Exhibit 10.53
 
 
CREDIT AGREEMENT
by and among
BOOKHAM, INC.,
as Parent,
and
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
as Borrowers,
THE LENDERS THAT ARE SIGNATORIES HERETO
as the Lenders,
and
WELLS FARGO FOOTHILL, INC.
as the Arranger and Administrative Agent
Dated as of August 2, 2006
 
 

 

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TABLE OF CONTENTS

                              Page  
 
                1.   DEFINITIONS AND CONSTRUCTION.     1  
 
               
 
  1.1   Definitions     1  
 
  1.2   Accounting Terms     1  
 
  1.3   Code     1  
 
  1.4   Construction     1  
 
  1.5   Schedules and Exhibits     2  
 
                2.   LOAN AND TERMS OF PAYMENT.     2  
 
               
 
  2.1   Revolver Advances     2  
 
  2.2   Intentionally Deleted     2  
 
  2.3   Borrowing Procedures and Settlements     2  
 
  2.4   Payments     7  
 
  2.5   Overadvances     8  
 
  2.6   Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations     9  
 
  2.7   Cash Management     10  
 
  2.8   Crediting Payments     10  
 
  2.9   Designated Account     11  
 
  2.10   Maintenance of Loan Account; Statements of Obligations     11  
 
  2.11   Fees     11  
 
  2.12   Letters of Credit     11  
 
  2.13   LIBOR Option     14  
 
  2.14   Capital Requirements     16  
 
  2.15   Joint and Several Liability of Borrowers     16  
 
                3.   CONDITIONS; TERM OF AGREEMENT.     18  
 
               
 
  3.1   Conditions Precedent to the Initial Extension of Credit     18  
 
  3.2   Conditions Precedent to all Extensions of Credit     18  
 
  3.3   Term     18  
 
  3.4   Effect of Termination     18  
 
  3.5   Early Termination by Borrowers     19  
 
                4.   REPRESENTATIONS AND WARRANTIES.     19  
 
               
 
  4.1   No Encumbrances     19  
 
  4.2   Eligible Accounts     19  
 
  4.3   Inventory     20  
 
  4.4   Equipment     20  
 
  4.5   Location of Inventory and Equipment     20  
 
  4.6   Inventory Records     20  
 
  4.7   Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims     20  
 
  4.8   Due Organization and Qualification; Subsidiaries     20  
 
  4.9   Due Authorization; No Conflict     21  
 
  4.10   Litigation     22  
 
  4.11   No Material Adverse Change     22  
 
  4.12   Fraudulent Transfer     22  
 
  4.13   Employee Benefits     22  
 
  4.14   Environmental Condition     22  
 
  4.15   Intellectual Property     22  

 

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TABLE OF CONTENTS
(continued)

                              Page  
 
               
 
  4.16   Leases     23  
 
  4.17   Deposit Accounts and Securities Accounts     23  
 
  4.18   Complete Disclosure     23  
 
  4.19   Indebtedness     23  
 
  4.20   Inactive Obligors     23  
 
                5.   AFFIRMATIVE COVENANTS.     23  
 
               
 
  5.1   Accounting System     23  
 
  5.2   Collateral Reporting     24  
 
  5.3   Financial Statements, Reports, Certificates     24  
 
  5.4   Guarantor Reports     24  
 
  5.5   Inspection     24  
 
  5.6   Maintenance of Properties     24  
 
  5.7   Taxes     24  
 
  5.8   Insurance     24  
 
  5.9   Location of Inventory and Equipment     25  
 
  5.10   Compliance with Laws     25  
 
  5.11   Leases     25  
 
  5.12   Existence     25  
 
  5.13   Environmental     26  
 
  5.14   Disclosure Updates     26  
 
  5.15   Control Agreements     26  
 
  5.16   Formation of Subsidiaries     26  
 
  5.17   Further Assurances     26  
 
  5.19   UK Mortgage Documents     27  
 
  5.20   Post-Closing Covenants     27  
 
                6.   NEGATIVE COVENANTS.     27  
 
               
 
  6.1   Indebtedness     27  
 
  6.2   Liens     28  
 
  6.3   Restrictions on Fundamental Changes     28  
 
  6.4   Disposal of Assets     28  
 
  6.5   Change Name     28  
 
  6.6   Nature of Business     28  
 
  6.7   Prepayments and Amendments     28  
 
  6.8   Change of Control     29  
 
  6.9   Consignments     29  
 
  6.10   Distributions     29  
 
  6.11   Accounting Methods     29  
 
  6.12   Investments     30  
 
  6.13   Transactions with Affiliates     30  
 
  6.14   Use of Proceeds     30  
 
  6.15   Inventory and Equipment with Bailees     31  
 
  6.16   Financial Covenants     31  
 
                7.   EVENTS OF DEFAULT.     32  
 
                8.   THE LENDER GROUP’S RIGHTS AND REMEDIES     33  
 
               
 
  8.1   Rights and Remedies     33  

 

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TABLE OF CONTENTS
(continued)

                              Page  
 
               
 
  8.2   Remedies Cumulative     34  
 
                9.   TAXES AND EXPENSES.     34  
 
                10.   WAIVERS; INDEMNIFICATION.     35  
 
               
 
  10.1   Demand; Protest; etc     35  
 
  10.2   The Lender Group's Liability for Collateral     35  
 
  10.3   Indemnification     35  
 
                11.   NOTICES.     35  
 
                12.   CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.     36  
 
                13.   ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.     37  
 
               
 
  13.1   Assignments and Participations.     37  
 
  13.2   Successors     39  
 
                14.   AMENDMENTS; WAIVERS.     39  
 
               
 
  14.1   Amendments and Waivers     39  
 
  14.2   Replacement of Holdout Lender     40  
 
  14.3   No Waivers; Cumulative Remedies     41  
 
                15.   AGENT; THE LENDER GROUP.     41  
 
               
 
  15.1   Appointment and Authorization of Agent     41  
 
  15.2   Delegation of Duties     41  
 
  15.3   Liability of Agent     42  
 
  15.4   Reliance by Agent     42  
 
  15.5   Notice of Default or Event of Default     42  
 
  15.6   Credit Decision     42  
 
  15.7   Costs and Expenses; Indemnification     43  
 
  15.8   Agent in Individual Capacity     43  
 
  15.9   Successor Agent     44  
 
  15.10   Lender in Individual Capacity     44  
 
  15.11   Withholding Taxes     44  
 
  15.12   Collateral Matters     46  
 
  15.13   Restrictions on Actions by Lenders; Sharing of Payments     47  
 
  15.14   Agency for Perfection     48  
 
  15.15   Payments by Agent to the Lenders     48  
 
  15.16   Concerning the Collateral and Related Loan Documents     48  
 
  15.17   Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information     48  
 
  15.18   Several Obligations; No Liability     49  
 
  15.19   Bank Product Providers     49  
 
                16.   GENERAL PROVISIONS.     49  
 
               
 
  16.1   Effectiveness     49  
 
  16.2   Section Headings     49  
 
  16.3   Interpretation     49  
 
  16.4   Severability of Provisions     50  
 
  16.5   Counterparts; Electronic Execution     50  

 

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TABLE OF CONTENTS
(continued)

                              Page  
 
               
 
  16.6   Revival and Reinstatement of Obligations     50  
 
  16.7   Confidentiality     50  
 
  16.8   Lender Group Expenses     51  
 
  16.9   USA PATRIOT Act     51  
 
  16.10   Integration     51  
 
  16.11   Bookham UK as Agent for Borrowers     51  
 
  16.12   Judgment Currency     51  

 

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EXHIBITS AND SCHEDULES

     
Exhibit A-1
  Form of Assignment and Acceptance
Exhibit B-1
  Form of Borrowing Base Certificate
Exhibit C-1
  Form of Compliance Certificate
Exhibit L-1
  Form of LIBOR Notice      
Schedule A-1
  Agent’s Account
Schedule C-1
  Commitments
Schedule D-1
  Designated Account
Schedule F-1
  Foreign Security Documents
Schedule P-1
  Permitted Intercompany Transactions
Schedule P-2
  Permitted Liens
Schedule 1.1
  Definitions
Schedule 2.7(a)
  Cash Management Banks
Schedule 3.1
  Conditions Precedent
Schedule 4.5
  Locations of Inventory and Equipment
Schedule 4.7(a)
  States of Organization
Schedule 4.7(b)
  Chief Executive Offices
Schedule 4.7(c)
  Organizational Identification Numbers
Schedule 4.7(d)
  Commercial Tort Claims
Schedule 4.8(b)
  Capitalization of Parent
Schedule 4.8(c)
  Capitalization of Parent’s Subsidiaries
Schedule 4.10
  Litigation
Schedule 4.14
  Environmental Matters
Schedule 4.15
  Intellectual Property
Schedule 4.17
  Deposit Accounts and Securities Accounts
Schedule 4.19
  Permitted Indebtedness
Schedule 5.2
  Collateral Reporting
Schedule 5.3
  Financial Statements, Reports, Certificates
Schedule 5.20
  Post-Closing Covenants

 

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CREDIT AGREEMENT
     THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of August 2,
2006, by and among the lenders identified on the signature pages hereof (such
lenders, together with their respective successors and permitted assigns, are
referred to hereinafter each individually as a “Lender” and collectively as the
“Lenders”), WELLS FARGO FOOTHILL, INC., a California corporation, as the
arranger and administrative agent for the Lenders (in such capacity, together
with its successors and assigns in such capacity, “Agent”), BOOKHAM, INC., a
Delaware corporation (“Parent”), and each of Parent’s Subsidiaries identified as
borrower on the signature pages hereof (such Subsidiaries are referred to
hereinafter each individually as a “Borrower”, and individually and
collectively, jointly and severally, as the “Borrowers”).
     The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
     1.1 Definitions. Capitalized terms used in this Agreement shall have the
meanings specified therefor on Schedule 1.1.
     1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
“financial statements” shall include the notes and schedules thereto. Whenever
the term “Borrowers” or the term “Parent” is used in respect of a financial
covenant or a related definition, it shall be understood to mean Borrowers and
their Subsidiaries or Parent and its Subsidiaries, as applicable, on a
consolidated basis, unless the context clearly requires otherwise.
     1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein; provided, however, that to the extent that the Code is used to define
any term herein and such term is defined differently in different Articles of
the Code, the definition of such term contained in Article 9 of the Code shall
govern.
     1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein or in any
other Loan Document to the satisfaction or repayment in full of the Obligations
shall mean the repayment in full in cash (or cash collateralization in
accordance with the terms hereof) of all Obligations other than unasserted
contingent indemnification Obligations and other than any Bank Product
Obligations that, at such time, are allowed by the applicable Bank Product
Provider to remain outstanding and that are not required by the provisions of
this Agreement to be repaid or cash collateralized. Any reference herein to any
Person shall be construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein or in any other Loan Document shall be
satisfied by the transmission of a Record and any Record so transmitted shall
constitute a representation and warranty as to the accuracy and completeness of
the information contained therein.

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     1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
     2.1 Revolver Advances.
          (a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, each Lender with a Revolver Commitment agrees
(severally, not jointly or jointly and severally) to make advances (“Advances”)
to Borrowers in an amount at any one time outstanding not to exceed such
Lender’s Pro Rata Share of an amount equal to the lesser of (i) the Maximum
Revolver Amount less the Letter of Credit Usage at such time, and (ii) the
Borrowing Base at such time less the Letter of Credit Usage at such time.
          (b) Anything to the contrary in this Section 2.1 notwithstanding,
Agent shall have the right to establish reserves against the Borrowing Base in
such amounts, and with respect to such matters, as Agent in its Permitted
Discretion shall deem necessary or appropriate, including reserves with respect
to (i) sums that Borrowers or their Subsidiaries are required to pay under any
Section of this Agreement or any other Loan Document (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and have failed to pay, and
(ii) amounts owing by Parent and its Subsidiaries to any Person to the extent
secured by a Lien on, or trust over, or preferential claim by operation of law
over, or claim of retention of title to, any of the Collateral (other than a
Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent
likely would have a priority superior to the Agent’s Liens (such as Liens,
preferred claims, claims of retention of title, or trusts in favor of employees,
creditors, landlords, warehousemen, carriers, mechanics, materialmen, laborers,
or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under applicable law) in and to such item of the
Collateral.
          (c) Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement. The outstanding principal amount of the
Advances, together with interest accrued thereon, shall be due and payable on
the Maturity Date or, if earlier, on the date on which they are declared due and
payable pursuant to the terms of this Agreement.
     2.2 Intentionally Deleted.
     2.3 Borrowing Procedures and Settlements.
          (a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent. Unless
Swing Lender is not obligated to make a Swing Loan pursuant to Section 2.3(b),
such notice must be received by Agent no later than 10:00 a.m. (California time)
on the Business Day that is the requested Funding Date specifying (i) the amount
of such Borrowing, and (ii) the requested Funding Date, which shall be a
Business Day; provided, however, that if Swing Lender is not obligated to make a
Swing Loan as to a requested Borrowing, such notice must be received by Agent no
later than 10:00 a.m. (California time) on the Business Day prior to the date
that is the requested Funding Date. At Agent’s election, in lieu of delivering
the above-described written request, any Authorized Person may give Agent
telephonic notice of such request by the required time. In such circumstances,
Borrowers agree that any such telephonic notice will be confirmed in writing
within 24 hours of the giving of such telephonic notice, but the failure to
provide such written confirmation shall not affect the validity of the request.
          (b) Making of Swing Loans. In the case of a request for an Advance and
so long as either (i) the aggregate amount of Swing Loans made since the last
Settlement Date plus the amount of the requested Advance does not exceed
$2,500,000, or (ii) Swing Lender, in its sole discretion, shall agree to make

2

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a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall make
an Advance in the amount of such Borrowing (any such Advance made solely by
Swing Lender pursuant to this Section 2.3(b) being referred to as a “Swing Loan”
and such Advances being referred to collectively as “Swing Loans”) available to
Borrowers on the Funding Date applicable thereto by transferring immediately
available funds to Borrowers’ Designated Account. Each Swing Loan shall be
deemed to be an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, except that all payments on any Swing
Loan shall be payable to Swing Lender solely for its own account. Subject to the
provisions of Section 2.3(d)(ii), Swing Lender shall not make and shall not be
obligated to make any Swing Loan if Swing Lender has actual knowledge that
(i) one or more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable
Borrowing, or (ii) the requested Borrowing would exceed the Availability on such
Funding Date. Swing Lender shall not otherwise be required to determine whether
the applicable conditions precedent set forth in Section 3 have been satisfied
on the Funding Date applicable thereto prior to making any Swing Loan. The Swing
Loans shall be secured by the Agent’s Liens, constitute Obligations hereunder,
and bear interest at the rate applicable from time to time to Advances that are
Base Rate Loans. Notwithstanding anything in this Section 2.3(b) to the
contrary, at any time that there is only one Lender, the Swing Lender shall not
be obligated to make a Swing Loan, requested Borrowings shall be made pursuant
to Section 2.3(c), and, subject to the other terms and provisions contained
herein, Borrowers may request Advances to be made directly as LIBOR Rate Loans.
          (c) Making of Loans.
               (i) In the event that Swing Lender is not obligated to make a
Swing Loan, then promptly after receipt of a request for a Borrowing pursuant to
Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m.
(California time) on the Business Day immediately preceding the Funding Date
applicable thereto, by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender’s Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to Agent’s Account, not later than 10:00 a.m.
(California time) on the Funding Date applicable thereto. After Agent’s receipt
of the proceeds of such Advances, Agent shall make the proceeds thereof
available to Administrative Borrower on the applicable Funding Date by
transferring immediately available funds equal to such proceeds received by
Agent to Administrative Borrower’s Designated Account; provided, however, that,
subject to the provisions of Section 2.3(d)(ii), Agent shall not request any
Lender to make, and no Lender shall have the obligation to make, any Advance if
Agent shall have actual knowledge that (1) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (2) the requested Borrowing would exceed the Availability on
such Funding Date.
               (ii) Unless Agent receives notice from a Lender prior to 9:00
a.m. (California time) on the date of a Borrowing, that such Lender will not
make available as and when required hereunder to Agent for the account of
Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may
assume that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds and Agent
in such circumstances has made available to Borrowers such amount, that Lender
shall on the Business Day following such Funding Date make such amount available
to Agent, together with interest at the Defaulting Lender Rate for each day
during such period. A notice submitted by Agent to any Lender with respect to
amounts owing under this subsection shall be conclusive, absent manifest error.
If such amount is so made available, such payment to Agent shall constitute such
Lender’s Advance on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to Agent on the Business Day following the
Funding Date, Agent will notify Administrative Borrower of such failure to fund
and, upon demand by Agent, Borrowers shall pay such amount to Agent for Agent’s
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Advances composing

3

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such Borrowing. The failure of any Lender to make any Advance on any Funding
Date shall not relieve any other Lender of any obligation hereunder to make an
Advance on such Funding Date, but no Lender shall be responsible for the failure
of any other Lender to make the Advance to be made by such other Lender on any
Funding Date.
               (iii) Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrowers to Agent for the Defaulting Lender’s
benefit, and, in the absence of such transfer to the Defaulting Lender, Agent
shall transfer any such payments to each other non-Defaulting Lender member of
the Lender Group ratably in accordance with their Commitments (but only to the
extent that such Defaulting Lender’s Advance was funded by the other members of
the Lender Group) or, if so directed by Administrative Borrower and if no
Default or Event of Default has occurred and is continuing (and to the extent
such Defaulting Lender’s Advance was not funded by the Lender Group), retain
same to be re-advanced to Borrowers as if such Defaulting Lender had made
Advances to Borrowers. Subject to the foregoing, Agent may hold and, in its
Permitted Discretion, re-lend to Borrowers for the account of such Defaulting
Lender the amount of all such payments received and retained by Agent for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents, such Defaulting Lender
shall be deemed not to be a “Lender” and such Lender’s Commitment shall be
deemed to be zero. This Section shall remain effective with respect to such
Lender until (x) the Obligations under this Agreement shall have been declared
or shall have become immediately due and payable, (y) the non-Defaulting
Lenders, Agent, and Administrative Borrower shall have waived such Defaulting
Lender’s default in writing, or (z) the Defaulting Lender makes its Pro Rata
Share of the applicable Advance and pays to Agent all amounts owing by
Defaulting Lender in respect thereof. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the performance
by Borrowers of their duties and obligations hereunder to Agent or to the
Lenders other than such Defaulting Lender. Any such failure to fund by any
Defaulting Lender shall constitute a material breach by such Defaulting Lender
of this Agreement and shall entitle Administrative Borrower at its option, upon
written notice to Agent, to arrange for a substitute Lender to assume the
Commitment of such Defaulting Lender, such substitute Lender to be acceptable to
Agent. In connection with the arrangement of such a substitute Lender, the
Defaulting Lender shall have no right to refuse to be replaced hereunder, and
agrees to execute and deliver a completed form of Assignment and Acceptance in
favor of the substitute Lender (and agrees that it shall be deemed to have
executed and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (other than Bank Product
Obligations, but including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind whatsoever;
provided however, that any such assumption of the Commitment of such Defaulting
Lender shall not be deemed to constitute a waiver of any of the Lender Groups’
or Borrowers’ rights or remedies against any such Defaulting Lender arising out
of or in relation to such failure to fund.
          (d) Protective Advances and Optional Overadvances.
               (i) Agent hereby is authorized by Borrowers and the Lenders, from
time to time in Agent’s sole discretion, (A) after the occurrence and during the
continuance of a Default or an Event of Default, or (B) at any time that any of
the other applicable conditions precedent set forth in Section 3 are not
satisfied, to make Advances to Borrowers on behalf of the Lenders that Agent, in
its Permitted Discretion deems necessary or desirable (1) to preserve or protect
the Collateral, or any portion thereof, (2) to enhance the likelihood of
repayment of the Obligations (other than the Bank Product Obligations), or
(3) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in Section 9 (any of the Advances described in this
Section 2.3(d)(i) shall be referred to as “Protective Advances”).
               (ii) Any contrary provision of this Agreement notwithstanding,
the Lenders hereby authorize Agent or Swing Lender, as applicable, and either
Agent or Swing Lender, as applicable, may,

4

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but is not obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrowers notwithstanding that an Overadvance exists
or thereby would be created, so long as (A) after giving effect to such
Advances, the outstanding Revolver Usage does not exceed the Borrowing Base by
more than $2,500,000, and (B) after giving effect to such Advances, the
outstanding Revolver Usage (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses) does not exceed the
Maximum Revolver Amount. In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amounts permitted by the immediately foregoing
provisions, regardless of the amount of, or reason for, such excess, Agent shall
notify the Lenders as soon as practicable (and prior to making any (or any
additional) intentional Overadvances (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent
determines that prior notice would result in imminent harm to the Collateral or
its value), and the Lenders with Revolver Commitments thereupon shall, together
with Agent, jointly determine the terms of arrangements that shall be
implemented with Borrowers intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an amount permitted
by the preceding paragraph. In such circumstances, if any Lender with a Revolver
Commitment objects to the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders. Each Lender with a
Revolver Commitment shall be obligated to settle with Agent as provided in
Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.3(d)(ii), and any
Overadvances resulting from the charging to the Loan Account of interest, fees,
or Lender Group Expenses.
               (iii) Each Protective Advance and each Overadvance shall be
deemed to be an Advance hereunder, except that no Protective Advance or
Overadvance shall be eligible to be a LIBOR Rate Loan and all payments on the
Protective Advances shall be payable to Agent solely for its own account. The
Protective Advances and Overadvances shall be repayable on demand, secured by
the Agent’s Liens, constitute Obligations hereunder, and bear interest at the
rate applicable from time to time to Advances that are Base Rate Loans. The
provisions of this Section 2.3(d) are for the exclusive benefit of Agent, Swing
Lender, and the Lenders and are not intended to benefit any Borrower in any way.
          (e) Settlement. It is agreed that each Lender’s funded portion of the
Advances is intended by the Lenders to equal, at all times, such Lender’s Pro
Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent,
Swing Lender, and the other Lenders agree (which agreement shall not be for the
benefit of any Borrower) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among the Lenders as to the
Advances, the Swing Loans, and the Protective Advances shall take place on a
periodic basis in accordance with the following provisions:
               (i) Agent shall request settlement (“Settlement”) with the
Lenders on a weekly basis, or on a more frequent basis if so determined by Agent
(1) on behalf of Swing Lender, with respect to the outstanding Swing Loans,
(2) for itself, with respect to the outstanding Protective Advances, and
(3) with respect to Borrowers’ or their Subsidiaries’ Collections received, as
to each by notifying the Lenders by telecopy, telephone, or other similar form
of transmission, of such requested Settlement, no later than 2:00 p.m.
(California time) on the Business Day immediately prior to the date of such
requested Settlement (the date of such requested Settlement being the
“Settlement Date”). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Protective
Advances for the period since the prior Settlement Date. Subject to the terms
and conditions contained herein (including Section 2.3(c)(iii)): (y) if a
Lender’s balance of the Advances (including Swing Loans and Protective Advances)
exceeds such Lender’s Pro Rata Share of the Advances (including Swing Loans and
Protective Advances) as of a Settlement Date, then Agent shall, by no later than
12:00 p.m. (California time) on the Settlement Date, transfer in immediately
available funds to a Deposit Account of such Lender (as such Lender may
designate), an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances), and (z) if a Lender’s balance
of the Advances (including Swing Loans and Protective Advances) is less than
such

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Lender’s Pro Rata Share of the Advances (including Swing Loans and Protective
Advances) as of a Settlement Date, such Lender shall no later than 12:00 p.m.
(California time) on the Settlement Date transfer in immediately available funds
to the Agent’s Account, an amount such that each such Lender shall, upon
transfer of such amount, have as of the Settlement Date, its Pro Rata Share of
the Advances (including Swing Loans and Protective Advances). Such amounts made
available to Agent under clause (z) of the immediately preceding sentence shall
be applied against the amounts of the applicable Swing Loans or Protective
Advances and, together with the portion of such Swing Loans or Protective
Advances representing Swing Lender’s Pro Rata Share thereof, shall constitute
Advances of such Lenders. If any such amount is not made available to Agent by
any Lender on the Settlement Date applicable thereto to the extent required by
the terms hereof, Agent shall be entitled to recover for its account such amount
on demand from such Lender together with interest thereon at the Defaulting
Lender Rate.
               (ii) In determining whether a Lender’s balance of the Advances,
Swing Loans, and Protective Advances is less than, equal to, or greater than
such Lender’s Pro Rata Share of the Advances, Swing Loans, and Protective
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in
good funds by Agent with respect to principal, interest, fees payable by
Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral. To
the extent that a net amount is owed to any such Lender after such application,
such net amount shall be distributed by Agent to that Lender as part of such
next Settlement.
               (iii) Between Settlement Dates, Agent, to the extent no
Protective Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of this
Agreement would be applied to the reduction of the Advances, for application to
Swing Lender’s Pro Rata Share of the Advances. If, as of any Settlement Date,
Collections of Borrowers or their Subsidiaries received since the then
immediately preceding Settlement Date have been applied to Swing Lender’s Pro
Rata Share of the Advances other than to Swing Loans, as provided for in the
previous sentence, Swing Lender shall pay to Agent for the accounts of the
Lenders, and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon receipt of
such amount, have, as of such Settlement Date, its Pro Rata Share of the
Advances. During the period between Settlement Dates, Swing Lender with respect
to Swing Loans, Agent with respect to Protective Advances, and each Lender
(subject to the effect of agreements between Agent and individual Lenders) with
respect to the Advances other than Swing Loans and Protective Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent, or the
Lenders, as applicable.
          (f) Notation. Agent shall record on its books the principal amount of
the Advances owing to each Lender, including the Swing Loans owing to Swing
Lender, and Protective Advances owing to Agent, and the interests therein of
each Lender, from time to time and such records shall, absent manifest error,
conclusively be presumed to be correct and accurate.
          (g) Lenders’ Failure to Perform. All Advances (other than Swing Loans
and Protective Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.

