Credit Agreement or the other Credit Documents,
second to accrued interest then due and payable under this Restated
Credit Agreement or the other Credit Documents and finally to reduce
the principal amount of outstanding Revolving Loans.
(e) Failure to Pay Administrative Agent. Unless Administrative
Agent shall have received notice from Borrower at least one (1)
Business Day prior to the date on which any payment is due to the Banks
hereunder that Borrower will not make such payment in full,
Administrative Agent may assume that Borrower has made such payment in
full to Administrative Agent on such date and Administrative Agent may,
in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If
and to the extent Borrower shall not have so made such payment in full
to Administrative Agent, such Bank shall repay to Administrative Agent
forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed
to such Bank until the date such Bank repays such amount to
Administrative Agent, at the Federal Funds Rate. A certificate of
Administrative Agent submitted to any Bank with respect to any amounts
owing by such Bank under this Subparagraph 2.06(e) shall be conclusive
absent manifest error.
2.07. Notes and Interest Account.
(a) Revolving Loan Notes. The obligation of Borrower to repay
the Revolving Loans made by each Bank and to pay interest thereon at
the rates provided herein shall be evidenced by a promissory note in
the form of Exhibit D (individually, a "Revolving Loan Note") which
note shall be (i) payable to the order of such Bank, (ii) in the amount
of such Bank's Revolving Loan Commitment, (iii) dated the Effective
Date and (iv) otherwise appropriately completed. Borrower authorizes
each Bank to record on the schedule annexed to such Bank's Revolving
Loan Note the date and amount of each Revolving Loan made by such Bank
and of each payment or prepayment of principal thereon made by
Borrower, and agrees that all such notations shall constitute prima
facie evidence of the matters noted, provided that a failure to so
record shall not affect Borrower's obligations to repay each Revolving
Loan, interest thereon and all other amounts payable hereunder, under
such Revolving Loan Note or under any other Credit Document. Borrower
further authorizes each Bank to attach to and make a part of such
Bank's Revolving Loan Note continuations of the schedule attached
thereto as necessary.
(b) Interest Account. Borrower authorizes Administrative Agent
to record in an account or accounts maintained by Administrative Agent
on its books (the "Interest
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Account") (i) the interest rates applicable to all Revolving Loans and
the effective dates of all changes thereto, (ii) the Interest Period
for each Revolving LIBOR Loan, (iii) the date and amount of each
principal and interest payment on each Revolving Loan and (iv) such
other information as Administrative Agent may determine is necessary
for the computation of interest payable by Borrower hereunder.
2.08. Loan Funding.
(a) Bank Funding and Disbursement to Borrower. Each Bank
shall, before 11:00 a.m. on the date of each Revolving Loan Borrowing,
make available to Administrative Agent at its office specified in
Paragraph 8.01, in same day or immediately available funds, such Bank's
Proportionate Share of such Revolving Loan Borrowing. After
Administrative Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Section III, Administrative
Agent will promptly disburse such funds in same day or immediately
available funds to Borrower. Unless otherwise directed by Borrower,
Administrative Agent shall disburse the proceeds of each Revolving Loan
Borrowing to Borrower by disbursement to the account or accounts
specified in the applicable Notice of Revolving Loan Borrowing.
(b) Bank Failure to Fund. Unless Administrative Agent shall
have received notice from a Bank prior to the date of any Revolving
Loan Borrowing that such Bank will not make available to Administrative
Agent such Bank's Proportionate Share of such Revolving Loan Borrowing,
Administrative Agent may assume that such Bank has made such portion
available to Administrative Agent on the date of such Revolving Loan
Borrowing in accordance with Subparagraph 2.08(a), and Administrative
Agent may, in reliance upon such assumption, make available to Borrower
(or otherwise disburse) on such date a corresponding amount. If any
Bank does not make the amount of its Proportionate Share of any
Revolving Loan Borrowing available to Administrative Agent on or prior
to the date of such Revolving Loan Borrowing, such Bank shall pay to
Administrative Agent, on demand, interest which shall accrue on such
amount until made available to Administrative Agent at rates equal to
(i) the daily Federal Funds Rate during the period from the date of
such Revolving Loan Borrowing through the third Business Day thereafter
and (ii) the Prime Rate thereafter. A certificate of Administrative
Agent submitted to any Bank with respect to any amounts owing under
this Subparagraph 2.08(b) shall be conclusive absent manifest error. If
any Bank's Proportionate Share of any Revolving Loan Borrowing is not
in fact made available to Administrative Agent by such Bank within
three (3) Business Days after the date of such Revolving Loan
Borrowing, Borrower shall pay to Administrative Agent, on demand, an
amount equal to such Proportionate Share together with interest
thereon, for each day from the date such amount was made available to
Borrower until the date such amount is repaid to Administrative Agent,
at the interest rate applicable at the time to the Revolving Loans
comprising such Revolving Loan Borrowing.
(c) Banks' Obligations Several. The failure of any Bank to
make the Revolving Loan to be made by it as part of any Revolving Loan
Borrowing shall not
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relieve any other Bank of its obligation hereunder to make its
Revolving Loan on the date of such Revolving Loan Borrowing, but no
Bank shall be responsible for the failure of any other Bank to make the
Revolving Loan to be made by such other Bank on the date of any
Revolving Loan Borrowing.
2.09. Pro Rata Treatment.
(a) Borrowings, Commitment Reductions, Etc. Except as
otherwise provided herein:
(i) Each Revolving Loan Borrowing and each
participation in a Letter of Credit shall be made by the Banks
pro rata according to their respective Proportionate Shares at
the time of such Revolving Loan Borrowing or with respect to
such participation in Letters of Credit, in accordance with
Subparagraph 2.02(d)(ii) hereof;
(ii) Each reduction of the Total Revolving Loan
Commitment shall be applied to reduce the respective Revolving
Loan Commitments of the Banks as provided in Subparagraph
2.03(c);
(iii) Each payment of principal of and interest on
Revolving Loans in any Revolving Loan Borrowing shall be made
or shared among the Banks holding Revolving Loans in such
Revolving Loan Borrowing pro rata according to the respective
unpaid principal amounts of such Revolving Loans held by such
Banks;
(iv) Each Reimbursement Payment and interest payable
by Borrower thereon shall be shared among the Banks (including
Issuing Bank) which made or funded the applicable Drawing
Payment pro rata according to the respective amounts of such
Drawing Payment so made or funded by such Banks;
(v) Each payment of Revolving Loan Commitment Fees
and the Fee on Increased Commitment shall be shared among the
Banks pro rata according to their respective Proportionate
Shares provided that in the case of each Bank which becomes a
Bank hereunder after the date hereof, the Revolving Loan
Commitment Fees shall be shared with such Bank commencing on
the date upon which such Bank so became a Bank; and
(vi) Each payment of LC Usage Fees shall be shared
among the Banks (including Issuing Bank in its capacity as a
Bank) pro rata according to their respective Proportionate
Shares provided that in the case of each Bank which becomes a
Bank hereunder after the date hereof, the LC Usage Fees shall
be shared with such Bank commencing on the date upon which
such Bank so became a Bank; and
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(vii) All other payments under this Restated Credit
Agreement and the other Credit Documents shall be for the
benefit of the Person or Persons specified.
(b) Sharing of Payments, Etc.
(i) If any Bank shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of Revolving Loans or
Reimbursement Obligations owed to it in excess of its ratable
share of payments on account of such Revolving Loans obtained
by all Banks entitled to such payments, such Bank shall
forthwith purchase an assignment from the other Banks entitled
to such excess payments in the Revolving Loans as shall be
necessary to cause such purchasing Bank to share the excess
payment ratably with each of them; provided, however, that if
all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase shall be
rescinded and each other Bank shall repay to the purchasing
Bank the purchase price to the extent of such recovery
together with an amount equal to such other Bank's ratable
share (according to the proportion of (i) the amount of such
other Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of
the total amount so recovered.
(ii) Borrower agrees that any Bank so purchasing an
assignment from another Bank pursuant to this Subparagraph
2.09(b) may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right of setoff) with
respect to such assignment as fully as if such Bank were the
direct creditor of Borrower in the amount of such assignment.
2.10. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first
day of any Interest Period for any Revolving LIBOR Loan, (i) any Bank
shall advise Administrative Agent that the LIBO Rate for such Interest
Period cannot be adequately and reasonably determined due to the
unavailability of funds in or other circumstances affecting the London
interbank market or (ii) any Bank shall advise Administrative Agent
that the rates of interest for such Revolving LIBOR Loans do not
adequately and fairly reflect the cost to such Bank of making or
maintaining such Revolving LIBOR Loans, Administrative Agent shall
immediately give notice of such condition to Borrower. After the giving
of any such notice and until Administrative Agent shall otherwise
notify Borrower that the circumstances giving rise to such condition no
longer exist, Borrower's right to request the making of or conversion
to, and the Banks' obligations to make or convert to Revolving LIBOR
Loans shall be suspended. Any Revolving LIBOR Loans outstanding at the
commencement of any such suspension shall be converted at the end of
the then current Interest Period for such Revolving LIBOR Loans into
Revolving Prime Rate Loans unless such suspension has then ended.
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(b) Illegality. If, after the date of this Restated Credit
Agreement the adoption of any Governmental Rule, any change in any
Governmental Rule or the application or requirements thereof (whether
such change occurs in accordance with the terms of such Governmental
Rule as enacted, as a result of amendment or otherwise), any change in
the interpretation or administration of any Governmental Rule by any
Governmental Authority, or compliance by any Bank with any request or
directive (whether or not having the force of law)of any Governmental
Authority (a "Change of Law") shall make it unlawful or impossible for
any Bank to make or maintain any Revolving LIBOR Loan, such Bank shall
immediately notify Administrative Agent and Borrower of such Change of
Law. Upon receipt of such notice, (i) Borrower's right to request the
making of or conversion to, and the Banks' obligations to make or
convert to, Revolving LIBOR Loans shall be terminated, and (ii)
Borrower shall, at the request of any Bank, either (A) pursuant to
Subparagraph 2.01(d) convert any such then outstanding Revolving LIBOR
Loans into Revolving Prime Rate Loans at the end of the current
Interest Period for such Revolving LIBOR Loans, or (B) immediately
repay or convert any such Revolving LIBOR Loans if any Bank shall
notify Borrower that the such Bank may not lawfully continue to fund
and maintain such Revolving LIBOR Loans. Any conversion or prepayment
of Revolving LIBOR Loans made pursuant to the preceding sentence prior
to the last day of an Interest Period for such Revolving LIBOR Loans
shall be deemed a prepayment thereof for purposes of Paragraph 2.12.
(c) Increased Costs. If, after the date of this Restated
Credit Agreement, any Change of Law:
(i) Shall subject any Bank to any tax, duty or other
charge with respect to any Revolving LIBOR Loan, or shall
change the basis of taxation of payments by Borrower to any
Bank on such a Revolving LIBOR Loan or in respect to such a
Revolving LIBOR Loan under this Restated Credit Agreement
(except for changes in the rate of taxation on the overall net
income of any Bank); or
(ii) Shall impose, modify or hold applicable any
reserve, special deposit or similar requirement against assets
held by, deposits or other liabilities in or for the account
of, advances or loans by, or any other acquisition of funds by
any Bank for any Revolving LIBOR Loan; or
(iii) Shall impose on any Bank any other condition
related to any Revolving LIBOR Loan or its Revolving Loan
Commitment;
And the effect of any of the foregoing is to increase the cost to such
Bank of making, renewing, or maintaining any such Revolving LIBOR Loan
or its Revolving Loan Commitment or to reduce any amount receivable by
such Bank hereunder (and, in the case of a Revolving LIBOR Loan, such
increased cost or reduced amount is not fully reflected in the LIBO
Rate applicable to such Revolving LIBOR Loan); then Borrower shall from
time to time, upon demand by such Bank, pay to such Bank additional
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amounts sufficient to reimburse such Bank for such increased costs or
to compensate such Bank for such reduced amounts. A Bank shall demand
such additional amounts by delivering to Borrower a written certificate
which sets forth in reasonable detail the allocation of the increased
costs or reduced amounts to such Bank's Revolving LIBOR Loans or
Revolving Loan Commitment, as the case may be, and the calculations
from which such costs or amounts were derived, which certificate shall
constitute prima facie evidence of such increased costs or reduced
amounts.
(d) Capital Requirements. If, after the date of this Restated
Credit Agreement, any Bank determines that (i) any Change of Law
affects the amount of capital required or expected to be maintained by
such Bank or any Person controlling such Bank (a "Capital Adequacy
Requirement"), (ii) the amount of capital maintained by such Bank or
such Person which is attributable to or based upon the Revolving Loans,
the Letters of Credit, the Revolving Loan Commitments or this Restated
Credit Agreement must be increased as a result of such Capital Adequacy
Requirement (taking into account such Bank's or such Person's policies
with respect to capital adequacy) and (iii) in the case of increased
capital attributable to or based upon the Revolving Loans, the
increased costs to such Bank or such Person of such increased capital
is not fully reflected in the interest rates applicable to the
Revolving Loans hereunder and such Bank or such Person's capital as a
consequence of its Revolving Loan Commitments or the Revolving Loans
made by such Bank or such Person is reduced to a level below that which
such Bank or such Person, as the case may be, could have achieved but
for the occurrence of any such circumstance; then Borrower shall pay to
such Bank or such Person, upon demand of such Bank, such amounts as
such Bank or such Person shall determine are necessary to compensate
such Bank or such Person for the increased costs to such Bank or such
Person of such increased capital and for such reduction in rate of
return. A Bank shall demand such amounts by delivering to Borrower a
written certificate which sets forth in reasonable detail the
allocation of the increased costs to such Bank's Revolving Loans,
Letters of Credit, Revolving Loan Commitment or this Restated Credit
Agreement, as the case may be, and the calculations from which such
costs were derived, which certificate shall constitute prima facie
evidence of such increased costs.
2.11. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Borrower
under this Restated Credit Agreement and the other Credit Documents
shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority (except net income taxes and
franchise taxes in lieu of net income taxes imposed on any Agent or a
Bank as a result of a present or former connection between the
jurisdiction of the Governmental Authority imposing such tax and such
Agent or such Bank, excluding a connection arising solely from such
Agent or such Bank having executed, delivered or performed its
obligations or received a payment under, or enforced, this Restated
Credit Agreement or the other Credit Documents) (all
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such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes"). If any
Taxes are required to be withheld from any amounts payable to any Agent
or any Bank hereunder or under the other Credit Documents, the amounts
so payable to such Agent or such Bank shall be increased to the extent
necessary to yield to such Agent or such Bank (after payment of all
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Restated Credit Agreement and
the other Credit Documents. Whenever any Taxes are payable by Borrower,
as promptly as possible thereafter, Borrower shall send to
Administrative Agent for its own account or for the account of such
other Agent or such Bank, as the case may be, a certified copy of an
original official receipt received by Borrower showing payment thereof.
If Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Administrative Agent the required
receipts or other required documentary evidence, Borrower shall
indemnify the Agents and the Banks for any incremental taxes, interest
or penalties that may become payable by any Agent or any Bank as a
result of any such failure. The agreements in this Subparagraph 2.11(a)
shall survive the termination of this Restated Credit Agreement.
(b) Withholding Exemption Certificates. On or prior to the
Effective Date (or the Assignment Effective Date in the case of any
Bank which becomes a Bank hereunder after the Effective Date), each
Bank which is not incorporated under the laws of the United States of
America or a state thereof shall deliver to Borrower and Administrative
Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or successor applicable form), as the case
may be, certifying in each case that such Bank is entitled to receive
payments under this Restated Credit Agreement without deduction or
withholding of any United States federal income taxes. Each Bank which
delivers to Borrower and Administrative Agent a Form 1001 or 4224
pursuant to the immediately preceding sentence further undertakes to
deliver to Borrower and Administrative Agent two further copies of the
said letter and Form 1001 or 4224 (or successor applicable forms), or
other manner of certification or procedure, as the case may be, on or
before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent letter and form previously delivered by it to Borrower and
Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by Borrower or Administrative Agent, certifying
in the case of a Form 1001 or 4224 that such Bank is entitled to
receive payments under this Restated Credit Agreement without deduction
or withholding of any United States federal income taxes, unless in any
such cases an event (including without limitation any change in treaty,
law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent a Bank from duly completing and
delivering any such letter or form with respect to it and such Bank
advises Borrower and Administrative Agent that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax. Borrower shall not be required to pay any
additional amounts to Administrative Agent or any Bank hereunder to the
extent that the obligation to pay such additional amounts would not
have arisen but for a failure by Administrative Agent
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or such Bank to comply with the provisions of this Subparagraph 2.11(b)
or the last sentence of Subparagraph 8.05(c).
2.12. Funding Loss Indemnification. If Borrower shall (a)
repay or prepay any Revolving LIBOR Loan on any day other than the last
day of an Interest Period therefor (whether an optional prepayment, a
mandatory prepayment, a payment upon acceleration or otherwise), (b)
fail to borrow any Revolving LIBOR Loan for which a Notice of Revolving
Loan Borrowing has been delivered to Administrative Agent (whether as a
result of the failure to satisfy any applicable conditions or
otherwise) or (c) fail to convert any Revolving Prime Rate Loans into
Revolving LIBOR Loans in accordance with a Notice of Revolving Loan
Conversion delivered to Administrative Agent (whether as a result of
the failure to satisfy any applicable conditions or otherwise),
Borrower shall, upon demand by any Bank, reimburse such Bank and hold
such Bank harmless for all costs and losses actually incurred by such
Bank as a result of such repayment, prepayment or failure. Borrower
understands that such costs and losses may include, without limitation,
losses incurred by a Bank as a result of funding and other contracts
entered into by such Bank to fund or in connection with the funding of
a Revolving LIBOR Loan. A Bank shall demand such reimbursement by
delivering to Borrower a written certificate which sets forth in
reasonable detail the allocation of the costs and losses to such Bank's
Revolving Loans and the calculations from which such costs and losses
were derived, which certificate shall constitute prima facie evidence
of such costs and losses.
2.13. Security
(a) Security Agreements; Guaranties; Etc. on Effective Date On
the Effective Date, the Obligations shall be secured by the following:
(i) A Third Amended and Restated Security Agreement
in the form of Exhibit E, duly executed by Borrower (the
"Borrower Security Agreement");
(ii) A Third Amended and Restated Pledge Agreement in
the form of Exhibit F, duly executed by Borrower (the
"Borrower Pledge Agreement"); and
(iii) A Guaranty in the form of Exhibit G, duly
executed by Bell Canada (the "Bell Canada Guaranty").
(b) Additional Security Agreements; Guaranties; Etc. on the
Tenex Data Acquisition Effective Date On and after the Tenex Data
Acquisition Effective Date, the Obligations shall also be secured by
the following:
(i) A Pledge Agreement substantially in the form of
Exhibit H, duly executed by Bell Canada (the "Bell Canada
Pledge Agreement").
(ii) A Guaranty substantially in the form of Exhibit
I, duly executed by Bell-Tenex (the "Bell-Tenex Guaranty");
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(iii) A Security Agreement substantially in the form
of Exhibit J, duly executed by Bell-Tenex (the "Bell-Tenex
Security Agreement"); and
(iv) One or more additional security agreements,
pledge agreements, guaranties and other instruments,
agreements, certificates, opinions and documents
(collectively, the "Bell-Tenex Canadian Security Documents")
as either Agent may request to grant, perfect, maintain,
protect and evidence security interests in favor of Collateral
Agent, for the benefit of the Banks, in any or all present and
future personal property of Bell-Tenex located in Canada prior
to the Liens (other than Permitted Liens) or other interests
of any Person.
(c) Additional Security Agreements; Guaranties; Etc. on the
Future Tech Acquisition Effective Date On and after the Future Tech
Acquisition Effective Date, the Obligations shall also be secured by
the following:
(i) A Guaranty substantially in the form of Exhibit
I, duly executed by Bell-Future Tech (the "Bell-Future Tech
Guaranty");
(ii) A Security Agreement substantially in the form
of Exhibit J, duly executed by Bell-Future Tech (the
"Bell-Future Tech Security Agreement"); and
One or more additional security agreements, pledge agreements,
guaranties and other instruments, agreements, certificates, opinions
and documents (collectively, the "Bell-Future Tech Security Documents")
as either Agent may request to grant, perfect, maintain, protect and
evidence security interests in favor of Collateral Agent, for the
benefit of the Banks, in any or all present and future personal
property of Bell-Future Tech prior to the Liens (other than Permitted
Liens) or other interests of any Person.
(d) Further Assurances. Borrower shall deliver to Collateral
Agent, and shall cause each of Bell Canada, Bell-Tenex and Bell-Future
Tech to deliver, such additional security agreements, pledge
agreements, guaranties and other instruments, agreements, certificates,
opinions and documents (including Uniform Commercial Code financing
statements and fixture filings and landlord waivers) as either Agent
may request to:
(i) Grant, perfect, maintain, protect and evidence
security interests in favor of Collateral Agent, for the
benefit of the Banks, in any or all present and future
personal property of Borrower and its Subsidiaries prior to
the Liens or other interests of any Person (other than
Permitted Liens); or
(ii) Otherwise establish, maintain, protect and
evidence the rights provided to Collateral Agent and the Banks
pursuant to the Security Documents.
Borrower shall fully cooperate with the Agents and perform all
additional acts reasonably requested by the Agents to effect the
purposes of this Paragraph 2.13.
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SECTION III. CONDITIONS PRECEDENT.
3.01. Conditions Precedent to Initial Revolving Loans. The obligations
of the Banks to make the Revolving Loans in the initial Revolving Loan Borrowing
on or after the Effective Date are subject to receipt by Administrative Agent,
on or prior to the Effective Date, of (a) the Notice of Revolving Loan Borrowing
requesting such Revolving Loan Borrowing delivered in accordance with this
Restated Credit Agreement and (b) each item listed in Schedule 3.01, each in
form and substance satisfactory to Administrative Agent, and with sufficient
copies for, Administrative Agent, Collateral Agent and each Bank.
3.02. Conditions Precedent to Each Credit Event. The occurrence of each
Credit Event, including the initial Revolving Loan Borrowing on or after the
Effective Date, is subject to the further conditions that on the date such
Credit Event is to occur and after giving effect to such Credit Event, the
following shall be true and correct:
(a) The representations and warranties set forth in Paragraph
4.01 are true and correct in all material respects as if made on such
date;
(b) No Default or Event of Default has occurred and is
continuing or will result from such Credit Event;
(c) Each of the Credit Documents required to be delivered to
Administrative Agent, Collateral Agent or any Bank on or prior to such
date remains in full force and effect (except as otherwise agreed by
Administrative Agent in writing); and
(d) In the case of Credit Events consisting of Revolving Loan
Borrowings or the issuance of a Letter of Credit (or any amendment of a
Letter of Credit that increases its stated amount or extends its
maturity date), no material adverse change in the Eligible Accounts or
Eligible Inventory which comprises the Borrowing Base shall have
occurred since the later date of (i) the latest audit conducted by or
on behalf of Administrative Agent, Collateral Agent or any Bank, and
(ii) the most recent Borrowing Base Certificate.
The submission by Borrower to Administrative Agent or Issuing Bank, as the case
may be, of each Notice of Revolving Loan Borrowing, each Notice of Revolving
Loan Conversion, each LC Application and each Notice of Revolving Loan Interest
Period Selection shall be deemed to be a representation and warranty by Borrower
as of the date thereon as to the above.
3.03. Covenant to Deliver. Borrower agrees (not as a condition but as a
covenant) to deliver to Administrative Agent or Collateral Agent, as the case
may be, each item required to be delivered to Administrative Agent or Collateral
Agent, as the case may be, as a condition to the occurrence of any Credit Event
if such Credit Event occurs. Borrower expressly agrees that the occurrence of
any such Credit Event prior to the receipt by Administrative Agent or Collateral
Agent, as the case may be, of any such item shall not constitute a waiver by
Administrative Agent, Collateral Agent or any Bank of Borrower's obligation to
deliver such item.
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SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. Borrower's Representations and Warranties. In order to induce the
Agents and the Banks to enter into this Restated Credit Agreement, Borrower
hereby represents and warrants to the Agents and the Banks as follows:
(a) Due Incorporation, Qualification, etc. Each of Borrower
and its Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted; and
(iii) is duly qualified, licensed to do business and in good standing
as a foreign corporation in each jurisdiction where the failure to be
so qualified or licensed might have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance by each
of Borrower and its Subsidiaries of each Credit Document executed, or
to be executed, by such Person and the consummation of the transactions
contemplated thereby (i) are within the power of such Person and (ii)
have been duly authorized by all necessary actions on the part of such
Person.
(c) Enforceability. Each Credit Document executed, or to be
executed, by each of Borrower and its Subsidiaries has been, or will
be, duly executed and delivered by such Person and constitutes, or will
constitute, a legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity.
(d) Non-Contravention. The execution and delivery by each of
Borrower and its Subsidiaries of the Credit Documents executed, or to
be executed, by such Person and the performance and consummation of the
transactions contemplated thereby do not (i) violate any Requirement of
Law applicable to such Person; (ii) violate any provision of, or result
in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or
both), any Contractual Obligation of such Person; or (iii) result in
the creation or imposition of any Lien upon any property, asset or
revenue of such Person (except such Liens as may be created in favor of
any Agent or any Bank pursuant to this Restated Credit Agreement or the
other Credit Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Credit Documents executed by Borrower or
its Subsidiaries and the performance and consummation of the
transactions contemplated thereby.
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(f) No Violation or Default. Neither Borrower nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default could have a Material Adverse
Effect. Without limiting the generality of the foregoing, neither
Borrower nor any of its Subsidiaries (A) has violated any Environmental
Laws, (B) has any liability under any Environmental Laws or (C) has
received notice or other communication of an investigation or is under
investigation by any Governmental Authority having authority to enforce
Environmental Laws, where such violation, liability or investigation
could have a Material Adverse Effect. No Event of Default or Default
has occurred and is continuing.
(g) Litigation. Except as set forth (with the dollar amounts
claimed) in Schedule 4.01(g), no actions (including, without
limitation, derivative actions), suits, proceedings or investigations
are pending or, to the knowledge of Borrower, threatened against
Borrower or any of its Subsidiaries at law or in equity in any court or
before any other Governmental Authority which (i) could (alone or in
the aggregate) have a Material Adverse Effect or (ii) seeks to enjoin,
either directly or indirectly, the execution, delivery or performance
by Borrower or any of its Subsidiaries of the Credit Documents or the
transactions contemplated thereby.
(h) Title. Borrower and its Subsidiaries own and have good and
marketable title in fee simple absolute to, or a valid leasehold
interest in, all their respective real properties and good title to
their other respective assets and properties as reflected in the most
recent Financial Statements delivered to Bank (except those assets and
properties disposed of in the ordinary course of business or otherwise
in compliance with this Restated Credit Agreement since the date of
such Financial Statements) and all respective assets and properties
acquired by Borrower and its Subsidiaries since such date (except those
disposed of in the ordinary course of business or otherwise in
compliance with this Restated Credit Agreement). Such assets and
properties are subject to no Lien, except for Permitted Liens.
(i) Financial Statements. The Financial Statements of Borrower
and its Subsidiaries which have been delivered to Administrative Agent
and the Banks, (i) are in accordance with the books and records of
Borrower and its Subsidiaries, which have been maintained in accordance
with good business practice; (ii) have been prepared in conformity with
GAAP; and (iii) fairly present the respective financial positions of
Borrower and its Subsidiaries at such date. Neither Borrower nor any of
its Subsidiaries has any contingent obligations, liability for taxes or
other outstanding obligations which are material in the aggregate,
except as disclosed in the audited Financial Statements of Borrower
dated December 31, 1997, furnished by Borrower to Administrative Agent
and the Banks prior to the date hereof, or in the Financial Statements
delivered to Administrative Agent and the Banks pursuant to
Subparagraph 5.01(a)(ii) or (iii).
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(j) Equity Securities. The authorized Equity Securities of
Borrower consist of (i) 20,000,000 shares of common stock of which
approximately 8,832,665 shares are duly issued and outstanding, (ii)
10,000,000 shares of preferred stock none of which shares are duly
issued and outstanding, (iii) no warrants to purchase shares of common
stock are issued and outstanding, (iv) the Almo Warrant, (v) options to
purchase 1,720,785 shares of common stock, pursuant to the 1998 Stock
Option Plan, of which approximately 1,395,113 options are outstanding
and (vi) 251,674 shares of common stock reserved pursuant to the
Company's Employee Stock Purchase Plan. All outstanding Equity
Securities (except for the option to purchase common stock) of Borrower
are duly authorized, validly issued, fully paid and non-assessable.
There are no other outstanding subscriptions, options, conversion
rights, warrants or other agreements or commitments of any nature
whatsoever (firm or conditional) obligating Borrower to issue, deliver
or sell, or cause to be issued, delivered or sold, any additional
Equity Securities of Borrower, or obligating Borrower to grant, extend
or enter into any such agreement or commitment. All Equity Securities
of Borrower have been offered and sold in compliance with all federal
and state securities laws and all other Requirements of Law.
(k) No Agreements to Sell Assets. Neither Borrower nor any of
its Subsidiaries has any legal obligation, absolute or contingent, to
any Person to sell all or a substantial portion of the assets of
Borrower or its Subsidiaries (other than sales in the ordinary course
of business), or to effect any merger, consolidation or other
reorganization of Borrower or any of its Subsidiaries or to enter into
any agreement with respect thereto.
(l) Employee Benefit Plans.
(i) Based upon the latest valuation of each "employee
pension benefit plan" (within the meaning of section 3(2) of
ERISA) that either Borrower or any ERISA Affiliate maintains
or contributes to, or has any obligation under (which
valuation occurred within twelve months of the date of this
representation), the aggregate benefit liabilities of such
plan within the meaning of Section 4001 of ERISA did not
exceed the aggregate value of the assets of such plan. Neither
Borrower nor any ERISA Affiliate has any liability with
respect to any post-retirement benefit under any Employee
Benefit Plan which is a welfare plan (as defined in section
3(1) of ERISA), other than liability for health plan
continuation coverage described in Part 6 of Title I(B) of
ERISA, which liability for health plan contribution coverage
will not have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the Code, and no condition exists or event has
occurred with respect to any such plan which would result in
the incurrence by either Borrower or any ERISA Affiliate of
any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of
Borrower or any ERISA Affiliate is legally valid and binding
and in full force and effect. No Employee Benefit Plan is
being
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audited or investigated by any government agency or is subject
to any pending or threatened claim or suit. Neither Borrower
nor any ERISA Affiliate nor any fiduciary of any Employee
Benefit Plan has engaged in a prohibited transaction under
section 406 of ERISA or section 4975 of the Code.
(iii) Neither Borrower nor any ERISA Affiliate
contributes to any Multiemployer Plan. Neither Borrower nor
any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a
result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result
of a sale of assets described in Section 4204 of ERISA.
Neither Borrower nor any ERISA Affiliate has been notified
that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of Section 4241 or Section 4245
of ERISA or that any Multiemployer Plan intends to terminate
or has been terminated under Section 4041A of ERISA.
(m) Other Regulations. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Investment Company Act
of 1940, the Public Utility Holding Company Act of 1935, the Federal
Power Act, any state public utilities code or to any federal or state
statute or regulatory scheme which would limit its ability execute,
deliver and perform any of the Credit Documents executed or to be
executed by it.
(n) Patent and Other Rights. Borrower and its Subsidiaries
own, and have the full right to license without the consent of any
other Person, all patents, licenses, trademarks, trade names, trade
secrets, service marks, copyrights and all rights with respect thereto,
which are required to conduct their businesses as now conducted.
(o) Governmental Charges and Other Indebtedness. Borrower and
its Subsidiaries have filed or caused to be filed all tax returns which
are required to be filed by them. Borrower and its Subsidiaries have
paid, or made provision for the payment of, all taxes and other
Governmental Charges which have or may have become due pursuant to said
returns or otherwise and all other Indebtedness, except such
Governmental Charges or Indebtedness, if any, which are being contested
in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which could not have a
Material Adverse Effect if unpaid.
(p) Margin Stock. Borrower owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of
Borrower, and no proceeds of any Revolving Loan will be used to
purchase or carry, directly or indirectly, and no Letter of Credit
shall be used to support the purchase of, any Margin Stock or to extend
credit, directly or indirectly, to any Person for the purpose of
purchasing or carrying any Margin Stock.
(q) Subsidiaries, etc. Set forth in Schedule 4.01(q) is a
complete list of all of Borrower's Subsidiaries, the jurisdiction of
incorporation of each, the classes of Equity Securities of each and the
number of shares and percentages of shares of each such class
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owned directly or indirectly by Borrower. Except for such Subsidiaries,
Borrower has no Subsidiaries, is not a partner in any partnership or a
joint venturer in any joint venture.
(r) Solvency, Etc. Borrower and each of its Subsidiaries is
Solvent and, after the execution and delivery of the Credit Documents
and the consummation of the transactions contemplated thereby, will be
Solvent.
(s) Catastrophic Events. Neither Borrower nor any of its
Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that could have a Material Adverse Effect. There are no disputes
presently subject to grievance procedure, arbitration or litigation
under any of the collective bargaining agreements, employment contracts
or employee welfare or incentive plans to which Borrower or any of its
Subsidiaries is a party, and there are no strikes, lockouts, work
stoppages or slowdowns, or, to the best knowledge of Borrower,
jurisdictional disputes or organizing activity occurring or threatened
which could have a Material Adverse Effect.
(t) Burdensome Contractual Obligations, Etc. Neither Borrower
nor any of its Subsidiaries and none of their properties is subject to
any Contractual Obligation or Requirement of Law which could have a
Material Adverse Effect.
(u) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material
Adverse Effect.
(v) Year 2000 Compatibility. Borrower and its Subsidiaries
have reviewed the areas within their business and operations which
could be materially adversely affected by, and are taking all steps
Borrower and its Subsidiaries consider reasonably necessary to address
on a timely basis, the "Year 2000 Problem" (that is, the risk that
computer applications used by Borrower and its Subsidiaries may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date on or after December 31,
1999), and have made related appropriate inquiry of material suppliers
and vendors. Based upon such review and program, Borrower believes that
the "Year 2000 Problem" will not have a Material Adverse Effect.
(w) Accuracy of Information Furnished. None of the Credit
Documents and none of the other certificates, statements or information
furnished to any Agent or any Bank by or on behalf of Borrower or any
of its Subsidiaries in connection with the Credit Documents or the
transactions contemplated thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.02. Reaffirmation. Borrower shall be deemed to have reaffirmed, for
the benefit of the Banks and the Agents, each representation and warranty
contained in Paragraph 4.01 on and as of the date of each Credit Event.
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SECTION V. COVENANTS.
5.01. Affirmative Covenants. Until the termination of this Restated
Credit Agreement and the satisfaction in full by Borrower of all Obligations,
Borrower will comply, and will cause compliance, with the following affirmative
covenants, unless Required Banks shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. Borrower shall furnish
to Administrative Agent or if otherwise specified herein, Collateral
Agent (with a copy for each Bank to be forwarded by Administrative
Agent or Collateral Agent, respectively) the following, each in such
form and such detail as Administrative Agent or Collateral Agent, as
applicable, shall reasonably request:
(i) Within fifty (50) days after the last day of each
fiscal quarter of Borrower, (A) a copy of the Financial
Statements of Borrower for such quarter and for the fiscal
year to date (including consolidated Financial Statements for
Borrower and its Subsidiaries), certified by the president or
chief financial officer of Borrower to present fairly the
financial condition, results of operations and other
information reflected therein and to have been prepared in
accordance with GAAP (subject to year-end audit adjustments)
and (B) the Form 10-Q Report filed by Borrower with the
Securities and Exchange Commission for such quarter;
(ii) Within ninety-five (95) days after the close of
each fiscal year of Borrower, (A) copies of the audited
Financial Statements of Borrower for such year (including
consolidated Financial Statements for Borrower and its
Subsidiaries), prepared by independent certified public
accountants acceptable to Bank, (B) copies of the unqualified
opinions (or qualified opinions reasonably acceptable to the
Banks) and management letters delivered by such accountants in
connection with all such Financial Statements, (C)
certificates of all such accountants to Bank stating that in
making the examination necessary for their opinion they have
obtained no knowledge of any Event of Default or Default which
has occurred and is continuing, or if, in the opinion of such
accountants, an Event of Default or Default has occurred and
is continuing, a statement as to the nature thereof (or other
certificates of such accountants reasonably acceptable to
Required Banks) and (D) the Form 10-K Report filed by Borrower
with the Securities and Exchange Commission for such year;
(iii) Contemporaneously with the quarterly and
year-end financial statements required by the foregoing
clauses (i) and (ii), a certificate of the president or chief
financial officer of Borrower in such detail as Administrative
Agent may reasonably request which (A) sets forth the
calculations conducted to verify that Borrower is in
compliance with each of the financial covenants set forth in
Paragraph 5.02(m) and stating that no Event of Default and no
Default has occurred and is continuing, or, if any such Event
of Default or Default has occurred and is continuing, a
statement as to the nature thereof and what action
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Borrower proposes to take with respect thereto, (B) states
that the Year 2000 remediation efforts of Borrower and its
Subsidiaries are proceeding as scheduled, and (C) indicates
whether an auditor, regulator or third party consultant has
issued a management letter or other communication regarding
any Material Adverse Effect the Year 2000 exposure, program or
progress could have on Borrower and its Subsidiaries taken as
a whole;
(iv) As soon as available and in no event later than
twenty (20) days after the last day of each fiscal month, to
Collateral Agent (A) agings of Borrower's and its
Subsidiaries' accounts receivable and accounts payable as of
the last day of each month, (B) a report of Borrower's and its
Subsidiaries' inventory as of the last day of such month, and
(C) a certificate in the form of Exhibit K (or other form
acceptable to Collateral Agent), appropriately completed (a
"Borrowing Base Certificate"), which sets forth the
calculation of the Borrowing Base as of such last day of such
month, certified by the chief financial officer or treasurer
of Borrower;
(v) As soon as possible and in no event later than
five (5) Business Days after any officer of Borrower knows of
the occurrence or existence of (A) any Reportable Event under
any Employee Benefit Plan or Multiemployer Plan; (B) any
actual or threatened litigation, suits, claims or disputes
against Borrower or any of its Subsidiaries involving
potential monetary damages payable by Borrower or any of its
Subsidiaries of $1,000,000 or more (alone or in the
aggregate); (C) any other event or condition which could
reasonably be expected to have a Material Adverse Effect; or
(D) any Event of Default or Default; the statement of the
president or chief financial officer of Borrower setting forth
details of such event, condition, Event of Default or Default
and the action which Borrower proposes to take with respect
thereto;
(vi) As soon as possible and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of all registration statements and reports filed
by Borrower with the Securities and Exchange Commission
(including 8Q reports) and all reports, proxy statements and
financial statements sent or made available by Borrower to its
shareholders generally;
(vii) As soon as possible and in no event later than
five (5) Business Days after they are filed, copies of all IRS
Form 5500 reports for all Employee Benefit Plans required to
file such form; and
(viii) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or
otherwise) of Borrower or any of its Subsidiaries, and
compliance by Borrower and its Subsidiaries with the terms of
this Restated Credit Agreement and the other Credit Documents
as any Agent may from time to time reasonably request.
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(b) Books and Records. Borrower and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance
with GAAP.
(c) Inspections. Borrower and its Subsidiaries shall permit
any Person designated by Collateral Agent in its sole discretion
(including without limitation any Bank that so requests, which request
shall not be unreasonably denied), upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Borrower and its Subsidiaries, to conduct audits of any or
all of the Collateral at Borrower's expense, to examine the books of
account of Borrower and its Subsidiaries and to discuss the affairs,
finances and accounts of Borrower and its Subsidiaries with, and to be
advised as to the same by, their officers, auditors and accountants,
all at such times and intervals as Collateral Agent may reasonably
request, including, without limitation, an annual audit of the accounts
and inventory of Borrower and its Subsidiaries, the fees and expenses
of which shall be payable by Borrower pursuant to Subparagraph 8.02(b).
Audit fees payable by Borrower in connection with audits of all or any
portion of the Collateral shall be charged at a rate of $750 per day
per person plus direct costs of travel, lodging and out-of-pocket
expenses.
(d) Insurance. Each of Borrower and its Subsidiaries shall (i)
insure its inventory against such risks, in such amounts and with such
insurers satisfactory to the Banks; (ii) carry and maintain additional
insurance of the types and in the amounts customarily carried from time
to time during the term of this Restated Credit Agreement by others
engaged in substantially the same business as such Person and operating
in the same geographic area as such Person, including fire, public
liability, property damage and worker's compensation, such insurance to
be carried with companies and in amounts satisfactory to the Banks;
(iii) name Collateral Agent as additional insured or loss payee, as
appropriate, on all such insurance; and (iv) deliver to Collateral
Agent from time to time, as Collateral Agent may request, schedules
setting forth all insurance then in effect and policy endorsements for
such insurance naming Collateral Agent as additional insured or loss
payee.
(e) Governmental Charges and Other Indebtedness. Borrower and
its Subsidiaries shall promptly pay and discharge before delinquent (i)
all taxes and other Governmental Charges prior to the date upon which
penalties accrue thereon, except such Governmental Charges as may in
good faith be contested or disputed by appropriate proceedings,
provided that in each such case appropriate reserves are maintained in
accordance with GAAP, (ii) all Indebtedness which, if unpaid, could
become a Lien upon the property of Borrower or its Subsidiaries and
(iii) all other Indebtedness which, if unpaid, could have a Material
Adverse Effect, except such Indebtedness as may in good faith be
contested or disputed by appropriate proceedings, or for which
arrangements for deferred payment have been made, provided that in each
such case appropriate reserves are maintained in accordance with GAAP.
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(f) Use of Proceeds. Borrower shall use the proceeds of the
Revolving Loans only for the purposes set forth in Subparagraph 2.01(g)
and Borrower shall request the issuance of Letters of Credit only for
the purposes set forth in Subparagraph 2.02(a)(ii). Borrower shall not
use any part of the proceeds of any Revolving Loan or any Letter of
Credit, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or for the purpose of purchasing or carrying
or trading in any securities under such circumstances as to involve
Borrower or Bank in a violation of Regulations T, U or X issued by the
Federal Reserve Board.
(g) General Business Operations. Each of Borrower and its
Subsidiaries shall (i) preserve and maintain its corporate existence
and all of its rights, privileges and franchises reasonably necessary
to the conduct of its business, (ii) conduct its business activities in
compliance with all Requirements of Law and Contractual Obligations
applicable to such Person, the violation of which could have a Material
Adverse Effect, (iii) keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear
excepted, and (iv) not change its chief executive office and principal
place of business from San Jose, California without ninety (90) days
prior written notice to Collateral Agent.
(h) Landlord Waivers and Consents. Borrower shall use its best
efforts to obtain such landlord waivers and consents, in form and
substance satisfactory to Collateral Agent, as Collateral Agent may
from time to time request pursuant to which each such landlord shall
acknowledge Collateral Agent's and the Banks' senior security interest
in all of Borrower's and its Subsidiaries' inventory stored at such
locations, disclaim any interest in such inventory and agree to provide
Collateral Agent on behalf of the Banks access to remove such
inventory.
(i) Year 2000 Compatibility. Borrower and its Subsidiaries
shall take all acts reasonably necessary to ensure that all software,
hardware, firmware, equipment, goods and systems utilized by or
material to their business, operations or financial condition will
properly perform date sensitive functions before, during and after the
year 2000. At the request of Administrative Agent, Borrower shall
provide to Administrative Agent such certifications or other evidence
of compliance with this Subparagraph 5.01(i) as Administrative Agent
may from time to time require.
(j) Tenex-Data Acquisition. On or prior to the Tenex Data
Acquisition Effective Date, Borrower shall obtain and deliver to
Administrative Agent each item listed in Schedule 5.01(j), each in form
and substance reasonably satisfactory to the Agents, and with
sufficient copies for, the Agents and each Bank.
(k) Inventory Appraisal. Borrower covenants that it will
complete and deliver to the Collateral Agent and the Banks an inventory
appraisal, in form and substance satisfactory to the Collateral Agent
and the Banks, within 90 days of the Fourth Amendment Effective Date.
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5.02. Negative Covenants. Until the termination of this Restated Credit
Agreement and the satisfaction in full by Borrower of all Obligations, Borrower
will comply, and will cause compliance, with the following negative covenants,
unless Required Banks or Banks, as the case may be, shall otherwise consent in
writing:
(a) Indebtedness. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except
for Permitted Indebtedness.
(b) Liens. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for Permitted Liens.
(c) Asset Dispositions. Neither Borrower nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
its assets or property, whether now owned or hereafter acquired, except
in the ordinary course of its business.
(d) Mergers, Acquisitions, Etc. Neither Borrower nor any of
its Subsidiaries shall consolidate with or merge into any other Person
or permit any other Person to merge into it, or acquire all or
substantially all of the assets of any other Person, except that any
wholly-owned Subsidiary of Borrower may merge into Borrower or any
other wholly-owned Subsidiary of Borrower.
(e) Investments. Neither Borrower nor any of its Subsidiaries
shall make any Investment except for Permitted Investments.
(f) Dividends, Redemptions, Etc. Borrower shall not (i) pay
any dividends or make any distributions on its Equity Securities; (ii)
purchase, redeem, retire, defease or otherwise acquire for value any of
its Equity Securities; (iii) return any capital to any holder of its
Equity Securities as such; (iv) make any distribution of assets, Equity
Securities, obligations or securities to any holder of its Equity
Securities as such; or (v) set apart any sum for any such purpose;
except that Borrower may pay Permitted Dividends.
(g) Capital Expenditures. Borrower and its Subsidiaries shall
not pay or incur Capital Expenditures which exceed in aggregate in any
fiscal year $5,000,000.
(h) Change in Business. Neither Borrower nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any business substantially different from and not
incidental to its present business.
(i) Indebtedness Payments. Neither Borrower nor any of its
Subsidiaries shall (i) make any payment on the Subordinated
Indebtedness; (ii) prepay, redeem, purchase, defease or otherwise
satisfy in any manner prior to the scheduled repayment thereof any
other Indebtedness for borrowed money (other than the Obligations) or
lease obligations; (iii) amend, modify or otherwise change the
subordination provisions of any Subordinated Indebtedness; or (iv)
amend, modify or otherwise change the terms of any
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Subordinated Indebtedness or any other Indebtedness for borrowed money
(other than the Obligations) or lease obligations so as to accelerate
the scheduled repayment thereof.
(j) ERISA. Neither Borrower nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, (ii)
take any action which will result in the partial or complete
withdrawal, within the meanings of sections 4203 and 4205 of ERISA,
from a Multiemployer Plan, (iii) engage or permit any Person to engage
in any transaction prohibited by section 406 of ERISA or section 4975
of the Code involving any Employee Benefit Plan or Multiemployer Plan
which would subject either Borrower or any ERISA Affiliate to any tax,
penalty or other liability including a liability to indemnify, (iv)
incur or allow to exist any accumulated funding deficiency (within the
meaning of section 412 of the Code or section 302 of ERISA), (v) fail
to make full payment when due of all amounts due as contributions to
any Employee Benefit Plan or Multiemployer Plan, (vi) fail to comply
with the requirements of section 4980B of the Code or Part 6 of Title
I(B) of ERISA, or (vii) adopt any amendment to any Employee Benefit
Plan which would require the posting of security pursuant to section
401(a)(29) of the Code, where singly or cumulatively, the above would
have a Material Adverse Effect.
(k) Transactions With Affiliates. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate except
that Borrower and its Subsidiaries may (i) sell assets to each other
for fair value and (ii) engage in other transactions with each other or
with Affiliates upon terms at least as favorable to Borrower and its
Subsidiaries as arms-length transactions with unaffiliated Persons.
(l) Accounting Changes. Neither Borrower nor any of its
Subsidiaries shall change (i) its fiscal year (currently January 1
through December 31) or (ii) its accounting practices except as
required by GAAP.
(m) Financial Covenants. Borrower shall not permit:
(i) Its Quick Ratio to be less than 0.50 to 1.00 for
any fiscal quarter;
(ii) Its Working Capital to be less than $60,000,000
for any fiscal quarter;
(iii) Its Tangible Net Worth, for any fiscal quarter,
to be less than the sum of (1) $70,000,000 plus (2) fifty
percent (50%) of the sum of Borrower's Net Income After Tax
for each quarter (excluding any quarter in which such amount
was negative) beginning with the quarter ending June 30, 1998
plus (3) one hundred percent (100%) of the Net Proceeds
derived from any issuance by Borrower of Equity Securities
minus (4) the net book value assigned to the Almo Warrants in
accordance with GAAP;
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(iv) Its Leverage Ratio to be greater than 3.50 to
1.00 for any fiscal quarter;
(v) Its Interest Coverage Ratio (A) for the three
quarter period beginning on April 1, 1998 and ending on
December 31, 1998 to be less than 2.00 to 1.00; and (B) for
any consecutive four-quarter period thereafter to be less than
2:00 to 1:00; or
(vi) Its Net Operating Income or Net Income After Tax
to be (1) a loss in excess of $350,000 for any quarter or (2)
a loss of any amount for any consecutive two-quarter period.
SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to pay when due any principal,
interest or other payment required under the terms of this Restated
Credit Agreement or any of the other Credit Documents; or
(b) Borrower or any of its Subsidiaries shall fail to observe
or perform any covenant, obligation, condition or agreement set forth
in clause (v)(D) of Subparagraph 5.01(a), Subparagraph 5.01(c) (but
only to the extent Borrower denies such right to conduct inspections to
Collateral Agent acting on behalf of the Banks), Subparagraph 5.01(d)
or Paragraph 5.02; or
(c) Borrower or any of its Subsidiaries shall fail to observe
or perform any other covenant, obligation, condition or agreement
contained in this Restated Credit Agreement or the other Credit
Documents and such failure shall continue for ten (10) days; or
(d) Any representation, warranty, certificate, or other
statement (financial or otherwise) made or furnished by or on behalf of
Borrower or any of its Subsidiaries to any Agent or any Bank in or in
connection with this Restated Credit Agreement or any of the other
Credit Documents, or as an inducement to any Agent or any Bank to enter
into this Restated Credit Agreement, shall be false, incorrect,
incomplete or misleading in any material respect when made or
furnished; or
(e) Borrower or any of its Subsidiaries shall fail to make any
payment when due under the terms of any bond, debenture, note or other
evidence of Indebtedness to be paid by such Person (excluding this
Restated Credit Agreement and the other Credit Documents but including
any other evidence of Indebtedness of Borrower or any of its
Subsidiaries to any Bank) and such failure shall continue beyond any
period of grace provided with respect thereto, or shall default in the
observance or performance of any other agreement, term or condition
contained in any such bond, debenture, note or other
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evidence of Indebtedness, and the effect of such failure or default is
to cause, or permit the holder or holders thereof to cause Indebtedness
in an aggregate amount of $200,000 or more to become due prior to its
stated date of maturity; or
(f) Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property,
(ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated
in full or in part, (v) become insolvent (as such term may be defined
or interpreted under any applicable statute), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or consent
to any such relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of
affecting any of the foregoing; or
(g) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Borrower or any of its Subsidiaries or of
all or a substantial part of the property thereof, or an involuntary
case or other proceedings seeking liquidation, reorganization or other
relief with respect to Borrower or any of its Subsidiaries or the debts
thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered
or such proceeding shall not be dismissed or discharged within sixty
(60) days of commencement; or
(h) A final judgment or order for the payment of money in
excess of $200,000 (exclusive of amounts covered by insurance issued by
an insurer not an Affiliate of Borrower) shall be rendered against
Borrower or any of its Subsidiaries and the same shall remain
undischarged and unpaid for a period of thirty (30) days during which
execution shall not be effectively stayed, or any judgment, writ,
assessment, warrant of attachment, or execution or similar process
shall be issued or levied against a substantial part of the property of
Borrower or any of its Subsidiaries and such judgment, writ, or similar
process shall not be released, stayed, vacated or otherwise dismissed
within thirty (30) days after issue or levy; or
(i) Any Credit Document or any material term thereof shall
cease to be, or be asserted by Borrower or any of its Subsidiaries not
to be, a legal, valid and binding obligation of Borrower or its
Subsidiaries enforceable in accordance with its terms; or
(j) Any Reportable Event occurs which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee to administer any Employee Benefit Plan, or
any Employee Benefit Plan shall be terminated within the meaning of
Title IV of ERISA or a trustee shall be appointed to administer any
Employee Benefit Plan; or
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(k) One or more conditions exist or events have occurred which
might reasonably indicate, or reasonably result in, a Material Adverse
Effect.
6.02. Remedies. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Subparagraph 6.01(f) or
6.01(g)) and at any time thereafter during the continuance of such Event of
Default, Administrative Agent may, with the consent of the Required Banks, or
shall, upon instructions from the Required Banks, by written notice to Borrower,
(a) terminate the Revolving Loan Commitments, the LC Commitment and the
obligations of the Banks and the Issuing Bank to make Revolving Loans, or issue
Letters of Credit, as the case may be, (b) declare all outstanding Obligations
payable by Borrower hereunder to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding, and/or (c) direct Borrower to deliver to
Administrative Agent funds in an amount equal to the aggregate stated amount of
all outstanding Letters of Credit. Upon the occurrence or existence of any Event
of Default described in Subparagraph 6.01(f) or 6.01(g), immediately and without
notice, (1) the Revolving Loan Commitments, the LC Commitment and the
obligations of the Banks and Issuing Bank to make Revolving Loans or issue
Letters of Credit, as the case may be, shall automatically terminate and (2) all
outstanding Obligations payable by Borrower hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Notes to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Administrative Agent may exercise any right, power or remedy permitted to it by
law, either by suit in equity or by action at law, or both. Immediately after
taking any action under this Paragraph 6.02, Administrative Agent shall notify
each Bank of such action.
SECTION VII. THE AGENTS AND RELATIONS AMONG BANKS.
7.01. Appointment, Powers and Immunities. Each Bank hereby appoints and
authorizes Administrative Agent and Collateral Agent to act as its agent
hereunder and under the other Credit Documents with such powers as are expressly
delegated to Administrative Agent or Collateral Agent by the terms of this
Restated Credit Agreement and the other Credit Documents, together with such
other powers as are reasonably incidental thereto. Neither Administrative Agent
nor Collateral Agent shall have any duties or responsibilities except those
expressly set forth in this Restated Credit Agreement or in any other Credit
Document, be a trustee for any Bank or have any fiduciary duty to any Bank.
Notwithstanding anything to the contrary contained herein, neither
Administrative Agent nor Collateral Agent shall be required to take any action
which is contrary to this Restated Credit Agreement or any other Credit Document
or applicable law. Neither Administrative Agent nor Collateral Agent nor any
Bank shall be responsible to any other Agent or Bank for any recitals,
statements, representations or warranties made by Borrower or any Subsidiary
contained in this Restated Credit Agreement or in any other Credit Document, for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Restated Credit Agreement, or any other Credit Document or for any
failure by Borrower or any Subsidiary to perform their respective obligations
hereunder or thereunder. Administrative Agent and Collateral Agent may employ
agents and attorneys-in-fact and shall
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not be responsible to any other Agent or Bank for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
Neither Administrative Agent nor Collateral Agent nor any of their respective
directors, officers, employees or agents shall be responsible to any other Agent
or any Bank for any action taken or omitted to be taken by it or them hereunder
or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Restated Credit Agreement, Administrative Agent
and Collateral Agent shall take such action with respect to the Credit Documents
as shall be directed by the Required Banks.