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     2.4 Payments.
          (a) Payments by Borrowers.
               (i) Except as otherwise expressly provided herein, all payments
by Borrowers shall be made to Agent’s Account for the account of the Lender
Group and shall be made in immediately available funds, no later than 11:00 a.m.
(California time) on the date specified herein. Any payment received by Agent
later than 11:00 a.m. (California time), shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
               (ii) Unless Agent receives notice from Administrative Borrower
prior to the date on which any payment is due to the Lenders that Borrowers will
not make such payment in full as and when required, Agent may assume that
Borrowers have made (or will make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent Borrowers
do not make such payment in full to Agent on the date when due, each Lender
severally shall repay to Agent on demand such amount distributed to such Lender,
together with interest thereon at the Defaulting Lender Rate for each day from
the date such amount is distributed to such Lender until the date repaid.
          (b) Apportionment and Application.
               (i) So long as no Event of Default has occurred and is continuing
and except as otherwise provided with respect to Defaulting Lenders, all
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which such
payments relate held by each Lender) and all payments of fees and expenses
(other than fees or expenses that are for Agent’s separate account) shall be
apportioned ratably among the Lenders having a Pro Rata Share of the type of
Commitment or Obligation to which a particular fee or expense relates. All
payments to be made hereunder by Borrowers shall be remitted to Agent and all
(subject to Section 2.4(b)(iv)) such payments, and all Collections which have
been received by Agent pursuant to Section 2.7, shall be applied, so long as no
Event of Default has occurred and is continuing, to reduce the balance of the
Advances outstanding and, thereafter, to Borrowers (to be wired to the
Designated Account) or such other Person entitled thereto under applicable law.
               (ii) At any time that an Event of Default has occurred and is
continuing and except as otherwise provided with respect to Defaulting Lenders,
all payments remitted to Agent and all proceeds of Collateral received by Agent
shall be applied as follows:
                    (A) first, to pay any Lender Group Expenses (including cost
or expense reimbursements) or indemnities then due to Agent under the Loan
Documents, until paid in full,
                    (B) second, to pay any fees or premiums then due to Agent
under the Loan Documents until paid in full,
                    (C) third, to pay interest due in respect of all Protective
Advances until paid in full,
                    (D) fourth, to pay the principal of all Protective Advances
until paid in full,

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                    (E) fifth, ratably to pay any Lender Group Expenses
(including cost or expense reimbursements) or indemnities then due to any of the
Lenders under the Loan Documents, until paid in full,
                    (F) sixth, ratably to pay any fees or premiums then due to
any of the Lenders under the Loan Documents until paid in full,
                    (G) seventh, ratably to pay interest due in respect of the
Advances (other than Protective Advances) and the Swing Loans, until paid in
full,
                    (H) eighth, ratably (i) to pay the principal of all Swing
Loans until paid in full, (ii) to pay the principal of all Advances until paid
in full, (iii) to Agent, to be held by Agent, for the ratable benefit of Issuing
Lender and those Lenders having a Revolver Commitment, as cash collateral in an
amount up to 105% of the Letter of Credit Usage, and (iv) to Agent, to be held
by Agent, for the benefit of the Bank Product Providers, as cash collateral in
an amount up to the amount of the Bank Product Reserve established prior to the
occurrence of, and not in contemplation of, the subject Event of Default,
                    (I) ninth, to pay any other Obligations (including the
provision of amounts to Agent, to be held by Agent, for the benefit of the Bank
Product Providers, as cash collateral in an amount up to the amount determined
by Agent in its Permitted Discretion as the amount necessary to secure
Borrowers’ and their Subsidiaries’ obligations in respect of Bank Products), and
                    (J) tenth, to Borrowers (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law.
               (iii) Agent promptly shall distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in writing, such
funds as it may be entitled to receive, subject to a Settlement delay as
provided in Section 2.3(e).
               (iv) In each instance, so long as no Event of Default has
occurred and is continuing, Section 2.4(b)(i) shall not apply to any payment
made by Borrowers to Agent and specified by Borrowers to be for the payment of
specific Obligations then due and payable (or prepayable) under any provision of
this Agreement.
               (v) For purposes of Section 2.4(b)(ii), “paid in full” means
payment of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any Insolvency
Proceeding), default interest, interest on interest, and expense reimbursements,
whether or not any of the foregoing would be or is allowed or disallowed in
whole or in part in any Insolvency Proceeding.
               (vi) In the event of a direct conflict between the priority
provisions of this Section 2.4 and any other provision contained in any other
Loan Document, it is the intention of the parties hereto that such provisions be
read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this Section 2.4 shall
control and govern.
     2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to the Lender Group pursuant to Section 2.1 or
Section 2.12 is greater than any of the limitations set forth in Section 2.1 or
Section 2.12, as applicable (an “Overadvance”), Borrowers immediately (or, with
respect to any intentional Overadvances made by Agent pursuant to
Section 2.3(d)(ii), on such other terms as shall be imposed by Agent and
Lenders) shall pay to Agent, in cash, the amount of such excess, which amount

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shall be used by Agent to reduce the Obligations in accordance with the
priorities set forth in Section 2.4(b). Borrowers promise to pay the Obligations
(including principal, interest, fees, costs, and expenses) in Dollars in full on
the Maturity Date or, if earlier, on the date on which the Obligations are
declared due and payable pursuant to the terms of this Agreement.
     2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.
          (a) Interest Rates. Except as provided in Section 2.6(c), all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows: (i) if the
relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate
equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per
annum rate equal to the Base Rate plus the Base Rate Margin.
          (b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable
benefit of the Lenders with a Revolver Commitment, subject to any agreements
between Agent and individual Lenders), a Letter of Credit fee (in addition to
the charges, commissions, fees, and costs set forth in Section 2.12(e)) which
shall accrue at a rate equal to 2.75% per annum times the Daily Balance of the
undrawn amount of all outstanding Letters of Credit.
          (c) Default Rate. Upon the occurrence and during the continuation of
an Event of Default (and at the election of Agent or the Required Lenders),
               (i) all Obligations (except for undrawn Letters of Credit and
except for Bank Product Obligations) that have been charged to the Loan Account
pursuant to the terms hereof shall bear interest on the Daily Balance thereof at
a per annum rate equal to 2 percentage points above the per annum rate otherwise
applicable hereunder, and
               (ii) the Letter of Credit fee provided for in Section 2.6(b)
shall be increased to 2 percentage points above the per annum rate otherwise
applicable hereunder.
          (d) Payment. Except as provided to the contrary in Section 2.11 or
Section 2.13(a), interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are outstanding. Borrowers hereby
authorize Agent, from time to time, without prior notice to Borrowers, to charge
all interest and fees (when due and payable), all Lender Group Expenses (as and
when incurred), all charges, commissions, fees, and costs provided for in
Section 2.12(e) (as and when accrued or incurred), all fees and costs provided
for in Section 2.11 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document (including any amounts due and
payable to the Bank Product Providers in respect of Bank Products up to the
amount of the Bank Product Reserve) to Borrowers’ Loan Account, which amounts
thereafter shall constitute Advances hereunder and shall accrue interest at the
rate then applicable to Advances that are Base Rate Loans. Any interest not paid
when due shall be compounded by being charged to the Loan Account and shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances that are Base Rate Loans.
          (e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.

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          (f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.
     2.7 Cash Management.
          (a) Parent shall and shall cause each of the Obligors to (i) establish
and maintain cash management services of a type and on terms satisfactory to
Agent at one or more of the banks set forth on Schedule 2.7(a) (each a “Cash
Management Bank”), and shall request in writing and otherwise take such
reasonable steps to ensure that all of their and their Subsidiaries’ Account
Debtors forward payment of the amounts owed by them directly to such Cash
Management Bank, and (ii) deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all of their Collections (including those sent directly by their Account Debtors
to Borrowers or their Subsidiaries) into a bank account in Agent’s name (a “Cash
Management Account”) at one of the Cash Management Banks.
          (b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Agent and the applicable Obligor. Each such Cash
Management Agreement shall provide, among other things, that (i) the Cash
Management Bank will comply with any instructions originated by Agent directing
the disposition of the funds in such Cash Management Account without further
consent by Parent or any of its Subsidiaries, as applicable, (ii) the Cash
Management Bank has no rights of setoff or recoupment or any other claim against
the applicable Cash Management Account, other than for payment of its service
fees and other charges directly related to the administration of such Cash
Management Account and for returned checks or other items of payment, and
(iii) it will forward, by daily sweep, all amounts in the applicable Cash
Management Account to the Agent’s Account.
          (c) So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.7(a) to add or replace
a Cash Management Bank or Cash Management Account; provided, however, that
(i) such prospective Cash Management Bank shall be reasonably satisfactory to
Agent, and (ii) prior to the time of the opening of such Cash Management
Account, the applicable Obligor and such prospective Cash Management Bank shall
have executed and delivered to Agent a Cash Management Agreement. The applicable
Obligor shall close any of its Cash Management Accounts (and establish
replacement cash management accounts in accordance with the foregoing sentence)
promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in Agent’s
reasonable judgment, or as promptly as practicable and in any event within 60
days of notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent’s liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent’s
reasonable judgment.
          (d) Each Cash Management Account shall be a cash collateral account
subject to a Control Agreement.
     2.8 Crediting Payments. The receipt of any payment item by Agent (whether
from transfers to Agent by the Cash Management Banks pursuant to the Cash
Management Agreements or otherwise) shall not be considered a payment on account
unless such payment item is a wire transfer of immediately available

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federal funds made to the Agent’s Account or unless and until such payment item
is honored when presented for payment. Should any payment item not be honored
when presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Agent only if it is received into the Agent’s Account on a Business Day on or
before 11:00 a.m. (California time). If any payment item is received into the
Agent’s Account on a non-Business Day or after 11:00 a.m. (California time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day.
     2.9 Designated Account. Agent is authorized to make the Advances, and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person or, without instructions, if pursuant to
Section 2.6(d). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower,
any Advance, Protective Advance, or Swing Loan requested by Borrowers and made
by Agent or the Lenders hereunder shall be made to the Designated Account.
     2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
on which Borrowers will be charged with all Advances (including Protective
Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrowers or for Borrowers’ account, the Letters of Credit issued by Issuing
Lender for Borrowers’ account, and with all other payment Obligations hereunder
or under the other Loan Documents (except for Bank Product Obligations),
including, accrued interest, fees and expenses, and Lender Group Expenses. In
accordance with Section 2.8, the Loan Account will be credited with all payments
received by Agent from Borrowers or for Borrowers’ account, including all
amounts received in the Agent’s Account from any Cash Management Bank. Agent
shall render statements regarding the Loan Account to Administrative Borrower,
including principal, interest, and fees, and including an itemization of all
charges and expenses constituting Lender Group Expenses owing, and such
statements, absent manifest error, shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.
     2.11 Fees. Borrowers shall pay to Agent, as and when due and payable under
the terms of the Fee Letter, the fees set forth in the Fee Letter.
     2.12 Letters of Credit.
          (a) Subject to the terms and conditions of this Agreement, the Issuing
Lender agrees to issue letters of credit for the account of Borrowers (each, an
“L/C”) or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an “L/C Undertaking”) with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, the
prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrowers. Each request for the issuance of a Letter of Credit or the amendment,
renewal, or extension of any outstanding Letter of Credit, shall be made in
writing by an Authorized Person and delivered to the Issuing Lender and Agent
via hand delivery, telefacsimile, or other electronic method of transmission
reasonably in advance of the requested date of issuance, amendment, renewal, or
extension. Each such request shall be in form and substance satisfactory to the
Issuing Lender in its Permitted Discretion and shall specify (i) the amount of
such Letter of Credit, (ii) the date of issuance, amendment, renewal, or
extension of such Letter of Credit, (iii) the expiration date of such Letter of
Credit, (iv) the name and address of the beneficiary thereof (or the beneficiary
of the Underlying Letter of Credit, as applicable), and (v) such other
information (including, in the case of an amendment, renewal, or extension,
identification of the outstanding Letter of Credit to be so amended, renewed, or
extended) as shall be necessary

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to prepare, amend, renew, or extend such Letter of Credit. If requested by the
Issuing Lender, Borrowers also shall be an applicant under the application with
respect to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the issuance
of such requested Letter of Credit:
               (i) the Letter of Credit Usage would exceed the Borrowing Base
less the outstanding amount of Advances, or
               (ii) the Letter of Credit Usage would exceed $5,000,000, or
               (iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the outstanding amount of Advances less the Bank Product
Reserve, and less the aggregate amount of reserves, if any, established by Agent
under Section 2.1(b).
     Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Administrative Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California time, on such
date, or, if such notice has not been received by Administrative Borrower prior
to such time on such date, then not later than 11:00 a.m., California time, on
the Business Day that Administrative Borrower receives such notice, if such
notice is received prior to 10:00 a.m., California time, on the date of receipt,
or by 11:00 a.m., California time, on the Business Day after notice is received
if such receipt is on or after 10:00 a.m. California time, on such date, and, in
the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, initially, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans.
To the extent an L/C Disbursement is deemed to be an Advance hereunder,
Borrowers’ obligation to reimburse such L/C Disbursement shall be discharged and
replaced by the resulting Advance. Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(b) to reimburse the Issuing Lender, then to such
Lenders and the Issuing Lender as their interests may appear.
          (b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to
fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing
subsection on the same terms and conditions as if Borrowers had requested such
Advance and Agent shall promptly pay to Issuing Lender the amounts so received
by it from the Lenders. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Lender or the Lenders with Revolver
Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Revolver Commitment, and each Lender with a Revolver Commitment shall be
deemed to have purchased, a participation in each Letter of Credit, in an amount
equal to its Pro Rata Share of the Risk Participation Liability of such Letter
of Credit, and each such Lender agrees to pay to Agent, for the account of the
Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender with a Revolver Commitment hereby absolutely and
unconditionally agrees to pay to Agent, for the account of the Issuing Lender,
such Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not reimbursed by Borrowers on the date due as provided in Section 2.12(a),
or of any reimbursement payment required to be refunded to Borrowers for any
reason. Each Lender with a Revolver Commitment acknowledges and agrees that its
obligation to deliver to Agent, for the account of the Issuing Lender, an amount
equal to its respective Pro Rata

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Share of each L/C Disbursement made by the Issuing Lender pursuant to this
Section 2.12(b) shall be absolute and unconditional and such remittance shall be
made notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3. If any
such Lender fails to make available to Agent the amount of such Lender’s Pro
Rata Share of each L/C Disbursement made by the Issuing Lender in respect of
such Letter of Credit as provided in this Section, such Lender shall be deemed
to be a Defaulting Lender and Agent (for the account of the Issuing Lender)
shall be entitled to recover such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate until paid in full.
          (c) Each Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided, however, that no Borrower shall
be obligated hereunder to indemnify for any loss, cost, expense, or liability to
the extent that it is caused by the gross negligence or willful misconduct of
the Issuing Lender or any other member of the Lender Group. Each Borrower agrees
to be bound by the Underlying Issuer’s regulations and interpretations of any
Underlying Letter of Credit or by Issuing Lender’s interpretations of any L/C
issued by Issuing Lender to or for such Borrower’s account, even though this
interpretation may be different from such Borrower’s own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrowers’ instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group’s
indemnification of any Underlying Issuer; provided, however, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group. Each
Borrower hereby acknowledges and agrees that neither the Lender Group nor the
Issuing Lender shall be responsible for delays, errors, or omissions resulting
from the malfunction of equipment in connection with any Letter of Credit.
          (d) Each Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender’s instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
          (e) Any and all issuance charges, commissions, fees, and costs
incurred by the Issuing Lender relating to Underlying Letters of Credit shall be
Lender Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer is .825% per annum
times the undrawn amount of each Underlying Letter of Credit, that such issuance
charge may be changed from time to time, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
          (f) If by reason of (i) any change after the Closing Date in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application thereof by any Governmental Authority, or (ii) compliance by the
Underlying Issuer or the Lender Group with any direction, request, or
requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor
thereto):

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               (i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued hereunder, or
               (ii) there shall be imposed on the Underlying Issuer or the
Lender Group any other condition regarding any Underlying Letter of Credit or
any Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this Section, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
     2.13 LIBOR Option.
          (a) Interest and Interest Payment Dates. In lieu of having interest
charged at the rate based upon the Base Rate, Borrowers shall have the option
(the “LIBOR Option”) to have interest on all or a portion of the Advances be
charged (whether at the time when made (unless otherwise provided herein), upon
conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of a
LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the LIBOR
Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto, (ii) the date on which all
or any portion of the Obligations are accelerated pursuant to the terms hereof,
or (iii) the date on which this Agreement is terminated pursuant to the terms
hereof. On the last day of each applicable Interest Period, unless
Administrative Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically
shall convert to the rate of interest then applicable to Base Rate Loans of the
same type hereunder. At any time that an Event of Default has occurred and is
continuing, Borrowers no longer shall have the option to request that Advances
bear interest at a rate based upon the LIBOR Rate and Agent shall have the right
to convert the interest rate on all outstanding LIBOR Rate Loans to the rate
then applicable to Base Rate Loans hereunder.
          (b) LIBOR Election.
               (i) Administrative Borrower may, at any time and from time to
time, so long as no Event of Default has occurred and is continuing, elect to
exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. (California
time) at least 3 Business Days prior to the commencement of the proposed
Interest Period (the “LIBOR Deadline”). Notice of Administrative Borrower’s
election of the LIBOR Option for a permitted portion of the Advances and an
Interest Period pursuant to this Section shall be made by delivery to Agent of a
LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic
notice received by Agent before the LIBOR Deadline (to be confirmed by delivery
to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California
time) on the same day). Promptly upon its receipt of each such LIBOR Notice,
Agent shall provide a copy thereof to each of the affected Lenders.
               (ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall
indemnify, defend, and hold Agent and the Lenders harmless against any loss,
cost, or expense incurred by Agent or any Lender as a result of (A) the payment
of any principal of any LIBOR Rate Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (B) the conversion of any LIBOR Rate Loan other than on the last day
of the Interest Period applicable thereto, or (C) the failure to borrow,
convert, continue or

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prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, or expenses, “Funding Losses”). Funding
Losses shall, with respect to Agent or any Lender, be deemed to equal the amount
determined by Agent or such Lender to be the excess, if any, of (1) the amount
of interest that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the last day
of the then current Interest Period therefor (or, in the case of a failure to
borrow, convert, or continue, for the period that would have been the Interest
Period therefor), minus (2) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Agent or such Lender
would be offered were it to be offered, at the commencement of such period,
Dollar deposits of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to Administrative Borrower
setting forth any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section 2.13 shall be conclusive absent manifest error.
In the event that Borrowers obtain any LIBOR Rate Loans during the Tax Clearance
Waiting Period, Agent and Lenders agree not to charge the Borrowers for any
Funding Losses under Section 2.13 (b)(ii)(A), if and to the extent that such
Funding Losses arise out of the automatic application of Collections to repay
such LIBOR Rate Loans under Section 2.4(b)(i) other than as a result of an Event
of Default. For purposes of the preceding sentence, “Tax Clearance Waiting
Period” means the period commencing on the Closing Date and continuing until the
earlier to occur of (x) Agent’s receipt of confirmation from the relevant
Governmental Authorities that the Lenders party to the Agreement on the Closing
Date are exempt from withholding tax under the laws of the United Kingdom, or
(y) the occurrence of a Default or an Event of Default.
               (iii) Borrowers shall have not more than 5 LIBOR Rate Loans in
effect at any given time. Borrowers only may exercise the LIBOR Option for LIBOR
Rate Loans of at least $1,000,000 and integral multiples of $500,000 in excess
thereof.
          (c) Conversion. Borrowers may convert LIBOR Rate Loans to Base Rate
Loans at any time; provided, however, that in the event that LIBOR Rate Loans
are converted or prepaid on any date that is not the last day of the Interest
Period applicable thereto, including as a result of any automatic prepayment
through the required application by Agent of proceeds of Parent’s and its
Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in accordance
with Section 2.13 (b)(ii) above.
          (d) Special Provisions Applicable to LIBOR Rate.
               (i) The LIBOR Rate may be adjusted by Agent with respect to any
Lender on a prospective basis to take into account any additional or increased
costs to such Lender of maintaining or obtaining any eurodollar deposits or
increased costs, in each case, due to changes in applicable law occurring
subsequent to the commencement of the then applicable Interest Period, including
changes in tax laws (except (a) changes of general applicability in corporate
income tax laws and (b) changes in the rate of tax on the overall income of the
Lender) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, which additional or increased costs would increase the cost
of funding or maintaining loans bearing interest at the LIBOR Rate. In any such
event, the affected Lender shall give Administrative Borrower and Agent notice
of such a determination and adjustment and Agent promptly shall transmit the
notice to each other Lender and, upon its receipt of the notice from the
affected Lender, Administrative Borrower may, by notice to such affected Lender
(y) require such Lender to furnish to Administrative Borrower a statement
setting forth the basis for adjusting such LIBOR Rate and the method for
determining the amount of such adjustment, or (z) repay the LIBOR Rate Loans
with respect to which such adjustment is made (together with any amounts due
under Section 2.13(b)(ii)).

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               (ii) In the event that any change in market conditions or any
law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date hereof,
in the reasonable opinion of any Lender, make it unlawful or impractical for
such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such
Lender shall give notice of such changed circumstances to Agent and
Administrative Borrower and Agent promptly shall transmit the notice to each
other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are
outstanding, the date specified in such Lender’s notice shall be deemed to be
the last day of the Interest Period of such LIBOR Rate Loans, and interest upon
the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate
then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to
elect the LIBOR Option until such Lender determines that it would no longer be
unlawful or impractical to do so.
          (e) No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate. The provisions of this Section shall apply as if each Lender or its
Participants had match funded any Obligation as to which interest is accruing at
the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.
     2.14 Capital Requirements. If, after the date hereof, any Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender’s calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error); provided, however, that
Borrowers shall not be required to compensate any Lender pursuant to this
Section 2.14 for such reduction of rate of return on capital incurred more than
90 days prior to the date that such Lender delivers such statement. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
     2.15 Joint and Several Liability of Borrowers.
          (a) Each Borrower is accepting joint and several liability hereunder
and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Lender Group under this Agreement, for the
mutual benefit, directly and indirectly, of each Borrower and in consideration
of the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.
          (b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Borrower without preferences or distinction among them.

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          (c) If and to the extent that any Borrower shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrowers will make such payment with respect to, or perform, such
Obligation.
          (d) The Obligations of each Borrower under the provisions of this
Section 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Borrower enforceable against each Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.
          (e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of any Advances or Letters of Credit issued under or pursuant to this
Agreement, notice of the occurrence of any Default, Event of Default, or of any
demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Borrower hereby assents to, and waives notice
of, any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Agent or Lenders at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the Obligations,
and the taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower. Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Borrower to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
Section 2.15 afford grounds for terminating, discharging or relieving any
Borrower, in whole or in part, from any of its Obligations under this
Section 2.15, it being the intention of each Borrower that, so long as any of
the Obligations hereunder remain unsatisfied, the Obligations of each Borrower
under this Section 2.15 shall not be discharged except by performance and then
only to the extent of such performance. The Obligations of each Borrower under
this Section 2.15 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Borrower or any Agent or Lender.
          (f) Each Borrower represents and warrants to Agent and Lenders that
such Borrower is currently informed of the financial condition of Borrowers and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. Each Borrower further represents
and warrants to Agent and Lenders that such Borrower has read and understands
the terms and conditions of the Loan Documents. Each Borrower hereby covenants
that such Borrower will continue to keep informed of Borrowers’ financial
condition, the financial condition of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment or nonperformance of the
Obligations.
          (g) The provisions of this Section 2.15 are made for the benefit of
Agent, Lenders and their respective successors and assigns, and may be enforced
by it or them from time to time against any or all Borrowers as often as
occasion therefor may arise and without requirement on the part of Agent,
Lender, successor or assign first to marshal any of its or their claims or to
exercise any of its or their rights against any Borrower or to exhaust any
remedies available to it or them against any Borrower or to resort to any other
source or means of obtaining payment of any of the Obligations hereunder or to
elect any other remedy. The provisions of this Section 2.15 shall remain in
effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the

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Obligations, is rescinded or must otherwise be restored or returned by Agent or
any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or
otherwise, the provisions of this Section 2.15 will forthwith be reinstated in
effect, as though such payment had not been made.
          (h) Each Borrower hereby agrees that it will not enforce any of its
rights of contribution or subrogation against any other Borrower with respect to
any liability incurred by it hereunder or under any of the other Loan Documents,
any payments made by it to Agent or Lenders with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to any Agent or
Lender hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
3. CONDITIONS; TERM OF AGREEMENT.
     3.1 Conditions Precedent to the Initial Extension of Credit. The obligation
of each Lender to make its initial extension of credit provided for hereunder,
is subject to the fulfillment, to the satisfaction of Agent and each Lender of
each of the conditions precedent set forth on Schedule 3.1 (the making of such
initial extension of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent).
     3.2 Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make any Advances hereunder (or to
extend any other credit hereunder) at any time shall be subject to the following
conditions precedent:
          (a) the representations and warranties contained in this Agreement or
in the other Loan Documents shall be true and correct in all material respects
(except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) on and as of the date of such extension of
credit, as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
          (b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
          (c) no injunction, writ, restraining order, or other order of any
nature restricting or prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against any Borrower, Agent, or any Lender; and
          (d) no Material Adverse Change shall have occurred since May 27, 2006.
     3.3 Term. This Agreement shall continue in full force and effect for a term
ending on August 1, 2009 (the “Maturity Date”). The foregoing notwithstanding,
the Lender Group, upon the election of the Required Lenders, shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
     3.4 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to outstanding Letters of Credit and including all Bank Product
Obligations) immediately shall become due and payable without notice or

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demand (including (a) either (i) providing cash collateral to be held by Agent
for the benefit of those Lenders with a Revolver Commitment in an amount equal
to 105% of the Letter of Credit Usage, or (ii) causing the original Letters of
Credit to be returned to the Issuing Lender, and (b) providing cash collateral
(in an amount determined by Agent as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Agent for the benefit of the Bank
Product Providers with respect to the Bank Product Obligations). No termination
of this Agreement, however, shall relieve or discharge Parent or its
Subsidiaries of their duties, Obligations, or covenants hereunder or under any
other Loan Document and the Agent’s Liens in the Collateral shall remain in
effect until all Obligations have been paid in full and the Lender Group’s
obligations to provide additional credit hereunder have been terminated. When
this Agreement has been terminated and all of the Obligations have been paid in
full and the Lender Group’s obligations to provide additional credit under the
Loan Documents have been terminated irrevocably, Agent will, at Borrowers’ sole
expense, execute and deliver any termination statements, lien releases, mortgage
releases, re-assignments of trademarks, discharges of security interests, and
other similar discharge or release documents (and, if applicable, in recordable
form) as are reasonably necessary to release, as of record, the Agent’s Liens
and all notices of security interests and liens previously filed by Agent with
respect to the Obligations.
     3.5 Early Termination by Borrowers. Borrowers have the option, at any time
upon 30 days prior written notice by Administrative Borrower to Agent, to
terminate this Agreement and terminate the Commitments hereunder by paying to
Agent, in cash, the Obligations (including (a) either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders with a Revolver
Commitment in an amount equal to 105% of the Letter of Credit Usage, or
(ii) causing the original Letters of Credit to be returned to the Issuing
Lender, and (b) providing cash collateral (in an amount determined by Agent as
sufficient to satisfy the reasonably estimated credit exposure) to be held by
Agent for the benefit of the Bank Product Providers with respect to the Bank
Product Obligations), in full. If Administrative Borrower has sent a notice of
termination pursuant to the provisions of this Section, then the Commitments
shall terminate and Borrowers shall be obligated to repay the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 105%
of the Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to the Issuing Lender, and (b) providing cash collateral (in an
amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure) to be held by Agent for the benefit of the Bank Product
Providers with respect to the Bank Product Obligations), in full, on the date
set forth as the date of termination of this Agreement in such notice.
4. REPRESENTATIONS AND WARRANTIES.
     In order to induce the Lender Group to enter into this Agreement, Parent
and each Borrower, jointly and severally, make the following representations and
warranties to the Lender Group which shall be true, correct, and complete, in
all material respects, as of the date hereof, and shall be true, correct, and
complete, in all material respects, as of the Closing Date, and at and as of the
date of the making of each Advance (or other extension of credit) made
thereafter, as though made on and as of the date of such Advance (or other
extension of credit) (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
     4.1 No Encumbrances. Parent and each of its Subsidiaries has good and
indefeasible title to, or a valid leasehold interest in, its personal property
assets and good and marketable title to, or a valid leasehold interest in, their
Real Property, in each case, free and clear of Liens except for Permitted Liens.
     4.2 Eligible Accounts. As to each Account that is identified by a Borrower
as an Eligible Account in a borrowing base report submitted to Agent, such
Account is (a) a bona fide existing payment obligation of the applicable Account
Debtor created by the sale and delivery of Inventory or the rendition of
services to such Account Debtor in the ordinary course of such Person’s
business, (b) at the time so identified, and thereafter except as disclosed to
Agent, owed to such Person without any known defenses, disputes, offsets,
counterclaims, or rights of return or cancellation, and (c) at the time so
identified, and thereafter except

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as disclosed to Agent, not excluded as ineligible by virtue of one or more of
the excluding criteria set forth in the definition of Eligible Accounts.
     4.3 Inventory. The Inventory of Active Obligors is, in all material
respects, of good and merchantable quality, free from known defects.
     4.4 Equipment. Each material item of Equipment of Active Obligors is used
or held for use in their business and is, in all material respects, in good
working order, ordinary wear and tear and damage by casualty excepted.
     4.5 Location of Inventory and Equipment. Except as disclosed on
Schedule 4.5, the Inventory and Equipment (other than vehicles or Equipment out
for repair) of Active Obligors with an aggregate fair market value in excess of
$100,000 at any one location or $250,000 in the aggregate for all such locations
are not stored with a bailee, warehouseman, or similar party and are located
only at, or in-transit between, the locations identified on Schedule 4.5 (as
such Schedule may be updated pursuant to Section 5.9).
     4.6 Inventory Records. Each Active Obligor keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its and its
Subsidiaries’ Inventory and the book value thereof.
     4.7 Jurisdiction of Organization; Location of Chief Executive Office;
Organizational Identification Number; Commercial Tort Claims.
          (a) The name of (within the meaning of Section 9-503 of the Code) and
jurisdiction of organization of Parent and each of its Subsidiaries is set forth
on Schedule 4.7(a) (as such Schedule may be updated from time to time to reflect
changes permitted to be made under Section 6.5).
          (b) The chief executive office of Parent and each of its Subsidiaries
is located at the address indicated on Schedule 4.7(b) (as such Schedule may be
updated from time to time to reflect changes permitted to be made under
Section 5.9).
          (c) Parent’s and each of its Subsidiaries’ tax identification numbers
and organizational identification numbers, if any, are identified on
Schedule 4.7(c) (as such Schedule may be updated from time to time to reflect
changes permitted to be made under Section 6.5).
          (d) As of the Closing Date, neither Parent nor any of its Subsidiaries
holds any commercial tort claims, except as set forth on Schedule 4.7(d).
     4.8 Due Organization and Qualification; Subsidiaries.
          (a) Parent and each of its Subsidiaries is duly organized or
incorporated and existing and in good standing under the laws of the
jurisdiction of its organization or incorporation and qualified to do business
in any state where the failure to be so qualified reasonably could be expected
to result in a Material Adverse Change.
          (b) Set forth on Schedule 4.8(b) (as such Schedule may be updated from
time to time to reflect changes permitted to be made under Section 5.16, or
changes to Parent’s capital structure that are not otherwise prohibited under
the Loan Documents), is a complete and accurate description of the authorized
capital Stock of Parent, by class, and, as of the Closing Date, a description of
the number of shares of each such class that are issued and outstanding. Other
than as described on Schedule 4.8(b), there are no subscriptions, options,
warrants, or calls relating to any shares of Parent’s capital Stock, including
any right of conversion or exchange under any outstanding security or other
instrument, except for the issuance of Series B Preferred Stock, or options,
warrants, and restricted stock granted to employees, management, and directors
in

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the ordinary course of Parent’s business as in effect on the Closing Date so
long as the granting of such options, warrants or restricted stock (x) does not
result in a Change of Control and (y) is not otherwise prohibited hereunder.
Parent is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital Stock or any security
convertible into or exchangeable for any of its capital Stock.
          (c) Set forth on Schedule 4.8(c) (as such Schedule may be updated from
time to time to reflect changes permitted to be made under Section 5.16), is a
complete and accurate list of Parent’s direct and indirect Subsidiaries,
showing: (i) the jurisdiction of their organization, (ii) the number of shares
of each class of common and preferred Stock authorized for each of such
Subsidiaries, and (iii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by Parent. All of the
outstanding capital Stock of each such Subsidiary has been validly issued and is
fully paid and non-assessable.
          (d) Except as set forth on Schedule 4.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Parent’s Subsidiaries’ capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. Neither Parent nor
any of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Parent’s Subsidiaries’ capital Stock or any security convertible into or
exchangeable for any such capital Stock.
     4.9 Due Authorization; No Conflict.
          (a) The execution, delivery, and performance by Parent and its
Subsidiaries of this Agreement and the Loan Documents to which each,
individually or collectively, is a party have been duly authorized by all
necessary action on the part of such Person.
          (b) The execution, delivery, and performance by Parent and its
Subsidiaries of this Agreement and the other Loan Documents to which each,
individually or collectively, is a party do not and will not (i) violate any
provision of any foreign or domestic federal, state, or local law or regulation
applicable to such Person, the Governing Documents of such Person, or any order,
judgment, or decree of any court or other Governmental Authority binding on such
Person, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of such Person, (iii) result in or require the creation or imposition
of any Lien of any nature whatsoever upon any properties or assets such Person,
other than Permitted Liens, or (iv) require any approval of such Person’s
interestholders or any approval or consent of any Person under any material
contractual obligation of such Person, other than consents or approvals that
have been obtained and that are still in force and effect.
          (c) Other than the filing of financing statements and other filings or
actions necessary to perfect Liens granted to Agent in the Collateral, the
execution, delivery, and performance by Parent and its Subsidiaries of this
Agreement and the other Loan Documents to which each, individually or
collectively, is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than consents or approvals that have been obtained
and that are still in force and effect.
          (d) This Agreement and the other Loan Documents to which Parent and
its Subsidiaries, individually or collectively, is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by such
Person will be the legally valid and binding obligations of such Person,
enforceable against such Person in accordance with their respective terms,
except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally.

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          (e) The Agent’s Liens are validly created, perfected (other than
(i) in respect of motor vehicles, (ii) the UK Real Property Collateral, and
(iii) any Deposit Accounts and Securities Accounts not subject to a Control
Agreement as permitted by Section 6.12, and subject only to the filing of
financing statements and other foreign perfection filings), and first priority
Liens, subject only to Permitted Liens.
     4.10 Litigation. Other than those matters disclosed on Schedule 4.10 and
other than matters arising after the Closing Date that reasonably could not be
expected to result in a Material Adverse Change, there are no actions, suits, or
proceedings pending or, to the best knowledge of each Obligor party hereto,
threatened against Parent or any of its Subsidiaries.
     4.11 No Material Adverse Change. All financial statements relating to
Parent and its Subsidiaries that have been delivered by any such Persons to the
Lender Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects, the
applicable Person’s or Persons’ financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Borrowers and their Subsidiaries since May 27,
2006.
     4.12 Fraudulent Transfer.
          (a) Parent and its Subsidiaries, on a consolidated basis, are Solvent.
          (b) No transfer of property is being made by Parent or its
Subsidiaries and no obligation is being incurred by Parent or its Subsidiaries
in connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Parent or any of its Subsidiaries.
     4.13 Employee Benefits. None of Parent, any of its Subsidiaries, or any of
their ERISA Affiliates maintains or contributes to any Benefit Plan.
     4.14 Environmental Condition. Except as set forth on Schedule 4.14, (a) to
the knowledge of each Obligor party hereto, none of Parent’s or any of its
Subsidiaries’ properties or assets has ever been used by Parent, its
Subsidiaries, or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such use, production, storage, handling, treatment, release or transport
was in violation, in any material respect, of any applicable Environmental Law
and expected to involve liabilities in an aggregate amount in excess of
$1,000,000, (b) to the knowledge of each Obligor party hereto, neither Parent’s
nor any of its Subsidiaries’ properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site which designation or identification could be
expected to result in liabilities in an aggregate amount in excess of
$1,000,000, (c) neither Parent nor any of its Subsidiaries has received notice
that a Lien arising under any Environmental Law involving an aggregate amount in
excess of $1,000,000 has attached to any revenues or to any Real Property owned
or operated by Parent or its Subsidiaries, and (d) neither Parent nor any of its
Subsidiaries have received a summons, citation, notice, or directive which could
reasonably be expected to involve liabilities in an aggregate amount in excess
of $1,000,000 from the United States Environmental Protection Agency or any
other foreign or domestic federal, state, or local governmental agency
concerning any action or omission by Parent or any Subsidiary of Parent
resulting in the releasing or disposing of Hazardous Materials into the
environment.
     4.15 Intellectual Property. Parent and its Subsidiaries own, or hold
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of their business as currently
conducted, and attached hereto as Schedule 4.15 (as updated from time to time)
is a true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which Parent or one of its Subsidiaries is the owner or is
an

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exclusive licensee; provided, however, that the Obligors party hereto may amend
Schedule 4.15 to add additional property so long as such amendment occurs by
written notice to Agent not less than 10 days after the date on which Parent or
any Subsidiary of Parent acquires any such property after the Closing Date.
     4.16 Leases. Parent and its Subsidiaries enjoy peaceful and undisturbed
possession under all leases material to their business and to which they are
parties or under which they are operating and all of such material leases are
valid and subsisting and no material default by Parent or its Subsidiaries
exists under any of them.
     4.17 Deposit Accounts and Securities Accounts. Set forth on Schedule 4.17
is a listing of all of Parent’s and its Subsidiaries’ Deposit Accounts and
Securities Accounts, including, with respect to each bank or securities
intermediary (a) the name and address of such Person, and (b) the account
numbers of the Deposit Accounts or Securities Accounts maintained with such
Person.
     4.18 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Parent and its Subsidiaries in writing to Agent or
any Lender (including all information contained in the Schedules hereto or in
the other Loan Documents) for purposes of or in connection with this Agreement,
the other Loan Documents, or any transaction contemplated herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of Parent and its Subsidiaries in writing to Agent or any Lender
will be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections represent Parent’s good faith estimate of its
and its Subsidiaries’ future performance for the periods covered thereby based
upon assumptions believed by Parent to be reasonable at the time of the delivery
thereof to Agent (it being understood that such projections and forecasts are
subject to uncertainties and contingencies, many of which are beyond the control
of Parent and its Subsidiaries and no assurances can be given that such
projections or forecasts will be realized).
     4.19 Indebtedness. Set forth on Schedule 4.19 is a true and complete list
of all Indebtedness of Parent and its Subsidiaries outstanding immediately prior
to the Closing Date that is to remain outstanding after the Closing Date and
such Schedule accurately sets forth the aggregate principal amount of such
Indebtedness and the principal terms thereof.
     4.20 Inactive Obligors. Each of the Inactive Obligors is inactive and does
not conduct any business operations, except as may be related to the dissolution
of such Inactive Obligor or the consolidation or merger of such Inactive Obligor
with one or more Active Obligors as permitted under the terms of this Agreement.
5. AFFIRMATIVE COVENANTS.
     Parent and each Borrower, joint and severally, covenants and agrees that,
until termination of all of the Commitments and payment in full of the
Obligations, each such Person shall and shall cause each of its respective
Subsidiaries to do all of the following:
     5.1 Accounting System. Maintain a system of accounting that enables Parent
and each Subsidiary to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by Agent. Active Obligors also shall
keep a reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their Subsidiaries’ sales.