7.02. Reliance by Agents. Administrative Agent and Collateral Agent
shall be entitled to rely upon any certificate, notice or other document
(including any cable, telegram, facsimile or telex) reasonably believed by it in
good faith to be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by Administrative
Agent and Collateral Agent with reasonable care. As to any other matters not
expressly provided for by this Restated Credit Agreement, neither Administrative
Agent nor Collateral Agent shall be required to take any action or exercise any
discretion, but shall be required to act or to refrain from acting upon
instructions of the Required Banks and shall in all cases be fully protected by
the Banks in acting, or in refraining from acting, hereunder or under any other
Credit Document in accordance with the instructions of the Required Banks, and
such instructions of the Required Banks and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
7.03. Defaults. Neither Administrative Agent nor any Collateral Agent
shall be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default unless Administrative Agent and Collateral Agent have received
a notice from any other Agent, a Bank or Borrower, referring to this Restated
Credit Agreement, describing such Default or Event of Default and stating that
such notice is a "Notice of Default". If Administrative Agent or Collateral
Agent receives such a notice of the occurrence of a Default or Event of Default,
such Agent shall give prompt notice thereof to the other Agent and the Banks.
Administrative Agent and Collateral Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Banks or all of the Banks if unanimity is required; provided, however, that
until Administrative Agent and Collateral Agent shall have received such
directions, Administrative Agent and Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as they shall deem advisable in the best
interest of the Banks.
7.04. Indemnification. Without limiting the Obligations of Borrower
hereunder, each Bank agrees to indemnify Administrative Agent and Collateral
Agent, ratably in accordance with their Proportionate Shares, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by or asserted against Administrative Agent and
Collateral Agent in any way relating to or arising out of this Restated Credit
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided, however, that
no Bank shall be liable for any of the foregoing to the extent
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they arise from Administrative Agent's and/or Collateral Agent's gross
negligence or willful misconduct. Administrative Agent and Collateral Agent
shall be fully justified in refusing to take or to continue to take any action
hereunder unless it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
7.05. Non-Reliance. Each Bank represents that it has, independently and
without reliance on Administrative Agent, Collateral Agent, or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of the financial condition and affairs of Borrower and the
Subsidiaries and decision to enter into this Restated Credit Agreement and
agrees that it will, independently and without reliance upon Administrative
Agent, Collateral Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Restated
Credit Agreement. Neither Administrative Agent nor Collateral Agent nor any Bank
shall be required to keep informed as to the performance or observance by
Borrower or any Subsidiary of the obligations under this Restated Credit
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of Borrower or any Subsidiary.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by Administrative Agent and/or Collateral
Agent hereunder, neither Administrative Agent nor Collateral Agent nor any Bank
shall have any duty or responsibility to provide any other Agent or any Bank
with any credit or other information concerning Borrower or any Subsidiary,
which may come into the possession of any Agent, or such Bank or any of its or
their Affiliates. Administrative Agent and Collateral Agent shall provide each
Bank with copies of any Credit Documents and any other documents, instruments
and agreements delivered to Administrative Agent and/or Collateral Agent in
connection therewith requested by such Bank.
7.06. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving notice thereof to
the Banks, and Administrative Agent may be removed at any time with or without
cause by the Required Banks. Upon any such resignation or removal, the Required
Banks shall have the right to appoint a successor Administrative Agent, which
Administrative Agent shall be reasonably acceptable to Borrower. If no successor
Administrative Agent shall have been appointed by the Required Banks and shall
have accepted such appointment within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Banks, appoint a successor Administrative Agent,
which shall be a bank having a combined capital, surplus and retained earnings
of not less than U.S. $250,000,000 and which shall be reasonably acceptable to
Borrower. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section VII shall
continue in effect for
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its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as Administrative Agent.
7.07. Resignation or Removal of Collateral Agent. Subject to the
appointment and acceptance of a successor Collateral Agent as provided below,
Collateral Agent may resign at any time by giving notice thereof to
Administrative Agent and the Banks, and Collateral Agent may be removed at any
time with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor
Collateral Agent, which Collateral Agent shall be reasonably acceptable to
Borrower. If no successor Collateral Agent shall have been appointed by the
Required Banks and shall have accepted such appointment within thirty (30) days
after the retiring Collateral Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Collateral Agent, then Administrative
Agent may, on behalf of the Banks, appoint a successor Collateral Agent, which
shall be a Bank under this Agreement and which shall be reasonably acceptable to
Borrower. Upon the acceptance of any appointment as Collateral Agent hereunder
by a successor Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Collateral Agent's resignation or removal hereunder as Collateral Agent, the
provisions of this Section VII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Collateral Agent.
7.08. Agents in their Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with Borrower and its Subsidiaries and affiliates as though
such Agent were not an Agent hereunder. With respect to Revolving Loans made and
Letters of Credit issued, if any, by CB&T or UBOC as a Bank, CB&T and UBOC shall
have the same rights and powers under this Restated Credit Agreement and the
other Credit Documents as any other Bank and may exercise the same as though it
were not an Agent, and the terms "Bank" or "Banks" shall include CB&T and UBOC
in their individual capacity.
7.09. Co-Agents. None of the Banks identified herein as a "co-agent"
shall have any right, power, obligation, liability, responsibility or duty under
this Restated Credit Agreement or any other Credit Document other than those
applicable to all Banks as such. Without limiting the foregoing, none of the
Banks so identified as a "co-agent" shall have or be deemed to have any
fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on any of the Banks identified as a "co-agent" in
deciding to enter into this Restated Credit Agreement or in taking or not taking
action hereunder.
7.10. Assignment and Delegation. Collateral Agent may from time to time
(i) assign or transfer all or any portion of its rights, benefits or privileges
as "collateral agent" hereunder or under any of the other Credit Documents to
one or more Banks and/or (ii) delegate to or subcontract with, or authorize or
appoint one or more Banks to perform all or any portion of the duties, covenants
or obligations to be performed by Collateral Agent in its capacity as
"collateral agent" hereunder or under any of the other Credit Documents. Any
such other Bank shall be
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entitled to all of the indemnities, immunities and other protective provisions
that Collateral Agent is entitled to hereunder as if such other Bank were named
as "Collateral Agent" hereunder. Collateral Agent shall not be responsible to
any other Agent or Bank for the negligence or misconduct of any such other Bank.
SECTION VIII. MISCELLANEOUS.
8.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower, any Bank or any Agent under this Restated Credit Agreement or the
other Credit Documents shall be in writing and faxed, mailed or delivered, if to
Borrower, Administrative Agent or Collateral Agent, at its respective facsimile
number or address set forth below, if to any Bank, at the address or facsimile
number specified beneath the heading "Address for Notices" under the name of
such Bank in Schedule I, or if to Issuing Bank, at the address or facsimile
number indicated in a notice given by Issuing Bank to the other parties from
time to time (or to such other facsimile number or address for any party as
indicated in any notice given by that party to the other party). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when sent by facsimile, upon
confirmation of receipt; provided, however, that any notice delivered to
Administrative Agent or Issuing Bank under Section II shall not be effective
until received by such Person.
Administrative Agent: California Bank & Trust
320 California Street, Suite 600
San Francisco, CA 94104
Attn: Relationship Manager - Bell
Microproducts
Telephone: (415) 445-8725
Facsimile: (415) 296-9617
Collateral Agent: Union Bank of California, N.A.
Northern California Commercial Banking Group
350 California Street, 10th Floor
San Francisco, CA 94104
Attention: William Hinch
Vice President
Telephone: (415) 705-7028
Facsimile: (415) 705-7111
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Borrower: Bell Microproducts Inc.
1941 Ringwood Avenue
San Jose, California 95131
Attention: Mr. Remo Canessa
Vice President, Chief Financial Officer
Telephone: (408) 467-2773
Facsimile: (408) 451-1632
Each Notice of Revolving Loan Borrowing, Notice of Revolving Loan Conversion or,
Notice of Revolving Loan Interest Period Selection or LC Application (or copy
thereof, as the case may be) shall be given by Borrower to Administrative Agent,
and in the case of an LC Application, to Issuing Bank, to the office of such
Person located at the address referred to above during Administrative Agent's
normal business hours; provided, however, that any such notice received by
Administrative Agent after 12:00 noon on any Business Day shall be deemed
received by Administrative Agent on the next Business Day. In any case where
this Restated Credit Agreement authorizes notices, requests, demands or other
communications by Borrower to any Agent or any Bank to be made by telephone or
facsimile, such Agent or Bank may conclusively presume that anyone purporting to
be a person designated in any incumbency certificate or other similar document
received by such Agent or Bank is such a person.
8.02. Expenses. Borrower shall pay within thirty (30) days of a written
demand therefor, whether or not any Revolving Loan is made or any Letter of
Credit is issued hereunder, (a) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by any Agent in connection
with the preparation, execution and delivery of, and the exercise of its duties
under, this Restated Credit Agreement and the other Credit Documents, and the
preparation, execution and delivery of amendments and waivers hereunder and
thereunder, (b) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by any Agent in connection with the
exercise of its duties (including permitted audits and inspections) under this
Restated Credit Agreement and the other Credit Documents, and (c) all reasonable
fees and expenses, including reasonable attorneys' fees and expenses, incurred
by any Agent and the Banks in the enforcement or attempted enforcement of any of
the Obligations or in preserving any of the Agent's or the Banks' rights and
remedies (including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Credit Documents or
the Obligations or any bankruptcy or similar proceeding involving Borrower or
any of its Subsidiaries). As used herein, the term "reasonable attorneys' fees
and expenses" shall include, without limitation, allocable costs and expenses of
each Agent's and each Bank's in-house legal counsel and staff.
8.03. Indemnification. To the fullest extent permitted by law, Borrower
agrees to protect, indemnify, defend and hold harmless Agents and the Banks and
their respective directors, officers, employees, agents and any affiliate
thereof ("Indemnitees") from and against any liabilities, losses, damages or
expenses of any kind or nature and from any suits, claims or demands (including
in respect of or for reasonable attorney's fees and other expenses) arising on
account of or in connection with any matter or thing or action or failure to act
by Indemnitees, or any of them, arising out of or relating to the Credit
Documents, including without limitation any
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use by Borrower of any proceeds of the Revolving Loans, except to the extent
such liability arises from the willful misconduct or gross negligence of (a) any
Agent acting on behalf of the Banks or (b) such Indemnitee. Upon receiving
knowledge of any suit, claim or demand asserted by a third party that any Agent
or any Bank believes is covered by this indemnity, such Agent or such Bank shall
give Borrower notice of the matter and an opportunity to defend it, at
Borrower's sole cost and expense, with legal counsel satisfactory to such Agent
or such Bank, as the case may be. Such Agent or such Bank may also require
Borrower to defend the matter. Any failure or delay of any Agent or any Bank to
notify Borrower of any such suit, claim or demand shall not relieve Borrower of
its obligations under this Paragraph 8.03 but shall reduce such obligations to
the extent of any increase in those obligations caused solely by an such
unreasonable failure or delay. The obligations of Borrower under this Paragraph
8.03 shall survive the payment and performance of the Obligations.
8.04. Waivers; Amendments. Any term, covenant, agreement or condition
of this Restated Credit Agreement or any other Credit Document may be amended or
waived if such amendment or waiver is in writing and is signed by Borrower and
the Required Banks; provided, however that:
(a) Any amendment, waiver or consent which (i) increases the
Total Revolving Loan Commitment, (ii) extends the Revolving Loan
Maturity Date, (iii) reduces the principal of or interest on any
Revolving Loan or any fees or other amounts payable for the account of
the Banks hereunder, (iv) increases the LC Commitment or extends the LC
Facility Expiration Date, (v) postpones any date fixed for any payment
of the principal of or interest on any Revolving Loans or Reimbursement
Obligations or any fees or other amounts payable for the account of the
Banks hereunder or thereunder, (v) amends this Paragraph 8.04, (vi)
amends the definition of Borrowing Base, Eligible Accounts, Eligible
Inventory or Required Banks, (vii) releases any part of the Collateral
other than an immaterial part of the Collateral, (viii) releases any
Guarantor from its Guaranty or decreases the amount of the obligations
guaranteed by such Guarantor under its Guaranty, or (ix) amends
Subparagraph 5.02(m) must be in writing and signed by all Banks;
(b) Any amendment, waiver or consent which increases or
decreases the Revolving Loan Commitment or Proportionate Share of any
Bank must be in writing and signed by such Bank;
(c) Any amendment, waiver or consent which increases the LC
Commitment or otherwise affects the rights or obligations of Issuing
Bank must be in writing and signed by Issuing Bank; and
(d) Any amendment, waiver or consent which affects the rights
of any Agent must be in writing and signed by such Agent.
No failure or delay by any Agent or any Bank in exercising any right hereunder
shall operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in
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such waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.
8.05. Successors and Assigns.
(a) Binding Effect. This Restated Credit Agreement and the
other Credit Documents shall be binding upon and inure to the benefit
of Borrower, the Banks, the Agents, all future holders of the Revolving
Loan Notes and their respective successors and permitted assigns,
except that Borrower may not assign or transfer any of its rights or
obligations under any Credit Document without the prior written consent
of the Agents and each Bank. All references in this Restated Credit
Agreement to any Person shall be deemed to include all successors and
assigns of such Person.
(b) Participations. Any Bank may, in the ordinary course of
its commercial lending business and in accordance with applicable law,
at any time sell to one or more banks or other financial institutions
("Participants") participating interests in any Revolving Loan owing to
such Bank, any Revolving Loan Note held by such Bank, any Revolving
Loan Commitment of such Bank or any other interest of such Bank under
this Restated Credit Agreement and the other Credit Documents without
the consent of any other party hereto; provided, however, that a Bank
may not sell a participation which would increase the Taxes payable by
Borrower under Paragraph 2.11 without the consent of Borrower. In the
event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this Restated Credit
Agreement to the other parties to this Restated Credit Agreement shall
remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such
Revolving Loan Note for all purposes under this Restated Credit
Agreement and Borrower and the Agents shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Restated Credit Agreement; provided, however,
that any agreement pursuant to which any Bank sells a participating
interest to a Participant may require the selling Bank to obtain the
consent of such Participant in order for such Bank to agree in writing
to any amendment of a type specified in clause (a)(i), (a)(ii),
(a)(iii) or (a)(iv) of Paragraph 8.04. Borrower also agrees that any
Bank which has transferred all or part of its interests in the
Revolving Loan Commitments and the Revolving Loans to one or more
Participants shall, notwithstanding any such transfer, be entitled to
the full benefits accorded such Bank under 2.10, Paragraph 2.11, and
Paragraph 2.12, as if such Bank had not made such transfer.
(c) Assignments. Any Bank may, in the ordinary course of its
commercial lending business and in accordance with applicable law, at
any time, sell and assign to any Bank, any affiliate of a Bank or any
other bank or financial institution (individually, an "Assignee Bank")
all or a portion of its rights and obligations under this Restated
Credit Agreement and the other Credit Documents (such a sale and
assignment to be referred to herein as an "Assignment") pursuant to an
assignment agreement in the form of Exhibit L (an "Assignment
Agreement"), executed by each Assignee Bank and such
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assignor Bank (an "Assignor Bank") and delivered to Administrative
Agent for its acceptance and recording in the Register; provided,
however, that:
(i) Without the written consent of Borrower and
Administrative Agent (which consent of Borrower and
Administrative Agent shall not be unreasonably withheld), no
Bank may make any Assignment to any Assignee Bank which is
not, immediately prior to such Assignment, a Bank hereunder or
an affiliate which controls, is controlled by or is under
common control with a Bank hereunder;
(ii) Without the written consent of Borrower and
Administrative Agent (which consent of Borrower and
Administrative Agent shall not be unreasonably withheld), no
Bank may make any Assignment to any Assignee Bank unless,
after giving effect to such Assignment, (A) the Revolving Loan
Commitment of the Assignee Bank is $5,000,000 or an integral
multiple thereof and (B) the Revolving Loan Commitment of the
Assignor Bank is either (1) $0, if the Assignor Bank has
assigned its entire Revolving Loan Commitment, or (2)
$5,000,000 or an integral multiple thereof, if the Assignor
Bank has assigned less than its entire Revolving Loan
Commitment; and
(iii) No Bank may make any Assignment which does not
assign and delegate an equal pro rata interest in such Bank's
Revolving Loans, Revolving Loan Commitment and all other
rights, duties and obligations of such Bank under this
Restated Credit Agreement and the other Credit Documents.
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date
determined pursuant to such Assignment Agreement, (A) each Assignee
Bank thereunder shall be a Bank hereunder with a Revolving Loan
Commitment as set forth on Attachment 1 to such Assignment Agreement
and shall have the rights, duties and obligations of such a Bank under
this Restated Credit Agreement and the other Credit Documents, and (B)
the Assignor Bank thereunder shall be a Bank with a Revolving Loan
Commitment as set forth on Attachment 1 to such Assignment Agreement,
or, if the Revolving Loan Commitment of the Assignor Bank has been
reduced to $0, the Assignor Bank shall cease to be a Bank; provided,
however, that any such Assignor Bank which ceases to be a Bank shall
continue to be entitled to the benefits of any provision of this
Restated Credit Agreement which by its terms survives the termination
of this Restated Credit Agreement. Each Assignment Agreement shall be
deemed to amend Schedule I to the extent, and only to the extent,
necessary to reflect the addition of each Assignee Bank, the deletion
of each Assignor Bank which reduces its Revolving Loan Commitment to
$0, and the resulting adjustment of Revolving Loan Commitments arising
from the purchase by each Assignee Bank of all or a portion of the
rights and obligations of an Assignor Bank under this Restated Credit
Agreement and the other Credit Documents. On or prior to the Assignment
Effective Date determined pursuant to each Assignment Agreement,
Borrower, at Assignor Bank's expense, shall execute and deliver to
Administrative Agent, in exchange for the surrendered Revolving Loan
Note of the Assignor Bank
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thereunder, a new Revolving Loan Note to the order of each Assignee
Bank thereunder (with each new Revolving Loan Note to be in an amount
equal to the Revolving Loan Commitment assumed by such Assignee Bank)
and, if the Assignor Bank is continuing as a Bank hereunder, a new
Revolving Loan Note to the order of the Assignor Bank (with the new
Revolving Loan Note to be in an amount equal to the Revolving Loan
Commitment retained by it). Each such new Revolving Loan Note shall be
dated the Effective Date and otherwise be in the form of the Revolving
Loan Note replaced thereby (provided that Borrower shall not be
obligated to pay any additional interest to any Assignee Bank in
respect of any principal payments made prior to the Effective Date of
the Assignment to such Assignee Bank). The Revolving Loan Notes
surrendered by the Assignor Bank shall be returned by Administrative
Agent to Borrower marked "replaced". Each Assignee Bank which was not
previously a Bank hereunder and which is not incorporated under the
laws of the United States of America or a state thereof shall, within
three (3) Business Days of becoming a Bank, deliver to Borrower and
Administrative Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 (or successor applicable
form), as the case may be, certifying in each case that such Bank is
entitled to receive payments under this Restated Credit Agreement
without deduction or withholding of any United States federal income
taxes.
(d) Register. Administrative Agent shall maintain at its
address referred to in Paragraph 8.01 a copy of each Assignment
Agreement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Banks and the Revolving
Loan Commitments of each Bank from time to time. The entries in the
Register shall be conclusive in the absence of manifest error, and
Borrower, Administrative Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Revolving
Loans recorded therein for all purposes of this Restated Credit
Agreement. The Register shall be available for inspection by Borrower
or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Registration. Upon its receipt of an Assignment Agreement
executed by an Assignor Bank and an Assignee Bank (and, to the extent
required by Subparagraph 8.05(c), by Borrower and Administrative
Agent), together with payment to Administrative Agent by the Assignor
Bank of a registration and processing fee of $2,500, Administrative
Agent shall (i) promptly accept such Assignment Agreement and (ii) on
the Effective Date of the Assignment determined pursuant thereto record
the information contained therein in the Register and give notice of
such acceptance and recordation to the Banks and Borrower.
Administrative Agent may, from time to time at its election, prepare
and deliver to the Banks and Borrower a revised Schedule I reflecting
the names, addresses and respective Revolving Loan Commitments of all
Banks then parties hereto.
(f) Collateral Security. Notwithstanding any other provision
contained in this Restated Credit Agreement and any other Credit
Document to the contrary, any Bank may assign all or any portion of the
Revolving Loans held by it to any Federal Reserve Bank or the United
States Treasury as collateral security, provided that any payment in
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respect of such assigned Revolving Loan made by Borrower to or for the
account of the assigning or pledging Bank in accordance with the terms
of this Restated Credit Agreement shall satisfy Borrower's obligations
hereunder in respect of such assigned Revolving Loans to the extent of
such payment. No such assignment shall release the assigning Bank from
its obligations hereunder.
(g) Confidentiality. The Agents and the Banks may disclose the
Credit Documents and any financial or other information relating to
Borrower or any Subsidiary to each other or to any Participant or
Assignee Bank or potential Participant or Assignee Bank which is not a
direct competitor of Borrower and which agrees in writing to maintain
the confidentiality thereof in accordance with safe and sound lending
practices.
8.06. Setoff; Security Interest.
(a) Setoff. In addition to any rights and remedies of the
Banks provided by law, each Bank shall have the right without prior
notice to Borrower, any such notice being expressly waived by Borrower
to the extent permitted by applicable law, upon the occurrence and
during the continuance of a Default or an Event of Default, to set-off
and apply against any Obligations of Borrower to such Bank which are
then due and payable, any amount owing from such Bank to Borrower, at
or at any time after, the happening of any of the above mentioned
events, and as security for such Obligations, Borrower hereby grants to
each Bank a continuing security interest in any and all deposits,
accounts or moneys of Borrower then or thereafter maintained with such
Bank, subject in each case to Subparagraph 2.09(b). The aforesaid right
of set-off may be exercised by such Bank against Borrower or against
any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or attachment
creditor of Borrower or against anyone else claiming through or against
Borrower or such trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of
set-off shall not have been exercised by such Bank prior to the
occurrence of a Default or an Event of Default. Each Bank agrees
promptly to notify Borrower after any such set-off and application made
by such Bank, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
(b) Security Interest. As security for the Obligations,
Borrower hereby grants to each Bank, for the benefit of all Banks, a
continuing security interest in any and all deposit accounts or moneys
of Borrower now or hereafter maintained with such Bank. Each Bank shall
have all of the rights of a secured party with respect to such security
interest.
8.07. No Third Party Rights. Nothing expressed in or to be implied from
this Restated Credit Agreement is intended to give, or shall be construed to
give, any Person, other than the parties hereto and their permitted successors
and assigns hereunder, any benefit or legal or equitable right, remedy or claim
under or by virtue of this Restated Credit Agreement or under or by virtue of
any provision herein.
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8.08. Partial Invalidity. If at any time any provision of this Restated
Credit Agreement is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Restated Credit Agreement nor
the legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
8.09. Arbitration.
(a) This Paragraph 8.09 concerns the resolution of any
controversies or claims between or among Borrower, any Bank and any
Agent, including but not limited to those that arise from:
(i) This Restated Credit Agreement or any other
Credit Document;
(ii) Any violation of this Restated Credit Agreement
or any other Credit Document; or
(iii) Any claims for damages resulting from any
business conducted between Borrower and any Bank or any Agent,
including claims for injury to persons, property or business
interests.
(b) At the request of Borrower, any Bank or any Agent, any
controversies or claims will be settled by arbitration in accordance
with the United States Arbitration Act. The United States Arbitration
Act will apply even though this Restated Credit Agreement provides that
it is governed by California law.
(c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial
rules of arbitration. The arbitration will be conducted within the
California county of San Francisco. Borrower, the Banks and any Agent
expressly agree that the arbitrator(s) (i) shall apply contract law and
(ii) shall not be empowered to make any award which a California court
is not empowered to make or any award for punitive damages.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this paragraph is
the equivalent of the filing of a lawsuit, and any claim or controversy
which may be arbitrated under this paragraph is subject to any
applicable statute of limitations. The arbitrators will have the
authority to decide whether any such claim or controversy is barred by
the statute of limitations and if so to dismiss the arbitration on that
basis.
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration proceeding
may be submitted to any authorized court of law to be confirmed and
enforced.
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(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to
arbitration arises from or relates to an obligation to Bank secured by
real property located in California. If the obligation is secured by
real property, Borrower, each Bank and each Agent must consent to
submission of the claim or controversy to arbitration. If all parties
do not consent to arbitration, the controversy or claim will be settled
as follows:
(i) Borrower, the Banks and the Agents will designate
a referee (or a panel of referees) selected under the auspices
of the American Arbitration Association in the same manner as
arbitrators are selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in
California Code of Civil Procedure Section 638 and the
following related sections;
(iii) The referee (or the presiding referee of the
panel) will be an active attorney or a retired judge; and
(iv) The award that results from the decision of the
referee (or the panel) will be entered as a judgment in the
court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644
and 645.
(h) This Paragraph 8.09 does not limit the right of Borrower,
any Bank or any Agent to:
(i) Exercise self-help remedies such as setoff;
(ii) Foreclose against or sell any real or personal
property collateral; or
(iii) Take action in a court of law, before, during
or after the arbitration proceeding to obtain an interim
remedy or additional or supplementary remedies.
(i) The pursuit of or a decision in an action for interim,
additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of Borrower, any Bank or any
Agent, including the suing party, to submit the controversy or claim to
arbitration.
8.10. Jury Trial. EACH OF BORROWER, THE BANKS AND THE AGENTS, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS RESTATED CREDIT AGREEMENT OR ANY
OTHER CREDIT DOCUMENT NOT RESOLVED PURSUANT TO PARAGRAPH 8.09.
51
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8.11. Counterparts. This Restated Credit Agreement may be executed in
any number of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.
SECTION IX. EFFECTIVE DATE OF RESTATED CREDIT AGREEMENT.
9.01. Effective Date. This Restated Credit Agreement shall become
effective on a Business Day on or prior to November 12, 1998 as designated by
Borrower in a written notice to Administrative Agent (the "Effective Date"),
subject to receipt by Administrative Agent (a) at least three (3) Business days
prior to the Effective Date of Borrower's written notice designating the
Effective Date and (b) on or prior to the Effective Date, of each item listed in
Schedule 3.01, each in form and substance reasonably satisfactory to the Banks,
and with sufficient copies for, each Agent and each Bank.
9.02. Loans Under Existing Credit Agreement. On the Effective Date, all
loans outstanding under the Existing Credit Agreement shall be deemed to be
Revolving Loans made by each of the Banks under this Restated Credit Agreement,
and all accrued unpaid interest thereon shall begin to accrue interest at the
rates set forth in this Restated Credit Agreement.
9.03. Effect. On and after the Effective Date, this Restated Credit
Agreement, the Borrower Security Agreement and the Borrower Pledge Agreement
shall amend, restate in their entirety and replace, without novation, the
Existing Credit Agreement, the Amended and Restated Security Agreement dated as
of May 23, 1995 executed by Borrower in favor of Administrative Agent (the
"Existing Borrower Security Agreement") and the Amended and Restated Pledge
Agreement dated as of May 23, 1995 executed by Borrower in favor of
Administrative Agent (the "Existing Borrower Pledge Agreement"), respectively;
provided, however, that the execution and delivery of this Restated Credit
Agreement, the Borrower Security Agreement and the Borrower Pledge Agreement and
the other Credit Documents shall not (a) operate as a waiver of any right, power
or remedy of the Banks under the Existing Credit Agreement, the Existing
Security Agreement or the Existing Pledge Agreement, except to the extent
expressly waived in this Restated Credit Agreement, the Borrower Security
Agreement, the Borrower Pledge Agreement or the other Credit Documents, or (b)
extinguish or impair any obligations of Borrower under the Existing Credit
Agreement, the Existing Security Agreement or the Existing Pledge Agreement
except to the extent any such obligation is actually satisfied by Borrower.
[The next page is the signature page]
52
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IN WITNESS WHEREOF, Borrower, the Banks, Administrative Agent and
Collateral Agent have caused this Restated Credit Agreement to be executed as of
the day and year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By:________________________
Name:
Title:
ADMINISTRATIVE AGENT: CALIFORNIA BANK & TRUST,
As Administrative Agent
By:________________________
Name:
Title:
By:________________________
Name:
Title:
COLLATERAL AGENT: UNION BANK OF CALIFORNIA, N.A.
As Collateral Agent
By:________________________
Name:
Title:
BANKS: CALIFORNIA BANK & TRUST,
As a Bank
By:________________________
Name:
Title:
By:________________________
Name:
Title:
53
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UNION BANK OF CALIFORNIA, N.A.
By:___________________________
Name:
Title:
SANWA BANK CALIFORNIA,
As a Bank
By:___________________________
Name:
Title:
COMERICA BANK-CALIFORNIA,
As a Bank
By:___________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
As a Bank
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
54
<PAGE>
IBM CREDIT CORPORATION,
As a Bank
By:___________________________
Name:
Title:
55
<PAGE>
SCHEDULE I
BANKS
Bank Revolving Loan Commitment
CALIFORNIA BANK & TRUST $30,000,000
Applicable Lending Office: 465 California
Street, First FloorSan Francisco, CA 94104
Address for Notices: 465 California Street,
First Floor San Francisco, CA 94104
Attn: Relationship Manager Bell Microproducts
Telephone: (415) 875-1445
Facsimile (415) 875-1456
UNION BANK OF CALIFORNIA, N.A. $30,000,000
Applicable Lending Office: 99 Almaden Boulevard,
2nd Floor San Jose, CA 95133
Address for Notices: Northern California
Commercial Banking Group 350 California Street,
10th Floor San Francisco, CA 94104
Attention: William Hinch Vice President
Telephone: (415)705-7028
Facsimile (415) 705-7111
I-1
<PAGE>
COMERICA BANK - CALIFORNIA $30,000,000
Applicable Lending Office: California
Corporate Banking 155 Grand Avenue,
Suite 402 Oakland, CA 94612
Address for Notices: California Corporate
Banking 155 Grand Avenue, Suite 402
Oakland, CA 94612 Attn: Scott Smith
Telephone: (510) 645-2202
Facsimile (510) 645-2220
SANWA BANK CALIFORNIA $20,000,000
Applicable Lending Office:San Jose
CBC220 Almaden Boulevard San Jose, CA
95113-2003
Address for Notices: 220 Almaden Boulevard
San Jose, CA 95113-2003
Attn: Clifford M. Wallace
Telephone: (408) 297-6500
Facsimile (408) 292-4092
I-2
<PAGE>
U.S. BANK NATIONAL ASSOCIATION $20,000,000
Applicable Lending Office:
U.S. Bank National Association
Corporate Banking Center
2890 North Main Street
Walnut Creek, CA 94596
Address for Notices:
U.S. Bank National Association
California Corporate Banking
2890 North Main Street
Walnut Creek, CA
94596
Attn: Michael Powell
Telephone: (925) 942-9489
Facsimile (925) 945-6919
IBM CREDIT CORPORATION $30,000,000
Applicable Lending Office:
IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA 94583
Address for Notices:
IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA 94583
Attn: Region Manager, West
Telephone: (925) 277-5600
Facsimile: (925) 277-5675
I-3
<PAGE>
SCHEDULE II
PRICING GRID
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
PERIOD PERIOD PERIOD PERIOD PERIOD
APPLICABLE
MARGINS: 1.45% 1.65% 1.85% 2.05% 2.25%
EXPLANATION
1. The Applicable Margin for each Revolving LIBOR Loan will be set for
each Pricing Period and will vary depending upon whether such period is
a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period
or a Level 5 Period.
2. The first Pricing Period, which commences on the November 12, 1998 and
ends on February 28, 1999, will be a Level 3 Period.
3. Each Pricing Period thereafter will be a Level 1 Period, a Level 2
Period, a Level 3 Period, a Level 4 Period or a Level 5 Period
depending upon Borrower's Leverage Ratio (as calculated pursuant to the
definition of "Leverage Ratio" set forth in Schedule 1.01) for the most
recent fiscal quarter period ending prior to the first day of such
Pricing Period as follows:
(a) If, during any Pricing Period, Borrower's Leverage Ratio is
less than 2.00 to 1.00, Borrower's pricing will be a Level 1
Period.
(b) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than or equal to 2.00 to 1.00 but less than or equal
to 2.50 to 1.00, Borrower's pricing will be a Level 2 Period.
(c) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 2.50 to 1.00 but less than or equal to 3.00 to
1.00, Borrower's pricing will be a Level 3 Period.
(d) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 3.00 to 1.00 but less than or equal to 3.25 to
1.00, Borrower's pricing will be a Level 4 Period.
(e) If, during any Pricing Period, Borrower's Leverage Ratio is
greater than 3.25 to 1.00, Borrower's pricing will be a Level
5 Period.
II-1
<PAGE>
SCHEDULE 1.01
DEFINITIONS
"Adjusted Net Income" shall mean, with respect to any Person for any
period, the sum, determined on a consolidated basis in accordance with GAAP, of
the following:
(a) The net income or net loss of such Person and its
Subsidiaries for such period before provision for income taxes or
interest;
minus
(b) The sum of (i) all extraordinary and non-recurring income
of such Person and its Subsidiaries accruing during such period (to the
extent added in calculating net income or loss in clause (a) above) and
(ii) all dividends paid or declared by such Person and its Subsidiaries
during such period (except for dividends paid or payable to such Person
or any of its wholly-owned Subsidiaries).
"Adjusted Total Liabilities" shall mean, with respect to any Person for
any period, the sum of the following:
(a) The total liabilities of such Person and its Subsidiaries
(determined on a consolidated basis in accordance with GAAP);
plus
(b) To the extent not included in clause (a) above, all
liabilities of such Person and its Subsidiaries under or with respect
to (i) Synthetic Leases and (ii) letters of credit, banker's
acceptances or other similar facilities.
"Administrative Agent" shall have the meaning given to that term in
clause (3) of the introductory paragraph hereof.
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, five percent (5%) or more of any class of
Equity Securities of such Person, (b) each Person that controls, is controlled
by or is under common control with such Person or any Affiliate of such Person
or (c) each of such Person's employees, officers, directors, joint venturers and
partners; provided, however, that in no case shall any Agent or any Bank be
deemed to be an Affiliate of Borrower or any of its Subsidiaries for purposes of
this Restated Credit Agreement. For the purpose of this definition, "control" of
a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agents" shall mean Administrative Agent and Collateral Agent.
1.01-1
<PAGE>
"Agent's Fee Letter" shall mean the letter agreement dated as of the
Fourth Amendment Effective Date among Borrower, Administrative Agent, Collateral
Agent and Comerica Bank - California.
"Almo" shall mean Almo corporation, a Pennsylvania corporation.
"Almo Warrant" shall mean, collectively, the warrants issued by
Borrower to Almo in connection with Borrower's acquisition of substantially all
of the assets of Almo's computer products division entitling Almo or any
subsequent holder thereof to convert such warrants into no more than 350,000
shares of Equity Securities issued by Borrower.
"Applicable Lending Office" shall mean, with respect to any Bank, (a)
initially, its office designated as such in Schedule I (or, in the case of any
Bank which becomes a Bank by an Assignment pursuant to Subparagraph 8.05(c), its
office designated as such in the applicable Assignment Agreement) and (b)
subsequently, such other office or offices of such Bank may designate to
Administrative Agent as the office at which such Bank's Revolving Loans will
thereafter be maintained and for the account of which all payments of principal
of, and interest on, such Bank's Revolving Loans will thereafter be made.
"Applicable Margin" shall mean, with respect to any Revolving LIBOR
Loan at any time, the per annum margin which is determined pursuant to the
Pricing Grid and added to the LIBO Rate for such Revolving LIBOR Loan. The
Applicable Margins shall be determined as provided in the Pricing Grid and may
change for each Pricing Period.
"Assignee Bank" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment" shall have the meaning given to that term in Subparagraph
8.05(c).
"Assignment Agreement" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment Effective Date" shall have, with respect to each Assignment
Agreement, the meaning set forth therein.
"Assignor Bank" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Banks" shall have the meaning given to that term in clause (2) of the
introductory paragraph hereof. Unless otherwise indicated, the term "Banks"
shall include any Bank acting as Issuing Bank but not in its capacity as such.
"Bell Canada" shall mean Bell Microproducts Canada Inc., a California
corporation and a wholly-owned Subsidiary of Borrower.
"Bell Canada Guaranty" shall have the meaning given to that term in
Subparagraph 2.13(a).
1.01-2
<PAGE>
"Bell Canada Pledge Agreement" shall have the meaning given to that
term in Subparagraph 2.13(b).
"Bell-Future Tech" shall mean Bell Microproducts-Future Tech, Inc., a
California corporation and a wholly-owned Subsidiary of the Borrower.
"Bell-Future Tech Security Documents" shall have the meaning given to
that term in Subparagraph 2.13(c).
"Bell-Future Tech Guaranty" shall have the meaning given to that term
in Subparagraph 2.13(c).
"Bell-Future Tech Security Agreement" shall have the meaning given to
that term in Subparagraph 2.13(c).
"Bell-Tenex" shall mean Bell Microproducts Canada-Tenex Data ULC, a
Nova Scotia, Canada unlimited liability company and a wholly-owned Subsidiary of
Bell Canada.
"Bell-Tenex Canadian Security Documents" shall have the meaning given
to that term in Subparagraph 2.13(b).
"Bell-Tenex Guaranty" shall have the meaning given to that term in
Subparagraph 2.13(b).
"Bell-Tenex Security Agreement" shall have the meaning given to that
term in Subparagraph 2.13(b).
"Borrower" shall have the meaning given to that term in clause (1) of
the introductory paragraph hereof.
"Borrower Pledge Agreement" shall have the meaning given to that term
in Subparagraph 2.13(a).
"Borrower Security Agreement" shall have the meaning given to that term
in Subparagraph 2.13(a).
"Borrowing Base" shall have the meaning given to that term in
Subparagraph 2.03(a).
"Borrowing Base Certificate" shall have the meaning given to that term
in Subparagraph 5.01(a).
"Business Day" shall mean any day on which (a) commercial banks are not
authorized or required to close in San Francisco, California or New York, New
York and (b) if such Business Day is related to a Revolving LIBOR Loan, dealings
in Dollar deposits are carried out in the London interbank market.
1.01-3
<PAGE>
"Capital Adequacy Requirement" shall have the meaning given to that
term in Subparagraph 2.10(d).
"Capital Asset" shall mean, with respect to any Person, tangible
property owned or leased (in the case of a Capital Lease) by such Person, or any
expense incurred by any Person that is required by GAAP to be reported as an
asset on such Person's balance sheet.
"Capital Event" shall mean the sale or issuance by Borrower of
Borrower's Equity Securities or Subordinated Indebtedness in one transaction or
a series of related transaction (other than in connection with the conversion of
the Almo Warrant or any stock option or similar plan of Borrower created in the
normal course of Borrower's business).
"Capital Expenditures" shall mean, with respect to any Person and any
period, all amounts expended and Indebtedness incurred or assumed by such Person
during such period for the acquisition of real property and other Capital Assets
(including amounts expended and Indebtedness incurred or assumed in connection
with Capital Leases).
"Capital Leases" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.
"CB&T" shall have the meaning given to that term in Recital A.
"Change of Law" shall have the meaning given to that term in
Subparagraph 2.10(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all property in which any Agent or any Bank has
a Lien to secure the Obligations.
"Collateral Agent" shall have the meaning given to that term in clause
(3) of the introductory paragraph hereof or any other Person that assumes the
duties and responsibilities of Collateral Agent pursuant to Subparagraph 7.07.
"Contractual Obligation" of any Person shall mean, any indenture, note,
security, deed of trust, mortgage, security agreement, lease, guaranty,
instrument, contract, agreement or other form of obligation to which such Person
is a party or by which such Person or any of its property is bound.
"Credit Documents" shall mean and include this Restated Credit
Agreement, the LC Applications, the Revolving Loan Notes, the Security
Documents, all amendments hereof and thereof, all waivers and consents hereunder
and thereunder and all other documents, instruments and agreements delivered by
Borrower or any of its Subsidiaries to any Agent or any Bank in connection with
this Restated Credit Agreement.
"Credit Event" shall mean the making of any Revolving Loan, the
conversion of any Revolving Loan from one Type of Revolving Loan to another Type
or the selection of a new
1.01-4
<PAGE>
Interest Period for any Revolving LIBOR Loan, or the issuance of any Letter of
Credit or any amendment of any Letter of Credit which increases its stated
amount or extends its expiration date.
"Default" shall mean any event or circumstance not yet constituting an
Event of Default which with the giving of any notice or the lapse of any period
of time or both, would become an Event of Default.
"Dollars" and "$" shall mean the lawful currency of the United States
of America and, in relation to any payment under this Restated Credit Agreement,
same day or immediately available funds.
"Drawing Payment" shall have the meaning given to that term in
Subparagraph 2.02(c).
"EBITDA" shall mean, with respect to any Person for any period, the sum
of the following, determined on a consolidated basis in accordance with GAAP
where applicable:
(a) The net income or net loss of such Person and its
Subsidiaries for such period before provision for income taxes;
plus
(b) The sum (to the extent deducted in calculating net income
or loss in clause (a) above) of (i) all Interest Expenses of such
Person and its Subsidiaries accruing during such period and (ii) all
depreciation and amortization of such Person and its Subsidiaries
accruing during such period.
"Effective Date" shall have the meaning given to that term in Paragraph
9.01.
"Eligible Accounts" shall mean, with respect to Borrower and, after the
Tenex Data Acquisition and the delivery to Administrative Agent of each of the
items listed on Schedule 5.01(j), Bell-Tenex, the aggregate net amount of all
accounts (as defined in the California Uniform Commercial Code) of Borrower and
Bell-Tenex, except, to the extent not already deducted, the following:
(a) Any account which does not arise from the sale or lease of
goods or services rendered to the account debtor thereon in the
ordinary course of Borrower's or the Canadian Subsidiaries' business,
or which arises from a sale, lease or service which has not been fully
performed by Borrower or Bell-Tenex;
(b) Any account or portion thereof to the extent the same is
subject to any right of discount, credit, allowance, rescission,
setoff, claim or defense or which is otherwise not valid and
enforceable against the account debtor thereon;
(c) Any account which is not subject to a first priority
perfected security interest in favor of Collateral Agent for the
benefit of the Agents and the Banks;
1.01-5
<PAGE>
(d) Any account which is not owned by Borrower or Bell-Tenex
free and clear of all Liens, rights and interests of all other Persons
except for Permitted Liens;
(e) Any account which is unpaid more than ninety (90) days
after the invoice date therefor;
(f) Any account arising from a consignment by Borrower or
Bell-Tenex as consignee or a COD shipment;
(g) Any account payable by (i) the United States government or
any department, agency or other subdivision thereof (except to the
extent Borrower complies with the Federal Assignment of Claims Act of
1940, as amended), (ii) a Person located in any jurisdiction outside
the United States or Canada (excluding the provinces of Newfoundland,
Nova Scotia, Prince Edward Island, New Brunswick, Nunavut, Manitoba,
Saskatchewan, Alberta and the Yukon Territory), except to the extent
secured by a letter of credit acceptable to Collateral Agent, or (iii)
an Affiliate of Borrower;
(h) Any account payable by an account debtor (i) which is the
subject of any bankruptcy, insolvency, liquidation or similar
proceeding, (ii) which has made an assignment for the benefit of its
creditors, (iii) for which a receiver has been appointed or (iv) which
has admitted in writing its inability to pay its debts as such debts
become due;
(i) All accounts payable by an account debtor which has failed
to pay twenty percent (20%) or more of its total accounts payable owed
to Borrower and/or Bell-Tenex within ninety (90) days of their invoice
date;
(j) Any account payable by an account debtor in which the
total accounts payable from such account debtor exceeds twenty five
percent (25%) of the total amount of all Eligible Accounts, to the
extent of such excess (except as approved from time to time by
Collateral Agent); and
(k) Any other account which Collateral Agent reasonably
determines is unlikely to be paid in full within ninety (90) days after
the invoice date.
(As used in clauses (a)-(k) of this definition, the term "account" when
used in the singular form shall mean an account arising from a single
invoice.)
"Eligible Inventory" shall mean, with respect to Borrower and, after
the Tenex Data Acquisition and the delivery to Administrative Agent of each of
the items listed on Schedule 5.01(j), Bell-Tenex, the net book value of all
inventory (as defined in the California Uniform Commercial Code) of Borrower and
Bell-Tenex, except the following:
(a) Any inventory which is not held by or on behalf of
Borrower or Bell-Tenex for sale or lease in the ordinary course of its
business;
(b) Any inventory consisting of work-in-process;
1.01-6
<PAGE>
(c) Any inventory which is not subject to a first priority
perfected security interest in favor of Collateral Agent for the
benefit of the Agents and the Banks;
(d) Any inventory located in any jurisdiction other than the
United States or Canada (excluding the provinces of Newfoundland, Nova
Scotia, Prince Edward Island, New Brunswick, Manitoba, Saskatchewan,
Alberta and Yukon Territory);
(e) Any inventory which is not owned by Borrower or Bell-Tenex
free and clear of all Liens, rights and interests of all other Persons
except for Permitted Liens;
(f) Any inventory which is obsolete, unsalable or damaged;
(g) Any inventory which has been consigned by Borrower or
Bell-Tenex (except for such inventory on consignment approved from time
to time by Collateral Agent);
(h) The portion of any inventory shown on the books of
Borrower or Bell-Tenex representing any purchase price discount earned
by Borrower or Bell-Tenex; and
(i) Any other inventory which Collateral Agent reasonably
determines is unlikely to be sold at or above its net book value.
"Employee Benefit Plan" shall mean any employee benefit plan within the
meaning of section 3(3) of ERISA maintained or contributed to by Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" means all Requirements of Law relating to the
protection of human health or the environment, including, without limitation,
(a) all Requirements of Law, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining
to the protection of the health and safety of employees or the public.
"Equity Securities" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be amended or supplemented, including any
rules or regulations issued in connection therewith.
1.01-7
<PAGE>
"ERISA Affiliate" shall mean any Person which is treated as a single
employer with Borrower under Section 414 of the Code.
"Event of Default" shall have the meaning given to that term in
Paragraph 6.01.
"Excluded Collateral" shall have the meaning given to that term in the
Borrower Security Agreement.
"Existing Borrower Pledge Agreement" shall have the meaning given to
that term in Paragraph 9.03.
"Existing Borrower Security Agreement" shall have the meaning given to
that term in Paragraph 9.03.
"Existing Credit Agreement" shall have the meaning given to that term
in Recital A.
"Federal Funds Rate" shall mean, for any day, the weighted average of
the per annum rates on overnight Federal funds transactions with member banks of
the Federal Reserve System arranged by Federal funds brokers as published by the
Federal Reserve Bank of New York for such day, (or, if such rate is not so
published for any day, the average rate quoted to Administrative Agent on such
day by three (3) Federal funds brokers of recognized standing selected by
Administrative Agent).
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Fee on Increased Commitment" shall have the meaning given to that term
in Subparagraph 2.03(c).
"Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of income and of changes in cash flow of such
Person for such period, and balance sheets of such Person as of the end of such
period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"First Amendment Effective Date" shall mean May 14, 1999.
"Fourth Amendment Effective Date" shall mean December 8, 1999.
"Fifth Amendment Effective Date" shall mean December 31, 1999.
"Future Tech Acquisition" shall mean the acquisition by Bell-Future
Tech of substantially all of the assets of the Future Tech International, Inc.
"Future Tech Acquisition Effective Date" shall mean the date that the
Future Tech Acquisition is consummated.
1.01-8
<PAGE>
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied, provided, however, that with respect to Borrower, the
definition of "current liabilities" as set forth in GAAP shall include the
Obligations.
"Governmental Authority" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, the
Comptroller of the Currency, any central bank or any comparable authority.
"Governmental Charges" shall mean all levies, assessments, fees, claims
or other charges imposed by any Governmental Authority upon or relating to (i)
Borrower or any of its Subsidiaries, (ii) the Revolving Loans, (iii) employees,
payroll, income or gross receipts of Borrower or any of its Subsidiaries, (iv)
the ownership or use of any of its assets by Borrower or any of its Subsidiaries
or (v) any other aspect of the business of Borrower or any of its Subsidiaries.
"Governmental Rule" shall mean any law, rule, regulation, ordinance,
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Guaranty" shall mean, collectively, the Bell Canada Guaranty and, the
Bell-Tenex Guaranty and the Bell-Future Tech Guaranty.
"Indebtedness" of any Person shall mean and include (a) all items of
indebtedness and liabilities which, in accordance with GAAP, would be included
in determining liabilities that are shown on the liability side of the balance
sheet of such Person, (b) all indebtedness and liabilities of other Persons
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable whether by any agreement to acquire
indebtedness and liabilities or to supply or advance funds or otherwise, and (c)
all indebtedness and liabilities of other Persons secured by any Lien in any
property of such Person (including without limitation Capital Leases).
"Indemnitees" shall have the meaning given to that term in Paragraph
8.03.
"Interest Account" shall have the meaning given to that term in
Subparagraph 2.07(b).
"Interest Coverage Ratio" shall mean, with respect to any Person for
any period, the ratio, determined on a consolidated basis in accordance with
GAAP, of (a) the sum of the Adjusted Net Income and Interest Expenses of such
Person and its Subsidiaries for such period to (b) the Interest Expenses of such
Person and its Subsidiaries for such period.
1.01-9
<PAGE>
"Interest Expenses" shall mean, with respect to any Person for any
period, the sum, determined on a consolidated basis in accordance with GAAP, of
(a) all interest expenses of such Person and its Subsidiaries during such period
(including, without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense and (iii) the portion of
any Capitalized Lease Obligations allocable to interest expense and financing
charges attributable to Synthetic Leases whether calculated as interest expense
or rental expense) plus (b) all letter of credit fees payable by such Person
accruing during such period.
"Interest Period" shall mean, with respect to any Revolving LIBOR Loan,
the time periods selected by Borrower pursuant to Subparagraph 2.01(b) or
Subparagraph 2.01(d) which commences on the first day of such Revolving Loan or
the effective date of any conversion and ends on the last day of such time
period, and thereafter, each subsequent time period selected by Borrower
pursuant to Subparagraph 2.01(e) which commences on the last day of the
immediately preceding time period and ends on the last day of that time period.
"Investment" of any Person shall mean any loan or advance of funds by
such Person to any other Person (other than advances to employees of such Person
for moving and travel expense, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition of any Equity
Securities or Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person (including,
without limitation, any Indebtedness incurred by such Person of the type
described in clauses (b) and (c) of the definition of "Indebtedness" on behalf
of any other Person); provided, however, that Investments shall not include
accounts receivable or other indebtedness owed by customers of such Person which
are current assets and arose from sales in the ordinary course of such Person's
business.
"Issuing Bank" shall mean CB&T, in its capacity as issuer of Letters of
Credit under Paragraph 2.02.
"LC Application" shall have the meaning given to that term in
Subparagraph 2.02(b).
"LC Commitment" shall have the meaning given to that term in
Subparagraph 2.02(a).
"LC Facility Expiration Date" shall have the meaning given to that term
in Subparagraph 2.02(a).
"LC Issuance Fees" shall have the meaning given to that term in
Subparagraph 2.04(c).
"LC Usage Fee" shall have the meaning given to that term in
Subparagraph 2.04(c).
"Letter of Credit" shall have the meaning given to that term in
Subparagraph 2.02(a).
"Leverage Ratio" shall mean, with respect to any Person at any time,
the ratio, determined on a consolidated basis in accordance with GAAP, of (a)
the Adjusted Total
1.01-10
<PAGE>
Liabilities of such Person and its Subsidiaries at such time to (b) the Tangible
Net Worth of such Person and its Subsidiaries at such time.
"LIBO Rate" shall mean, with respect to any Interest Period for the
Revolving LIBOR Loans in any Revolving Loan Borrowing consisting of Revolving
LIBOR Loans, a rate per annum equal to the quotient of (a) the rate per annum at
which Dollar deposits are offered to CB&T in the London interbank eurodollar
currency market on the second Business Day prior to the commencement of such
Interest Period at or about 11:00 A.M. (London time) (for delivery on the first
day of such Interest Period) for a term comparable to such Interest Period and
in an amount approximately equal to the amount of the Revolving Loan to be made
by CB&T as part of such Revolving Loan Borrowing, divided by (b) one minus the
Reserve Requirement for such Revolving Loans in effect from time to time. The
LIBO Rate applicable to any Revolving Loan for any Interest Period shall be
automatically adjusted during such Interest Period to reflect any change in the
applicable Reserve Requirement.
"Lien" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, Capital Lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Margin Stock" shall have the meaning given to that term in Regulation
U issued by the Federal Reserve Board, as amended from time to time, and any
successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
Borrower or any of its Subsidiaries; (b) the ability of Borrower or any of its
Subsidiaries to pay or perform the Obligations in accordance with the terms of
this Restated Credit Agreement and the other Credit Documents; (c) the rights
and remedies of any Agent or any Bank under this Restated Credit Agreement, the
other Credit Documents or any related document, instrument or agreement or (d)
the value of the Collateral, any Agent's or any Bank's security interests in the
Collateral or the perfection or priority of such security interests.
"Maturity" shall mean, with respect to any Revolving Loan,
Reimbursement Obligation, interest, fees or other amount payable by Borrower
under this Restated Credit Agreement or the other Credit Documents, the date
such Revolving Loan, Reimbursement Obligation, interest, fee or other amount
becomes due, whether upon the stated maturity or due date, upon acceleration or
otherwise.
"Multiemployer Plan" shall mean any multiemployer plan within the
meaning of section 3(37) of ERISA maintained or contributed to by Borrower or
any ERISA Affiliate.
"Net Income After Tax" shall mean, with respect to any Person for any
period, the net income or net loss of such Person and its Subsidiaries for such
period (after provision for income taxes), determined on a consolidated basis in
accordance with GAAP.
1.01-11
<PAGE>
"Net Operating Income" shall mean, with respect to any Person for any
period, the sum, determined on a consolidated basis in accordance with GAAP, of
the following:
(a) The net income or net loss of such Person and its
Subsidiaries for such period (before provision for income taxes);
plus
(b) The sum (to the extent deducted in calculating net income
or loss in clause (a) above) of all extraordinary and non-recurring
expenses of such Person and its Subsidiaries accruing during such
period;
minus
(c) The sum (to the extent added in calculating net income or
loss in clause (a) above) of all extraordinary and non-recurring income
of such Person and its Subsidiaries accruing during such period.
"Net Proceeds" shall mean with respect to the sale or issuance of any
Indebtedness, any Equity Security or any other security by any Person, the
aggregate consideration received by such Person from such sale or issuance less
the sum of the actual amount of the reasonable fees and commissions payable to
Persons other than such Person or any Affiliate of such Person, the reasonable
legal and other professional expenses and the other reasonable expenses directly
related to such sale or issuance that are to be paid by such Person.
"Notice of Revolving Loan Borrowing" shall have the meaning given to
that term in Subparagraph 2.01(b).
"Notice of Revolving Loan Conversion" shall have the meaning given to
that term in Subparagraph 2.01(d).
"Notice of Revolving Loan Interest Period Selection" shall have the
meaning given to that term in Subparagraph 2.01(e).
"Obligations" shall mean and include, with respect to Borrower, all
loans, advances, debts, liabilities, and obligations, howsoever arising, owed by
Borrower to any Agent or the Banks of every kind and description (whether or not
evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of this Restated Credit
Agreement or any of the other Credit Documents, including without limitation all
interest, fees, charges, expenses, attorneys' fees and accountants' fees
chargeable to Borrower or payable by Borrower hereunder or thereunder.
"Outstanding Facilities Credit" shall have the meaning given to that
term in Subparagraph 2.03(a).
"Participant" shall have the meaning given to that term in Subparagraph
8.05(b).
1.01-12
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Dividend" shall mean and include:
(a) Dividends payable solely in the common stock of Borrower;
(b) Dividends payable by any wholly-owned Subsidiary solely to
Borrower; and
(c) Repurchases of employee stock pursuant to repurchase
agreements.