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     5.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with
copies for each Lender) with each of the reports set forth on Schedule 5.2 at
the times specified therein. In addition, Parent and each Borrower agrees to
cooperate fully with Agent to facilitate and implement a system of electronic
collateral reporting in order to provide electronic reporting of each of the
items set forth above.
     5.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
copies to each Lender, each of the financial statements, reports, or other items
set forth on Schedule 5.3 at the times specified therein. In addition, Parent
agrees that no Subsidiary of Parent will have a fiscal year different from that
of Parent.
     5.4 Guarantor Reports. Cause each Guarantor to deliver its annual financial
statements at the time when Parent provides its audited financial statements to
Agent, but only to the extent such Guarantor’s financial statements are not
consolidated with Parent’s financial statements.
     5.5 Inspection. Permit Agent, each Lender, and each of their duly
authorized representatives or agents to visit any of its properties and inspect
any of its assets or books and records, to examine and make copies of its books
and records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees at such reasonable times
and intervals as Agent or any such Lender may designate and, so long as no
Default or Event of Default exists, with reasonable prior notice to
Administrative Borrower.
     5.6 Maintenance of Properties. Maintain and preserve all of its properties
which are necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear, tear, and casualty excepted (and
except where the failure to do so could not be expected to result in a Material
Adverse Change), and comply at all times with the provisions of all material
leases to which it is a party as lessee, so as to prevent any loss or forfeiture
thereof or thereunder.
     5.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Parent,
its Subsidiaries, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Parent will and will cause its Subsidiaries to make timely
payment or deposit of all tax payments and withholding taxes required of them by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Agent with proof satisfactory to Agent indicating that the applicable
Person has made such payments or deposits.
     5.8 Insurance.
          (a) At Borrowers’ expense, maintain insurance respecting Parent’s and
its Subsidiaries’ assets wherever located, covering loss or damage by fire,
theft, explosion, and all other hazards and risks as ordinarily are insured
against by other Persons engaged in the same or similar businesses. Parent and
its Subsidiaries also shall maintain business interruption, public liability,
and product liability insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation. All such policies of insurance
shall be in such amounts and with such insurance companies as are reasonably
satisfactory to Agent. Administrative Borrower shall deliver copies of all such
policies of Obligors to Agent with an endorsement naming Agent as the sole loss
payee (under a satisfactory lender’s loss payable endorsement) or additional
insured, as appropriate. Each such policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever.
          (b) Administrative Borrower shall give Agent prompt notice of any loss
exceeding $250,000 covered by such insurance of Parent or any of its
Subsidiaries. So long as no Event of Default has occurred and is continuing,
Parent and its Subsidiaries, as the case may be, shall have the exclusive right
to

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adjust any losses payable under any such insurance policies of Subsidiaries that
are not Obligors and under any insurance policies of Obligors which are less
than $1,000,000. Following the occurrence and during the continuation of an
Event of Default, or in the case of any losses exceeding $1,000,000 payable
under such insurance covering Collateral, Agent shall have the exclusive right
to adjust any losses payable under any such insurance policies covering
Collateral, without any liability to Parent and its Subsidiaries whatsoever in
respect of such adjustments. Any monies received as payment for any loss under
any insurance policy mentioned above (other than liability insurance policies or
casualty policies respecting assets that are not Collateral) or as payment of
any award or compensation for condemnation or taking by eminent domain with
respect to Collateral, shall be paid over to Agent to be applied at the option
of the Required Lenders either to the prepayment of the Obligations (provided
that any such prepayment shall not result in a permanent reduction of the
Commitments) or to be disbursed to Administrative Borrower under staged payment
terms reasonably satisfactory to the Required Lenders for application to the
cost of repairs, replacements, or restorations; provided, however, that, with
respect to any such monies in an aggregate amount during any 12 consecutive
month period not in excess of $1,000,000, so long as (A) no Default or Event of
Default shall have occurred and is continuing, (B) Administrative Borrower shall
have given Agent prior written notice of Parent’s or its respective
Subsidiaries’ intention to apply such monies to the cost of repair, replacement,
or restoration of the property which is the subject of the loss, destruction, or
taking by condemnation, (C) the monies are held in a Borrower’s Deposit Account
subject to a Control Agreement, and (D) Parent or its Subsidiaries complete such
repairs, replacements, or restorations within 180 days after the initial receipt
of such monies, Parent or such Subsidiaries shall have the option to apply such
monies to the cost of repair, replacement, or restoration of the property which
is the subject of the loss, destruction, or taking by condemnation unless and to
the extent that such applicable period shall have expired or an Event of Default
shall have occurred without such repair, replacement, or restoration being made,
in which case, any amounts remaining in the cash collateral account shall be
applied to the Obligations in accordance with Section 2.4(b)(ii).
     5.9 Location of Inventory and Equipment. Keep Active Obligors’ Inventory
and Equipment (other than vehicles and Equipment out for repair) only at the
locations identified on Schedule 4.5 and keep each Obligor’s chief executive
offices only at the locations identified on Schedule 4.7(b); provided, however,
that Administrative Borrower may amend Schedule 4.5 or Schedule 4.7 so long as
such amendment occurs by written notice to Agent not less than 30 days prior to
the date on which such Inventory or Equipment is moved to such new location or
such chief executive office is relocated, so long as such new location is within
the continental United States, Canada, or the United Kingdom, and so long as
(x) at the time of such written notification, the applicable Obligor provides
Agent a Collateral Access Agreement with respect to such locations at which
Inventory or Equipment with an aggregate fair market value in excess of $100,000
at any one location or $250,000 for all such locations is located (it being
understood that in the event an Obligor is unable to obtain any such Collateral
Access Agreement, Agent may establish such reserves against Availability as it
deems necessary in its Permitted Discretion with respect to such Inventory or
Equipment), and (y) except as otherwise expressly permitted hereunder, at the
time any such Inventory or Equipment is moved or transferred, Agent’s Liens on
such Inventory and Equipment are not adversely affected.
     5.10 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change.
     5.11 Leases. Pay when due all rents and other amounts payable under any
material leases to which Parent or any Subsidiary of Parent is a party or by
which Parent’s or any of its Subsidiaries’ properties and assets are bound,
unless such payments are the subject of a Permitted Protest.
     5.12 Existence. Except in connection with a Permitted Restructuring
Transaction, at all times preserve and keep in full force and effect Parent’s
and each of its Subsidiaries’ valid existence and good

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standing and, except as could not reasonably be expected to result in a Material
Adverse Change, any rights, franchises, permits, licenses, accreditations,
authorizations, or other approvals material to their businesses.
     5.13 Environmental. (a) Keep any property either owned or operated by
Parent or any Subsidiary of Parent free of any Environmental Liens involving an
aggregate amount in excess of $1,000,000 or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, where the failure to comply could be expected to involve
potential liabilities in excess of $1,000,000 in the aggregate, (c) promptly
notify Agent of any release of a Hazardous Material in any reportable quantity
from or onto property owned or operated by Parent or any Subsidiary of Parent
and take any Remedial Actions required to abate said release or otherwise to
come into compliance with applicable Environmental Laws in each case, where the
failure to comply could be expected to involve potential liabilities in excess
of $1,000,000 in the aggregate, and (d) promptly, but in any event within 5 days
of its receipt thereof, provide Agent with written notice of any of the
following: (i) notice that an Environmental Lien involving an aggregate amount
in excess of $1,000,000 has been filed against any of the real or personal
property of Parent or any Subsidiary of Parent, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against Parent or any Subsidiary of Parent which could reasonably be expected to
involve potential liabilities in excess of $1,000,000 in the aggregate, and
(iii) notice of a violation, citation, or other administrative order which
reasonably could be expected to result in a Material Adverse Change.
     5.14 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, notify Agent if any written information,
exhibit, or report furnished to the Lender Group contained, at the time it was
furnished, any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which made. The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect of
amending or modifying this Agreement or any of the Schedules hereto.
     5.15 Control Agreements. Take all reasonable steps in order for Agent to
obtain control in accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107
of the Code with respect to (subject to the proviso contained in Section 6.12)
all of Obligors’ Securities Accounts, Deposit Accounts, electronic chattel
paper, investment property, and letter-of-credit rights.
     5.16 Formation of Subsidiaries. At the time that any Obligor forms any
direct Subsidiary or acquires any direct Subsidiary after the Closing Date, such
Obligor shall (a) cause such new Subsidiary to provide to Agent a joinder to the
Guaranty and the Security Agreement, together with such other security documents
(including mortgages with respect to any Real Property of such new Subsidiary),
as well as appropriate financing statements (and with respect to all property
subject to a mortgage, fixture filings), all in form and substance satisfactory
to Agent (including being sufficient to grant Agent a first priority Lien
(subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary), (b) provide to Agent a pledge agreement and appropriate
certificates and powers or financing statements, hypothecating all of the direct
or beneficial ownership interest in such new Subsidiary, in form and substance
satisfactory to Agent, and (c) provide to Agent all other documentation,
including one or more opinions of counsel satisfactory to Agent, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all property subject to a
mortgage). Any document, agreement, or instrument executed or issued pursuant to
this Section 5.16 shall be a Loan Document.
     5.17 Further Assurances. Subject to the provisions regarding the UK Real
Property Collateral set forth in Section 5.19, at any time upon the request of
Agent, Parent and Borrowers shall execute or deliver

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to Agent, and shall cause their Subsidiaries to execute or deliver to Agent, any
and all financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, mortgages, deeds of trust,
opinions of counsel, and all other documents (collectively, the “Additional
Documents”) that Agent may request in form and substance reasonably satisfactory
to Agent, to create, perfect, and continue perfected or to better perfect the
Agent’s Liens in all of the properties and assets of Parent and the Subsidiaries
of Parent that are Obligors (whether now owned or hereafter arising or acquired,
tangible or intangible, real or personal), to create and perfect Liens in favor
of Agent in any Real Property acquired by Parent and the Subsidiaries of Parent
that are Obligors after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan Documents. To
the maximum extent permitted by applicable law, Parent and Borrowers authorize
Agent to execute any such Additional Documents in Parent’s, Borrowers’ or their
Subsidiaries’ names, as applicable, and authorizes Agent to file such executed
Additional Documents in any appropriate filing office.
     5.18 Intentionally Omitted.
     5.19 UK Mortgage Documents. In the event the UK Real Property Collateral is
not sold within 120 days of the Closing Date, or at any other time, upon Agent’s
request, following an Event of Default, the Parent, Borrowers, and the
applicable Obligor shall execute and deliver any and all additional security
documents requested by Agent with respect to the UK Real Property Collateral,
each such document to be in form and substance satisfactory to Agent, together
with all other documentation requested by Agent in connection therewith,
including, without limitation, (x) one or more opinions of counsel satisfactory
to Agent, which in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above, and (y) a policy of
title insurance or other documentation with respect to the UK Real Property
Collateral.
     5.20 Post-Closing Covenants. The continuing obligation of the Lender Group
(or any member thereof) to make any Advances hereunder at any time (or to extend
any other credit hereunder) shall be subject to the fulfillment, to the
satisfaction of Agent and each Lender (or waiver thereby), of each of the
post-closing covenants set forth on Schedule 5.20 within the prescribed time
periods set forth on such Schedule. Except as otherwise specifically provided in
such Schedule, the failure by Borrowers to satisfy the post-closing covenants
set forth on Schedule 5.20 within the prescribed time periods shall constitute
an Event of Default.
6. NEGATIVE COVENANTS.
     Parent and each Borrower, jointly and severally, covenants and agrees that,
until termination of all of the Commitments and payment in full of the
Obligations, such Person will not and will not permit any of its respective
Subsidiaries to do any of the following:
     6.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
          (a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,
          (b) Indebtedness set forth on Schedule 4.19 and any Refinancing
Indebtedness in respect of such Indebtedness,
          (c) Permitted Purchase Money Indebtedness and any Refinancing
Indebtedness in respect of such Indebtedness,
          (d) endorsement of instruments or other payment items for deposit,

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          (e) Indebtedness comprising Permitted Investments;
          (f) Indebtedness evidenced by Permitted Intercompany Advances; and
          (g) other unsecured Indebtedness of the Parent and its Subsidiaries
which is subordinated to the Obligations on terms and conditions (including all
economic and subordination terms and the absence of covenants) acceptable to
Lenders and does not exceed in the aggregate $5,000,000 at any time outstanding,
and any Refinancing Indebtedness in respect of such Indebtedness.
     6.2 Liens. Create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens.
     6.3 Restrictions on Fundamental Changes. Except with respect to a Permitted
Restructuring Transaction.
          (a) Enter into any merger, consolidation, reorganization, or, except
with respect to the issuance of the Series B Preferred Stock, any
recapitalization or reclassification its Stock,
          (b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution),
          (c) Suspend or go out of a substantial portion of its or their
business.
     6.4 Disposal of Assets. Other than Permitted Dispositions, Permitted
Investments, Permitted Intercompany Advances, or a Permitted Restructuring
Transaction, convey, sell, lease, license, assign, transfer, or otherwise
dispose of (or enter into an agreement to convey, sell, lease, license assign,
transfer, or otherwise dispose of) any of the assets of any Parent or any
Subsidiary of Parent.
     6.5 Change Name. Change Parent’s or any of its Subsidiaries’ name,
organizational identification number, state of organization or organizational
identity; provided, however, that Parent or a Subsidiary of Parent may change
its name upon at least 15 days prior written notice by Administrative Borrower
to Agent of such change and so long as, at the time of such written
notification, such Person provides any financing statements necessary to perfect
and continue perfected the Agent’s Liens.
     6.6 Nature of Business. Make any change in the nature of its business or
acquire any properties or assets that are not reasonably related to the conduct
of such business activities.
     6.7 Prepayments and Amendments. Except in connection with Refinancing
Indebtedness permitted by Section 6.1,
          (a) optionally prepay, redeem, defease, purchase, or otherwise acquire
any Indebtedness of Parent or any Subsidiary of Parent, other than (i) the
Obligations in accordance with this Agreement, or (ii) Permitted Intercompany
Advances so long as any such prepayment, redemption, defeasance, or purchase is
permitted under the terms of the Intercompany Subordination Agreement,
          (b) make any payment on account of Indebtedness that has been
contractually subordinated in right of payment if such payment is not permitted
at such time under the subordination terms and conditions,

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          (c) directly or indirectly, amend, modify, alter, increase, or change
any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Section 6.1(b) or (c), or
          (d) directly or indirectly, amend, modify, alter, increase or change
any of the payment or other material terms or conditions of the Series B
Preferred Stock following issuance thereof.
     6.8 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
     6.9 Consignments. Solely with respect to Obligors, consign any of their
Inventory or sell any of their Inventory on bill and hold, sale or return, sale
on approval, or other conditional terms of sale.
     6.10 Distributions. Make any distribution or declare or pay any dividends
(in cash or other property, other than common Stock) on, or purchase, acquire,
redeem, or retire any of any of Parent or any of its Subsidiaries’ Stock, of any
class, whether now or hereafter outstanding, except that:
          (a) a Borrower may make cash distributions or declare and make
dividend payments to Parent or another Borrower, and a non-Obligor Subsidiary or
a Guarantor may make cash distributions or declare and make dividend payments to
any Active Obligor;
          (b) Parent and its Subsidiaries may declare and make dividend payments
and other distributions payable solely in its equity interests, so long as
Agent’s Liens, if any, in the equity of the issuer are not adversely affected;
and
          (c) (i) Parent may make scheduled payments of cash dividends on the
Series B Preferred Stock, consistent with the terms thereof on the date such
Stock is issued, provided, that any dividends (whether paid or accrued) for the
initial 12 months after issuance of such Stock will be payable only in
additional shares of Stock of Parent, and no payment of cash dividends shall be
made prior to the 18 month anniversary of the issuance of such Stock or at any
time that an Event of Default exists or would result therefrom; (ii) Parent may
make optional redemptions of the Series B Preferred Stock, consistent with the
terms thereof on the date such Stock is issued, provided, that at the time of
any such redemption (x) no Event of Default exists or would result therefrom,
(y) the Daily Balance on such date, taking any such redemption into account
would be $0, and (z) at least 24 months shall have passed from the issuance of
such Stock being redeemed; (iii) Parent may make mandatory redemptions of the
Series B Preferred Stock as a result of Permitted Dispositions of the stock or
assets of Bookham (Switzerland) or the thin film filter operations of Bookham
(US), consistent with the terms thereof on the date such Stock is issued,
provided, that at the time of any such redemption (x) no Event of Default exists
or would result therefrom, and (y) after taking such redemption into account, no
Overadvance would exist and the Borrowers would have Excess Availability plus
Qualified Cash of not less than $25,000,000; and (iv) in the event Parent fails
to register a form S-3 Registration Statement in connection with the issuance of
such Stock, Parent may make payments due to the holders of such Stock as a
result of such failure, consistent with the terms thereof on the date such Stock
is issued, provided, that at the time of any such payment (x) no Event of
Default exists or would result therefrom, and (y) the Borrowers would have
Excess Availability plus Qualified Cash of not less than $25,000,000 after
taking any such payment into account.
     6.11 Accounting Methods. Modify or change its fiscal year or its method of
accounting (other than as may be required to conform to GAAP) or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Parent’s and its Subsidiaries’ accounting records
without said accounting firm or service bureau agreeing to provide Agent
information regarding Parent’s and its Subsidiaries’ financial condition.

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     6.12 Investments. Except for Permitted Investments, directly or indirectly,
make or acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however, that
(i) Parent and its Subsidiaries that are Obligors shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts for the first 30 days immediately following the Closing Date
in an aggregate amount in excess of $100,000 at any one time, and thereafter,
$25,000, at any one time, unless such Person and the applicable securities
intermediary or bank have entered into Control Agreements governing such
Permitted Investments in order to perfect (and further establish) the Agent’s
Liens in such Permitted Investments, (ii) unless and until Bookham China
consummates the Bookham China Sale and Leaseback, Bookham China shall not have
cash and Cash Equivalents in an aggregate amount in excess of $5,500,000 at any
one time, and upon and during the 2 months after the consummation of the Bookham
China Sale and Leaseback, in an aggregate amount in excess of $14,000,000 at any
one time, (iii) Bookham Switzerland shall not have cash and Cash Equivalents in
an aggregate amount in excess of $3,500,000 at any one time, (iv) Forthaven
Ltd., a company organized under the laws of England and Wales (“Forthaven”),
shall not have cash and Cash Equivalents in an aggregate amount in excess of
£135,000 (UK pounds sterling) at any one time, and (v) Parent’s Subsidiaries
that are not Obligors (other than Bookham China, Bookham Switzerland, and
Forthaven) shall not have cash and Cash Equivalents in an aggregate amount in
excess of $300,000 at any one time. Subject to the Investments permitted by the
foregoing proviso, Parent shall not and shall not permit its Subsidiaries that
are Obligors to establish or maintain any Deposit Account or Securities Account
unless Agent shall have received a Control Agreement in respect of such Deposit
Account or Securities Account.
     6.13 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any transaction with any Affiliate of Parent or any Subsidiary
of Parent except for:
          (a) Permitted Intercompany Transactions;
          (b) the payment of reasonable fees, compensation, or employee benefit
arrangements to, and any indemnity provided for the benefit of, outside
directors of Parent in the ordinary course of business and consistent with
industry practice;
          (c) distributions described in and permitted under Section 6.10; and
          (d) Permitted Intercompany Advances, Permitted Dispositions, and
Permitted Investments.
Notwithstanding the foregoing, in no event may an Active Obligor make payments,
sell or make any other transfers of assets to an Inactive Obligor.
     6.14 Use of Proceeds.
          (a) Use the proceeds of the Advances for any purpose other than (i) on
the Closing Date, to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (ii) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes.
          (b) Transfer, directly or indirectly any proceeds of the Advances to
any Inactive Obligor.
          (c) With respect to Inactive Obligors, request or receive, directly or
indirectly any proceeds of the Advances from the Agent, Lenders, an Active
Obligor, or otherwise.

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     6.15 Inventory and Equipment with Bailees. Except as set forth on Schedule
4.5 and as permitted by Section 5.9, store the inventory or Equipment of Parent
or its Subsidiaries that are Obligors at any time now or hereafter with a
bailee, warehouseman, or similar party unless such bailee, warehouseman, or
similar party has first provided Agent with a Collateral Access Agreement.
     6.16 Financial Covenants.
          (a) Minimum EBITDA. Fail to achieve EBITDA, measured on a quarter-end
basis, of at least the required amount set forth in the following table for the
applicable period set forth opposite thereto:

      Applicable Amount   Applicable Period       ($11,505,000)   For the 1
quarter period
ending September 30, 2006       ($14,433,000)   For the 2 quarter period
ending December 31, 2006       ($15,763,000)   For the 3 quarter period
ending March 31, 2007       ($16,205,000)   For the 4 quarter period
ending June 30, 2007       $2,184,000   For the 4 quarter period
ending September 30, 2007       $7,321,000   For the 4 quarter period
ending December 31, 2007       $7,810,000   For the 4 quarter period
ending March 31, 2008 and each quarter end thereafter

; provided, however, that Borrowers shall only be required to satisfy the
foregoing financial covenant in the event that they do not achieve Minimum
Liquidity. For purposes of the preceding sentence, Agent will test Minimum
Liquidity on the last day of each month during the term of this Agreement. Such
test for any month will be based upon an average of the weekly Excess
Availability and weekly Qualified Cash amounts for weeks ending during such
month, which amounts will be based upon availability and cash balance reports
delivered to Agent in accordance with the terms of this Agreement. In the event
that Borrowers fail to achieve Minimum Liquidity as of any such monthly test, or
fail to timely deliver the reports necessary to make such determination, or if a
Default or Event of Default has occurred and is continuing, then Borrowers will
be required to satisfy the foregoing financial covenant for the most recently
completed Applicable Period in the foregoing table. For purposes of this
Section 6.16(a), Minimum Liquidity means that the sum of Excess Availability
plus Qualified Cash is at least $30,000,000.
          (b) Capital Expenditures. Make Capital Expenditures in any fiscal year
in excess of the amount set forth in the following table for the applicable
period:

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              Closing Date             through the end of             Fiscal
Year 2006   Fiscal Year 2007   Fiscal Year 2008   Fiscal Year 2009              
$4,000,000   $8,000,000 plus the lesser
of (a) $4,000,000 minus
the aggregate amount of
Capital Expenditures made
from the Closing Date
through the end of Fiscal
Year 2006, and (b)
$2,000,000   $8,000,000 plus the lesser
of (a) $8,000,000 minus
the aggregate amount of
Capital Expenditures
made during the Fiscal
Year 2007, and (b)
$4,000,000   $8,000,000 plus the
lesser of (a) $8,000,000
minus the aggregate
amount of Capital
Expenditures made
during the Fiscal Year
2008, and (b)
$4,000,000

7. EVENTS OF DEFAULT.
     Any one or more of the following events shall constitute an event of
default (each, an “Event of Default”) under this Agreement:
     7.1 If any Obligor fails to pay when due and payable, or when declared due
and payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts (other than any portion thereof constituting principal)
constituting Obligations (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding), and
such failure continues for a period of 3 Business Days, or (b) all or any
portion of the principal of the Obligations;
     7.2 If Parent or any Subsidiary of Parent:
          (a) fails to perform or observe any covenant or other agreement
contained in any of Sections 2.7, 5.2, 5.3, 5.4, 5.5, 5.8, 5.12, 5.14, 5.16,
5.17 and 6.1 through 6.16 of this Agreement or Section 6 of the Security
Agreement;
          (b) fails to perform or observe any covenant or other agreement
contained in any of Sections 5.6, 5.7, 5.9, 5.10, 5.11 and 5.15 of this
Agreement and such failure continues for a period of 10 days after the earlier
of (i) the date on which such failure shall first become known to any officer of
any Obligor or (ii) written notice thereof is given to Administrative Borrower
by Agent; or
          (c) fails to perform or observe any covenant or other agreement
contained in this Agreement, or in any of the other Loan Documents, in each
case, other than any such covenant or agreement that is the subject of another
provision of this Section 7 (in which event such other provision of this
Section 7 shall govern), and such failure continues for a period of 20 days
after the earlier of (i) the date on which such failure shall first become known
to any officer of any Obligor or (ii) written notice thereof is given to
Administrative Borrower by Agent;
     7.3 If any material portion of Parent’s or any of its Subsidiaries’ assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person and the same is not discharged
before the earlier of 30 days after the date it first arises or 5 days prior to
the date on which such property or asset is subject to forfeiture by such
Person;
     7.4 If an Insolvency Proceeding is commenced by Parent or any Subsidiary of
Parent;