"Permitted Indebtedness" shall mean and include:
(a) Indebtedness to subcontractors and trade creditors
incurred in the ordinary course of business;
(b) Indebtedness of Borrower to the Banks and the Agents under
this Restated Credit Agreement and the other Credit Documents;
(c) Unsecured Indebtedness of Borrower, provided that (A) the
Obligations shall at all times rank senior in right of payment with
such unsecured Indebtedness, (B) such unsecured Indebtedness does not
contain material provisions that are more restrictive to Borrower and
its Subsidiaries than the material provisions contained in this
Restated Credit Agreement, (C) no principal payable in connection with
such unsecured Indebtedness is scheduled for payment on or prior to the
Maturity Date, and (D) such unsecured Indebtedness is otherwise
acceptable to the Banks in their sole discretion;
(d) Purchase money Indebtedness incurred to acquire a Capital
Asset provided that (i) such Indebtedness does not exceed the purchase
price of such Capital Asset, (ii) such Indebtedness is incurred not
later than thirty (30) days after the acquisition of such asset and
(iii) the sum of all payments due on such purchase money Indebtedness
and Capital Leases and operating leases referred to in the following
clause (e) shall not exceed in the aggregate $500,000 in any fiscal
year;
(e) Indebtedness under Capital Leases and operating leases
provided that the sum of all payments due on such Capital Leases and
operating leases and purchase money Indebtedness referred to in the
preceding clause (d) shall not exceed in the aggregate $500,000 in any
fiscal year; provided, however, that amounts paid by Borrower pursuant
to that certain operating lease agreement, dated as of October 22,
1999, by and between Borrower and Winthrop Resources Corporation, shall
be excluded from the calculation set forth in this clause (e) and the
preceding clause (d) for so long as the sum of all payments due
thereunder does not exceed in the aggregate $1,000,000 in any fiscal
year;
(f) Indebtedness of any wholly-owned Subsidiary of Borrower to
Borrower arising from the extension by Borrower to such Subsidiary of
working capital financing in the ordinary course of Borrower's and such
Subsidiary's businesses, provided that, to
1.01-13
<PAGE>
the extent requested by Collateral Agent, such Subsidiary has taken all
steps necessary to grant to Borrower and perfect security interests in
the assets of such Subsidiary as security for such Indebtedness;
(g) Indebtedness arising from the endorsement of instruments
in the ordinary course of business;
(h) Indebtedness of Borrower and its Subsidiaries to any Bank
under Rate Contracts, provided, that (A) all such arrangements are
entered into in connection with bona fide hedging operations and not
for speculation and (B) the aggregate net amount owed by Borrower and
its Subsidiaries under, on account of or otherwise in connection with
such Rate Contracts does not exceed $50,000,000 (marked to market) at
any time; and
(i) Other Indebtedness not exceeding $100,000 at any time.
"Permitted Investments" shall mean and include:
(a) Deposits with commercial banks organized under the laws of
the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than ninety (90)
days from the date of issuance;
(c) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers;
(d) Investments arising under Rate Contracts otherwise
permitted pursuant to clause (h) of the definition of "Permitted
Indebtedness"; and
(e) Investments not otherwise permitted hereby not exceeding
in the aggregate $50,000 at any time outstanding.
"Permitted Liens" shall mean and include:
(a) Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith, provided provision is made to the reasonable
satisfaction of Collateral Agent for the eventual payment thereof if
subsequently found payable;
(b) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided provision
is made to the reasonable satisfaction of Collateral Agent for the
eventual payment thereof if subsequently found payable;
1.01-14
<PAGE>
(c) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed
money) or leases, or to secure statutory obligations of surety or
appeal bonds or to secure indemnity, performance or other similar bonds
in the ordinary course of business;
(d) Liens arising out of a judgment or award not exceeding
$100,000 (exclusive of any amounts covered by insurance issued by a
Person not an Affiliate of Borrower) with respect to which an appeal is
being prosecuted, a stay of execution pending appeal having been
secured;
(e) Liens securing purchase money indebtedness if such
indebtedness is Permitted Indebtedness pursuant to clause (d) of the
definition thereof and such Liens do not extend to property other than
the property financed with such indebtedness;
(f) Liens securing obligations under a Capital Lease if such
lease is Permitted Indebtedness pursuant to clause (e) of the
definition thereof and such Liens do not extend to property other than
the property leased under such Capital Lease;
(g) Liens in favor of any Agent or any Bank to secure the
Obligations;
(h) Leases, subleases, licenses and sublicenses granted to
Borrower the granting of which is not prohibited pursuant to the
definition of Permitted Indebtedness;
(i) Liens in favor of customs and revenue authorities which
secure payment of duties in connection with the importation of goods;
(j) Liens existing on property acquired by Borrower or any of
its Subsidiaries at the time of such acquisition (including Liens on
the assets of any Person at the time such Person becomes a Subsidiary
of Borrower), unless such Liens were created in contemplation of such
acquisition;
(k) Liens on insurance policies and the proceeds thereof
incurred solely to secure the financing of premiums owing with respect
thereto;
(l) Liens in favor of Borrower; and
(m) Such minor defects, irregularities, encumbrances,
easements, rights of way, and clouds on title as normally exist on
similar properties which do not, individually or in the aggregate,
materially impair the property affected thereby or the use thereof.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint venture, a
trust or other entity or a Governmental Authority.
"Pricing Grid" shall mean Schedule II.
1.01-15
<PAGE>
"Pricing Period" shall mean (a) the period commencing on the Effective
Date and ending on February 28, 1999, (b) the period commencing on March 1, 1999
and ending on May 31, 1999, and (c) each consecutive three-calendar month period
thereafter which commences on the day following the last day of the immediately
preceding three-calendar month period and ends on the last day of that time
period as follows:
(i) December 1st through February 28th or February 29th (as
applicable);
(ii) March 1st through May 31st;
(iii) June 1st through August 31st; and
(iv) September 1st through November 30th.
"Prime Rate" shall mean the per annum rate publicly announced by CB&T
from time to time at its head office as its prime rate. The Prime Rate is
determined by CB&T from time to time as a means of pricing credit extensions to
some customers and is neither directly tied to any external rate of interest or
index nor necessarily the lowest rate of interest charged by CB&T at any given
time for any particular class of customers or credit extensions.
"Proportionate Share" shall mean, with respect to any Bank at any time,
a fraction (expressed as a percentage), the numerator of which is such Bank's
Revolving Loan Commitment at such time and the denominator of which is the Total
Revolving Loan Commitment at such time.
"Quick Ratio" shall mean, with respect to any Person at any time, the
ratio, determined on a consolidated basis in accordance with GAAP, of (a) the
cash and trade accounts receivable of such Person and its Subsidiaries at such
time to (b) the current liabilities of such Person and its Subsidiaries at such
time.
"Rate Contracts" shall mean swap agreements (as that term is defined in
Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any
other agreements or arrangements designed to provide protection against
fluctuations in interest or currency exchange rates.
"Reimbursement Obligation" shall have the meaning given to that term in
Subparagraph 2.02(c).
"Reimbursement Payment" shall have the meaning given to that term in
Subparagraph 2.02(c).
"Reportable Event" shall have the meaning given to that term in ERISA
and applicable regulations thereunder.
"Required Banks" shall mean (a) at any time Revolving Loans are
outstanding, Banks holding sixty-six and two-thirds percent (66 2/3%) or more of
the aggregate principal amount of
1.01-16
<PAGE>
such Revolving Loans and (b) at any time no Revolving Loans are outstanding,
Banks whose Proportionate Shares equal or exceed sixty-six and two-thirds
percent (66 2/3%).
"Requirement of Law" applicable to any Person shall mean (a) the
Articles or Certificate of Incorporation and By-laws, Partnership Agreement or
other organizational or governing documents of such Person, (b) any Governmental
Rule applicable to such Person, (c) any license, permit, approval or other
authorization granted by any Governmental Authority to or for the benefit of
such Person and (d) any judgment, decision or determination of any Governmental
Authority or arbitrator, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Reserve Requirement" shall mean, with respect to any day in an
Interest Period for a Revolving LIBOR Loan, the aggregate of the reserve
requirement rates (expressed as a decimal) in effect on such day for
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Federal Reserve Board) required to be maintained by a member
bank of the Federal Reserve System. As used herein, the term "reserve
requirement" shall include, without limitation, any basic, supplemental or
emergency reserve requirements imposed on Bank by any Governmental Authority.
"Restated Borrower Pledge Agreement" shall have the meaning given to
that term in Paragraph 9.03.
"Restated Borrower Security Agreement" shall have the meaning given to
that term in Paragraph 9.03.
"Restated Credit Agreement" shall have the meaning given to that term
in the introductory paragraph hereof.
"Revolving LIBOR Loan" shall have the meaning given to that term in
Subparagraph 2.01(b).
"Revolving Loan" shall have the meaning given to that term in
Subparagraph 2.01(a).
"Revolving Loan Borrowing" shall mean a borrowing by Borrower
consisting of a Revolving Loan made by each Bank on the same date and of the
same Type pursuant to a single Notice of Revolving Loan Borrowing.
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite the name of such Bank in Schedule I under the column
entitled "Revolving Loan Commitment" or as reduced from time to time pursuant to
Paragraph 2.03 hereof.
"Revolving Loan Commitment Fees" shall have the meaning given to that
term in Subparagraph 2.04(b).
"Revolving Loan Maturity Date" shall have the meaning given to that
term in Subparagraph 2.01(a).
1.01-17
<PAGE>
"Revolving Loan Note" shall have the meaning given to that term in
Subparagraph 2.07(a).
"Revolving Prime Rate Loan" shall have the meaning given to that term
in Subparagraph 2.01(b).
"SecurityDocuments" shall mean and include (i) prior to the Tenex Data
Acquisition Effective Date and after the Future Tech Acquisition Effective Date,
the Borrower Security Agreement, the Borrower Pledge Agreement, the Bell Canada
Guaranty, and all other documents, instruments and agreements delivered to any
Agent or any Bank to secure the Obligations or in connection with the
Collateral; (ii) on and after the Tenex Data Acquisition Effective Date, each of
the items listed in clause (i) above, the Bell Canada Pledge Agreement, the
Bell-Tenex Guaranty, the Bell-Tenex Security Agreement, the Bell-Tenex Canadian
Security Documents; and (iii) on and after the Future Tech Acquisition Effective
Date, each of the items listed in clause (i) and clause (ii) above, the
Bell-Future Tech Guaranty, the Bell-Future Tech Security Agreement, the
Bell-Future Tech Security Documents, and all other documents, instruments and
agreements delivered to any Agent or any Bank to secure the Obligations or in
connection with the Collateral.
"Senior Adjusted Total Liabilities" shall mean, with respect to
Borrower at any time, the difference of the following:
(a) The Adjusted Total Liabilities of Borrower and its
Subsidiaries at such time;
minus
(b) The aggregate principal amount of all Subordinated
Indebtedness of Borrower permitted pursuant to Subparagraph 5.02(b) and
clause (c) of the definition of "Permitted Indebtedness".
"Solvent" shall mean, with respect to any Person on any date, that on
such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small amount of capital.
"Subordinated Indebtedness" shall mean the unsecured subordinated
Indebtedness of Borrower permitted pursuant to Subparagraph 5.02(b) and clause
(c) of the definition of "Permitted Indebtedness".
1.01-18
<PAGE>
"Subsidiary" of any Person shall mean (a) any corporation of which more
than 50% of the issued and outstanding Equity Securities having ordinary 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) is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries, (b) any partnership, joint venture,
limited liability company or other association of which more than 50% of the
equity interest having the power to vote, direct or control the management of
such partnership, joint venture or other association is at the time owned and
controlled by such Person, by such Person and one or more of the other
Subsidiaries or by one or more of such Person's other subsidiaries and (c) any
other Person included in the Financial Statements of such Person on a
consolidated basis.
"Synthetic Lease" shall mean an off-balance sheet financing arrangement
for equipment or real estate which is treated as an operating lease under GAAP
but pursuant to which the lessee of such equipment or real estate has the
benefits and burdens of ownership of the leased equipment or real estate for
U.S. tax purposes.
"Tangible Net Worth" shall mean, with respect to any Person at any
time, the remainder at such time, determined on a consolidated basis in
accordance with GAAP, of (a) the total assets of such Person and its
Subsidiaries minus (b) the sum (without limitation and without duplication of
deductions) of (i) the total liabilities of such Person and its Subsidiaries,
(ii) all reserves established by such Person and its Subsidiaries for
anticipated losses and expenses (to the extent not deducted in calculating total
assets in clause (a) above), (iii) all intangible assets of such Person and its
Subsidiaries (to the extent included in calculating total assets in clause (a)
above), including, without limitation, goodwill (including any amounts, however
designated on the balance sheet, representing the cost of acquisition of
businesses and investments in excess of underlying tangible assets), trademarks,
trademark rights, trade name rights, copyrights, patents, patent rights,
licenses, unamortized debt discount, marketing expenses, organizational
expenses, non-compete agreements and deferred research and development and (iv)
the amount, if any, by which the aggregate intercompany receivables owed to such
Person by its Affiliates exceeds the aggregate intercompany receivables payable
by such Person to its Affiliates.
"Taxes" shall have the meaning given to such term in Paragraph 2.11.
"Tenex Data Acquisition" shall mean the acquisition by Bell-Tenex of
substantially all of the assets of the Tenex Data Division of Axidata, Inc., a
Canadian corporation and a Subsidiary of Abitibi, Inc., a Canadian corporation.
"Tenex Data Acquisition Effective Date" shall mean the date that the
Tenex Data Acquisition is consummated.
"Total Revolving Loan Commitment" shall mean One Hundred Sixty Million
Dollars ($160,000,000) or, if such amount is reduced pursuant to 2.03(b), the
amount to which so reduced and in effect at such time.
1.01-19
<PAGE>
"Total Unused Revolving Loan Commitment" shall mean, at any time, the
remainder of (a) the Total Revolving Loan Commitment at such time minus (b) the
Outstanding Facilities Credit at such time.
"Type" shall mean, with respect to any Revolving Loan or Revolving Loan
Borrowing at any time, the classification of such Revolving Loan or Revolving
Loan Borrowing by the type of interest rate it then bears, whether an interest
rate based on the Prime Rate or the LIBO Rate.
"UBOC" shall mean Union Bank of California, N.A., a national banking
association.
"Working Capital" shall mean, with respect to any Person at any time,
the working capital of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
1.01-20
<PAGE>
SCHEDULE 3.01
EFFECTIVE DATE CONDITIONS PRECEDENT
A. PRINCIPAL CREDIT DOCUMENTS.
(1) The Third Amended and Restated Credit Agreement, duly
executed by Borrower, each Bank, Administrative Agent
and Collateral Agent;
(2) The Revolving Loan Note payable to each Bank, duly
executed by Borrower;
(3) The Borrower Security Agreement, duly executed by
Borrower;
(4) The Borrower Pledge Agreement, duly executed by
Borrower; and
(5) The Bell Canada Guaranty, duly executed by Bell Canada;
B. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.
(1) Copies of (a) the audited Financial Statements of Borrower
and its Subsidiaries for the fiscal year ended December 31, 1997,
prepared by Pricewaterhousecoopers, LLP., and (b) the unqualified
opinion (or qualified opinion reasonably acceptable to the Banks) and
management letter (if any) delivered by such accountants in connection
with such Financial Statements; and
(2) A Borrowing Base Certificate dated the Effective Date
which sets forth the calculation of the Borrowing Base as of September
30, 1998, certified by the Chief Financial Officer of Borrower.
C. BORROWER CORPORATE DOCUMENTS.
(1) The Articles of Incorporation of Borrower, certified as of
a recent date prior to the Effective Date by the Secretary of State of
California;
(2) A Certificate of Good Standing (or comparable certificate)
for Borrower, certified as of a recent date prior to the Effective Date
by the Secretary of State of California;
(3) A certificate of the Secretary of Borrower, dated as of
the date of this Restated Credit Agreement, certifying (a) that the
Articles of Incorporation of Borrower, in the form certified by the
Secretary of State of California and delivered to Administrative Agent
pursuant to item C(1) hereof, is in full force and effect and has not
been amended, supplemented, revoked or repealed since the date of such
certification; (b) that attached thereto is a true and correct copy of
the Bylaws of Borrower as in effect on the Effective Date; (c) that
attached thereto are true and correct copies of resolutions duly
adopted by the Board of Directors of Borrower and continuing in effect,
which authorize
3.01(e)-1
<PAGE>
the execution, delivery and performance by Borrower of this Restated
Credit Agreement and the other Credit Documents executed or to be
executed by Borrower and the consummation of the transactions
contemplated hereby and thereby; and (d) that there are no proceedings
for the dissolution or liquidation of Borrower (commenced or
threatened);
(4) A certificate of the Secretary of Borrower, dated as of
the date of this Restated Credit Agreement, certifying the incumbency,
signatures and authority of the officers of Borrower authorized to
execute, deliver and perform this Restated Credit Agreement and the
other applicable Credit Documents on behalf of Borrower; and
(5) A Certificate of Good Standing (or comparable certificate)
for each Subsidiary of Borrower, certified as of a recent date prior to
the Effective Date by the Secretary of State (or comparable public
official) of such Subsidiary's jurisdiction of incorporation (or, in
the case of a foreign subsidiary, an opinion of counsel acceptable to
Administrative Agent to such effect).
D. BELL CANADA CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation of Bell Canada, certified
as of a recent date prior to the Effective Date by the California
Secretary of State;
(2) A Certificate of Good Standing (or comparable certificate)
for Bell Canada, certified as of a recent date prior to the Effective
Date by the California Secretary of State;
(3) A certificate of the Secretary of Bell-Canada, dated the
Effective Date, certifying (a) that the Certificate of Incorporation of
Bell-Canada, in the form certified by the California Secretary of State
and delivered to Administrative Agent pursuant to item D(1) hereof, is
in full force and effect and has not been amended, supplemented,
revoked or repealed since the date of such certification; (b) that
attached thereto is a true and correct copy of the Bylaws of Bell
Canada as in effect on the Effective Date; (c) that attached thereto
are true and correct copies of resolutions duly adopted by the Board of
Directors of Bell Canada and continuing in effect, which authorize the
execution, delivery and performance by Bell Canada of the Credit
Documents executed or to be executed by Bell Canada and the
consummation of the transactions contemplated hereby and thereby; and
(d) that there are no proceedings for the dissolution or liquidation of
Bell Canada (commenced or threatened); and
(4) A certificate of the Secretary of Bell Canada, dated the
Effective Date, certifying the incumbency, signatures and authority of
the officers of Bell Canada authorized to execute, deliver and perform
the applicable Credit Documents on behalf of Bell Canada.
3.01(e)-2
<PAGE>
E. SECURITY DOCUMENTS.
(1) All Uniform Commercial Code financing statements
(including amendments and fixture filings) and other documents,
instruments and agreements reasonably requested by Collateral Agent to
perfect the security interests, liens and assignments granted to
Collateral Agent by Borrower in connection herewith, appropriately
completed and duly executed by the appropriate parties;
(2) Uniform Commercial Code search certificates evidencing the
filing of the financing statements necessary to perfect the security
interests granted to Collateral Agent by Borrower pursuant to the
Credit Documents prior to the financing statements of all other
Persons;
(3) The certificates representing the stock pledged to
Collateral Agent pursuant to the Borrower Pledge Agreement, together
with blank stock powers for each such certificate duly executed by
Borrower.
(4) Such other documents, instruments and agreements as
Collateral Agent may reasonably request to establish and perfect the
Liens granted to Collateral Agent or any Bank in this Agreement, the
Security Documents and the other Credit Documents.
F. OPINIONS.
(1) A written opinion of Wilson, Sonsini, Goodrich & Rosati,
outside counsel to Borrower, dated as of the Effective Date and
addressed to Administrative Agent and each Bank, covering such legal
matters as Administrative Agent may reasonably request and otherwise in
form and substance satisfactory to Administrative Agent.
G. OTHER ITEMS.
(1) A duly completed and timely delivered Notice of Borrowing.
(2) A certificate of the President, a Vice President or Chief
Financial Officer of Borrower, addressed to Administrative Agent and
the Banks and dated as of the Effective Date, certifying that:
(a) The representations and warranties set forth in
Paragraph 4.01 are true and correct as of such date;
(b) No Event of Default or Default has occurred and
is continuing as of such date; and
(c) Each of the Credit Documents required to be
delivered to Administrative Agent or any Bank on or prior to
the Effective Date is in full force and effect as of such
date;
3.01(e)-3
<PAGE>
(3) Certificates of insurance in forms acceptable to
Collateral Agent, naming Collateral Agent as additional insured or as
loss payee;
(4) All fees payable to Administrative Agent and the Banks on
or prior to the Effective Date;
(5) All fees and expenses of Administrative Agent's counsel
through the Effective Date; and
(6) Such other evidence as any Bank may reasonably request to
establish the accuracy and completeness of the representations and
warranties and the compliance with the terms and conditions contained
in this Restated Credit Agreement and the other Credit Documents.
3.01(g)-4
<PAGE>
SCHEDULE 4.01(g)
MATERIAL LITIGATION
None
4.01(g)-1
<PAGE>
SCHEDULE 4.01(q)
<TABLE>
SUBSIDIARIES
<CAPTION>
Name Jurisdiction Classes Outstanding Percent
of of Shares Owned
Incorporation Stock ----------- -----
------------- -------
<S> <C> <C> <C> <C>
Bell Microproducts Canada, Inc. California Common 100 100%
Bell Microproducts-Future Tech, Inc. California Common 1,000 100%
</TABLE>
4.01(q)-1
<PAGE>
SCHEDULE 5.01(j)
DOCUMENTS TO BE DELIVERED BY BORROWER
ON OR PRIOR TO THE TENEX DATA ACQUISITION EFFECTIVE DATE
A. PRINCIPAL BELL CANADA AND BELL-TENEX CREDIT DOCUMENTS.
(1) The Bell Canada Pledge Agreement, duly executed by Bell
Canada;
(2) The Bell-Tenex Guaranty, duly executed by Bell-Tenex;
(3) The Bell-Tenex Security Agreement, duly executed by
Bell-Tenex; and
(4) The Bell-Tenex Canadian Security Documents, duly executed
by Bell-Tenex.
B. BELL-TENEX CORPORATE DOCUMENTS.
(1) The Certificate of Incorporation of Bell-Tenex, certified
as of a recent date prior to the Tenex Data Acquisition Effective Date
by the Deputy Registrar of Joint Stock Companies of Nova Scotia;
(2) A Certificate of Good Standing (or comparable certificate)
for Bell-Tenex, certified as of a recent date prior to the Tenex Data
Acquisition Effective Date by the Deputy Registrar of Joint Stock
Companies of Nova Scotia;
(3) A certificate of the Secretary of Bell-Tenex, dated the
Tenex Data Acquisition Effective Date, certifying (a) that the
Certificate of Incorporation of Bell-Tenex, in the form certified by
the Deputy Registrar of Joint Stock Companies of Nova Scotia and
delivered to Administrative pursuant to item B(1) hereof, is in full
force and effect and has not been amended, supplemented, revoked or
repealed since the date of such certification; (b) that attached
thereto is a true and correct copy of the Memorandum and Articles of
Association of Bell-Tenex as in effect on the Tenex Data Acquisition
Effective Date; (c) that attached thereto are true and correct copies
of resolutions duly adopted by the Board of Directors of Bell-Tenex and
continuing in effect, which authorize the execution, delivery and
performance by Bell-Tenex of the Credit Documents executed or to be
executed by Bell-Tenex and the consummation of the transactions
contemplated hereby and thereby; and (d) that there are no proceedings
for the dissolution or liquidation of Bell-Tenex (commenced or
threatened); and
(4) A certificate of the Secretary of Bell-Tenex, dated the
Tenex Data Acquisition Effective Date, certifying the incumbency,
signatures and authority of the officers of Bell-Tenex authorized to
execute, deliver and perform the applicable Credit Documents on behalf
of Bell-Tenex.
5.01(j)-1
<PAGE>
C. SECURITY DOCUMENTS.
(1) All Uniform Commercial Code financing statements and other
documents, instruments and agreements reasonably requested by
Collateral Agent to perfect the security interests, liens and
assignments granted to Collateral Agent by Bell Canada and Bell-Tenex
in connection herewith, appropriately completed and duly executed by
the appropriate parties;
(2) Search certificates or similar documentation evidencing
the filing of the financing statements necessary to perfect the
security interests granted to Collateral Agent by Bell Canada and
Bell-Tenex pursuant to the Credit Documents will be prior to the
financing statements of all other Persons;
(3) The certificates representing the stock pledged to
Collateral Agent pursuant to the Bell Canada Pledge Agreement, together
with blank stock powers for each such certificate duly executed by
Borrower.
(4) Such other documents, instruments and agreements as
Collateral Agent may reasonably request to establish and perfect the
Liens granted to Collateral Agent or any Bank in this Agreement, the
Security Documents and the other Credit Documents.
D. OPINIONS.
(1) A written opinion of Wilson, Sonsini, Goodrich & Rosati,
outside counsel to Borrower, dated as of the Tenex Data Acquisition
Effective Date and addressed to Administrative Agent and each Bank,
covering such legal matters as Administrative Agent may reasonably
request and otherwise in form and substance satisfactory to
Administrative Agent.
(2) Written opinions of Blake, Cassels & Graydon and Stewart
McKelvey Stirling Scales, outside counsel to Bell-Tenex, dated as of
the Tenex Data Acquisition Effective Date and addressed to
Administrative Agent and each Bank, covering such legal matters as
Administrative Agent may reasonably request and otherwise in form and
substance satisfactory to Administrative Agent.
E. OTHER ITEMS.
(1) A certificate of the President, a Vice President or Chief
Financial Officer of Borrower, addressed to Administrative Agent and
the Banks and dated as of the Tenex Data Acquisition Effective Date,
certifying that:
(a) The representations and warranties set forth in
Paragraph 4.01 are true and correct as of such date;
(b) No Event of Default or Default has occurred and
is continuing as of such date; and
5.01(j)-2
<PAGE>
(c) Each of the Credit Documents required to be
delivered to Administrative Agent or any Bank on or prior to
the Tenex Data Acquisition Effective Date is in full force and
effect as of such date;
(3) Certificates of insurance in forms acceptable to
Collateral Agent, naming Collateral Agent as additional insured or as
loss payee with respect to the assets of Bell-Tenex secured pursuant to
the Bell-Tenex Security Agreement and the Bell-Tenex Canadian Security
Documents;
(4) Such other evidence as any Bank may reasonably request to
establish the accuracy and completeness of the representations and
warranties and the compliance with the terms and conditions contained
in this Restated Credit Agreement and the other Credit Documents.
5.01(j)-3
<PAGE>
ATTACHMENT B
FORM OF GUARANTOR CONSENT LETTER
December 31, 1999
TO: ADMINISTRATIVE AGENT,
As Administrative Agent for the Banks
and the Agents under the
Restated Credit Agreement referred to below
1. Reference is made to the following:
(a) The Third Amended and Restated Credit Agreement dated as
of November 12, 1998, among Borrower, the Banks, Administrative Agent
and Collateral Agent, as amended by that certain First Amendment to
Third Amended and Restated Credit Agreement dated as of May 13, 1999,
that certain Second Amendment to Third Amended and Restated Credit
Agreement dated as of July 21, 1999, that certain Third Amendment to
Third Amended and Restated Credit Agreement dated as of October 15,
1999 and that certain Fourth Amendment to Third Amended and Restated
Credit Agreement dated as of December 8, 1999 (as amended, the
"Restated Credit Agreement");
(b) [The Bell Canada Guaranty, dated as of November 12, 1998
(the " Bell Canada Guaranty"),] [The Bell-Tenex Guaranty, dated as of
November 20, 1998 (the "Bell-Tenex Guaranty"),] [The Bell-Future Tech
Guaranty, dated as of July 20, 1999 (the "Bell-Future Tech Guaranty"),]
executed by the undersigned ("Guarantor") in favor of the Banks and
Collateral Agent; and
(c) The Fifth Amendment to Third Amended and Restated Credit
Agreement, dated as of December 31, 1999, among Borrower, the Banks,
Administrative Agent and Collateral Agent (the " Fifth Amendment");
2. Guarantor hereby confirms that it is a wholly-owned subsidiary of
[Bell Microproducts Inc., a California corporation] [Bell Microproducts Canada
Inc., a California corporation ("Bell Canada") and that Bell Canada is a
wholly-owned subsidiary of Bell Microproducts Inc., a California corporation].