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     7.5 If an Insolvency Proceeding is commenced against Parent or any
Subsidiary of Parent, and any of the following events occur: (a) the applicable
Person consents to the institution of such Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 60 calendar days of the date of the filing thereof, (d) an
interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Parent or any Subsidiary of Parent, or (e) an order
for relief shall have been issued or entered therein;
     7.6 If Parent, any Obligor, Bookham China, or Bookham Switzerland is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;
     7.7 If one or more judgments, orders, or awards involving an aggregate
amount of $1,000,000, or more (except to the extent fully covered by insurance
pursuant to which the insurer has accepted liability therefor in writing) shall
be entered or filed against Parent or any Subsidiary of Parent or with respect
to any of their respective assets, and the same is not released, discharged,
bonded against, or stayed pending appeal before the earlier of 30 days after the
date it first arises or 5 days prior to the date on which such asset is subject
to being forfeited by the applicable Person;
     7.8 If (a) there is a default in one or more agreements to which Parent or
any Subsidiary of Parent is a party with one or more third Persons relative to
Indebtedness of such Person involving an aggregate amount of $1,000,000 or more,
and such default (i) occurs at the final maturity of the obligations thereunder,
or (ii) results in a right by such third Person(s), irrespective of whether
exercised, to accelerate the maturity of Parent’s Subsidiary’s (as applicable)
obligations thereunder; or (b) there shall occur any event which would result in
the mandatory redemption or other payment in respect of the Series B Preferred
Stock in a manner not specifically permitted under the terms of this Agreement;
     7.9 If any warranty, representation, statement, or Record made herein or in
any other Loan Document or delivered to Agent or any Lender in connection with
this Agreement or any other Loan Document proves to be untrue in any material
respect (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) as of the date of issuance or making or deemed
making thereof;
     7.10 If the obligation of any Guarantor under its respective Guaranty is
limited or terminated by operation of law or by such Guarantor, or any such
Guarantor becomes the subject of an Insolvency Proceeding;
     7.11 If the Security Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby, except as a result of a disposition of the applicable Collateral in a
transaction permitted under this Agreement; or
     7.12 Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by Parent or any Subsidiary of Parent, or a proceeding shall be
commenced by Parent or any Subsidiary of Parent, or by any Governmental
Authority having jurisdiction over Parent or any Subsidiary of Parent, seeking
to establish the invalidity or unenforceability thereof, or Parent or any
Subsidiary of Parent shall deny that it has any liability or obligation
purported to be created under any Loan Document.
8. THE LENDER GROUP’S RIGHTS AND REMEDIES
     8.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default, the Required Lenders (at their election but without
notice of their election and without demand) may

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authorize and instruct Agent to do any one or more of the following on behalf-
of the Lender Group (and Agent, acting upon the instructions of the Required
Lenders, shall do the same on behalf of the Lender Group), all of which are
authorized by Parent and Borrowers:
          (a) Declare all or any portion of the Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
          (b) Cease advancing money or extending credit to or for the benefit of
Borrowers under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrowers and the Lender Group;
          (c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of the Lender Group, but without affecting
any of the Agent’s Liens in the Collateral and without affecting the
Obligations; and
          (d) The Lender Group shall have all other rights and remedies
available at law or in equity or pursuant to any other Loan Document.
The foregoing to the contrary notwithstanding, upon the occurrence of any Event
of Default described in Section 7.4 or Section 7.5, in addition to the remedies
set forth above, without any notice to Borrowers or any other Person or any act
by the Lender Group, the Commitments shall automatically terminate and the
Obligations then outstanding, together with all accrued and unpaid interest
thereon and all fees and all other amounts due under this Agreement and the
other Loan Documents, shall automatically and immediately become due and
payable, without presentment, demand, protest, or notice of any kind, all of
which are expressly waived by Parent and Borrowers.
     8.2 Remedies Cumulative. The rights and remedies of the Lender Group under
this Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election.
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
9. TAXES AND EXPENSES.
     If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves
against the Borrowing Base or the Maximum Revolver Amount as Agent deems
necessary to protect the Lender Group from the exposure created by such failure,
or (c) in the case of the failure to comply with Section 5.8, obtain and
maintain insurance policies of the type described in Section 5.8 and take any
action with respect to such policies as Agent deems prudent. Any such amounts
paid by Agent shall constitute Lender Group Expenses and any such payments shall
not constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.

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10. WAIVERS; INDEMNIFICATION.
     10.1 Demand; Protest; etc. Parent and each Borrower waive demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Parent or any such Borrower may in any way be
liable.
     10.2 The Lender Group’s Liability for Collateral. Parent and each Borrower
hereby agree that: (a) so long as Agent complies with its obligations, if any,
under the Code, the Lender Group shall not in any way or manner be liable or
responsible for (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Parent and
Borrowers.
     10.3 Indemnification. Parent and each Borrower shall pay, indemnify,
defend, and hold the Agent-Related Persons, the Lender-Related Persons, and each
Participant (each, an “Indemnified Person”) harmless (to the fullest extent
permitted by law) from and against any and all claims, demands, suits, actions,
investigations, proceedings, liabilities, fines, costs, penalties, and damages,
and all reasonable fees and disbursements of attorneys, experts, or consultants
and all other costs and expenses actually incurred in connection therewith or in
connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution, delivery, enforcement, performance, or
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Parent’s and its
Subsidiaries’ compliance with the terms of the Loan Documents, (b) with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto, and (c) in
connection with or arising out of any presence or release of Hazardous Materials
at, on, under, to or from any assets or properties owned, leased or operated by
Parent or any of its Subsidiaries or any Environmental Actions, Environmental
Liabilities and Costs or Remedial Actions related in any way to any such assets
or properties of Parent or any of its Subsidiaries (each and all of the
foregoing, the “Indemnified Liabilities”). The foregoing to the contrary
notwithstanding, neither Parent nor Borrowers shall have any obligation to any
Indemnified Person under this Section 10.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Parent or Borrowers were required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by such Person with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR
ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION (BUT NOT GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
11. NOTICES.
     Unless otherwise provided in this Agreement, all notices or demands by
Parent, Borrowers, or Agent to the other relating to this Agreement or any other
Loan Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Administrative Borrower or Agent, as applicable,

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may designate to each other in accordance herewith), or telefacsimile to
Borrowers in care of Administrative Borrower or to Agent, as the case may be, at
its address set forth below:

     
If to Administrative Borrower:
  BOOKHAM TECHNOLOGY PLC
 
  2584 Junction Avenue
 
  San Jose, California 95134
 
  Attn: Jerry Turin, Corporate Controller
 
  Fax No.: 408.904.5072
 
   
with copies to:
  WILMER HALE
 
  60 State Street
 
  Boston, Massachusetts 02109
 
  Attn: John D. Sigel, Esq.
 
  Fax No.: 617.526.5000
 
   
If to Agent:
  WELLS FARGO FOOTHILL, INC.
 
  2450 Colorado Avenue
 
  Suite 3000 West
 
  Santa Monica, California 90404
 
  Attn: Business Finance Division Manager
 
  Fax No.: 310.453.7413
 
   
with copies to:
  BUCHALTER NEMER
 
  1000 Wilshire Boulevard, Suite 1500
 
  Los Angeles, CA 90017-2457
 
  Attn: Robert J. Davidson, Esq.
 
  Fax No.: 213.896.0400

     Agent and Administrative Borrower may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner given
to the other party. All notices or demands sent in accordance with this
Section 11, other than notices by Agent in connection with enforcement rights
against the Collateral under the provisions of the Code, shall be deemed
received on the earlier of the date of actual receipt or 3 Business Days after
the deposit thereof in the mail. Parent and each Borrower acknowledges and
agrees that notices sent by the Lender Group in connection with the exercise of
enforcement rights against Collateral under the provisions of the Code shall be
deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or any other method set forth
above.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
          (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
          (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES,

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STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND EACH MEMBER OF THE
LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).
          (c) PARENT, BORROWERS AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND EACH MEMBER
OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
     13.1 Assignments and Participations.
          (a) Any Lender may assign and delegate to one or more assignees (each
an “Assignee”) that are Eligible Transferees all or any portion, of the
Obligations, the Commitments and the other rights and obligations of such Lender
hereunder and under the other Loan Documents, in a minimum amount (unless waived
by the Agent) of $5,000,000 (except such minimum amount shall not apply to
(x) an assignment or delegation by any Lender to any other Lender or an
Affiliate of any Lender or (y) a group of new Lenders, each of whom is an
Affiliate of each other or a fund or account managed by any such new Lender or
an Affiliate of such new Lender to the extent that the aggregate amount to be
assigned to all such new Lenders is at least $5,000,000); provided, however,
that Borrowers and Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been given
to Administrative Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Administrative Borrower and Agent an
Assignment and Acceptance and Agent has notified the assigning Lender of its
receipt thereof in accordance with Section 13.1(b), and (iii) unless waived by
the Agent, the assigning Lender or Assignee has paid to Agent for Agent’s
separate account a processing fee in the amount of $3,500. Anything contained
herein to the contrary notwithstanding, the payment of any fees shall not be
required and the Assignee need not be an Eligible Transferee if such assignment
is in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of the assigning Lender.
          (b) From and after the date that Agent notifies the assigning Lender
(with a copy to Administrative Borrower) that it has received an executed
Assignment and Acceptance and, if applicable, payment of the required processing
fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assigning Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (except with respect to Section 10.3 hereof) and be released from any
future obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and

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obligations under this Agreement and the other Loan Documents, such Lender shall
cease to be a party hereto and thereto), and such assignment shall effect a
novation among Borrowers, the assigning Lender, and the Assignee; provided,
however, that nothing contained herein shall release any assigning Lender from
obligations that survive the termination of this Agreement, including such
assigning Lender’s obligations under Section 15 and Section 16.7(a) of this
Agreement.
          (c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of Parent
or Borrowers or the performance or observance by Parent or Borrowers of any of
their obligations under this Agreement or any other Loan Document furnished
pursuant hereto, (iii) such Assignee confirms that it has received a copy of
this Agreement, together with such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such Assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (v) such Assignee appoints and authorizes Agent to take
such actions and to exercise such powers under this Agreement as are delegated
to Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (vi) such Assignee agrees that it will perform all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
          (d) Immediately upon Agent’s receipt of the required processing fee,
if applicable, and delivery of notice to the assigning Lender pursuant to
Section 13.1(b), this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Lender
pro tanto.
          (e) Any Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons (a “Participant”) participating
interests in all or any portion of its Obligations, its Commitment, and the
other rights and interests of that Lender (the “Originating Lender”) hereunder
and under the other Loan Documents; provided, however, that (i) the Originating
Lender shall remain a “Lender” for all purposes of this Agreement and the other
Loan Documents and the Participant receiving the participating interest in the
Obligations, the Commitments, and the other rights and interests of the
Originating Lender hereunder shall not constitute a “Lender” hereunder or under
the other Loan Documents and the Originating Lender’s obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrowers,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender, or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrowers hereunder shall be determined
as if such Lender had not

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sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be derivative through
the Originating Lender with whom such Participant participates and no
Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to the other Lenders, Agent, Parent,
Borrowers, the Collections of Parent or its Subsidiaries, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among themselves.
          (f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may, subject to the provisions of
Section 16.7, disclose all documents and information which it now or hereafter
may have relating to Parent and its Subsidiaries and their respective
businesses.
          (g) Any other provision in this Agreement notwithstanding, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR § 203.24, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
     13.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that none of Parent or Borrowers may assign this Agreement or any rights or
duties hereunder without the Lenders’ prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Parent or any Borrower from its Obligations. A Lender may
assign this Agreement and the other Loan Documents and its rights and duties
hereunder and thereunder pursuant to Section 13.1 and, except as expressly
required pursuant to Section 13.1, no consent or approval by Parent or any
Borrower is required in connection with any such assignment.
14. AMENDMENTS; WAIVERS.
     14.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document (other than Bank Product Agreements or
the Fee Letter), and no consent with respect to any departure by any Obligor
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by Agent at the written request of the Required
Lenders) and Administrative Borrower (on behalf of all Obligors) and then any
such waiver or consent shall be effective, but only in the specific instance and
for the specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all of the
Lenders directly affected thereby and Administrative Borrower (on behalf of all
Obligors), do any of the following:
          (a) increase or extend any Commitment of any Lender,
          (b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,
          (c) reduce the principal of, or the rate of interest on, any loan or
other extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,
          (d) change the Pro Rata Share that is required to take any action
hereunder,

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          (e) amend or modify this Section or any provision of this Agreement
providing for consent or other action by all Lenders,
          (f) other than as permitted by Section 15.12, release Agent’s Lien in
and to any of the Collateral,
          (g) change the definition of “Required Lenders” or “Pro Rata Share”,
          (h) contractually subordinate any of the Agent’s Liens,
          (i) other than in connection with a merger, liquidation, dissolution
or sale of such Person expressly permitted by the terms hereof or the other Loan
Documents, release any Obligor from any obligation for the payment of money,
          (j) amend any of the provisions of Section 2.4(b)(i) or (ii),
          (k) change the definitions of Borrowing Base, Eligible Accounts, or
Maximum Revolver Amount, or change Section 2.1(b), or
          (l) amend any of the provisions of Section 15,
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, as
applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan Document. The
foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
any Obligor, shall not require consent by or the agreement of the Obligors.
     14.2 Replacement of Holdout Lender.
          (a) If any action to be taken by the Lender Group or Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender (“Holdout Lender”) fails to give its consent, authorization, or
agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to
the Holdout Lender, may permanently replace the Holdout Lender with one or more
substitute Lenders (each, a “Replacement Lender”), and the Holdout Lender shall
have no right to refuse to be replaced hereunder. Such notice to replace the
Holdout Lender shall specify an effective date for such replacement, which date
shall not be later than 15 Business Days after the date such notice is given.
          (b) Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance, subject only to the Holdout Lender being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance. The replacement of any Holdout Lender shall be
made in accordance with the terms of Section 13.1. Until such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments,
and the other rights and obligations of the Holdout Lender hereunder and under
the other Loan Documents, the Holdout Lender shall remain obligated to make the
Holdout Lender’s Pro Rata Share of Advances and to purchase a participation in
each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.

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     14.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Obligors of any
provision of this Agreement or any other Loan Document. Agent’s and each
Lender’s rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.
15. AGENT; THE LENDER GROUP.
     15.1 Appointment and Authorization of Agent. Each Lender hereby designates
and appoints WFF as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to execute and
deliver each of the other Loan Documents on its behalf and to take such other
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 15. The
provisions of this Section 15 (other than the proviso to Section 15.11(a)) are
solely for the benefit of Agent, and the Lenders, and Parent and its
Subsidiaries shall have no rights as a third party beneficiary of any of the
provisions contained herein. Any provision to the contrary contained elsewhere
in this Agreement or in any other Loan Document notwithstanding, Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall Agent have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word “Agent” is for convenience only, that WFF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections of Parent and its Subsidiaries, and related matters, (b) execute
or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances,
for itself or on behalf of Lenders as provided in the Loan Documents,
(d) exclusively receive, apply, and distribute the Collections of Parent and its
Subsidiaries as provided in the Loan Documents, (e) open and maintain such bank
accounts and cash management arrangements as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections of Parent and its
Subsidiaries, (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to any Obligor, the Obligations, the
Collateral, the Collections of Parent and its Subsidiaries, or otherwise related
to any of same as provided in the Loan Documents, and (g) incur and pay such
Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
     15.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

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     15.3 Liability of Agent. None of the Agent Related Persons shall (a) be
liable to any Lender for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Parent or any Subsidiary
or Affiliate of Parent, or any officer or director thereof , contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the books and records or properties of Parent or the
books or records or properties of any of Parent’s Subsidiaries or Affiliates.
     15.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, telefacsimile or other electronic
method of transmission, telex or telephone message, statement or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent, or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to Borrowers or counsel to any
Lender), independent accountants and other experts selected by Agent. Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless Agent shall first receive such
advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the requisite Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.
     15.5 Notice of Default or Event of Default. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.” Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 15.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
Section 8; provided, however, that unless and until Agent has received any such
request, 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 it
shall deem advisable.
     15.6 Credit Decision. Each Lender acknowledges that none of the Agent
Related Persons has made any representation or warranty to it, and that no act
by Agent hereinafter taken, including any review of the affairs of Parent and
its Subsidiaries or Affiliates, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrowers and any other

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Person party to a Loan Document, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrowers. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrowers and any other Person party
to a Loan Document. Except for notices, reports, and other documents expressly
herein required to be furnished to the Lenders by Agent, Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of Borrowers and any other Person party
to a Loan Document that may come into the possession of any of the Agent Related
Persons.
     15.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including court costs, attorneys fees and
expenses, fees and expenses of financial accountants, advisors, consultants, and
appraisers, costs of collection by outside collection agencies, auctioneer fees
and expenses, and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Parent or its Subsidiaries are obligated
to reimburse Agent or Lenders for such expenses pursuant to this Agreement or
otherwise. Agent is authorized and directed to deduct and retain sufficient
amounts from the Collections of Parent and its Subsidiaries received by Agent to
reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses by Parent or its Subsidiaries, each Lender hereby agrees
that it is and shall be obligated to pay to Agent such Lender’s Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrowers and without limiting the obligation
of Borrowers to do so), according to their Pro Rata Shares, from and against any
and all Indemnified Liabilities; provided, however, that no Lender shall be
liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person’s gross negligence or
willful misconduct nor shall any Lender be liable for the obligations of any
Defaulting Lender in failing to make an Advance or other extension of credit
hereunder. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for such Lender’s Pro Rata Share of any costs or out of pocket
expenses (including attorneys, accountants, advisors, and consultants fees and
expenses) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
     15.8 Agent in Individual Capacity. WFF and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Parent and its
Subsidiaries and Affiliates and any other Person party to any Loan Documents as
though WFF were not Agent hereunder, and, in each case, without notice to or
consent of the other members of the Lender Group. The other members of the
Lender Group acknowledge that, pursuant to such activities, WFF or its
Affiliates may receive information regarding Parent, its Subsidiaries, or its
Affiliates and any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Parent, its Subsidiaries, or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
provide such information to them. The terms “Lender” and “Lenders” include WFF
in its individual capacity.

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     15.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders (unless such notice is waived by the Required Lenders). If Agent resigns
under this Agreement, the Required Lenders shall appoint a successor Agent for
the Lenders. If no successor Agent is appointed prior to the effective date of
the resignation of Agent, Agent may appoint, after consulting with the Lenders,
a successor Agent. If Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Required Lenders
may agree in writing to remove and replace Agent with a successor Agent from
among the Lenders. In any such event, upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the rights,
powers, and duties of the retiring Agent and the term “Agent” shall mean such
successor Agent and the retiring Agent’s appointment, powers, and duties as
Agent shall be terminated. After any retiring Agent’s resignation hereunder as
Agent, the provisions of this Section 15 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor Agent has accepted appointment as Agent by the date
which is 45 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
     15.10 Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with Parent
and its Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though such Lender were not a Lender hereunder without notice to or
consent of the other members of the Lender Group. The other members of the
Lender Group acknowledge that, pursuant to such activities, such Lender and its
respective Affiliates may receive information regarding Parent or its Affiliates
and any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Parent or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver such Lender will use its reasonable
best efforts to obtain), such Lender shall not be under any obligation to
provide such information to them. With respect to the Swing Loans and Protective
Advances, Swing Lender shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the sub-agent of Agent.
     15.11 Withholding Taxes.
          (a) All payments made by any Borrower hereunder or under any note or
other Loan Document will be made without setoff, counterclaim, or other defense.
In addition, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future Taxes, and in the event any
deduction or withholding of Taxes is required, each Borrower shall comply with
the penultimate sentence of this Section 15.11(a). “Taxes” shall mean, any
taxes, levies, imposts, duties, fees, assessments or other charges of whatever
nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein measured by or based on the
net income or net profits of any Lender or any withholding tax that is imposed
on amounts payable to such Lender at the time such Lender becomes a party to the
Agreement or is attributable to such Lender’s failure to comply with
Sections 15.11(b) or (c)) and all interest, penalties or similar liabilities
with respect thereto. If any Taxes are so levied or imposed, each Borrower
agrees to pay the full amount of such Taxes and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement, any
note, or Loan Document, including any amount paid pursuant to this
Section 15.11(a) after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein; provided, however, that
Borrowers shall not be required to increase any such amounts if the increase in
such amount payable results from Agent’s or such Lender’s own willful misconduct
or gross negligence (as finally determined by a court of competent
jurisdiction). Each Borrower will furnish to Agent as promptly as possible

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after the date the payment of any Tax is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by any Borrower.
          (b) If a Lender claims an exemption from United States withholding
tax, Lender agrees with and in favor of Agent and any Borrower, to deliver to
Agent and the Administrative Borrower:
               (i) if such Lender claims an exemption from United States
withholding tax pursuant to its portfolio interest exception, (A) a statement of
the Lender, signed under penalty of perjury, that it is not a (I) a “bank” as
described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of any
Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (III) a
controlled foreign corporation related to any Borrower within the meaning of
Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS Form
W-8BEN, before it becomes a Lender under this Agreement and at any other time
reasonably requested by Agent or any Borrower;
               (ii) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed and
executed IRS Form W-8BEN before receiving its first payment under this Agreement
and at any other time reasonably requested by Agent or any Borrower;
               (iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form W-8ECI before receiving its first
payment under this Agreement and at any other time reasonably requested by Agent
or any Borrower; or
               (iv) such other form or forms, including IRS Form W-9, as may be
required under the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding or backup withholding
tax before receiving its first payment under this Agreement and at any other
time reasonably requested by Agent or any Borrower.
Lender agrees promptly to notify Agent and Administrative Borrower of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
          (c) If a Lender claims an exemption from withholding tax in a
jurisdiction other than the United States, Lender agrees with and in favor of
Agent and Borrowers, to deliver to Agent any such form or forms, as may be
required under the laws of such jurisdiction as a condition to exemption from,
or reduction of, foreign withholding or backup withholding tax before receiving
its first payment under this Agreement and at any other time reasonably
requested by Agent or Administrative Borrower.
Lender agrees promptly to notify Agent and Administrative Borrower of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
          (d) If any Lender claims exemption from, or reduction of, withholding
tax and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrowers to such Lender, such
Lender agrees to notify Agent and Administrative Borrower of the percentage
amount in which it is no longer the beneficial owner of Obligations of Borrowers
to such Lender. To the extent of such percentage amount, Agent and Borrowers
will treat such Lender’s documentation provided pursuant to Sections 15.11(b) or
15.11(c) as no longer valid. With respect to such percentage amount, Lender may
provide new documentation, pursuant to Sections 15.11(b) or 15.11(c), if
applicable.
          (e) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection
(b) or (c)

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of this Section 15.11 are not delivered to Agent, then Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
          (f) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender due to a
failure on the part of the Lender (because the appropriate form was not
delivered, was not properly executed, or because such Lender failed to notify
Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify and hold Agent harmless for all amounts paid, directly or
indirectly, by Agent, as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section 15.11, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
          (g) If a Borrower has paid an amount to any Lender under
Section 15.11(a) and the Lender subsequently utilizes, retains or receives a Tax
Credit that arises as a result of the deduction or withholding or payment of
Taxes which gave rise to the payment of the amount in question, the Lender shall
pay to Borrowers the lesser of (x) the amount of such Tax Credit or (y) such
amount as the Lender determines in its discretion (acting reasonably) will leave
the Borrower (after that payment) in the same after-Tax position as it would
have been in had such deduction or withholding or payment of Taxes not been
required to be made by the Borrower in the first place. “Tax Credit” shall mean
a credit against, relief or remission for, or repayment of any Taxes.
          (h) WFF, in its capacity as a Lender, hereby represents and warrants
to Borrowers that it is a Treaty Lender at the date of this Agreement. “Treaty
Lender” means, in relation to any Lender, that the Lender: (i) is a resident of
a Treaty State for the purposes of the relevant Treaty, and is entitled to the
full benefit of that Treaty with respect to interest payments, (ii) is the
beneficial owner of any payments made hereunder by a Borrower for the purposes
of the relevant Treaty, and (iii) does not carry on a business in any state
other than the Treaty State through a permanent establishment with which that
Lender’s receipt of any payments hereunder is effectively connected. “Treaty
State” means a jurisdiction having a Treaty with the United Kingdom which makes
provision for full exemption from Tax imposed by the United Kingdom on any
payment of interest. “Treaty” means a double taxation convention.
          (i) Notwithstanding anything else in this Agreement, in respect of
United Kingdom Taxes only, so long as no Event of Default shall have occurred
and be continuing, no Lender shall be able to assign the benefit of
Section 15.11(a) (pursuant to Section 13 or otherwise) unless the Assignee
represents to Borrower Agent, Agent, and the assigning Lender that it is a
Treaty Lender or a Qualifying Lender at the date of that assignment. “Qualifying
Lender” means a bank within the charge to United Kingdom corporation tax or a
company resident in the United Kingdom for United Kingdom Tax purposes (provided
that such company or bank does not carry on any business through a permanent
establishment outside of the United Kingdom with which that Lender’s receipt of
any payments hereunder is effectively connected).
     15.12 Collateral Matters.
          (a) The Lenders hereby irrevocably authorize Agent, at its option and
in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrowers
of all Obligations, (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Administrative
Borrower certifies to Agent that the sale or disposition is permitted under
Section 6.4 or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in which
neither Parent nor any of its Subsidiaries owned any interest at the time the
Agent’s Lien was granted nor at any time

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thereafter, (iv) constituting property leased to Parent or its Subsidiaries
under a lease that has expired or is terminated in a transaction permitted under
this Agreement, or (v) constituting property of a Subsidiary, the Stock of which
is being sold in accordance with the terms of this Agreement. Except as provided
above, Agent will not execute and deliver a release of any Lien on any
Collateral without the prior written authorization of (y) if the release is of
all or substantially all of the Collateral, all of the Lenders, or
(z) otherwise, the Required Lenders. Upon request by Agent or Administrative
Borrower at any time, the Lenders will confirm in writing Agent’s authority to
release any such Liens on particular types or items of Collateral pursuant to
this Section 15.12; provided, however, that (1) Agent shall not be required to
execute any document necessary to evidence such release on terms that, in
Agent’s opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Parent or any of its
Subsidiaries in respect of) all interests retained by Parent or any of its
Subsidiaries, including, the proceeds of any sale, all of which shall continue
to constitute part of the Collateral.
          (b) Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by Parent or any of its
Subsidiaries or is cared for, protected, or insured or has been encumbered, or
that the Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent’s own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
     15.13 Restrictions on Actions by Lenders; Sharing of Payments.
          (a) Each of the Lenders agrees that it shall not, without the express
written consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the written request of Agent, set off against the
Obligations, any amounts owing by such Lender to Parent, or any of its
Subsidiaries, or any deposit accounts of Parent, or any of its Subsidiaries, now
or hereafter maintained with such Lender. Each of the Lenders further agrees
that it shall not, unless specifically requested to do so in writing by Agent,
take or cause to be taken any action, including, the commencement of any legal
or equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral.
          (b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (B) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of participations shall
be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.

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     15.14 Agency for Perfection. Agent hereby appoints each other Lender as its
agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent’s Liens in assets which, in accordance with Article 8 or
Article 9, as applicable, of the Code can be perfected only by possession or
control. Should any Lender obtain possession or control of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefor shall deliver possession or control of such Collateral to Agent or in
accordance with Agent’s instructions.
     15.15 Payments by Agent to the Lenders. All payments to be made by Agent to
the Lenders shall be made by bank wire transfer of immediately available funds
pursuant to such wire transfer instructions as each party may designate for
itself by written notice to Agent. Concurrently with each such payment, Agent
shall identify whether such payment (or any portion thereof) represents
principal, premium, fees, or interest of the Obligations.
     15.16 Concerning the Collateral and Related Loan Documents. Each member of
the Lender Group authorizes and directs Agent to enter into this Agreement and
the other Loan Documents. Each member of the Lender Group agrees that any action
taken by Agent in accordance with the terms of this Agreement or the other Loan
Documents relating to the Collateral and the exercise by Agent of its powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
     15.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information. By becoming a party to this Agreement,
each Lender:
          (a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a “Report” and collectively, “Reports”) prepared by or at the
request of Agent, and Agent shall so furnish each Lender with such Reports,
          (b) expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,
          (c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Parent and
its Subsidiaries and will rely significantly upon Parent’s and its Subsidiaries’
books and records, as well as on representations of such Person’s personnel,
          (d) agrees to keep all Reports and other material, non-public
information regarding Parent and its Subsidiaries and their operations, assets,
and existing and contemplated business plans in a confidential manner in
accordance with Section 16.7, and
          (e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or fail to take or any conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender’s participation in, or the indemnifying Lender’s purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.

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In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Parent or its Subsidiaries to Agent that has not been
contemporaneously provided by Parent or its Subsidiaries to such Lender, and,
upon receipt of such request, Agent promptly shall provide a copy of same to
such Lender, (y) to the extent that Agent is entitled, under any provision of
the Loan Documents, to request additional reports or information from Parent or
its Subsidiaries, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender’s notice to Agent, whereupon
Agent promptly shall request of Administrative Borrower the additional reports
or information reasonably specified by such Lender, and, upon receipt thereof
from Administrative Borrower, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Administrative Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
     15.18 Several Obligations; No Liability. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 15.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No
Lender shall be responsible to Parent, any Borrower or any other Person for any
failure by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
     15.19 Bank Product Providers. Each Bank Product Provider shall be deemed a
party hereto for purposes of any reference in a Loan Document to the parties for
whom Agent is acting; it being understood and agreed that the rights and
benefits of such Bank Product Provider under the Loan Documents consist
exclusively of such Bank Product Provider’s right to share in payments and
collections out of the Collateral as more fully set forth herein. In connection
with any such distribution of payments and collections, Agent shall be entitled
to assume no amounts are due to any Bank Product Provider unless such Bank
Product Provider has notified Agent in writing of the amount of any such
liability owed to it prior to such distribution.
16. GENERAL PROVISIONS.
     16.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by Borrowers, Agent, and each Lender whose signature is provided
for on the signature pages hereof.
     16.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
     16.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against the Lender Group, Parent, or
Borrowers, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

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     16.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
     16.5 Counterparts; Electronic Execution. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
     16.6 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Obligations by any Obligor or the transfer to the Lender Group of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors’ rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (each, a “Voidable Transfer”), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Obligors automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
     16.7 Confidentiality.
          (a) Agent and Lenders each individually (and not jointly or jointly
and severally) agree that material, non-public information regarding Parent and
its Subsidiaries, their operations, assets, and existing and contemplated
business plans shall be treated by Agent and the Lenders in a confidential
manner, and shall not be disclosed by Agent and the Lenders to Persons who are
not parties to this Agreement, except: (i) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group,
(ii) to Subsidiaries and Affiliates of any member of the Lender Group (including
the Bank Product Providers), provided that any such Subsidiary or Affiliate
shall have agreed to receive such information hereunder subject to the terms of
this Section 16.7, (iii) as may be required by statute, decision, or judicial or
administrative order, rule, or regulation, (iv) as may be agreed to in advance
by Parent or its Subsidiaries or as requested or required by any Governmental
Authority pursuant to any subpoena or other legal process, (v) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders), (vi) in connection
with any assignment, participation or pledge of any Lender’s interest under this
Agreement, provided that any such assignee, participant, or pledgee shall have
agreed in writing to receive such information hereunder subject to the terms of
this Section, and (vii) in connection with any litigation or other adversary
proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents. The provisions of this
Section 16.7(a) shall survive for 2 years after the payment in full of the
Obligations.
          (b) Anything in this Agreement to the contrary notwithstanding, Agent
may provide information concerning the terms and conditions of this Agreement
and the other Loan Documents to loan syndication and pricing reporting services.

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     16.8 Lender Group Expenses. Borrowers agree to pay any and all Lender Group
Expenses promptly after demand therefor by Agent and agrees that their
obligations contained in this Section 16.8 shall survive payment or satisfaction
in full of all other Obligations.
     16.9 USA PATRIOT Act. Each Lender that is subject to the requirements of
the USA Patriot Act (Title 111 of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies Parent and Borrowers that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies Parent and Borrowers, which information includes the name and
address of Parent and Borrowers and other information that will allow such
Lender to identify Parent and Borrowers in accordance with the Act.
     16.10 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
     16.11 Bookham UK as Agent for Borrowers. Each Borrower hereby irrevocably
appoints Bookham UK as the borrowing agent and attorney-in-fact for all
Borrowers (the “Administrative Borrower”) which appointment shall remain in full
force and effect unless and until Agent shall have received prior written notice
signed by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Agent with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce the Lender Group to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender Group
and hold each member of the Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of
(a) the handling of the Loan Account and Collateral of Borrowers as herein
provided, (b) the Lender Group’s relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will have no
liability to the relevant Agent-Related Person or Lender-Related Person under
this Section 16.10 with respect to any liability that has been finally
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of such Agent-Related Person or
Lender-Related Person, as the case may be.
     16.12 Judgment Currency. The specification under this Agreement of Dollars
is of the essence. Each Obligor’s obligations hereunder and under the other Loan
Documents to make payments in Dollars shall not be discharged or satisfied by
any tender or recovery pursuant to any judgment expressed in or converted into
any currency other than Dollars, except to the extent that such tender or
recovery results in the effective receipt by the Lender Group of the full amount
of Dollars expressed to be payable to the Lender Group under this Agreement or
the other Loan Documents. If, for the purpose of obtaining or enforcing judgment
in any court, it is necessary to convert into or from any currency other than
Dollars (such other currency being hereinafter referred to as the “Judgment
Currency”) an amount due in Dollars, the rate of exchange used shall be that at
which Agent could, in accordance with normal banking procedures, purchase
Dollars with the Judgment Currency on the Business Day preceding that on which
final judgment is given. The obligation of

51

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each Obligor in respect of any such sum due from it to Agent or Lenders
hereunder shall, notwithstanding any judgment in such Judgment Currency, be
discharged only to the extent that, on the Business Day immediately following
the date on which Agent or such Lenders receive any sum adjudged to be so due in
the Judgment Currency, Agent or such Lenders may, in accordance with normal
banking procedures, purchase Dollars with the Judgment Currency. If the Dollars
so purchased are less than the sum originally due to Agent or such Lenders in
Dollars, each Obligor agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify Agent or such Lenders, as the case may be, against
such loss, and if the Dollars so purchased exceed the sum originally due to
Agent or Lenders in Dollars, Agent or Lenders, as the case may be, agree to
remit to such Obligor such excess.
[signature pages to follow]

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.

              BOOKHAM, INC.,
a Delaware corporation, as Parent
 
       
 
  By:   /s/ Steve Abely
 
       
 
  Name:
Title:   Steve Abely
Chief Financial Officer
 
            BOOKHAM TECHNOLOGY PLC,
a limited liability company incorporated under
the laws of England and Wales, as a Borrower
 
       
 
  By:   /s/ Steve Abely
 
       
 
  Name:
Title:   Steve Abely
Director
 
            NEW FOCUS, INC.,
a Delaware corporation, as a Borrower
 
       
 
  By:   /s/ Steve Abely
 
       
 
  Name:
Title:   Steve Abely
President
 
            BOOKHAM (US) INC.,
a Delaware corporation, as a Borrower
 
       
 
  By:   /s/ Steve Abely
 
       
 
  Name:
Title:   Steve Abely
President

S-1
Credit Agreement

 

--------------------------------------------------------------------------------

 

              WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent and as a Lender
 
       
 
  By:   /s/ Alex Hechler
 
       
 
  Name:
Title   Alex Hechler
Vice President

S-2
Credit Agreement

 

--------------------------------------------------------------------------------

 

EXHIBIT A-1
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
     This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is
entered into as of                                          between
                                         (“Assignor”) and
                                         (“Assignee”). Reference is made to the
Agreement described in Annex I hereto (the “Credit Agreement”). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Credit Agreement.
     1. In accordance with the terms and conditions of Section 13 of the Credit
Agreement, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
the Assignor’s rights and obligations under the Loan Documents as of the date
hereof with respect to the Obligations owing to the Assignor, and Assignor’s
portion of the Commitments, all to the extent specified on Annex I.
     2. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim and (ii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment Agreement and to consummate the transactions contemplated hereby;
(b) makes no representation or warranty and assumes no responsibility with
respect to (i) any statements, representations or warranties made in or in
connection with the Loan Documents, or (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
other instrument or document furnished pursuant thereto; (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or any Guarantor or the performance or
observance by any Borrower or any Guarantor of any of their respective
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto, and (d) represents and warrants that the amount set
forth as the Purchase Price on Annex I represents the amount owed by Borrowers
to Assignor with respect to Assignor’s share of the Advances assigned hereunder,
as reflected on Assignor’s books and records.
     3. The Assignee (a) confirms that it has received copies of the Credit
Agreement and the other Loan Documents, together with copies of the financial
statements referred to therein and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement; (b) agrees that it will, independently and
without reliance upon Agent, Assignor, or any other Lender, based upon such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under the Loan
Documents; (c) confirms that it is an Eligible Transferee; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
(e) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender; [and (f) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee’s
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty.]
     4. Following the execution of this Assignment Agreement by the Assignor and
Assignee, the Assignor will deliver this Assignment Agreement to the Agent for
recording by the Agent. The effective date of this Assignment (the “Settlement
Date”) shall be the latest to occur of (a) the date of the execution and
delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for
its sole and separate account a

1

--------------------------------------------------------------------------------

 

processing fee in the amount of $5,000 (if required by the Credit Agreement),
(c) the receipt of any required consent of the Agent, and (d) the date specified
in Annex I.
     5. As of the Settlement Date (a) the Assignee shall be a party to the
Credit Agreement and, to the extent of the interest assigned pursuant to this
Assignment Agreement, have the rights and obligations of a Lender thereunder and
under the other Loan Documents, and (b) the Assignor shall, to the extent of the
interest assigned pursuant to this Assignment Agreement, relinquish its rights
and be released from its obligations under the Credit Agreement and the other
Loan Documents, provided, however, that nothing contained herein shall release
any assigning Lender from obligations that survive the termination of this
Agreement, including such assigning Lender’s obligations under Article 15 and
Section 16.7 of the Credit Agreement.
     6. Upon the Settlement Date, Assignee shall pay to Assignor the Purchase
Price (as set forth in Annex I). From and after the Settlement Date, Agent shall
make all payments that are due and payable to the holder of the interest
assigned hereunder (including payments of principal, interest, fees and other
amounts) to Assignor for amounts which have accrued up to but excluding the
Settlement Date and to Assignee for amounts which have accrued from and after
the Settlement Date. On the Settlement Date, Assignor shall pay to Assignee an
amount equal to the portion of any interest, fee, or any other charge that was
paid to Assignor prior to the Settlement Date on account of the interest
assigned hereunder and that are due and payable to Assignee with respect
thereto, to the extent that such interest, fee or other charge relates to the
period of time from and after the Settlement Date.
     7. This Assignment Agreement may be executed in counterparts and by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. This Assignment Agreement may be executed and delivered
by telecopier or other facsimile transmission all with the same force and effect
as if the same were a fully executed and delivered original manual counterpart.
     8. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

2

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement and Annex I hereto to be executed by their respective officers, as of
the first date written above.

      [NAME OF ASSIGNOR] as Assignor
 
   
By
   
 
   
Name:
   
Title:
   
 
    [NAME OF ASSIGNEE] as Assignee
 
   
By
   
 
   
Name:
   
Title:
   

[ACCEPTED THIS ___DAY OF
                                        ]
WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent
By                                                            
Name:
Title:

3

--------------------------------------------------------------------------------

 

ANNEX FOR ASSIGNMENT AND ACCEPTANCE
ANNEX I

1.   Borrowers: Bookham Technology PLC and New Focus Inc.   2.   Name and Date
of Credit Agreement:       Credit Agreement, dated as of July ___, 2006, by and
among Bookham Inc., a Delaware corporation (“Parent”), the subsidiaries of
Parent party thereto as Borrowers, the lenders from time to time a party thereto
(the “Lenders”), and Wells Fargo Foothill, Inc., a California corporation, as
the arranger and administrative agent for the Lenders

              3.   Date of Assignment Agreement:  
                                          
 
            4.   Amounts:    
 
           
 
  (a)   Assigned Amount of Revolver Commitment  
$                                        
 
           
 
  (b)   Assigned Amount of Advances   $                                        
 
            5.   Settlement Date:                                             
 
            6.   Purchase Price   $                                        

7.   Notice and Payment Instructions, etc.

         
Assignee:
  Assignor:    
 
       
 
       
 
       
 
       
 
       
 
       

Annex I-1

--------------------------------------------------------------------------------

 

8.   Agreed and Accepted:

         
[ASSIGNOR]
  [ASSIGNEE]    
 
       
 
       
 
       
 
       
 
       
 
       

Accepted:
WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent
By                                        
Name:
Title:

Annex I-2

--------------------------------------------------------------------------------

 

EXHIBIT C-1
FORM OF COMPLIANCE CERTIFICATE
[on Parent’s letterhead]

     
To:
  Wells Fargo Foothill, Inc.
 
  2450 Colorado Avenue
 
  Suite 3000 West
 
  Santa Monica, CA 90404
 
  Attn: Business Finance Division Manager

     
Re:
  Compliance Certificate dated                     , 20___

Ladies and Gentlemen:
     Reference is made to that certain CREDIT AGREEMENT (the “Credit Agreement”)
dated as of July ___, 2006, by and among the lenders identified on the signature
pages thereof (such lenders, together with their respective successors and
permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), WELLS FARGO FOOTHILL, INC., a California
corporation, as the arranger and administrative agent for the Lenders (“Agent”),
Bookham, Inc., a Delaware corporation (“Parent”), and each of its Subsidiaries
party thereto. Initially capitalized terms used in this Compliance Certificate
have the meanings set forth in the Credit Agreement unless specifically defined
herein.
     Pursuant to Schedule 5.3 of the Credit Agreement, the undersigned officer
of Parent hereby certifies that:
     1. The financial information of Parent and its Subsidiaries furnished in
Schedule 1 attached hereto, has been prepared in accordance with GAAP (except
for year-end adjustments and the lack of footnotes), and fairly presents in all
material respects the financial condition of Parent and its Subsidiaries.
     2. Such officer has reviewed the terms of the Credit Agreement and has
made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of Parent and its Subsidiaries during
the accounting period covered by the financial statements delivered pursuant to
Schedule 5.3 of the Credit Agreement.
     3. Such review has not disclosed the existence on and as of the date
hereof, and the undersigned does not have knowledge of the existence as of the
date hereof, of any event or condition that constitutes a Default or Event of
Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
Parent and its Subsidiaries have taken, are taking, or propose to take with
respect thereto.
     4. The representations and warranties of Parent and its Subsidiaries set
forth in the Credit Agreement and the other Loan Documents are true and correct
in all material respects on and as of the date hereof (except to the extent they
relate to a specified date), except as set forth on Schedule 3 attached hereto.
     5. Parent and its Subsidiaries are in compliance with the applicable
covenants contained in Section 6.16 of the Credit Agreement as demonstrated on
Schedule 4 hereof.

1

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, this Compliance Certificate is executed by the
undersigned this ___day of                                         ,
                    .

      BOOKHAM, INC., a Delaware corporation
 
   
By:
   
 
   
Name:
   
Title:
   

2

--------------------------------------------------------------------------------

 

SCHEDULE 4
Financial Covenants

1.   Minimum EBITDA.

     Parent’s and its Subsidiaries’ EBITDA, measured on a quarter-end basis, for
the quarter period ending                     ,                      is
$                    , which amount [is/is not] greater than or equal to the
amount set forth in Section 6.16(a) of the Credit Agreement for the
corresponding period.

2.   Capital Expenditures.

     Parent’s and its Subsidiaries Capital Expenditures from the beginning of
Parent’s most recent Fiscal Year to the date hereof is                     ,
which [is/is not] greater than or equal to the amount set forth in
Section 6.16(b) of the Credit Agreement for the corresponding period.