3. Guarantor hereby consents to the Fifth Amendment. Guarantor
expressly agrees that the Fifth Amendment shall in no way affect or alter the
rights, duties, or obligations of Guarantor, the Banks or Collateral Agent under
the [Bell Canada Guaranty] [Bell-Tenex Guaranty] [Bell-Future Tech Guaranty].
4. Pursuant to the [Bell Canada Guaranty] [Bell-Tenex Guaranty]
[Bell-Future Tech Guaranty], Guarantor continues to guaranty the payment when
due of, inter alia, all loans, advances, debts, liabilities and obligations,
however arising, owed by the Borrower to any Agent or any Bank of every kind and
description now existing or hereafter arising pursuant to the terms
B-1
<PAGE>
of the Restated Credit Agreement as amended by the Fifth Amendment or any of the
other Credit Documents.
5. The [Pledge] [Security] Agreement, dated as of [November 20,
1998][July 20, 1999] executed by Guarantor in favor of Collateral Agent (the
"[Pledge] [Security] Agreement") and any other security granted to any Agent or
any of the Banks from time to time as security for the obligations of Guarantor
under the [Bell Canada Guaranty] [Bell-Tenex Guaranty] [Bell-Future Tech
Guaranty] remains in full force and effect and unamended, and the security
interests, mortgages, charges, liens, assignments, transfers and pledges granted
by Guarantor pursuant to the [Pledge] [Security] Agreement and such other
documents (if any) continue to extend to all debts, liabilities and obligations,
present or future, direct or indirect, absolute or contingent, matured or
unmatured, at any time due or accruing due, of Guarantor to any of the Banks and
any Agent arising under, in connection with or pursuant to the Restated Credit
Agreement and the other Credit Documents, as acknowledged and confirmed by this
Guarantor Consent Letter, notwithstanding the amendment of the Restated Credit
Agreement by the Fifth Amendment.
6. From and after the date hereof, the term "Restated Credit Agreement"
as used in the [Bell-Canada Guaranty] [Bell-Tenex Guaranty] [Bell-Future Tech
Guaranty] shall mean the Restated Credit Agreement, as amended by the Fifth
Amendment.
7. Guarantor's consent to the Fifth Amendment shall not be construed
(i) to have been required by the terms of the [Bell Canada Guaranty] [Bell-Tenex
Guaranty] [Bell-Future Tech Guaranty], any other Credit Document or any other
document, instrument or agreement relating thereto or (ii) to require the
consent of Guarantor in connection with any future amendment of the Restated
Credit Agreement or any other Credit Document.
B-2
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guarantor Consent
Letter as of the day and year first written above.
[BELL/MICROPRODUCTS CANADA-TENEX DATA ULC]
[BELL MICROPRODUCTS CANADA INC.]
[BELL MICROPRODUCTS - FUTURE TECH, INC.]
By: _____________________________
Name:________________________
Title:_______________________
B-3
LEASE AGREEMENT
Between
ACBEL TECHNOLOGIES, INC.,
as "Landlord"
and
BELL MICROPRODUCTS, INC.,
as "Tenant"
i
<PAGE>
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
<S> <C>
Lease Date: For identification purposes only, the date of this Lease is
August 1, 1999
Landlord: ACBEL TECHNOLOGIES, INC., DBA SUN MOON STAR, a
California corporation
Tenant: BELL MICROPRODUCTS, INC., a California corporation
Building Address: 1941 Ringwood Avenue
San Jose, California 95131
Rentable Area of
Building: Approximately 56,840 square feet
Premises Address: 1941 Ringwood Avenue, Suite 200
San Jose, California 95131
Rentable Area of
Premises: Approximately 22,868 square feet
Term: September 1, l999 through December 31, 2002
Scheduled September 1, 1999
Commencement Date:
Expiration Date: December 31, 2002
Base Rent: Commencement Date through 5/31/2000: $28,585.00 per month
(based upon a monthly rate of $1.25 per rentable square foot in the
Premises)
6/1/2000 -- 5/31/2001: $30,871.80 per month (based upon a
monthly rate of $1.35 per rentable square foot in the Premises)
6/1/2002 -- 5/31/2002: $33,158.60 per month (based upon a
monthly rate of $1.45 per rentable square foot in the Premises)
6/1/2002 -- 12/31/2002 $34,302.00 per month (based upon a
monthly rate of $1.50 per rentable square foot in the Premises)
Permitted Use: Marketing, research and development, storage and distribution of
pc-related products, administrative and general office, but only to
the extent permitted by the City of San Jose and County of Santa
Clara and all agencies and governmental authorities having
jurisdiction thereof.
Maintenance, This is a "triple net lease" where Tenant is responsible for
Operating Costs and maintenance, operating costs and taxes, all in accordance with the
Taxes: applicable provisions of the Lease.
Security Deposit: $34,302.00
Landlord's Address 1941 Ringwood Avenue, Suite 200
until Commencement San Jose, CA 95113
Date:
with a copy to:
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Attn: Naomi A. Vargas
-1-
<PAGE>
Tenant's Address: 1941 Ringwood Avenue, Suite 100
San Jose, CA 95131
Broker(s): None
</TABLE>
Exhibits:
- --------
Exhibit A: The Premises
Exhibit B: Expansion Space
The Basic Lease Information set forth above is part of the Lease. In the
event of any conflict between any provision in the Basic Lease Information and
the Lease, the Lease shall control.
-2-
<PAGE>
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("Landlord"), and the Tenant identified in the Basic Lease
Information ("Tenant"). Landlord and Tenant hereby agree as follows:
1. PREMISES. In consideration for the rents and all other charges and
payments payable by Tenant, and for the agreements terms and conditions to be
performed by Tenant in this Lease, Landlord does hereby lease to Tenant, and
Tenant does hereby hire and take from Landlord, the premises described in the
Basic Lease Information (the "Premises"), upon the agreements, terms and
conditions of this Lease for the Term hereinafter stated. The Premises demised
by this Lease consists of a building identified in the Basic Lease Information
(the "Building"). The Premises has the address and contains the square footage
specified in the Basic Lease Information. The location and dimensions of the
Premises are depicted on the attached Exhibit A incorporated herein by this
reference. Tenant shall also have the exclusive right to use the parking areas
appurtenant to the Building. The Building, together with the parking facilities
serving the Building ("Parking"), and the parcel of land on which the Building
and the Parking are situated are collectively referred to herein as the
"Property".
2. TERM; POSSESSION.
2.1 Term. The term of this Lease (the "Term") shall commence on the
date set forth in the Basic Lease Information ("Commencement Date"), and shall
expire on the date set forth in the Basic Lease Information (the "Expiration
Date").
2.2 Delivery and Acceptance of Possession. It is specifically agreed
between the parties that Landlord shall not be required to make, nor be
responsible for any cost, in connection with any repair, restoration, and /or
improvements to the Premises in order for this Lease to commence, or thereafter,
throughout the term of this Lease except as expressly set forth in this Lease.
Tenant shall accept the Premises as being in good condition and repair and shall
accept the Premises and the improvements therein in the condition that exists at
the Commencement Date and without any representation or warranty by Landlord as
to the condition of the Premises or as to the compliance of the Premises, or any
portion thereof, with environmental laws, seismic and earthquake requirements,
the Americans with Disabilities Act of 1990, applicable zoning, municipal,
county, state, and federal laws, ordinances and regulations or any covenants or
restrictions of record (collectively, "Applicable Laws"), or as to the present
and future suitability of the Premises for Tenant's intended use. Tenant has
made such investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefor as the
same relate to Tenant's occupancy of the Premises and/or the terms of this
Lease. Neither Landlord, nor any of Landlord's agents, has made any oral or
written representations or warranties with respect to said matters other than as
set forth in this lease.
2.3 Delay in Delivery of Possession. Tenant acknowledges that Landlord
is in the process of locating replacement premises in order to accomodate
Tenant's expansion needs. If for any reason including the failure of Landlord to
locate new premises for its business operations, Landlord cannot deliver
possession of the Premises to Sublessee for any reason whatsoever, Landlord
shall not be subject to any liability therefor, nor shall such failure affect
the validity of this Lease. Tenant shall not, however, be obligated to pay Rent
or perform its other obligations until it receives possession of the Premises.
Notwithstanding the foregoing, if possession of the Premises is not delivered to
Tenant within 90 days following the scheduled Commencement Date, Tenant or
Landlord may elect to terminate this Lease upon written notice to the other and
Landlord shall promptly refund all monies previously tendered by Tennant.
3. RENT.
3.1 Base Rent. Tenant agrees to pay to Landlord the Base Rent set forth
in the Basic Lease Information, without prior notice or demand, on the first day
of each and every calendar month during the Term, except that Base Rent for the
first full calendar month in which Base Rent is payable shall be paid upon
Tenant's execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial
-3-
<PAGE>
month at the beginning or end of the Term shall be prorated based on the actual
number of days in the month. All Rent shall be paid without offset, recoupment
or deduction in lawful money of the United States of America to Landlord at
Landlord's Address as set forth in the Basic Lease Information, or to such other
person or at such other place as Landlord may from time to time designate. If
the Basic Lease Information provides for any change in Base Rent by reference to
years or months (without specifying particular dates), the change will take
effect on the applicable monthly anniversary of the Commencement Date.
3.2 Additional Rent. This Lease is intended to be a triple-net Lease
with respect to Landlord; and except as specifically provided for herein, the
Base Rent owing hereunder shall not to be reduced, offset or diminished,
directly or indirectly, by any cost, charge or expense payable hereunder by
Tenant or by others in connection with the Premises, the Building and/or the
Property or any part thereof. Base Rent and all other sums owing to Landlord
under this Lease shall be considered to be additional rent (collectively
"Additional Rent"). Any items of Additional Rent which would be properly
capitalized shall be amortized over the useful life of the item in question in
accordance with generally accepted accounting principles, and Tenant shall pay
the amortized cost thereof to Landlord, together with interest thereon at the
rate of eight percent (8%) per annum. on a monthly basis during the Lease Term.
Tenant shall pay Additional Rent to Landlord within thirty (30) days after
written demand.
3.3 Security Deposit: Upon execution of this Lease, Tenant shall
deposit with Landlord the amount set forth in the Basic Lease Summary as
security for the performance by Tenant of its obligations under this Lease, and
not as prepayment of rent (the "Security Deposit"). Landlord may from time to
time apply such portion of the Security Deposit as is reasonably necessary for
the following purposes: (a) to remedy any default by Tenant in the payment of
rent; (b) to repair damage to the Premises caused by Tenant which is not
repaired by Tenant within any applicable notice and cure periods; (c) to clean
the Premises upon termination of the Lease; and (d) to remedy any other default
of Tenant to the extent permitted by Law, and in this regard, Tenant hereby
waives any restriction on the uses to which the Security Deposit may be put
contained in California Civil Code Section 1950.7. In the event the Security
Deposit or any portion thereof is so used, Tenant agrees to pay to Landlord
promptly upon demand an amount in cash sufficient to restore the Security
Deposit to the full original amount. Landlord shall not be deemed a trustee of
the Security Deposit and shall not be required to segregate it from its general
accounts. Tenant shall not be entitled to any interest on the Security Deposit.
If Landlord transfers the Premises during the Lease Term, Landlord shall pay the
Security Deposit to any transferee of Landlord's interest in conformity with the
provisions of California Civil Code Section 1950.7 and/or any successor statute,
in which event the transferring Landlord will be released from all liability for
the return of the Security Deposit.
3.4 Relocation Fee. In order to accommodate Tenant's request to lease
the Premises, which are currently occupied by Landlord, Landlord is agreeing to
relocate its business operations to another location. As consideration for such
relocation, Tenant agrees to pay to Landlord, concurrently with the execution of
this Lease, the sum of Thirty-Two Thousand Five Hundred Dollars ($32,500.00).
4. MAINTENANCE AND REPAIRS.
4.1 Tenant=s Obligations. Tenant currently is leasing the remaining
portion of the Building (i.e., Suite 100) under a Lease dated March 17, 1992, as
subsequently amended ("Suite 100 Lease"). By leasing the Premises under this
Lease, Tenant will be the only tenant in the Building, and accordingly, Tenant
agrees that, except as provided in Section 4.2 below, Tenant shall be
responsible to clean, maintain and repair the entire Property and all
improvements thereon, including, without limitation, landscaping (including
cleaning the parking lot and sidewalks), all interior areas of the Building,
which shall include periodic janitorial service; repair-maintenance, and
replacement of the lighting and plumbing fixtures; the restrooms serving the
Building; any interior stairways in the Building; the interior and exterior
glass, plate glass and skylights; interior walls; floor coverings; ceiling
(ceiling tiles and grid); Alterations; fire extinguishers; outlets and fixtures
and any appliances in
-4-
<PAGE>
the Building, in a first class condition, and keep the Building in a clean, safe
and orderly condition. Prior to the Commencement Date, Tenant shall provide
Landlord with a copy of a service contract with a licensed commercial heating,
ventilating and air-conditioning maintenance company (which contract and company
shall be subject to Landlord=s prior approval, which shall not be unreasonably
withheld or delayed), to maintain, on an ongoing basis (at least quarterly), the
heating, ventilating and air-conditioning system ("HVAC") serving the Building.
Tenant shall be responsible for all repairs and maintenance of the Building
Systems. To the extent that the provisions in the Suite 100 Lease regarding the
maintenance, repair and replacement obligations of the parties with respect to
the Property or any portion thereof conflict with this Article 4, the provisions
of this Section 4 shall prevail.
4.2 Landlord=s Obligations. Landlord shall assign to Tenant all rights
Landlord may have to reimbursement from others for the repairs and maintenance
to be performed by Tenant, whether pursuant to a warranty, guarantee, insurance
policy or other claim. Except to the extent necessitated by the negligent acts
or omissions or willful misconduct of Tenant, its agents, employees or
contractors, or Tenant=s misuse of the Building, Landlord shall (a) maintain,
repair and replace, if necessary, at its sole cost, or permit Tenant to perform,
under the direction and at the cost of Landlord, the structural elements of the
Building, (which shall consist of the beams, columns, bearing walls, roof
structure, and foundations), (b) replace, if necessary, at its sole cost, or
permit Tenant to perform, under the direction and at the cost of Landlord, the
HVAC compressor serving the Building, and (c) maintain, repair and replace, if
necessary, subject to reimbursement by Tenant as Additional Rent, the roof
membrane, including the plywood sheathing, the plumbing and electrical systems,
the hardscape (consisting of the parking lot and sidewalks), and the exterior
walls of the Building. Any such repairs performed by Tenant under (b) above
shall require the approval of Landlord, which approval shall not be unreasonably
withheld. As a material part of the consideration for this Lease, Tenant hereby
waives any benefits of any applicable existing or future Law, including the
provisions of California Civil Code Sections 1932(1), 1941 and 1942, that allows
a tenant to make repairs at its landlord=s expense. It is the intention of the
parties that the terms of this Lease govern the respective obligations of the
parties as to maintenance and repair of the Building, and they expressly waive
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.
4.3 Landlord=s Rights. Landlord hereby reserves the right, upon 48 hours
prior oral or written notice to Tenant (or without notice in the event of an
emergency) from time to time, without liability to Tenant, and without
constituting an eviction, constructive or otherwise, or entitling Tenant to any
abatement of rent or to terminate this Lease or otherwise releasing Tenant from
any of Tenant=s obligations under this Lease:
(a) To make alterations, additions, repairs, improvements to
or in all or any part of the Premises, the fixtures and equipment therein, and
the Premises Systems (except that Landlord shall not have any right under this
provision to materially reduce the size of the Premises, or permanently,
materially and adversely affect Tenant=s access to and use of the Premises,
except only as may be required to comply with Laws or as a result of any fire or
other casualty, or Condemnation);
(b) To change the Premises=name or street address; and
(c) If any governmental authority promulgates or revises any
Law or imposes mandatory or voluntary controls or guidelines on Landlord or the
Premises relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Premises (collectively AControls=), to comply with such
Controls, whether mandatory or voluntary, or make any alterations to the
Premises related thereto; provided, that Tenant shall not be required to comply
with any such Controls requiring capital improvements to the Premises unless
such improvements are required solely due to Tenant's particular use of the
Premises.
(d) In exercising its rights under this Section 7.3, Landlord
agrees to use reasonable efforts to minimize any interruption to or disruption
of Tenant=s use of the Premises.
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5. USE AND COMPLIANCE WITH LAWS.
5.1 Limitation on Use: Tenant shall not use the Premises for any use
other than the Permitted Use specified in the Basic Lease Summary, without the
prior written consent of Landlord which will not be unreasonably withheld.
Tenant shall not do anything in or about the Premises which will (i) cause
structural injury to the Building, or (ii) cause damage to any part of the
Building except to the extent reasonably necessary for the installation of
Tenant's Trade Fixtures and Tenant's Alterations, and then only in a manner
which has been first approved by Landlord in writing. Tenant shall not operate
any equipment within the Premises which will (i) materially damage any portion
of the Property, (ii) overload existing electrical systems or other mechanical
equipment servicing the Building, (iii) impair the efficient operation of the
sprinkler system, the HVAC equipment, mechanical, plumbing, electrical, fire
protection, life safety, security or other systems in the Building
(collectively, "Building Systems"), or (iv) damage, overload or corrode the
sanitary sewer system. Tenant shall not attach, hang or suspend anything from
the ceiling, roof, walls or columns of the Building or set any load on the floor
in excess of the load limits for which such items are designed nor operate hard
wheel forklifts within the Premises. Any dust, fumes, or waste products
generated by Tenant's use of the Premises shall be contained and disposed so
that they do not (i) create an unreasonable fire or health hazard, (ii) damage
the Premises, or (iii) result in the violation of any Applicable Laws. Except as
approved by Landlord, Tenant shall not change the exterior of the Building or
install any equipment or antennas on or make any penetrations of the exterior or
roof of the Building. Tenant shall not commit any waste in or about the
Premises, and Tenant shall keep the Premises in a neat, clean, attractive and
orderly condition, free of any nuisances. Tennant shall not conduct on any
portion of the Premises or the Property any sale of any kind, including any
public or private auction, fire sale, going-out-of-business sale, distress sale
or other liquidation sale.
5.2 Compliance with Regulations: Tenant shall not use the Premises in
any manner which violates any Applicable Laws which affect the Premises. Tenant
shall abide by and promptly observe and comply with all Laws and all recorded
covenants, conditions and restrictions relating to the Property (collectively,
"Private Restrictions"). Tenant shall not use the Premises in any manner which
will cause a cancellation of any insurance policy covering Tenant's Alterations
or any improvements installed by Landlord at its expense or which poses an
unreasonable risk of damage or injury to the Premises. Tenant shall not sell, or
permit to be kept, used, or sold in or about the Premises any article which may
be prohibited by the standard form of fire insurance policy, except as may be
permitted by Landlord in writing after Tenant's disclosure of the prohibited
article and the means by which Tenant shall protect the Premises from fire or
other casualty. Tenant shall comply with all reasonable requirements of any
insurance company, insurance underwriter, or Board of Fire Underwriters which
are necessary to maintain the insurance coverage carried by either Landlord or
Tenant pursuant to this Lease. Notwithstanding anything to the contrary in this
Lease, Tenant shall not be required to cause the Premises to comply with any
Laws or Private Restrictions requiring structural changes to the Premises unless
the compliance with such Laws or Private Restrictions is necessitated solely due
to Tenant's particular use of the Premises.
5.3 Outside Areas: No materials, supplies, tanks or containers,
equipment, finished products or semi-finished products, raw materials,
inoperable vehicles or articles of any nature shall be stored upon or permitted
to remain outside of the Premises except in fully fenced and screened areas
outside the Building which have been designed for such purpose and have been
approved in writing by Landlord for such use by Tenant.
5.4 Signs: Tenant shall not place on any portion of the Premises any
sign, placard, lettering in or on windows, banner, displays or other advertising
or communicative material which is visible from the exterior of the Building
without the prior written approval of Landlord, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, Landlord agrees that
Tenant may install a monument sign on the Property similar to the monument sign
located at Tenant's other facility in Santa Clara Valley. All signs approved
permitted to be placed on the Premises, the Building and the Property shall
strictly conform to all Applicable Laws and shall be installed at the expense of
Tenant. Tenant shall maintain such signs in good condition and repair. At the
expiration or earlier termination of this Lease, Tenant shall remove all of its
signs and repair and damage caused as a result.
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5.6 Hazardous Materials.
(a) As used in this Lease, the term "Hazardous Materials"
shall mean and include any substance that is or contains (1) any "hazardous
substance" as now or hereafter defined in ss. 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA") (42 U.S.C. ss. 9601 et seq.) or any regulations promulgated under
CERCLA; (2) any "hazardous waste" as now or hereafter defined in the Resource
Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C. ss. 6901 et seq.)
or any regulations promulgated under RCRA; (3) any substance now or hereafter
regulated by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C.
ss. 2601 et seq.) or any regulations promulgated under TSCA; (4) petroleum,
petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons;
(5) asbestos and asbestos-containing material, in any form, whether friable or
non-friable; (6) polychlorinated biphenyls; (7) lead and lead-containing
materials; or (8) any additional substance, material or waste (A) the presence
of which on or about the Premises (i) requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined), (ii) causes
or threatens to cause a nuisance on the Premises or any adjacent area or
property or poses or threatens to pose a hazard to the health or safety of
persons on the Premises or any adjacent area or property, or (iii) which, if it
emanated or migrated from the Premises, could constitute a trespass, or (B)
which is now or is hereafter classified or considered to be hazardous or toxic
under any Environmental Laws.
(b) As used in this Lease, the term "Environmental Laws" shall mean and
include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or
hereinafter in effect relating to (A) pollution, (B) the protection or
regulation of human health, natural resources or the environment, (C) the
treatment, storage or disposal of Hazardous Materials, or (D) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.
(c) Tenant agrees that during its use and occupancy of the Premises it
will (1)) not release, store, transport, generate, discharge or dispose of any
Hazardous Materials on, in, at, under, or emanating from, the Premises, the
Building or the Property; or authorize Tenant's Agents or anyone else under its
control to do so, (2) comply with all Environmental Laws relating and the use of
Hazardous Materials on or about the Premises by Tenant or Tenant's Agents and
not engage in or permit others under its control to engage in any activity at
the Premises in violation of any Environmental Laws; and (3) immediately notify
Landlord of (A) any inquiry, test, investigation or enforcement proceeding by
any governmental agency or authority against Tenant, Landlord or the Premises,
Building or Property relating to any Hazardous Materials or under any
Enviornmental Laws or (B) the occurrence of any event or existence of any
condition that would cause a breach of any of the covenants set forth in this
Section 5.6.
(d) If Tenant's use of Hazardous Materials on or about the Premises
results in a release, discharge or disposal of Hazardous Materials on, in, at,
under, or emanating from, the Premises, the Building or the Property, Tenant
agrees to investigate, clean up, remove or remediate such Hazardous Materials in
full compliance with (1) the requirements of (A) all Environmental Laws and (B)
any governmental agency or authority responsible for the enforcement of any
Environmental Laws; and (2) any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the
Property.
(e) If Tenant's business operations involve the use of Hazardous
Materials other than the normal use of customary household and office supplies,
Tenant also agrees at Tenant's expense: (1) to install such Hazardous Materials
monitoring, storage and containment devices as Landlord reasonably deems
necessary (Landlord shall have no obligation to evaluate the need for any such
installation or to require any such installation); and (2) to retain each year
by no later than the Anniversary Date a qualified environmental consultant,
acceptable to Landlord, to evaluate whether Tenant is in compliance with all
applicable Environmental Laws. Tenant, at its expense, shall submit to Landlord
a report from such environmental consultant which discusses the environmental
consultant's findings within sixty (60) days after each Anniversary Date.
Tenant,
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at its expense, shall promptly undertake and complete any and all steps
necessary, and in full compliance with applicable Environmental Laws, to fully
correct any and all problems or deficiencies identified by the environmental
consultant that were caused by Tenant or Tenant's agents, employees,
contractors, or invitees or the agents, employees, contractors or invitees of
Tenant's subtenants (collectively, "Tenant's Agents") and promptly provide
Landlord with documentation of all such corrections.
(f) Upon reasonable notice to Tenant, Landlord may inspect the Premises
and surrounding areas for the purpose of determining whether there exists on or
about the Premises any Hazardous Material or other condition or activity that is
in violation of the requirements of this Lease or of any Environmental Laws.
Such inspections may include, but are not limited to, entering the Premises or
adjacent property with drill rigs or other machinery for the purpose of
obtaining laboratory samples. Landlord shall not be limited in the number of
such inspections during the Term of this Lease. In the event (1) such
inspections reveal the presence of any such Hazardous Material or other
condition or activity caused by Tenant or Tenant's Agents in violation of the
requirements of this Lease or of any Environmental Laws, or (2) Tenant or its
Agents cause or permit the presence of any Hazardous Materials in, on, under,
through or about the Premises, the Building or the Property or exacerbate the
condition of or the conditions caused by any Hazardous Materials in, on, under,
through or about the Premises, the Building or the Property, Tenant shall
reimburse Landlord for the cost of such inspections within ten (10) days of
receipt of a written statement therefor. Tenant will supply to Landlord such
historical and operational information regarding the Premises and surrounding
areas as may be reasonably requested to facilitate any such inspection and will
make available for meetings appropriate personnel having knowledge of such
matters. Tenant agrees to give Landlord at least sixty (60) days' prior notice
of its intention to vacate the Premises so that Landlord will have an
opportunity to perform such an inspection prior to such vacation. The right
granted to Landlord herein to perform inspections shall not create a duty on
Landlord's part to inspect the Premises, or liability on the part of Landlord
for Tenant's use, storage, treatment or disposal of Hazardous Materials, it
being understood that Tenant shall be solely responsible for all liability in
connection therewith.
(g) Landlord shall have the right, but not the obligation, prior to a
Default upon five (5) days written notice (or without notice in the event of an
emergency or to prevent imminent injury or damage) or subsequent to a Default,
without in any way limiting Landlord's other rights and remedies under this
Lease, to enter upon the Premises, or to take such other actions as it deems
necessary or advisable, to investigate, clean up, remove or remediate any
Hazardous Materials or contamination by Hazardous Materials present on, in, at,
under, or emanating from, the Premises, the Building or the Property in
violation of Tenant's obligations under this Lease or under any Environmental
Laws. Notwithstanding any other provision of this Lease, Landlord shall also
have the right, at its election, in its own name or as Tenant's agent, to
negotiate, defend, approve and appeal, at Tenant's expense, any action taken or
order issued by any governmental agency or authority with regard to any such
Hazardous Materials caused by Tenant or Tenant's Agents or contamination by
Hazardous Materials caused by Tenant or Tenant's Agents. To the extent such
costs and expenses are not incurred in response to any action taken or order
issued by any governmental agency or authority, Landlord agrees to exercise its
rights under this Section 5.6(g) prudently and to incur reasonable expenditures
in connection therewith. All such costs and expenses paid or incurred by
Landlord in the exercise of the rights set forth in this Section 5.6, shall be
payable by Tenant upon demand.
(h) Tenant shall surrender the Premises to Landlord upon the expiration
or earlier termination of this Lease free of debris, waste or Hazardous
Materials placed on, about or near the Premises by Tenant or Tenant's Agents,
including, without limitation, the obtaining of any closure permits or other
governmental permits or approvals related to Tenant's use of Hazardous Materials
in or about the Premises. Tenant's obligations and liabilities pursuant to the
provisions of this Section 5.6 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Premises, the Building, and/or the Property is not in
compliance with the provisions of this Lease with respect to Hazardous Materials
caused by Tenant or Tenant's Agents, including, without limitation, all
Environmental Laws, at the expiration or earlier termination of this Lease, then
at Landlord's sole option, Landlord may require Tenant to hold over possession
of the Premises until Tenant can surrender the Premises to Landlord in the
condition in which the Premises existed as of the Commencement Date and prior to
the appearance of such Hazardous Materials caused by Tenant
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or Tenant's Agents except for normal wear and tear, including, without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. The burden of proof hereunder shall be upon Tenant. For
purposes hereof, the term "normal wear and tear" shall not include any
deterioration in the condition or diminution of the value of any portion of the
Premises, the Building, and/or the Property in any manner whatsoever related to
directly, or indirectly, Hazardous Materials. Any such holdover by Tenant will
be with Landlord's consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of Section 19 of
this Lease.