Schedule 4

--------------------------------------------------------------------------------

 

EXHIBIT L-1
FORM OF LIBOR NOTICE
Wells Fargo Foothill, Inc., as Agent
under the below referenced Credit Agreement
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404
Ladies and Gentlemen:
     Reference hereby is made to that certain Credit Agreement, dated as of July
___, 2006 (the “Credit Agreement”), among Bookham, Inc., a Delaware corporation
(“Parent”), each of its Subsidiaries signatory thereto (such Subsidiaries, each,
a “Borrower” and collectively, jointly and severally, “Borrowers”), the lenders
signatory thereto (the “Lenders”), and Wells Fargo Foothill, Inc., a California
corporation, as the arranger and administrative agent for the Lenders (“Agent”).
Initially capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement.
     This LIBOR Notice represents Borrowers’ request to elect the LIBOR Option
with respect to outstanding Advances in the amount of $                     (the
“LIBOR Rate Advance”)[, and is a written confirmation of the telephonic notice
of such election given to Agent].
     The LIBOR Rate Advance will have an Interest Period of [1, 2, [or] 3]
month(s) commencing on                                         .
     This LIBOR Notice further confirms Borrowers’ acceptance, for purposes of
determining the rate of interest based on the LIBOR Rate under the Credit
Agreement, of the LIBOR Rate as determined pursuant to the Credit Agreement.
     Administrative Borrower represents and warrants that (i) as of the date
hereof, each representation or warranty contained in or pursuant to any Loan
Document or any agreement, instrument, certificate, document or other writing
furnished at any time under or in connection with any Loan Document, and as of
the effective date of any advance, continuation or conversion requested above,
is true and correct in all material respects (except to the extent any
representation or warranty expressly related to an earlier date), (ii) each of
the covenants and agreements contained in any Loan Document have been performed
(to the extent required to be performed on or before the date hereof or each
such effective date), and (iii) no Default or Event of Default has occurred and
is continuing on the date hereof, nor will any thereof occur after giving effect
to the request above.

 

--------------------------------------------------------------------------------

 

Wells Fargo Foothill, Inc., as Agent
Page 2

     
Dated:
   
 
   
 
    BOOKHAM TECHNOLOGY PLC, a company incorporated under the laws of England and
Wales, as Administrative Borrower
 
   
By
   
 
   
Name:
   
Title:
   

Acknowledged by:
WELLS FARGO FOOTHILL, INC.,
a California corporation, as Agent
By:                                        
Name:
Title:

 

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SCHEDULE F-1
Foreign Security Documents

•   Debenture, dated as of the Closing Date, granted by Bookham UK and Bookham
Nominees Limited, a company incorporated under the laws of England and Wales
(“BNL”), in favor of Agent.   •   Mortgage Over Shares, dated as of the Closing
Date, granted by Parent and BNL in favor of Agent.   •   Deed of Charge, dated
as of the Closing Date, by and among Bookham International Limited, an exempted
company incorporated with limited liability under the laws of the Cayman
Islands, and Agent.   •   Charge Over Shares, dated as of the Closing Date, by
and between Bookham UK and Agent.   •   Confirmatory Assignment of Security
Interest for filing under the Patent Act (Canada), dated as of the Closing Date,
by and between Bookham UK and Agent.

--------------------------------------------------------------------------------

 

Schedule 1.1
As used in the Agreement, the following terms shall have the following
definitions:
     “Account” means an account (as that term is defined in the Code).
     “Account Debtor” means any Person who is obligated on an Account, chattel
paper, or a general intangible.
     “ACH Transactions” means any cash management or related services (including
the Automated Clearing House processing of electronic fund transfers through the
direct Federal Reserve Fedline system) provided by a Bank Product Provider for
the account of Parent or its Subsidiaries.
     “Active Obligor” means each Obligor that is not an Inactive Obligor.
     “Additional Documents” has the meaning specified therefor in Section 5.17.
     “Administrative Borrower” has the meaning specified therefor in
Section 16.10.
     “Advances” has the meaning specified therefor in Section 2.1(a).
     “Affiliate” means, as applied to any Person, any other Person who controls,
is controlled by, or is under common control with, such Person. For purposes of
this definition, “control” means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 6.13 of the Agreement: (a) any Person which owns directly or indirectly
10% or more of the Stock having ordinary voting power for the election of
directors or other members of the governing body of a Person or 10% or more of
the partnership or other ownership interests of a Person (other than as a
limited partner of such Person) shall be deemed an Affiliate of such Person,
(b) each director (or comparable manager) of a Person shall be deemed to be an
Affiliate of such Person, and (c) each partnership in which a Person is a
general partner shall be deemed an Affiliate of such Person.
     “Agent” has the meaning specified therefor in the preamble to the
Agreement.
     “Agent-Related Persons” means Agent, together with its Affiliates,
officers, directors, employees, attorneys, and agents.
     “Agent’s Account” means the Deposit Account of Agent identified on Schedule
A-1.
     “Agent’s Liens” means the Liens granted by Borrowers or their Subsidiaries
to Agent under the Loan Documents.
     “Agreement” means the Credit Agreement to which this Schedule 1.1 is
attached.
     “Assignee” has the meaning specified therefor in Section 13.1(a).
     “Assignment and Acceptance” means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1.
     “Authorized Person” means any officer or employee of Administrative
Borrower.

1

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     “Availability” means, as of any date of determination, the amount that
Borrowers are entitled to borrow as Advances under Section 2.1 of the Agreement
(after giving effect to all then outstanding Obligations (other than Bank
Product Obligations) and all sublimits and reserves then applicable hereunder).
     “Bank Product” means any financial accommodation extended to Parent or its
Subsidiaries by a Bank Product Provider (other than pursuant to the Agreement)
including: (a) credit cards, (b) credit card processing services, (c) debit
cards, (d) purchase cards, (e) ACH Transactions, (f) cash management, including
controlled disbursement, accounts or services, or (g) transactions under Hedge
Agreements.
     “Bank Product Agreements” means those agreements entered into from time to
time by Parent or its Subsidiaries with a Bank Product Provider in connection
with the obtaining of any of the Bank Products.
     “Bank Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Parent or its
Subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank
Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including all such amounts that Parent or its
Subsidiaries are obligated to reimburse to Agent or any member of the Lender
Group as a result of Agent or such member of the Lender Group purchasing
participations from, or executing indemnities or reimbursement obligations to, a
Bank Product Provider with respect to the Bank Products provided by such Bank
Product Provider to Parent or its Subsidiaries.
     “Bank Product Provider” means Wells Fargo or any of its Affiliates.
     “Bank Product Reserve” means, as of any date of determination, the amount
of reserves that Agent has established (based upon the Bank Product Providers’
reasonable determination of the credit exposure of Parent and its Subsidiaries
in respect of Bank Products) in respect of Bank Products then provided or
outstanding.
     “Bankruptcy Code” means title 11 of the United States Code, as in effect
from time to time.
     “Base LIBOR Rate” means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate, to be the rate at which Dollar
deposits (for delivery on the first day of the requested Interest Period) are
offered to major banks in the London interbank market 2 Business Days prior to
the commencement of the requested Interest Period, for a term and in an amount
comparable to the Interest Period and the amount of the LIBOR Rate Loan
requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR
Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
Administrative Borrower in accordance with the Agreement, which determination
shall be conclusive in the absence of manifest error.
     “Base Rate” means, the rate of interest announced, from time to time,
within Wells Fargo at its principal office in San Francisco as its “prime rate”,
with the understanding that the “prime rate” is one of Wells Fargo’s base rates
(not necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publications as Wells Fargo may designate.
     “Base Rate Loan” means the portion of the Advances that bears interest at a
rate determined by reference to the Base Rate.
     “Base Rate Margin” means 1.25 percentage points.
     “Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35)
of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any
Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the
past six years.

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     “Board of Directors” means the board of directors (or comparable managers)
of Person or any committee thereof duly authorized to act on behalf of the board
of directors (or comparable managers).
     “Bookham Canada” means Bookham (Canada) Inc., a company organized under the
federal laws of Canada.
     “Bookham China” means Bookham Technology (Shenzhen) (FFTZ) Co. Ltd., a
company organized under the laws of The People’s Republic of China.
     “Bookham China Sale and Leaseback” means a sale and leaseback financing
transaction by Bookham China with respect to its operating facility in Shenzhen,
China.
     “Bookham Switzerland” means Bookham (Switzerland) AG, a company organized
under the laws of Switzerland.
     “Bookham UK” means Bookham Technology plc, a limited liability company
incorporated under the laws of England and Wales.
     “Bookham (US)” means Bookham (US) Inc., a Delaware corporation.
     “Borrower” and “Borrowers” have the respective meanings specified therefor
in the preamble to the Agreement.
     “Borrowing” means a borrowing hereunder consisting of Advances made on the
same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the
case of a Swing Loan, or by Agent in the case of a Protective Advance, in each
case, to Administrative Borrower.
     “Borrowing Base” means, as of any date of determination, 80% of the amount
of Eligible Accounts, minus the sum of (i) the amount, if any, of the Dilution
Reserve, (ii) the Bank Product Reserve, and (iii) the aggregate amount of
reserves, if any, established by Agent under Section 2.1(b).
     “Borrowing Base Certificate” means a certificate in the form of
Exhibit B-1.
     “Business Day” means any day that is not a Saturday, Sunday, or other day
on which banks are authorized or required to close in the state of California,
except that, if a determination of a Business Day shall relate to a LIBOR Rate
Loan, the term “Business Day” also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.
     “Capital Expenditures” means, with respect to any Person for any period,
the aggregate of all expenditures by such Person and its Subsidiaries during
such period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.
     “Capitalized Lease Obligation” means that portion of the obligations under
a Capital Lease that is required to be capitalized in accordance with GAAP.
     “Capital Lease” means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
     “Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or by the United
Kingdom or any political subdivision of any such state or any public
instrumentality thereof maturing within 1 year from the date of acquisition
thereof

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and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s
Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than
270 days from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody’s,
(d) certificates of deposit or bankers’ acceptances maturing within 1 year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States or of the United Kingdom or any state thereof having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies
the criteria described in clause (d) above, or (ii) any other bank organized
under the laws of the United States or any state thereof so long as the amount
maintained with any such other bank is less than or equal to $100,000 and is
insured by the Federal Deposit Insurance Corporation, and (f) Investments in
money market funds substantially all of whose assets are invested in the types
of assets described in clauses (a) through (e) above.
     “Cash Management Account” has the meaning specified therefor in Section
2.7(a).
     “Cash Management Agreements” means those certain cash management
agreements, in form and substance satisfactory to Agent, each of which is among
Parent or one of its Subsidiaries, Agent, and one of the Cash Management Banks.
     “Cash Management Bank” has the meaning specified therefor in
Section 2.7(a).
     “Change of Control” means that (a) any “person” or “group” (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 35%, or more, of the Stock of Parent having the right to vote for the
election of members of the Board of Directors of Parent, or (b) a majority of
the members of the Board of Directors of Parent do not constitute Continuing
Directors, or (c) any Obligor ceases to own and control, directly or indirectly,
100% (or such lesser percentage owned by such Obligor as of the Closing Date) of
the outstanding capital Stock of each of its respective Subsidiaries existing as
of the Closing Date, other than as a result of a Permitted Disposition or as
otherwise specifically permitted under the Agreement.
     “Closing Date” means the date of the making of the initial Advance (or
other extension of credit) hereunder or the date on which Agent sends
Administrative Borrower a written notice that each of the conditions precedent
set forth on Schedule 3.1 either have been satisfied or have been waived.
     “Code” means the California Uniform Commercial Code, as in effect from time
to time.
     “Collateral” means all assets and interests in assets and proceeds thereof
now owned or hereafter acquired by Parent or its Subsidiaries in or upon which a
Lien is granted under any of the Loan Documents.
     “Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in Parent’s or its Subsidiaries’ books and records, Equipment, or Inventory, in
each case, in form and substance satisfactory to Agent.
     “Collections” means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
     “Commitment” means, with respect to each Lender, its Revolver Commitment,
or its Total Commitment, as the context requires, and, with respect to all
Lenders, their Revolver Commitments, or their Total Commitments, as the context
requires, in each case as such Dollar amounts are set forth beside such Lender’s
name under the applicable heading on Schedule C-1 or in the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder, as such
amounts may be reduced or increased from time to time pursuant to assignments
made in accordance with the provisions of Section 13.1.

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     “Compliance Certificate” means a certificate substantially in the form of
Exhibit C-1 delivered by the chief financial officer of Parent to Agent.
     “Continuing Director” means (a) any member of the Board of Directors of
Parent who was a director (or comparable manager) of Parent on the Closing Date,
and (b) any individual who becomes a member of the Board of Directors of Parent
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors of Parent by a majority of the Continuing
Directors, but excluding any such individual originally proposed for election in
opposition to the Board of Directors in office at the Closing Date in an actual
or threatened election contest relating to the election of the directors (or
comparable managers) of Parent and whose initial assumption of office resulted
from such contest or the settlement thereof.
     “Control Agreement” means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by Parent or one of its
Subsidiaries, Agent, and the applicable securities intermediary (with respect to
a Securities Account) or bank (with respect to a Deposit Account).
     “Copyright Security Agreement” has the meaning specified therefor in the
Security Agreement.
     “Daily Balance” means, as of any date of determination and with respect to
any Obligation, the amount of such Obligation owed at the end of such day.
     “Default” means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
     “Defaulting Lender” means any Lender that fails to make any Advance (or
other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.
     “Defaulting Lender Rate” means (a) for the first 3 days from and after the
date the relevant payment is due, the Base Rate, and (b) thereafter, the
interest rate then applicable to Advances that are Base Rate Loans (inclusive of
the Base Rate Margin applicable thereto).
     “Deposit Account” means any deposit account (as that term is defined in the
Code).
     “Designated Account” means the Deposit Account of Administrative Borrower
identified on Schedule D-1.
     “Designated Account Bank” has the meaning specified therefor in
Schedule D-1.
     “Dilution” means, as of any date of determination, a percentage, based upon
the experience of the immediately prior 90 consecutive days, that is the result
of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to
Borrowers’ Accounts during such period, by (b) Borrowers’ billings with respect
to Accounts during such period.
     “Dilution Reserve” means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts by 1 percentage
point for each percentage point by which Dilution is in excess of 5%.
     “Dollars” or “$” means United States dollars.
     “EBITDA” means, with respect to any fiscal period, the sum of:
          (a) Parent’s and its Subsidiaries’ consolidated net earnings (or loss)
for such period, plus

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          (b) without duplication, the sum of the following amounts for such
period, to the extent such amounts were deducted in determining such
consolidated net earnings (or loss) for such period: (i) interest expense, plus
(ii) income tax expense, plus (iii) depreciation and amortization, plus (iv)
restructuring charges of not more than $8,000,000, to the extent incurred on or
before March 31, 2007, plus (v) non-cash extraordinary or unusual losses, plus
(vi) non-cash impairment and non-cash charges related to the issuance of stock
and options, minus
          (c) without duplication, the sum of the following amounts, to the
extent such amounts were included in determining such consolidated net earnings
(or loss) for such period: (i) extraordinary or unusual gains, plus
(ii) interest income.
     “Eligible Accounts” means, without duplication, (i) the Eligible Wuhan
Accounts, (ii) the Eligible Marconi Accounts, (iii) the Eligible Siemens
Accounts, and (iv) those Accounts created by a Borrower in the ordinary course
of its business, that arise out of its sale of goods or rendition of services,
that comply with each of the representations and warranties respecting Eligible
Accounts made in the Loan Documents, and that are not excluded as ineligible by
virtue of one or more of the excluding criteria set forth below; provided,
however, that such criteria may be revised from time to time by Agent in Agent’s
Permitted Discretion to address the results of any audit performed by Agent from
time to time after the Closing Date. In determining the amount to be included,
Eligible Accounts shall be calculated net of customer deposits and unapplied
cash. Eligible Accounts shall not include the following:
          (a) Accounts that the Account Debtor has failed to pay within 90 days
of original invoice date or Accounts with selling terms of more than 60 days,
          (b) Accounts owed by an Account Debtor (or its Affiliates) where 50%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
          (c) Accounts with respect to which the Account Debtor is an Affiliate
of any Borrower or an employee or agent of any Borrower or any Affiliate of any
Borrower,
          (d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale
on approval, a bill and hold, or any other terms by reason of which the payment
by the Account Debtor may be conditional,
          (e) Accounts that are not payable in Dollars,
          (f) Accounts with respect to which the Account Debtor either (i) does
not maintain its chief executive office or its registered office in the United
States, Canada, the United Kingdom, or such other jurisdiction(s) permitted by
Agent in its Permitted Discretion, or (ii) is not organized or incorporated
under the laws of the United States, Canada, the United Kingdom, or such other
jurisdiction(s) permitted by Agent in its Permitted Discretion, or any state,
province, municipality, or other political subdivision thereof, or (iii) is the
government of any foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any department,
agency, public corporation, or other instrumentality thereof, unless, in each
such case, (y) the Account is supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent, or
(z) the Account is covered by credit insurance in form, substance, and amount,
and by an insurer, satisfactory to Agent,
          (g) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which the
applicable Borrower has complied, to the reasonable satisfaction of Agent, with
the Assignment of Claims Act, 31 USC § 3727), or (ii) any state or other
political subdivision of the United States,

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          (h) Accounts with respect to which the Account Debtor is a creditor of
any Borrower, has or has asserted a right of setoff, or has disputed its
obligation to pay all or any portion of the Account, to the extent of such
claim, right of setoff, or dispute,
          (i) Accounts with respect to an Account Debtor whose total obligations
owing to Borrowers exceed 10% (or 30% with respect to Flextronics Canada, Inc.,
or 20% with respect to Huawei Tech Investment Co. Ltd. or Nortel) of all
Eligible Accounts (such percentage, as applied to a particular Account Debtor,
being subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates), to the extent of the
obligations owing by such Account Debtor in excess of such percentage; provided,
however, that, in each case, the amount of Eligible Accounts that are excluded
because they exceed the foregoing percentage shall be determined by Agent based
on all of the otherwise Eligible Accounts prior to giving effect to any
eliminations based upon the foregoing concentration limit,
          (j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
          (k) Accounts with respect to which the Account Debtor is located in a
state or jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that
requires, as a condition to access to the courts of such jurisdiction, that a
creditor qualify to transact business, file a business activities report or
other report or form, or take one or more other actions, unless the applicable
Borrower has so qualified, filed such reports or forms, or taken such actions
(and, in each case, paid any required fees or other charges), except to the
extent that the applicable Borrower may qualify subsequently as a foreign entity
authorized to transact business in such state or jurisdiction and gain access to
such courts, without incurring any cost or penalty viewed by Agent to be
significant in amount, and such later qualification cures any access to such
courts to enforce payment of such Account,
          (l) Accounts, the collection of which, Agent, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor’s financial
condition,
          (m) Accounts that are not subject to a valid and perfected first
priority Agent’s Lien,
          (n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or
          (o) Accounts that represent the right to receive progress payments or
other advance billings that are due prior to the completion of performance by
the applicable Borrower of the subject contract for goods or services.
     “Eligible Marconi Accounts” means Accounts created by a Borrower owing from
Marconi SUD SPA (“Marconi”) to Borrowers that (i) would otherwise constitute
Eligible Accounts but for the exclusionary criteria set forth in parts (a) or
(f) of the definition of Eligible Accounts; (ii) Marconi has not failed to pay
within the earlier of 120 days of original invoice date or 60 days after the due
date; and (iii) do not contain selling terms of more than 120 days.
     “Eligible Siemens Accounts” means Accounts created by a Borrower owing from
Siemens AG (“Siemens”) to Borrowers that (i) would otherwise constitute Eligible
Accounts but for the exclusionary criteria set forth in parts (a) or (f) of the
definition of Eligible Accounts; (ii) Siemens has not failed to pay within the
earlier of 120 days of original invoice date or 60 days after the due date; and
(iii) do not contain selling terms of more than 120 days.

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     “Eligible Transferee” means (a) a commercial bank organized under the laws
of the United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, financial institution, or fund that is engaged in making, purchasing,
or otherwise investing in commercial loans in the ordinary course of its
business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender, (e) so
long as no Event of Default has occurred and is continuing, any other Person
approved by Agent and Administrative Borrower (which approval of Administrative
Borrower shall not be unreasonably withheld, delayed, or conditioned), and
(f) during the continuation of an Event of Default, any other Person approved by
Agent.
     “Eligible Wuhan Accounts” means Accounts created by a Borrower owing from
Wuhan Research Institute of Posts (“Wuhan”) to Borrowers that (i) would
otherwise constitute Eligible Accounts but for the exclusionary criteria set
forth in parts (a) or (f) of the definition of Eligible Accounts; (ii) do not
exceed $2,000,000 in the aggregate; (iii) Wuhan has not failed to pay within the
earlier of 120 days of original invoice date or 60 days after the due date;
(iv) do not contain selling terms of more than 120 days; and (v) are supported
by an irrevocable letter of credit satisfactory to Agent (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Agent.
     “Environmental Actions” means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of Parent, any Subsidiary of Parent, or any of their predecessors in interest,
(b) from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by Parent, any Subsidiary of
Parent, or any of their predecessors in interest.
     “Environmental Law” means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on Parent
or any Subsidiary of Parent, relating to the environment, the effect of the
environment on employee health, or Hazardous Materials, in each case as amended
from time to time.
     “Environmental Liabilities” means all liabilities, monetary obligations,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of
counsel, experts, or consultants, and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurred as a result of any
claim or demand, or Remedial Action required, by any Governmental Authority or
any third party, and which relate to any Environmental Action.
     “Environmental Lien” means any Lien in favor of any Governmental Authority
for Environmental Liabilities.
     “Equipment” means equipment (as that term is defined in the Code).
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
     “ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Parent or a
Subsidiary of a Parent under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer as
the

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employees of Parent or a Subsidiary of Parent under IRC Section 414(c),
(c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which Parent or a Subsidiary of Parent is a member under IRC Section 414(m), or
(d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
Person subject to ERISA that is a party to an arrangement with Parent or a
Subsidiary of Parent and whose employees are aggregated with the employees of
Parent or a Subsidiary of Parent under IRC Section 414(o).
     “Event of Default” has the meaning specified therefor in Section 7.
     “Excess Availability” means, as of any date of determination, the amount
equal to Availability minus the aggregate amount, if any, of all trade payables
of Parent and its Subsidiaries aged in excess of their historical levels with
respect thereto and all book overdrafts of Parent and its Subsidiaries in excess
of their historical practices with respect thereto, in each case as determined
by Agent in its Permitted Discretion.
     “Exchange Act” means the Securities Exchange Act of 1934, as in effect from
time to time.
     “Fee Letter” means that certain fee letter between Borrowers and Agent, in
form and substance satisfactory to Agent.
     “Foreign Security Documents” means, collectively, the documents set forth
on Schedule F-1 together with the documents, agreements, or instruments executed
or delivered in connection therewith, and “Foreign Security Document” means any
one of them.
     “Funding Date” means the date on which a Borrowing occurs.
     “Funding Losses” has the meaning specified therefor in Section 2.13(b)(ii).
     “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
     “Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.
     “Governmental Authority” means any domestic or foreign federal, state,
local, or other governmental or administrative body, instrumentality, board,
department, or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body.
     “Guarantors” means, collectively, Parent and each other person which from
time to time executes a Guaranty, and “Guarantor” means any one of them.
     “Guaranties” means those certain general continuing guaranties executed and
delivered by each Guarantor in favor of Agent, for the benefit of the Lender
Group and the Bank Product Providers, in form and substance satisfactory to
Agent, and “Guaranty” means any one of them.
     “Hazardous Materials” means (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

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     “Hedge Agreement” means any and all agreements, or documents now existing
or hereafter entered into by Parent or any of its Subsidiaries that provide for
an interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Parent’s or any of its Subsidiaries’
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security, or currency valuations or commodity prices.
     “Holdout Lender” has the meaning specified therefor in Section 14.2(a).
     “Inactive Obligors” means, collectively, Onetta Inc, a Delaware
corporation; Focused Research Inc., a California corporation; and Globe Y
Technology, Inc., a California corporation and “Inactive Obligor” means any one
of them.
     “Indebtedness” means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations as a lessee under Capital Leases, (d) all obligations or liabilities
of others secured by a Lien on any asset of a Person or its Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations to pay the deferred purchase price of assets (other than trade
payables incurred in the ordinary course of business and repayable in accordance
with customary trade practices), (f) all obligations owing under Hedge
Agreements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (f) above.
     “Indemnified Liabilities” has the meaning specified therefor in
Section 10.3.
     “Indemnified Person” has the meaning specified therefor in Section 10.3.
     “Insolvency Proceeding” means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law or any equivalent laws in any other
jurisdiction, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief and including, in
the case of any Person incorporated in England and Wales, any corporate action,
legal proceedings or other procedure or step is taken (including the making of
an application, the presentation of a petition, the filing or service of a
notice or the passing of a resolution) in relation to:

  (a)   the suspension of payments, a moratorium or any indebtedness,
winding-up, dissolution, administration or reorganization (by way of voluntary
arrangement scheme of arrangement or otherwise) of such Person other than a
solvent liquidation or reorganization of such Person;     (b)   a composition,
assignment or arrangement with any creditor of such Person;     (c)   the
appointment of a liquidator, supervisor, receiver, administrator, administrative
receiver, compulsory manager, trustee or other similar officer in respect of
such Person or any of its assets.