(i) Tenant agrees to indemnify and hold harmless Landlord from and
against any and all claims, losses (including, without limitation, loss in value
of the Premises, the Building or the Property, liabilities and expenses
(including reasonable attorney's fees)) sustained by Landlord attributable to
(1) any Hazardous Materials caused or permitted to be placed on or about the
Premises, the Building or the Property by Tenant or Tenant's Agents, or (2)
Tenant's breach of any provision of this Section 5.6. Landlord agrees to
indemnify and hold harmless Tenant from and against any and all claims, losses
(including reasonable attorney's fees) sustained by Tenant attributable to any
Hazardous Materials caused or permitted to be placed on or about the Premises,
the Building or the Property by Landlord or Landlord's agents, employees,
contractors or invitees.
(j) Landlord represents and warrants to Tenant that (A) to its actual
knowledge as of the Lease Date specified in the Basic Lease Information,
Landlord has not received any written notice of any action, proceeding or claim
that is pending or threatened regarding the presence of any Hazardous Materials
on the Property or the failure of the Property to comply with any Environmental
Laws; and (B) Landlord has not caused any Hazardous Materials to be released,
used, stored or disposed of in violation of Environmental Laws in those Premises
delivered to Tenant on the Commencement Date of this Lease.
(k) The provisions of this Section 5.6 shall survive the expiration or
earlier termination of this Lease.
6. TENANT IMPROVEMENTS & ALTERATIONS.
6.1 Alterations. Tenant shall not make any alterations, improvements or
changes to the Premises, including installation of any security system or
telephone or data communication wiring, ("Alterations"), without Landlord's
prior written consent. Any such Alterations shall be completed by Tenant at
Tenant's sole cost and expense: (i) with due diligence, in a good and
workmanlike manner, using new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with the construction
rules and regulations promulgated by Landlord from time to time; (iv) in
accordance with all Applicable Laws (including all work, whether structural or
non-structural, inside or outside the Premises, required to comply fully with
all Applicable Laws and necessitated by Tenant's work); and (v) subject to all
conditions which Landlord may in Landlord's discretion impose. Such conditions
may include requirements for Tenant to: (i) provide payment or performance bonds
or additional insurance (from Tenant or Tenant's contractors, subcontractors or
design professionals); (ii) use contractors or subcontractors designated by
Landlord; and (iii) remove all or part of the Alterations prior to or upon
expiration or termination of the Term, as designated by Landlord. If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, is required in connection with or as a result of Tenant's work, such
work shall be performed at Tenant's expense by contractors designated by
Landlord. Landlord's right to review and approve (or withhold approval of)
Tenant's plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by Tenant is intended solely to protect Landlord, the
Property and Landlord's interests. No approval or consent by Landlord shall be
deemed or construed to be a representation or warranty by Landlord as to the
adequacy, sufficiency, fitness or suitability thereof or compliance thereof with
Applicable Laws or other requirements. Except as otherwise provided in
Landlord's consent, all Alterations shall upon installation become part of the
realty and be the property of Landlord. No consent shall be required for any
Alteration which does not affect basic Building Systems, the structure of the
Building or any portion of the Building other than the interior of the Building,
provided that the particular Alteration together with all other Alterations made
within twelve (12) months of the particular Alteration, does not cost more than
$25,000.00. Tenant shall be required to provide
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Landlord with thirty (30) days prior written notice of its intent to construct
any Alteration so that Landlord may post a notice of nonresponsibility.
6.2 Additional Requirements. Before making any Alterations for which
Landlord's consent is required, Tenant shall submit to Landlord for Landlord's
prior approval reasonably detailed final plans and specifications prepared by a
licensed architect or engineer, a copy of the construction contract, including
the name of the contractor and all subcontractors proposed by Tenant to make the
Alterations and a copy of the contractor's license. Tenant shall reimburse
Landlord upon demand for any expenses incurred by Landlord in connection with
any Alterations made by Tenant, including reasonable fees charged by Landlord's
contractors or consultants to review plans and specifications prepared by Tenant
and to update the existing as-built plans and specifications of the Building to
reflect the Alterations. Tenant shall obtain all applicable permits,
authorizations and governmental approvals and deliver copies of the same to
Landlord before commencement of any Alterations.
6.3 Liens. Tenant shall keep the Premises and the Property free and
clear of all liens arising out of any work performed, materials furnished or
obligations incurred by Tenant. If any such lien attaches to the Premises or the
Property, and Tenant does not cause the same to be released by payment, bonding
or otherwise within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released, and any
sums expended by Landlord in connection therewith shall be payable by Tenant on
demand with interest thereon from the date of expenditure by Landlord at the
Interest Rate (as defined in Section 16.2 - Interest). Tenant shall give
Landlord at least ten (10) days' notice prior to the commencement of any
Alterations and cooperate with Landlord in posting and maintaining notices of
non-responsibility in connection therewith.
6.4 Trade Fixtures. Subject to the provisions of Section 5 - Use and
Compliance with Laws and the foregoing provisions of this Section, Tenant may
install and maintain furnishings, equipment, movable partitions, business
equipment and other trade fixtures ("Trade Fixtures") in the Premises, provided
that the Trade Fixtures do not become an integral part of the Premises or the
Building. Tenant shall promptly repair any damage to the Premises or the
Building caused by any installation or removal of such Trade Fixtures.
7. REAL PROPERTY TAXES
7.1 Real Property Taxes Defined: The term "Real Property Taxes" shall
mean all taxes, assessments, levies, and other charges of any kind or nature
whatsoever, general and special, foreseen and unforeseen (including all
installments of principal and interest required to pay any existing or future
general or special assessments for public improvements, services or benefits,
and any increases resulting from reassessments resulting from a change in
ownership, new construction, or any other cause), now or hereafter imposed by
any governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of all or any
portion of the Property (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed) or Landlord's interest therein, the
fixtures, equipment and other property of Landlord, real or personal, that are
an integral part of and located on the Property, the gross receipts, income, or
rentals from the Property, or the use of parking areas, public utilities, or
energy within the Property. If at any time during the Lease Term the method of
taxation or assessment of the Property prevailing as of the Effective Date shall
be altered so that in lieu of or in addition to any Real Property Tax described
above there shall be levied, assessed or imposed (whether by reason of a change
in the method of taxation or assessment, creation of a new tax or charge, or any
other cause) an alternate or additional tax or charge (i) on the value, use or
occupancy of the Property or Landlord's interest therein, or (ii) on or measured
by the gross receipts, income or rentals from the Property, on Landlord's
business of leasing the Property, or computed in any manner with respect to the
operation of the Property, then any such tax or charge, however designated,
shall be included within the meaning of the term "Real Property Taxes" for
purposes of this Lease. Notwithstanding the foregoing, the term "Real Property
Taxes" shall not include estate, inheritance, transfer, gift or franchise taxes
of Landlord or the federal or state net income tax imposed on Landlord's income
from all sources. Notwithstanding the foregoing, during the initial term of this
Lease, Landlord agrees that Tenant
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shall not be responsible to pay for any tax or charge measured by the gross
receipts, income or rentals from the Property.
7.2 Payment of Taxes. Tenant shall pay the Real Property Taxes
applicable to the Property during the term of this Lease. Subject to Section
7.3, all such payments shall be made at least ten (10) days prior to any
delinquency date. Tenant shall promptly furnish Landlord with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or termination of this Lease,
Tenant's share of such taxes shall be prorated to cover only that portion of the
tax bill applicable the period that this Lease is in effect, and Landlord shall
reimburse Tenant for any overpayment within thirty (30) days after receipt of
the tax bill establishing the overpayment. If Tenant shall fail to pay any
required Real Property Taxes, Landlord shall have the right to pay the same and
Tenant shall reimburse Landlord therefor upon demand together with interest
thereon at the Interest Rate.
7.3 Advance Payment. In the event Tenant incurs a penalty on any
delinquent payment of Real Property Taxes, Landlord may, at its option, estimate
the current Real Property Taxes and require that such taxes be paid in advance
to Landlord by Tenant, either: (i) in a lump sum amount equal to the installment
due, at least twenty (20) days prior to the applicable delinquency date, or (ii)
monthly in advance with the payment of the Base Rent. If Landlord elects to
require payment monthly in advance, the monthly payment shall be an amount equal
to the amount of the estimated installment of taxes divided by the number of
months remaining before the month in which said installment becomes delinquent.
When the actual installment of tax bill is known, the amount of such equal
monthly advance payments shall be adjusted as required to provide the funds
needed to pay the applicabl taxes. If the amount collected by Landlord is
insufficient to pay such Real Property Taxes when due, Tenant shall pay Landlord
upon demand, such additional sums as are necessary to pay such obligations. All
moneys paid to Landlord under this Section 7.3 may be intermingled with other
moneys of Landlord and shall not bear interest.
8. TENANT'S TAXES. "Tenant's Taxes" shall mean (a) all taxes,
assessments, license fees and other governmental charges or impositions levied
or assessed against or with respect to Tenant's personal property or Trade
Fixtures in the Premises, whether any such imposition is levied directly against
Tenant or levied against Landlord or the Property, (b) all rental, excise, sales
or transaction privilege taxes arising out of this Lease (excluding, however,
state and federal personal or corporate income taxes measured by the income of
Landlord from all sources) imposed by any taxing authority upon Landlord or upon
Landlord's receipt of any rent payable by Tenant pursuant to the terms of this
Lease ("Rental Tax"), and (c) any increase in Taxes attributable to inclusion of
a value placed on Tenant's personal property, Trade Fixtures or Alterations.
Tenant shall pay any Rental Tax to Landlord in addition to and at the same time
as Base Rent is payable under this Lease, and shall pay all other Tenant's Taxes
before delinquency (and, at Landlord's request, shall furnish Landlord
satisfactory evidence thereof). If Landlord pays Tenant's Taxes or any portion
thereof, Tenant shall reimburse Landlord upon demand for the amount of such
payment, together with interest at the Interest Rate from the date of Landlord's
payment to the date of Tenant's reimbursement. Notwithstanding the foregoing,
during the initial term of this Lease, Landlord agrees that Tenant shall not be
responsible to pay for any Rental Tax.
9. UTILITIES.
9.1 Payment for Utilities and Services. Tenant shall promptly pay, as
the same become due, all charges for water, gas, electricity, telephone, sewer
service, waste pick-up and any other utilities, materials or services furnished
directly to or used by Tenant on or about the Premises during the Lease Term,
including, without limitation, (i) meter, use and/or connection fees, hook-up
fees, or standby fee (excluding any connection fees or hook-up fees which relate
to making the existing electrical, gas, and water service available to the
Premises as of the Commencement Date), and (ii) penalties for discontinued or
interrupted service.
9.2 Interruption of Services. In the event of an interruption in or
failure or inability to provide any services or utilities to the Premises or
Building for any reason, such service failure shall not, regardless of its
duration, impose upon Landlord any liability whatsoever, constitute an eviction
of Tenant, constructive or otherwise, entitle Tenant to an abatement of rent or
to terminate
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this Lease or otherwise release Tenant from any of Tenant's obligations under
this Lease. Tenant hereby waives any benefits of any applicable existing or
future Law, including the provisions of California Civil Code Section 1932(1),
permitting the termination of this Lease due to such interruption, failure or
inability.
10. EXCULPATION AND INDEMNIFICATION.
10.1 Tenant's Indemnification of Landlord. Tenant shall indemnify,
protect, defend and hold Landlord and Landlord's authorized representatives
harmless from and against any claims, actions, liabilities, damages, costs or
expenses, including reasonable attorneys' fees and costs incurred in defending
against the same (the "Claims") arising from (a) the acts or omissions of Tenant
or Tenant's Agents in or about the Property, or (b) any construction or other
work undertaken by Tenant on the Property (including any design defects), or (c)
any breach or default under this Lease by Tenant, or (d) any loss, injury or
danmge, howsoever and by whomsoever caused, to any person or property, occurring
in or about the Property during the Term, excepting only Claims described in
this clause (d) to the extent they are caused by the willful misconduct or
grossly negligent acts or omissions of Landlord or its authorized
representatives.
10.2 Damage to Tenant and Tenant's Property. Landlord shall not be
liable to Tenant for any loss, injury or other damage to Tenant or to Tenant's
property in or about the Premises or the Property from any cause (including
defects in the Property or in any equipment in the Property; fire, explosion or
other casualty; bursting, rupture, leakage or overflow of any plumbing or other
pipes or lines, sprinklers, tanks, drains, drinking fountains or washstands in,
above, or about the Premises or the Property). Tenant hereby waives all claims
against Landlord for any such loss, injury or damage and the cost and expense of
defending against claims relating thereto, excluding any loss, injury or damage
caused solely by Landlord's gross negligence or willful misconduct.
Notwithstanding any other provision of this Lease to the contrary, in no event
shall Landlord be liable to Tenant for any punitive or consequential damages or
damages for loss of business by Tenant.
10.3 Survival. The obligations of the parties under this Section 10
shall survive the expiration or termination of this Lease.
11. INSURANCE
11.1 Tenant's Insurance.
(a) Liability Insurance. Tenant shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than Two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined,
Four Million Dollars ($4,000,000.00) annual general aggregate, and One Million
Dollars ($1,000,000.00) products and completed operations annual aggregate.
Tenant's liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; (v) extend
coverage to cover liability for the actions of Tenant's Agents; and (iv)
designate separate limits for the Property. Each policy of liability insurance
required by this Section shall: (i) contain a cross liability endorsement or
separation of insureds clause; (ii) provide that any waiver of subrogation
rights or release prior to a loss does not void coverage; (iii) provide that it
is primary to and not contributing with, any policy of insurance carried by
Landlord covering the same loss; (iv) provide that any failure to comply with
the reporting provisions shall not affect coverage provided to Landlord, its
partners, property managers and Mortgagees; and (v) name Landlord, its partners,
and such other parties in interest as Landlord may from time to time reasonably
designate to Tenant in writing, as additional insureds. Such additional insureds
shall be provided at least the same extent of coverage as is provided to Tenant
under such policies. All endorsements effecting such additional insured status
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shall be at least as broad as additional insured endorsement form number CG 20
11 11 85 promulgated by the Insurance Services Office.
(b) Property Insurance; Business Interruption. Tenant shall at
all times maintain in effect with respect to any Alterations and Tenant's Trade
Fixtures and personal property, commercial property insurance providing
coverage, on an "all risk" or "special form" basis, in an amount equal to at
least 90% of the full replacement cost of the covered property. Tenant may carry
such insurance under a blanket policy, provided that such policy provides
coverage equivalent to a separate policy. During the Term, the proceeds from any
such policies of insurance shall be used for the repair or replacement of the
Alterations, Trade Fixtures and personal property so insured. Landlord shall be
provided coverage under such insurance to the extent of its insurable interest
and, if requested by Landlord, both Landlord and Tenant shall sign all documents
reasonably necessary or proper in connection with the settlement of any claim or
loss under such insurance. Landlord will have no obligation to carry insurance
on any Alterations or on Tenant's Trade Fixtures or personal property. Tenant
also shall carry business interruption insurance covering direct or indirect
loss of Tenant=s earnings attributable to Tenant=s inability to use fully or
obtain access to the Premises, or as a result of the interruption of Tenant=s
business for any reason.
(c) Requirements For All Policies. Each policy of insurance
required under this Section 11.1 shall: (i) be in a form, and written by an
insurer, reasonably acceptable to Landlord, (ii) be maintained at Tenant's sole
cost and expense, and (iii) require at least thirty (30) days' written notice to
Landlord prior to any cancellation, nonrenewal or modification of insurance
coverage. Insurance companies issuing such policies shall have rating
classifications of "A" or better and financial size category ratings of "VII" or
better according to the latest edition of the A.M. Best Key Rating Guide. All
insurance companies issuing such policies shall be admitted carriers licensed to
do business in the state where the Property is located. Any deductible amount
under such insurance shall not exceed $5,000. Tenant shall provide to Landlord,
upon request, evidence that the insurance required to be carried by Tenant
pursuant to this Section, including any endorsement effecting the additional
insured status, is in full force and effect and that premiums therefor have been
paid.
(d) Updating Coverage. Tenant shall increase the amounts of
insurance as required by any Mortgagee, and, not more frequently than once every
three (3) years, as recommended by Landlord's insurance broker, if, in the
reasonable opinion of either of them, the amount of insurance then required
under this Lease is not adequate. Any limits set forth in this Lease on the
amount or type of coverage required by Tenant's insurance shall not limit the
liability of Tenant under this Lease.
(e) Certificates of Insurance. Prior to occupancy of the
Premises by Tenant, and not less than thirty (30) days prior to expiration of
any policy thereafter, Tenant shall furnish to Landlord a certificate of
insurance reflecting that the insurance required by this Section is in force,
accompanied by an endorsement showing the required additional insureds
satisfactory to Landlord in substance and form. Notwithstanding the requirements
of this paragraph, Tenant shall at Landlord's request provide to Landlord a
certified copy of each insurance policy required to be in force at any time
pursuant to the requirements of this Lease or its Exhibits.
11.2 Landlord's Insurance. Subject to reimbursement by Tenant within
ten (10) days after delivery of written demand, during the Term of this Lease
Landlord shall maintain in effect insurance on the Building with responsible
insurers, on an "all risk" or "special form" basis, insuring the Building in an
amount equal to 100% of the replacement cost thereof, excluding land,
foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater
amounts.
11.3 Release and Waiver of Subrogation: The parties hereto release each
other, and their respective agents and employees, from any liability for injury
to any person or damage to property that is caused by or results from any risk
insured against under any valid and collectible insurance policy is required to
be carried by either of the parties hereunder which contains a waiver of
subrogation by the insurer and is in force at the time of such injury or damage;
subject to the following limitations: (i) the foregoing provision shall not
apply to the commercial general
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liability insurance described by Section 11.1; (ii) such release shall apply
to liability resulting from any risk insured against or covered by
self-insurance maintained or provided by Tenant to satisfy the requirements of
Section 11.1 to the extent permitted by this Lease; and (iii) Tenant shall not
be released from any such liability to the extent any damages resulting from
such injury or damage are not covered by the recovery obtained by Landlord from
such insurance, but only if the insurance in question permits such partial
release in connection with obtaining a waiver of subrogation from the insurer.
This release shall be in effect only so long as the applicable insurance policy
contains a clause to the effect that this release shall not affect the right of
the insured to recover under such policy. Each party shall use reasonable
efforts to cause each insurance policy obtained by it to provide that the
insurer waives all right of recovery by way of subrogation against the other
party and its agents and employees in connection with any injury or damage
covered by such policy. However, if any insurance policy cannot be obtained with
such a waiver of subrogation, or if such waiver of subrogation is only available
at additional cost and the party for whose benefit the waiver is to be obtained
does not pay such additional cost, then the party obtaining such insurance shall
notify the other party of that fact and thereupon shall be relieved of the
obligation to obtain such waiver of subrogation rights from the insurer with
respect to the particular insurance involved.
12. DAMAGE OR DESTRUCTION.
12.1 Landlord's Duty to Repair.
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, unless either party is entitled to and elects to
terminate this Lease pursuant to Sections 12.2 - Landlord's Right to Terminate
and 12.3 - Tenant's Right to Terminate, Landlord shall, at its expense, use
reasonable efforts to repair and restore the Premises and/or the Property, as
the case may be, to substantially their former condition to the extent permitted
by then Applicable Laws; provided, however, that in no event shall Landlord have
any obligation for repair or restoration beyond the extent of (i) insurance
proceeds which are actually received by Landlord for such repair or restoration,
or for any of Tenant's personal property, Trade Fixtures or Alterations, plus
(ii) deductibles which shall be paid by Tenant upon demand in the event the
casualty is caused by the negligent act or omission or willful misconduct of
Tenant or Tenant's Agents.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent shall be abated with regard to any portion of the
Premises that Tenant is prevented from using by reason of such damage or its
repair from the date of the casualty until substantial completion of Landlord's
repair of the affected portion of the Premises as required under this Lease. In
no event shall Landlord be liable to Tenant by reason of any injury to or
interference with Tenant's business or property arising from fire or other
casualty or by reason of any repairs to any part of the Property necessitated by
such casualty.
12.2 Landlord's Right to Terminate. Landlord may elect to terminate
this Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Building
cannot be substantially repaired and restored under Applicable Laws within one
(1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate
proceeds are not, for any reason, made available to Landlord from Landlord's
insurance policies (and/or from Landlord's funds made available for such
purpose, at Landlord's sole option) to make the required repairs;
(c) If the Building is damaged or destroyed to the extent
that, in the reasonable judgment of Landlord, the cost to repair and restore the
Building would exceed twenty-five percent (25%) of the full replacement cost of
the Property; or
(d) If the fire or other casualty occurs during the last year
of the Term (including any extension thereof), provided that the cost to repair
and restore the Building would exceed five percent (5%) of the full replacement
cost of the Building.
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If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within sixty
(60) days after the date of the casualty, specifying whether Landlord elects to
terminate this Lease as provided above and, if not, Landlord's estimate of the
time required to complete Landlord's repair obligations under this Lease.
12.3 Tenant's Right to Terminate. If all or a substantial part of the
Premises are rendered untenantable or inaccessible by damage to all or any part
of the Property from fire or other casualty, and Landlord does not elect to
terminate as provided above, then Tenant may elect to terminate this Lease if
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease is greater than two hundred seventy (270) days
after the date of the casualty, in which event Tenant may elect to terminate
this Lease by giving Landlord notice of such election to terminate within thirty
(30) days after Landlord's notice to Tenant pursuant to Section 12.2 -
Landlord's Right to Terminate.
12.4 Waiver. Landlord and Tenant each hereby waive the provisions of
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 Definitions.
(a) "Award" shall mean all compensation, sums, or anything of
value awarded, paid or received on a total or partial Condemnation.
(b) "Condemnation" shall mean (i) a permanent taking (or a
temporary taking for a period extending beyond the end of the Term) pursuant to
the exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power
("Condemnor"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(c) "Date of Condemnation" shall mean the earlier of the date
that title to the property taken is vested in the Condemnor or the date the
Condemnor has the right to possession of the property being condemned.
13.2 Effect on Lease.
(a) If the Premises are totally taken by Condemnation, this
Lease shall terminate as of the Date of Condemnation. If a portion but not all
of the Premises is taken by Condemnation, this Lease shall remain in effect;
provided, however, that if the portion of the Premises remaining after the
Condemnation will be unsuitable for Tenant's continued use, then upon notice to
Landlord within thirty (30) days after Landlord notifies Tenant of the
Condemnation, Tenant may terminate this Lease effective as of the Date of
Condemnation.
(b) If twenty-five percent (25%) or more of the Property or of
the parcel(s) of land on which the Building is situated or of the floor area in
the Building is taken by Condemnation, or if as a result of any Condemnation the
Building is no longer reasonably suitable for use as an industrial building,
whether or not any portion of the Premises is taken, Landlord may elect to
terminate this Lease, effective as of the Date of Condemnation, by notice to
Tenant within thirty (30) days after the Date of Condemnation.
(c) If all or a portion of the Premises is temporarily taken
by a Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
13.3 Restoration. If this Lease is not terminated as provided
in Section 13.2 - Effect on Lease, Landlord, at its expense, shall diligently
proceed to repair and restore the Premises to substantially its former condition
(to the extent permitted by then Applicable Laws) and/or repair
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and restore the Building to an architecturally complete office building;
provided, however, that Landlord's obligations to so repair and restore shall be
limited to the amount of any Award received by Landlord and not required to be
paid to any Mortgagee (as defined in Section 20.2 below). In no event shall
Landlord have any obligation to repair or replace any improvements in the
Premises beyond the amount of any Award received by Landlord for such repair or
to repair or replace any of Tenant's personal property, Trade Fixtures, or
Alterations.
13.4 Abatement and Reduction of Rent. If any portion of the Premises is
taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of rentable
square feet in the Premises so taken or rendered permanently untenantable. In
addition, if this Lease remains in effect following a Condemnation and Landlord
proceeds to repair and restore the Premises, the Base Rent and Additional Rent
payable under this Lease shall be abated during the period of such repair or
restoration to the extent such repairs prevent Tenant's use of the Premises.
13.5 Awards. Any Award made shall be paid to Landlord, and Tenant
hereby assigns to Landlord, and waives all interest in or claim to, any such
Award, including any claim for the value of the unexpired Term; provided,
however, that Tenant shall be entitled to receive, or to prosecute a separate
claim for, an Award for a temporary taking of the Premises or a portion thereof
by a Condemnor where this Lease is not terminated (to the extent such Award
relates to the unexpired Term), or an Award or portion thereof separately
designated for relocation expenses or the interruption of or damage to Tenant's
business or as compensatlon for Tenant's personal property, Trade Fixtures or
Alterations.
13.6 Waiver. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING
14.1 Landlord's Consent Required. Tenant shall not assign this Lease or
any interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "Transfer"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld. If Tenant is a business entity, any direct
or indirect transfer of fifty percent (50%) or more of the ownership interest of
the entity (whether in a single transaction or in the aggregate through more
than one transaction) shall be deemed a Transfer; provided, however, that any
sale of Tenant's capital stock through a public exchange shall not be deemed an
assignment subletting or other transfer of this Lease or the Premises requiring
Landlord's consent. Notwithstanding any provision in this Lease to the contrary,
Tenant shall not mortgage, pledge, hypothecate or otherwise encumber this Lease
or all or any part of Tenant's interest under this Lease.
14.2 Reasonable Consent.
(a) Prior to any proposed Transfer, Tenant shall submit in
writing to Landlord (i) the name and legal composition of the proposed assignee,
subtenant, user or other transferee (each a "Proposed Transferee"); (ii) the
nature of the business proposed to be carried on in the Premises; (iii) a
current balance sheet, income statements for the last two years and such other
reasonable financial and other information concerning the Proposed Transferee as
Landlord may request; and (iv) a copy of the proposed assignment, sublease or
other agreement governing the proposed Transfer. Within fifteen (15) Business
Days after Landlord receives all such information it shall notify Tenant whether
it approves or disapproves such Transfer or if it elects to proceed under
Section 14.7 - Landlord's Right to Space.
(b) Tenant acknowledges and agrees that, among other
circumstances for which Landlord could reasonably withhold consent to a proposed
Transfer, it shall be reasonable for
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Landlord to withhold consent where (i) the Proposed Transferee does not intend
itself to occupy the entire portion of the Premises assigned or sublet, (ii)
Landlord reasonably disapproves of the Proposed Transferee's business operating
ability or history, reputation or creditworthiness or the nature or character of
the business to be conducted by the Proposed Transferee at the Premises, (iii)
the Proposed Transferee is a governmental agency or unit or an existing tenant
in the Property, (iv) the use of the Premises by the Proposed Transferee is not
included within the uses permitted by Tenant under this Lease; (v) Tenant is in
default of any obligation of Tenant under this Lease beyond any applicable cure
period, or Tenant has defaulted under this Lease on three (3) or more occasions
at any time during the Lease Term; (vi) the Proposed Transferee intends to use,
store or generate Hazardous Materials which Landlord in its sole discretion
determines may violate the terms of Section 5.6 hereof, or (vi) Landlord
otherwise determines that the proposed Transfer would have the effect of
decreasing the value of the Property or increasing the expenses associated with
operating, maintaining and repairing the Property.
14.3 Excess Consideration. If Landlord consents to the Transfer, Tenant
shall pay to Landlord as additional rent, within ten (10) days after receipt by
Tenant, fifty percent (50%) of any consideration paid by any transferee (the
"Transferee") for the Transfer, including, in the case of a sublease, the excess
of the rent and other consideration payable by the subtenant over the amount of
Base Rent and Additional Rent payable hereunder applicable to the subleased
space. Notwithstanding the foregoing, during the initial term of this Lease,
Tenant shall not be obligated to pay to Landlord any excess consideration
arising out of a Transfer.
14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall
relieve Tenant of any obligation to be performed by Tenant under this Lease,
Whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 Expenses and Attorneys' Fees. Tenant shall pay to Landlord on
demand all costs and expenses (including reasonable attorneys' fees) incurred by
Landlord in connection with reviewing or consenting to any proposed Transfer
(including any request for consent to, or any waiver of Landlord's rights in
connection with, any security interest in any of Tenant's property at the
Premises).
14.6 Effectiveness of Transfer. Prior to the date on which any
permitted Transfer (whether or not requiring Landlord's consent) becomes
effective, Tenant shall deliver to Landlord a counterpart of the fully executed
Transfer document and Landlord's standard form of Consent to Assignment or
Consent to Sublease executed by Tenant and the Transferee in which each of
Tenant and the Transferee confirms its obligations pursuant to this Lease.
Failure or refusal of a Transferee to execute any such instrument shall not
release or discharge the Transferee from liability as provided herein. The
voluntary, involuntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and any such
surrender or cancellation shall, at the option of Landlord, either terminate all
or any existing subleases or operate as an assignment to Landlord of any or all
of such subleases.
14.7 Landlord's Right to Space. In addition to Landlord's right to
approve or disapprove any proposed Transfer, if Tenant notifies Landlord that it
desires to enter into a Transfer, Landlord, in lieu of consenting to such
Transfer, may elect (i) in the case of an assignment or a sublease of the entire
Premises, to terminate this Lease, or (ii) in the case of a sublease of less
than the entire Premises, to terminate this Lease as it relates to the space
proposed to be subleased by Tenant. In such event, this Lease will terminate (or
the space proposed to be subleased will be removed from the Premises subject to
this Lease and the Base Rent and Tenant's share of Additional Rent under this
Lease shall be proportionately reduced) on the date the Transfer was proposed to
be effective, and Landlord may lease such space to any party, including the
prospective Transferee identified by Tenant. However, no termination of this
Lease with respect to part or all of the Premises shall
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become effective without the prior written consent, where necessary, of the
holder of each deed of trust encumbering the Premises. Notwithstanding the
foregoing, during the initial term of this Lease, Landlord shall not be entitled
to make either of the elections set forth in this Section 14.7.
14.8 Assignment of Sublease Rents. Tenant hereby absolutely and
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant
appointed on Landlord's application may (but shall not be obligated to) collect
such rents and other consideration and apply the same toward Tenant's
obligations to Landlord under this Lease; provided, however, that Landlord
grants to Tenant at all times prior to occurrence of any breach or default by
Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and
terminated immediately upon any Event of Default).
14.9 Permitted Transfers. Notwithstanding anything to the contrary
herein, Tenant may, without Landlord's prior written consent, sublet the
Premises or assign the Lease to ("Permitted Transferee") (a) a subsidiary,
affiliate, franchisee, division or corporation controlled or under common
control with Tenant; (b) a successor corporation related to Tenant by merger,
consolidation, non-bankruptcy reorganization or government action, provided such
successor corporation has a net worth at the time of the applicable sublease or
assignment of no less than Tenant's net worth on the Commencement Date of this
Lease; and (c) a purchaser of substantially all of Tenant's assets as a going
concern. Except for the requirement that Tenant first obtain the written consent
of Landlord, all other terms and provisions of this Lease, including Section
14.3, shall apply to any assignment or sub1ease to a Permitted Transferee as if
Landlord had consented to or approved such assignment or sublease, and any such
assignment or subletting shall in no way relieve Tenant of any liability under
this Lease. Tenant shall provide Landlord with the following no later than ten
(10) days prior to the effective date of the proposed assignment or subletting
to a permitted Transferee: (x) the name and address of the Permitted Transferee,
(y) a copy of the proposed sublet or assignment agreement, including the
material terms and conditions thereof, and (z) with respect to any Permitted
Transferees described in subsection (b) above, satisfactory evidence of the net
worth of the Permitted Transferee. In no event shall any Permitted Transferee
conduct any use in the Premises or portion thereof which conflicts with the
provisions of Section 5.1 of this Lease.
15. DEFAULT AND REMEDIES.
15.1 Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" by Tenant:
(a) Tenant fails to make any payment of rent on the date when
due, or any amount required to replenish the security deposit as provided in
Section 4 above, if payment in full is not received by Landlord within fifteen
(15) days after written demand.
(b) Tenant abandons the Premises.
(c) Tenant fails timely to deliver any subordination document,
estoppel certificate or financial statement requested by Landlord within five
(5) days after the applicable time period specified in Sections 20 -
Encumbrances - and 21 - Estoppel Certificates and Financial Statements - below.
(d) Tenant violates the restrictions on Transfer set forth in
Section 14 - Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any under any state or federal bankruptcy or other statute,
law or regulation affecting creditors' rights; all or substantially all of
Tenant's assets are subject to judicial seizure or attachment and are not
released within 30 days, or Tenant consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for Tenant or for all or any substantial
part of Tenant's assets.
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(f) Tenant fails, within ninety (90) days after the
commencement of any proceedings against Tenant seeking relief under any state or
federal bankruptcy or other statute, law or regulation affecting creditors'
rights, to have such proceedings dismissed, or Tenant fails, within ninety (90)
days after an appointment, without Tenant's consent or acquiescence, of any
trustee, receiver or liquidator for Tenant or for all or any substantial part of
Tenant's assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of
this Lease other than those described in (a) through (f) above, and does not
fully cure such failure within fifteen (15) days after notice to Tenant or, if
such failure cannot be cured within such fifteen (15)-day period, Tenant fails
within such fifteen (15)-day period to commence, and thereafter diligently
proceed with, all actions necessary to cure such failure as soon as reasonably
possible but in all events within ninety (90) days of such notice; provided,
however, that if Landlord in Landlord's reasonable judgment determines that such
failure cannot or will not be cured by Tenant within such ninety (90) days, then
such failure shall constitute an Event of Default immediately upon such notice
to Tenant.
(h) Tenant commits a default under any provision of the Suite
100 Lease which is not cured within any applicable cure period provided for
therein.
15.2 Remedies. Upon the occurrence of an Event of Default, Landlord
shall have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
reletting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant's surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including the worth at the time of award of the amount
by which the rent which would be payable by Tenant hereunder for the remainder
of the Term after the date of the award of damages, including Additional Rent as
reasonably estimated by Landlord, exceeds the amount of such rental loss as
Tenant proves could have been reasonably avoided, discounted at the discount
rate published by the Federal Reserve Bank of San Francisco for member banks at
the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in California
Civil Code Section 1951.4 (Landlord may continue this Lease in effect after
Tenant's breach and abandonment and recover rent as it becomes due, if Tenant
has the right to sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's
expense. If Landlord pays any sum or incurs any expense in curing the Event of
Default, Tenant shall reimburse Landlord upon demand for the amount of such
payment or expense with interest at the Interest Rate from the date the sum is
paid or the expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the
Premises, and such property may be stored by Landlord in a public warehouse or
elsewhere at the sole cost and for the account of Tenant. If Landlord does not
elect to store any or all of Tenant's property left in the Premises, Landlord
may consider such property to be abandoned by Tenant, and Landlord may thereupon
dispose of such property in any manner deemed appropriate by Landlord. Any
proceeds realized by Landlord on the disposal of any such property shall be
applied first to offset all expenses of storage and sale, then credited against
Tenant's outstanding obligations to Landlord under this Lease, and any balance
remaining after satisfaction of all obligations of Tenant under this Lease shall
be delivered to Tenant.
-19-
<PAGE>
16. LATE CHARGE AND INTEREST.
16.1 Late Charge. If any payment of Base Rent or Additional Rent is not
received by Landlord within five (5) days after the date when due, Tenant shall
pay to Landlord on demand as a late charge an additional amount equal to five
percent (5%) of the overdue payment. The parties agree that this late charge
represents a reasonable estimate of the expenses that Landlord will incur
because of any late payment of Base Rent or Additional Rent (other than interest
and attorneys' fees and costs). Landlord's acceptance of any late charge shall
not constitute a waiver of Tenant's default with respect to the overdue amount
or prevent Landlord from exercising any of the rights or remedies available to
Landlord under this Lease. Tenant shall pay the late charge as Additional Rent
with the next installment of Rent.
16.2 Interest. In addition to the late charges referred to above, which
are intended to defray Landlord's costs resulting from late payments, any
payment from Tenant to Landlord not paid within ten (10) days after the date
when due shall at Landlord's option bear interest from the date due until paid
to Landlord by Tenant at the lesser of eighteen percent (18%) per annum or the
maximum lawful rate that Landlord may charge to Tenant under Applicable laws
(the "Interest Rate"). Acceptance of any late charge and/or interest shall not
constitute a waiver of Tenant's default with respect to the overdue sum or
prevent Landlord from exercising any of its other rights and remedies under this
Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by
either party unless such waiver is in a writing signed by such party. The waiver
by Landlord of any breach of any provision of this Lease shall not be deemed a
waiver of such provision or of any subsequent breach of the same or any other
provision of this Lease. No delay or omission in the exercise of any right or
remedy of Landlord upon any default by Tenant shall impair such right or remedy
or be construed as a waiver. Landlord's acceptance of any payments of rent due
under this Lease shall not be deemed a waiver of any default by Tenant under
this Lease (including Tenant's recurrent failure to timely pay rent) other than
Tenant's nonpayment of the accepted sums, and no endorsement or statement on any
check or payment or in any letter or document accompanying any check or payment
shall be deemed an accord and satisfaction. Landlord's consent to or approval of
any act by Tenant requiring Landlord's consent or approval shall not be deemed
to waive or render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.
18. ENTRY, INSPECTION AND CLOSURE. Upon at least 48 hours prior oral or
written notice to Tenant (and without notice in emergencies), Landlord and its
authorized representatives may enter the Premises at all reasonable times to:
(a) determine whether the Premises are in good condition, (b) determine whether
Tenant is complying with its obligations under this Lease, (c) perform any
maintenance or repair of the Premises or the Building that Landlord has the
right or obligation to perform, (d) install or repair improvements for other
tenants where access to the Premises is required for such installation or
repair, (e) serve, post or keep posted any notices required or allowed under the
provisions of this Lease, (f) show the Premises to prospective brokers, agents,
buyers, transferees, Mortgagees or tenants, or (g) do any other act or thing
necessary for the safety or preservation of the Premises or the Building. When
reasonably necessary Landlord may temporarily close entrances, doors, corridors,
elevators or other facilities in the Building without liability to Tenant by
reason of such closure. Landlord shall conduct its activities under this Section
in a manner that will minimize inconvenience to Tenant without incurring
additional expense to Landlord. In no event shall Tenant be entitled to an
abatement of rent on account of any entry by Landlord, and Landlord shall not be
liable in any manner for any inconvenience, loss of business or other damage to
Tenant or other persons arising out of Landlord's entry on the Premises in
accordance with this Section. No action by Landlord pursuant to this paragraph
shall constitute an eviction of Tenant, constructive or otherwise, entitle
Tenant to an abatement of rent or to terminate this Lease or otherwise release
Tenant from any of Tenant's obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 Surrender. Upon the expiration or termination of this Lease,
Tenant shall surrender the Premises and all Alterations to Landlord broom-clean
and in their original condition, except for reasonable wear and tear, damage
from casualty or condemnation, Hazardous Materials not caused by Tenant or
Tenant's Agents and any changes resulting from approved Alterations; provided,
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<PAGE>
however, that prior to the expiration or termination of this Lease Tenant shall
remove all telephone and other cabling installed in the Building by Tenant and
remove from the Premises all Tenant's personal property and any Trade Fixtures
and all Alterations that Landlord has elected to require Tenant to remove as
provided in Section 6.1 - Tenant Improvements & Alterations, and repair any
damage caused by such removal. If such removal is not completed before the
expiration or termination of the Term, Landlord shall have the right (but no
obligation) to remove the same, and Tenant shall pay Landlord on demand for all
costs of removal and storage thereof and for the rental value of the Premises
for the period from the end of the Term through the end of the time reasonably
required for such removal. Landlord shall also have the right to retain or
dispose of all or any portion of such property if Tenant does not pay all such
costs and retrieve the property within ten (10) days after notice from Landlord
(in which event title to all such property described in Landlord's notice shall
be transferred to and vest in Landlord). Tenant waives all Claims against
Landlord for any damage or loss to Tenant resulting from Landlord's removal,
storage, retention, or disposition of any such property. Upon expiration or
termination of this Lease or of Tenant's possession, whichever is earliest,
Tenant shall surrender all keys to the Premises or any other part of the
Building and shall deliver to Landlord all keys for or make known to Landlord
the combination of locks on all safes, cabinets and vaults that may be located
in the Premises. Tenant's obligations under this Section shall survive the
expiration or termination of this Lease.
19.2 Holding Over. If Tenant (directly or through any Transferee or
other successor-in-interest of Tenant) remains in possession of the Premises
after the expiration or termination of this Lease, Tenant's continued possession
shall be on the basis of a tenancy at the sufferance of Landlord. No act or
omission by Landlord, other than its specific written consent, shall constitute
permission for Tenant to continue in possession of the Premises, and if such
consent is given or declared to have been given by a court judgment, Landlord
may terminate Tenant's holdover tenancy at any time upon seven (7) days written
notice. In such event, Tenant shall continue to comply with or perform all the
terms and obligations of Tenant under this Lease, except that the monthly Base
Rent during Tenant's holding over shall be twice the Base Rent payable in the
last full month prior to the termination hereof. Acceptance by Landlord of rent
after such termination shall not constitute a renewal or extension of this
Lease; and nothing contained in this provision shall be deemed to waive
Landlord's right of re-entry or any other right hereunder or at law. Tenant
shall indenmify, defend and hold Landlord harmless from and against all Claims
arising or resulting directly or indirectly from Tenant's failure to timely
surrender the Premises, including (i) any rent payable by or any loss, cost, or
damages claimed by any prospective tenant of the Premises, and (ii) Landlord's
damages as a result of such prospective tenant rescinding or refusing to enter
into the prospective lease of the Premises by reason of such failure to timely
surrender the Premises.
20. ENCUMBRANCES.
20.1 Subordination. This Lease is expressly made subject and
subordinate to any mortgage, deed of trust, ground lease, underlying lease or
like encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded ("Encumbrance");
provided, however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within fifteen (15) days after written request therefor by
Landlord and in a form reasonably requested by Landlord, any additional
documents evidencing the subordination of this Lease with respect to any such
Encumbrance and the nondisturbance agreement of the holder of any such
Encumbrance. If the interest of Landlord in the Property is transferred pursuant
to or in lieu of proceedings for enforcement of any Encumbrance, Tenant shall
immediately and automatically attorn to the new owner, and this Lease shall
continue in full force and effect as a direct lease between the transferee and
Tenant on the terms and conditions set forth in this Lease.
20.2 Mortgagee Protection. Tenant agrees to give any holder of any
Encumbrance covering any part of the Property ("Mortgagee"), by registered mail,
a copy of any notice of default served upon Landlord, provided that prior to
such notice Tenant has been notitied in writing (by way of notice of assignment
of rents and leases, or otherwise) of the address of such Mortgagee. If Landlord
shall have failed to cure such default within thirty (30) days from the
effective date of
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<PAGE>
such notice of default, then the Mortgagee shall have an additional thirty (30)
days within which to cure such default or if such default cannot be cured within
that time, then such additional time as may be necessary to cure such default
(including the time necessary to foreclose or otherwise terminate its
Encumbrance, if necessary to effect such cure), and this Lease shall not be
terminated so long as such remedies are being diligently pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 Estoppel Certificates. Within ten (10) days after written request
therefor, Tenant shall execute and deliver to Landlord, in a form provided by or
satisfactory to Landlord, a certificate stating that this Lease is in full force
and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including the
Term, the monthly Base Rent, the date to which Rent has been paid, the amount of
any security deposit or prepaid rent, whether either party hereto is in default
under the terms of the Lease, and whether Landlord has completed its
construction obligations hereunder (if any). Tenant irrevocably constitutes,
appoints and authorizes Landlord as Tenant's special attorney-in-fact for such
purpose to complete, execute and deliver such certificate if Tenant fails timely
to execute and deliver such certificate as provided above. Any person or entity
purchasing, acquiring an interest in or extending financing with respect to the
Property shall be entitled to rely upon any such certificate.
If Tenant fails to deliver such certificate within ten (10) days after
Landlord's second written request therefor, Tenant shall be liable to Landlord
for any damages incurred by Landlord including any profits or other benefits
from any financing of the Property or any interest therein which are lost or
made unavailable as a result, directly or indirectly, pf Tenant's failure or
refusal to timely execute or deliver such estoppel certificate.
21.2 Financial Statements. Within ten (10) days after written request
therefor, but not more than once a year, Tenant shall deliver to Landlord a copy
of the financial statements (including at least a year end balance sheet and a
statement of profit and loss) of Tenant (and of each guarantor of Tenant's
obligations under this Lease) for each of the three most recently completed
years, prepared in accordance with generally accepted accounting principles
(and, if such is Tenant's normal practice, audited by an independent certified
public accountant), all then available subsequent interim statements, and such
other financial information as may reasonably be requested by Landlord or
required by any Mortgagee.
22. NOTICES. Any notice, demand, request, consent or approval that
either party desires or is required to give to the other party under this Lease
shall be in writing and shall be served personally, delivered by messenger or
courier service, or sent by U.S. certified mail, return receipt requested,
postage prepaid, addressed to the other party at the party's address for notices
set forth in the Basic Lease Information. Any notice required pursuant to any
Laws may be incorporated into, given concurrently with or given separately from
any notice required under this Lease. Notices shall be deemed to have been given
and be effective on the earlier of (a) receipt (or refusal of delivery or
receipt); or (b) one (1) business day after acceptance by the independent
service for delivery, if sent by independent messenger or courier service, or
three (3) business days after mailing if sent by mail in accordance with this
Section. Either party may change its address for notices hereunder, effective
fifteen (15) days after notice to the other party complying with this Section.
If Tenant sublets the Premises, notices from Landlord shall be effective on the
subtenant when given to Tenant pursuant to this Section.
23. ATTORNEYS' FEES. In the event of any dispute between Landlord and
Tenant in any way related to this Lease, the non-prevailing party shall pay to
the prevailing party all reasonable attorneys' fees and costs and expenses of
any type incurred by the prevailing party in connection with any action or
proceeding (including any appeal and the enforcement of any judgment or award),
whether or not the dispute is litigated or prosecuted to final judgment.
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of
all of Tenant's obligations under this Lease and subject to the terms of this
Lease, including Section 20 - Encumbrances, Tenant shall have the quiet
possession of the Premises throughout the Term as against any persons or
entities lawfully claiming by, through or under Landlord.
-22-
<PAGE>
25. SECURITY MEASURES. Tenant shall be responsible for all security
measures for the Premises, such as the registration or search of all persons
entering or leaving the Building, requiring identification for access to the
Building, evacuation of the Building for cause, suspected cause, or for drill
purposes, and for Building access to prevent any threat of property loss or
damage, bodily injury or business interruption. Landlord shall have no security
responsibility for the Premises or the Property. Landlord, its agents and
employees shall have no liability to Tenant or Tenant's Agents for the
implementation or exercise of, or the failure to implement or exercise, any
security measures for the Premises or the Property, or for any resulting
disturbance of Tenant's use or enjoyment of the Premises.
26. FORCE MAJEURE. If Landlord is delayed, interrupted or prevented
from performing any of its obligations under this Lease, and such delay,
interruption or prevention is due to fire, act of God, governmental act or
failure to act, labor dispute, unavailability of materials or any cause outside
the reasonable control of Landlord, then the time for performance of the
affected obligations of Landlord shall be extended for a period equivalent to
the period of such delay, interruption or prevention.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply
with any reasonable rules and regulations hereafter adopted by Landlord for all
tenants of the Property, upon notice to Tenant thereof. Landlord shall not be
responsible to Tenant or to any other person for any violation of, or failure to
observe, the rules and regulations by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease,
shall mean only the owner or owners of the Property at the time in question. In
the event of any conveyance of title to the Property, then from and after the
date of such conveyance, the transferor Landlord shall be relieved of all
liability with respect to Landlord's obligations to be performed under this
Lease after the date of such conveyance. Notwithstanding any other term or
provision of this Lease, the liability of Landlord for its obligations under
this Lease is limited solely to Landlord's interest in the Property as the same
may from time to time be encumbered, and no personal liability shall at any time
be asserted or enforceable against any other assets of Landlord or against
Landlord's partners or members or its or their respective partners,
shareholders, members, directors, officers or managers on account of any of
Landlord's obligations or actions under this Lease.
29. CONSENTS AND APPROVALS
29.1 Determination. Wherever the consent, approval, determination, or
judgment of Landlord is required or permitted under this Lease, such consent,
approval, determination or judgment is not to be unreasonably withheld, unless
the specific provision contained in this Lease otherwise specifies the standards
under which Landlord may withhold its consent. If it is determined that Landlord
failed to give its consent where it was required to do so under this Lease,
Tenant shall be entitled to injunctive relief but shall not to be entitled to
monetary damages or to terminate this Lease for such failure.
29.2 No Liability Imposed on Landlord. The review and/or approval by
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Property, and no third parties, including Tenant or Tenant's Agents or any
person or entity claiming by, through or under Tenant, shall have any rights as
a consequence thereof.
30. BROKERS. Landlord has not engaged any broker in connection with this
Lease. Tenant shall indemnify and hold Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Agents.
31. ENTIRE AGREEMENT. This Lease, including the Exhibits and any
Addenda attached hereto, and the documents referred to herein, if any,
constitute the entire agreement between Landlord and Tenant with respect to the
leasing of space by Tenant in the Building, and supersede all prior or
contemporaneous agreements, understandings, proposals and other representations
by or between Landlord and Tenant, whether written or oral, all of which are
merged herein. Neither
-23-
<PAGE>
Landlord nor Landlord's agents have made any representations or warranties with
respect to the Premises, the Building, the Property or this Lease except as
expressly set forth herein, and no rights, easements or licenses shall be
acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.
32. EXPANSION OPTION.
32.1 Exercise of Option. Subject to the remaining provisions of this
Section 32, Tenant shall have the option and right (the "Expansion
Option") to lease from Landlord the remaining space in the Building
consisting of 33,972 rentable square feet and more particularly
described on Exhibit B A attached hereto (the "Expansion Space") when
it becomes available on June 1, 2000. Tenant shall have the right to
exercise its Expansion Option by delivering to Landlord written notice
of its election ("Tenant Exercise Notice") not less than six (6)months
nor more than nine (9) months prior to June 1, 2000. If Tenant fails to
so exercise the Expansion Option, the Expansion Option shall be of no
further force or effect.
32.2 Terms and Conditions. The Expansion Space shall be leased to
Tenant upon all terms and conditions of the Lease with the following
exceptions:
(a) The Expansion Space shall be delivered to Tenant in "as
is" condition.
(b) Base Rent for the Expansion Space will be equal to the
product of the per square foot rent applicable to the current
Premises (at the time such Base Rent is calculated) under the
Basic Lease Provisions multiplied by the rentable area of the
Expansion Space, subject to annual adjustment as set forth in
the Basic Lease Provisions.
(c) Base Rent and Additional Rent for the Expansion Space
shall commence on June 1, 2000.
32.3 Amendment of Lease. Within fifteen (15) days after Landlord's
receipt of Tenant's Expansion Notice, Landlord and Tenant will enter
into an amendment to this Lease reflecting (i) the addition of the
Expansion Space to the Premises, (ii) the increase in Base Rent and
Additional Rent payable under this Lease, and (iii) such other
amendments as are necessary.
32.4 Possession. Landlord shall not be liable for the failure to give
possession of any of the Expansion Space by reason of holding over or
retention of any third party tenant, tenants or occupants if such
holding over or retention of possession is contrary to the terms and
provisions of the lease of any such third party tenant, tenants or
occupants with Landlord. The Landlord shall also not be liable for the
failure to give possession of any Expansion Space by reason of force
majeure as defined in the Lease. Any rent otherwise due by Tenant with
respect to such Expansion Space shall, however, be abated until
possession is delivered to Tenant and such abatement shall constitute
full settlement of all claims that Tenant might otherwise have against
Landlord by reason of any failure of Landlord to timely give possession
of such Expansion Space to Tenant during such holdover period and/or
during such time period as such force majeure is continuing.
32.5 Notwithstanding any other provision or inference herein to the
contrary, Tenant's rights and Landlord's obligations with respect to this option
shall expire and be of no further force or effect on the earliest of (i) the
occurrence of an Event of Default (as defined in Section 15 of the Lease) more
than two (2) times in any thirty-six (36) month period during the Term of the
Lease, (iii) an assignment of this Lease by Tenant (except to a Permitted
Transferee), or (iv) a sublease of all or any portion of the Premises by Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by
a writing signed by Landlord and Tenant. Subject to Section 14 - Assignment and
Subletting and Section 28 - Landlord's Liability, this Lease shall be binding on
and shall inure to the benefit of the parties and
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<PAGE>
their respective successors, assigns and legal representatives. The
determination that any provisions hereof may be void, invalid, illegal or
unenforceable shall not impair any other provisions hereof and all such other
provisions of this Lease shall remain in full force and effect. The
unenforceability, invalidity or illegality of any provision of this Lease under
particular circumstances shall not render unenforceable, invalid or illegal
other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party, even if such party drafted the provision in
question. When required by the context of this Lease, the singular includes the
plural. Wherever the term "including" is used in this Lease, it shall be
interpreted as meaning "including, but not limited to" the matter or matters
thereafter enumerated. The captions contained in this Lease are for purposes of
convenience only and are not to be used to interpret or construe this Lease. If
more than one person or entity is identified as Tenant hereunder, the
obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease, except as to the conditions
relating to the delivery of possession of the Premises to Tenant. Neither
Landlord nor Tenant shall record this Lease.
34. AUTHORITY. If Tenant is a corporation, partnership, limited
liability company or other form of business entity, Tenant represents and
warrants that Tenant is a duly organized and validly existing entity, that
Tenant has full right and authority to enter into this Lease and that the
persons signing on behalf of Tenant are authorized to do so and have the power
to bind Tenant to this Lease. Tenant shall provide Landlord upon request with
evidence reasonably satisfactory to Landlord confirming the foregoing
representations.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as
of the date first above written.
TENANT: LANDLORD:
BELL MICROPRODUCTS, INC., ACBEL TECI-INOLOGIES, INC.,
a California corporation DBA SUN MOON STAR, a California
corporation
By:
--------------------------------
Name: By:
----------------------
Title: VP OPERATIONS
--------------------- --------------------------------
Name:
---------------------------
Title:
--------------------------
By:
--------------------------------
Name:
----------------------
Title:
---------------------
-25-
<PAGE>
EXHIBIT A
THE PREMISES
INITIALS:
Landlord ________
Tenant ________
B-1
<PAGE>
EXHIBIT B
EXPANSION SPACE
INITIALS:
Landlord ________
Tenant ________
-2-
EXHIBIT 23.1
BELL MICROPRODUCTS INC.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Numbers 33-83398, 33-66580, 333-10837, 333-41179 and
333-58053) of Bell Microproducts Inc. of our report dated February 14, 2000
appearing on page 17 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,103
<SECURITIES> 0
<RECEIVABLES> 173,843
<ALLOWANCES> 4,986
<INVENTORY> 156,648
<CURRENT-ASSETS> 336,066
<PP&E> 11,418
<DEPRECIATION> 3,792
<TOTAL-ASSETS> 360,351
<CURRENT-LIABILITIES> 153,440
<BONDS> 110,638
0
0
<COMMON> 93
<OTHER-SE> 96,180
<TOTAL-LIABILITY-AND-EQUITY> 360,351
<SALES> 1,058,275
<TOTAL-REVENUES> 1,058,275
<CGS> 967,491
<TOTAL-COSTS> 967,491
<OTHER-EXPENSES> 62,928
<LOSS-PROVISION> 6,579
<INTEREST-EXPENSE> 6,413
<INCOME-PRETAX> 15,511
<INCOME-TAX> 6,581
<INCOME-CONTINUING> 8,430
<DISCONTINUED> (1,892)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,038
<EPS-BASIC> 0.78
<EPS-DILUTED> 0.77
</TABLE>