     “Intercompany Advances” means loans or advances or the repayment of loans
or advances from Parent or one of its Subsidiaries to Parent or one of its
Subsidiaries, and includes the repayment of intercompany payables owing on the
Closing Date.
     “Intercompany Subordination Agreement” means a subordination agreement
executed and delivered by Parent, each of Parent’s Subsidiaries, and Agent, the
form and substance of which is satisfactory to Agent.

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     “Interest Expense” means, for any period, the aggregate of the interest
expense of Parent and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
     “Interest Period” means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; provided, however,
that (a) if any Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.
     “Inventory” means inventory (as that term is defined in the Code).
     “Investment” means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or other
acquisitions of Indebtedness, Stock, or all or substantially all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
     “IRC” means the Internal Revenue Code of 1986, as in effect from time to
time.
     “Issuing Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent, agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.
     “L/C” has the meaning specified therefor in Section 2.12(a).
     “L/C Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.
     “L/C Undertaking” has the meaning specified therefor in Section 2.12(a).
     “Lender” and “Lenders” have the respective meanings set forth in the
preamble to the Agreement, and shall include any other Person made a party to
the Agreement in accordance with the provisions of Section 13.1.
     “Lender Group” means, individually and collectively, each of the Lenders
(including the Issuing Lender) and Agent.
     “Lender Group Expenses” means, subject to the terms and provisions of the
Fee Letter, all (a) costs or expenses (including taxes, and insurance premiums)
required to be paid by Parent or any of its Subsidiaries under any of the Loan
Documents that are paid, advanced, or incurred by the Lender Group, (b) fees or
charges paid or incurred by Agent in connection with the Lender Group’s
transactions with Parent or its Subsidiaries, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and

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trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic collateral
appraisals or business valuations), real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) costs and expenses
incurred by Agent in the disbursement of funds to Borrowers or other members of
the Lender Group (by wire transfer or otherwise), (d) charges paid or incurred
by Agent resulting from the dishonor of checks, (e) reasonable costs and
expenses paid or incurred by the Lender Group to correct any default or enforce
any provision of the Loan Documents, or after the occurrence of any Default or
Event of Default in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) audit fees and expenses of Agent related to any inspections or
audits to the extent of the fees and charges (and up to the amount of any
limitation) contained in the Agreement or the Fee Letter, (g) reasonable costs
and expenses of third party claims or any other suit paid or incurred by the
Lender Group in enforcing or defending the Loan Documents or third party claims
or any other suit in connection with the transactions contemplated by the Loan
Documents or the Lender Group’s relationship with Parent or any Subsidiary of
Parent, (h) Agent’s reasonable costs and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering,
syndicating, or amending the Loan Documents, and (i) Agent’s and each Lender’s
reasonable costs and expenses (including attorneys, accountants, consultants,
and other advisors fees and expenses) incurred in terminating, enforcing
(including attorneys, accountants, consultants, and other advisors fees and
expenses incurred in connection with a “workout,” a “restructuring,” or an
Insolvency Proceeding concerning Parent or any Subsidiary of Parent or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
     “Lender-Related Person” means, with respect to any Lender, such Lender,
together with such Lender’s Affiliates, officers, directors, employees,
attorneys, and agents.
     “Letter of Credit” means an L/C or an L/C Undertaking, as the context
requires.
     “Letter of Credit Usage” means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit.
     “LIBOR Deadline” has the meaning specified therefor in Section 2.13(b)(i).
     “LIBOR Notice” means a written notice in the form of Exhibit L-1.
     “LIBOR Option” has the meaning specified therefor in Section 2.13(a).
     “LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by Agent by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.
     “LIBOR Rate Loan” means each portion of an Advance that bears interest at a
rate determined by reference to the LIBOR Rate.
     “LIBOR Rate Margin” means 2.75 percentage points.
     “Lien” means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory
or other), security interest, or other security arrangement and any other
preference, priority, or preferential arrangement of any kind or nature
whatsoever, including any conditional sale contract or other title retention
agreement, the interest of a lessor under a Capital Lease and any synthetic or
other financing lease having substantially the same economic effect as any of
the foregoing.

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     “Loan Account” has the meaning specified therefor in Section 2.10.
     “Loan Documents” means the Agreement, the Bank Product Agreements, any
Borrowing Base Certificate, the Cash Management Agreements, the Control
Agreements, the Copyright Security Agreement, the Fee Letter, the Foreign
Security Documents, the Guaranties, the Intercompany Subordination Agreement,
the Letters of Credit, the Patent Security Agreement, the Security Agreement,
the Trademark Security Agreement, any note or notes executed by a Borrower in
connection with the Agreement and payable to a member of the Lender Group, and
any other agreement entered into, now or in the future, by any Obligor and the
Lender Group in connection with the Agreement.
     “Material Adverse Change” means (a) a material adverse change in the
business, operations, results of operations, assets, liabilities or financial
condition of Parent and its Subsidiaries taken as a whole, (b) a material
impairment of Parent’s and its Subsidiaries’ ability, taken as a whole, to
perform their obligations under the Loan Documents to which it is a party or of
the Lender Group’s ability to enforce the Obligations or realize upon the
Collateral, or (c) a material impairment of the enforceability or priority of
the Agent’s Liens with respect to the Collateral as a result of an action or
failure to act on the part of Parent or a Subsidiary of Parent.
     “Maturity Date” has the meaning specified therefor in Section 3.3.
     “Maximum Revolver Amount” means $25,000,000.
     “Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.
     “Obligations” means (a) all loans, Advances, debts, principal, interest
(including any interest that accrues after the commencement of an Insolvency
Proceeding regardless of whether allowed or allowable in whole or in part as a
claim in any such Insolvency Proceeding), contingent reimbursement obligations
with respect to outstanding Letters of Credit, premiums, liabilities (including
all amounts charged to Borrowers’ Loan Account pursuant to the Agreement),
obligations (including indemnification obligations), fees (including the fees
provided for in the Fee Letter), charges, costs, Lender Group Expenses
(including any fees or expenses that accrue after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in any such Insolvency Proceeding), lease payments, guaranties,
covenants, and duties of any kind and description owing by Borrowers to the
Lender Group pursuant to or evidenced by the Loan Documents and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all interest not paid when due and all other expenses or other amounts
that Borrowers are required to pay or reimburse by the Loan Documents or by law
or otherwise in connection with the Loan Documents, and (b) all Bank Product
Obligations. Any reference in the Agreement or in the Loan Documents to the
Obligations shall include all or any portion thereof and any extensions,
modifications, renewals, or alterations thereof, both prior and subsequent to
any Insolvency Proceeding.
     “Obligor” means any Person that is a Borrower or a Guarantor.
     “Originating Lender” has the meaning specified therefor in Section 13.1(e).
     “Overadvance” has the meaning specified therefor in Section 2.5.
     “Parent” has the meaning specified therefor in the preamble to the
Agreement.
     “Participant” has the meaning specified therefor in Section 13.1(e).
     “Patent Security Agreement” has the meaning specified therefor in the
Security Agreement.

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     “Permitted Discretion” means a determination made in the exercise of
reasonable (from the perspective of a secured asset-based lender) business
judgment.
     “Permitted Dispositions” means (a) sales of Inventory to buyers in the
ordinary course of business, (b) the use or transfer of money or Cash
Equivalents in a manner that is not prohibited by the terms of the Agreement or
the other Loan Documents, (c) the licensing, on a non-exclusive basis, of
patents, trademarks, copyrights, and other intellectual property rights in the
ordinary course of business, (d) the transfer of assets by an Obligor to an
Active Obligor, (e) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom, dispositions of assets consisting of
obsolete or surplus Equipment or surplus, obsolete, redundant, or immaterial
Intellectual Property (as such term is defined in the Security Agreement) not
otherwise permitted in clauses (a) through (d) so long as made at fair market
value and the aggregate amount of all such dispositions since the Closing Date
would not exceed $20,000,000, (f) the sales of New Focus Inc., a Delaware
corporation, or the thin film filter operations of Bookham (US), so long as, in
either case, (i) Administrative Borrower provides Agent with not less than 30
days prior written notice of such sale, together with written confirmation,
supported by detailed calculations satisfactory to Agent, that on a pro forma
basis, Borrowers will have positive Availability after giving effect to any such
sale and that no Overadvance would result therefrom, (ii) no Default or Event of
Default has occurred and is continuing or would result therefrom, (iii) the cash
proceeds of any such sale are remitted to a Deposit Account of Parent or a
Borrower which is subject to a Control Agreement and any non-cash proceeds of
sale are subject to Agent’s Lien, and (iv) on or before the consummation of any
such sale, Parent delivers to Agent updated schedules to the Loan Documents
reflecting such sale, provided, that in no event may any schedule be updated in
a manner that would reflect or evidence a Default or an Event of Default,
(g) the sale of the UK Real Property Collateral, Bookham Switzerland, or the
high powered laser operations of Bookham Switzerland, so long as, in each case,
(i) Parent provides Agent with not less than 15 days prior written notice of
such sale, (ii) no Default or Event of Default has occurred and is continuing or
would result therefrom, (iii) the cash proceeds of any such sale are remitted to
a Deposit Account of Parent or a Borrower which is subject to a Control
Agreement and any non-cash proceeds of sale are subject to Agent’s Lien, and
(iv) on or before the consummation of any such sale, Parent delivers to Agent
updated schedules to the Loan Documents reflecting such sale, provided, that in
no event may any schedule be updated in a manner that would reflect or evidence
a Default or an Event of Default, and (h) the Bookham China Sale and Leaseback
so long as (i) Parent provides Agent with not less than 15 days prior written
notice of such transaction, (ii) no Default or Event of Default has occurred and
is continuing or would result therefrom, and (iii) on or before the consummation
of such sale, Parent delivers to Agent updated schedules to the Loan Documents
reflecting such sale, provided, that in no event may any schedule be updated in
a manner that would reflect or evidence a Default or an Event of Default.
     “Permitted Intercompany Advance” means Intercompany Advances (a) made by
any of Parent’s Subsidiaries that is not an Obligor to any of Parent’s other
Subsidiaries that is not an Obligor; (b) made by Parent or any of Parent’s
Subsidiaries to an Active Obligor so long as they are the subject of the
Intercompany Subordination Agreement; (c) made by any of Parent’s Subsidiaries
that is an Obligor to Bookham China, so long as (i) no Default or Event of
Default has occurred and is continuing or would result therefrom, and (ii) all
such Intercompany Advances do not exceed $4,500,000 per month (subject to annual
increases requested by Borrowers and acceptable to Agent, which increases must
be based upon historic revenue growth since the Closing Date), provided, that no
such Intercompany Advances may be made following Bookham China’s receipt of cash
proceeds from the Bookham China Sale and Leaseback, until such cash proceeds
have been fully utilized to fund the ongoing business of Bookham China,;
(d) made by any of Parent’s Subsidiaries that is an Obligor to Bookham
Switzerland, so long as (i) no Default or Event of Default has occurred and is
continuing or would result therefrom, and (ii) all such Intercompany Advances do
not exceed $1,400,000 per calendar month; (e) made by any of Parent’s
Subsidiaries that is an Obligor to any of Parent’s other Subsidiaries that is
not an Obligor (other than Bookham China or Bookham Switzerland), so long as
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom, and (ii) all such Intercompany Advances do not exceed $100,000
outstanding at any one time; and (f) payments made by any Obligor to the Lender
Group in respect of obligations under this Agreement or the Loan Documents, to
the

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extent that the same are construed as “advances” for the benefit of one or more
of the other Obligors and so long as they are subject to the Intercompany
Subordination Agreement.
     “Permitted Intercompany Transactions” means (a) each of the transactions
set forth on Schedule P-1 that are materially consistent with the past practices
of Parent’s and its Subsidiaries’ business operations as in effect on the
Closing Date and disclosed to Agent on or before the Closing Date,
(b) transactions by and between Obligors that are materially consistent with the
past practices of Obligors’ business operations as in effect on the Closing Date
and disclosed to Agent on or before the Closing Date, and (c) transactions
between Parent or its Subsidiaries, on the one hand, and any Affiliate of Parent
or its Subsidiaries, on the other hand, so long as such transactions (i) are
upon fair and reasonable terms, (ii) are fully disclosed to Agent if they
involve one or more payments by Parent or any of Subsidiary of Parent in excess
of $500,000 for any single transaction or series of transactions, and (iii) are
no less favorable to Parent or its Subsidiaries, as applicable, than would be
obtained in an arm’s length transaction with a non-Affiliate.
     “Permitted Investments” means (a) Permitted Intercompany Advances,
(b) Investments in cash and Cash Equivalents, (c) Investments in negotiable
instruments for collection, (d) advances made in connection with purchases of
goods or services in the ordinary course of business, (e) Investments received
in settlement of amounts due to Parent or any Subsidiary of Parent effected in
the ordinary course of business or owing to Parent or any Subsidiary of Parent
as a result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of Parent or any Subsidiary of
Parent, (f) so long as no Default or Event of Default has occurred and is
continuing, the consummation of the transfer of Equipment and Inventory with
respect to Bookham UK’s chip on carrier processes to Bookham China, (g) the
forgiveness of any Indebtedness owing from Bookham Switzerland to an Obligor, so
long as such forgiveness is fully disclosed to Agent by Parent and is made in
the ordinary course of the Obligors’ business as in effect on the Closing Date,
(h) so long as no Default or Event of Default has occurred and is continuing,
the transfer of wafers and die banks from Bookham UK to Bookham China in the
ordinary course of Parent’s and its Subsidiaries’ business as in effect on the
Closing Date and (i) contributions by Bookham UK to Bookham China consisting of
Equipment to be used by Bookham China in the ordinary course of business so long
as (i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) all such contributions do not exceed $5,000,000 in the
aggregate in any calendar year, and (iii) Agent is given prior written notice by
Parent of any single contribution in excess of $500,000.
     “Permitted Liens” means (a) Liens held by Agent to secure the Obligations,
(b) Liens for unpaid taxes, assessments, or other governmental charges or levies
that either (i) are not yet delinquent, or (ii) do not have priority over the
Agent’s Liens and the underlying taxes, assessments, or charges or levies are
the subject of Permitted Protests, (c) judgment Liens that do not constitute an
Event of Default under Section 7.7 of the Agreement, (d) Liens set forth on
Schedule P-3, provided that any such Lien only secures the Indebtedness that it
secures on the Closing Date and any Refinancing Indebtedness in respect thereof,
(e) the interests of lessors under operating leases, (f) purchase money Liens or
the interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as (i) such
Lien attaches only to the asset purchased or acquired and the proceeds thereof,
and (ii) such Lien only secures the Indebtedness that was incurred to acquire
the asset purchased or acquired or any Refinancing Indebtedness in respect
thereof, (g) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business and not in connection with the borrowing of
money, and which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests, (h) Liens on amounts deposited in connection
with obtaining worker’s compensation or other unemployment insurance, (i) Liens
on amounts deposited in connection with the making or entering into of bids,
tenders, or leases in the ordinary course of business and not in connection with
the borrowing of money, (j) Liens on amounts deposited as security for surety or
appeal bonds in connection with obtaining such bonds in the ordinary course of
business, and (k) with respect to any Real Property, easements, rights of way,
and zoning restrictions that do not materially interfere with or impair the use
or operation thereof.

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     “Permitted Liquidation” means the liquidation, winding up, or dissolution
of any Subsidiary of Parent that is not an Active Obligor, Bookham China, or
Bookham Switzerland so long as (i) Parent provides Agent with not less than
30 days prior written notice of such liquidation, winding up, or dissolution,
(ii) no Default or Event of Default has occurred and is continuing or would
result therefrom, and (iii) on or before the consummation of any such
liquidation, winding up, or dissolution, Parent delivers to Agent updated
schedules to the Loan Documents reflecting such liquidation, winding up, or
dissolution, provided, that in no event may any schedule be updated in a manner
that would reflect or evidence a Default or an Event of Default.
     “Permitted Merger” means (a) the merger or consolidation of any Obligor
with and into a Borrower so long as the Borrower is the surviving entity,
(b) the merger or consolidation of any Guarantor with and into any other
Guarantor, (c) the merger or consolidation of any Subsidiary of Parent that is
not an Obligor with any other Subsidiary of Parent that is not an Obligor,
(d) the merger or consolidation of any Subsidiary of Parent that is not an
Obligor with any Obligor so long as the Obligor is the surviving entity,
provided that, in any of the forgoing cases, (i) Parent provides Agent with not
less than 30 days prior written notice of such merger or consolidation, (ii) no
Default or Event of Default has occurred and is continuing or would result
therefrom, (iii) Agent’s Liens on the Collateral pledged by any Obligor under
the Loan Documents to which it is a party are not adversely affected, and
(iv) on or before the consummation of any such merger or consolidation, Parent
delivers to Agent updated schedules to the Loan Documents reflecting such merger
or consolidation, provided, that in no event may any schedule be updated in a
manner that would reflect or evidence a Default or an Event of Default.
     “Permitted Protest” means the right of Parent or any of its Subsidiaries to
protest any Lien (other than any Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on Parent’s or any of its Subsidiaries’ books
and records in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by Parent or any of its
Subsidiaries, as applicable, in good faith, and (c) Agent is satisfied that,
while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Agent’s Liens.
     “Permitted Purchase Money Indebtedness” means, as of any date of
determination, Purchase Money Indebtedness incurred by Parent and its
Subsidiaries after the Closing Date in an aggregate principal amount outstanding
at any one time not in excess of $5,000,000.
     “Permitted Restructuring Transaction” means a Permitted Merger or a
Permitted Liquidation.
     “Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
     “Projections” means Parent’s forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a basis
consistent with Parent’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
     “Pro Rata Share” means, as of any date of determination:
          (a) with respect to a Lender’s obligation to make Advances and right
to receive payments of principal, interest, fees, costs, and expenses with
respect thereto, (i) prior to the Revolver Commitments being terminated or
reduced to zero, the percentage obtained by dividing (y) such Lender’s Revolver
Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and (ii)
from and after the time that the Revolver Commitments have been terminated or
reduced to zero, the percentage obtained by dividing (y) the aggregate
outstanding principal amount of such Lender’s Advances by (z) the aggregate
outstanding principal amount of all Advances,

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          (b) with respect to a Lender’s obligation to participate in Letters of
Credit, to reimburse the Issuing Lender, and right to receive payments of fees
with respect thereto, (i) prior to the Revolver Commitments being terminated or
reduced to zero, the percentage obtained by dividing (y) such Lender’s Revolver
Commitment, by (z) the aggregate Revolver Commitments of all Lenders, and
(ii) from and after the time that the Revolver Commitments have been terminated
or reduced to zero, the percentage obtained by dividing (y) the aggregate
outstanding principal amount of such Lender’s Advances by (z) the aggregate
outstanding principal amount of all Advances, and
          (c) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under Section 15.7), the
percentage obtained by dividing (i) such Lender’s Revolver Commitment, by
(ii) the aggregate amount of Revolver Commitments of all Lenders; provided,
however, that in the event the Revolver Commitments have been terminated or
reduced to zero, Pro Rata Share under this clause shall be the percentage
obtained by dividing (A) the outstanding principal amount of such Lender’s
Advances plus such Lender’s ratable portion of the Risk Participation Liability
with respect to outstanding Letters of Credit, by (B) the outstanding principal
amount of all Advances plus the aggregate amount of the Risk Participation
Liability with respect to outstanding Letters of Credit.
     “Protective Advances” has the meaning specified therefor in
Section 2.3(d)(i).
     “Purchase Money Indebtedness” means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
     “Qualified Cash” means, as of any date of determination, the amount of
unrestricted cash and Cash Equivalents of Parent, Borrowers, and Bookham Canada
that is in Deposit Accounts or in Securities Accounts, or any combination
thereof, and which such Deposit Account or Securities Account is the subject of
a Control Agreement and is maintained by a branch office of the bank or
securities intermediary located within the United States, Canada, or the United
Kingdom.
     “Qualifying Lender” has the meaning specified therefor in Section 15.11(i).
     “Real Property” means any estates or interests in real property now owned
or hereafter acquired by any Obligor and the improvements thereto.
     “Record” means information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in perceivable
form.
     “Refinancing Indebtedness” means refinancings, renewals, or extensions of
Indebtedness so long as: (a) the terms and conditions of such refinancings,
renewals, or extensions do not, in Agent’s reasonable judgment, materially
impair the prospects of repayment of the Obligations by Obligors or materially
impair Borrowers’ creditworthiness, (b) such refinancings, renewals, or
extensions do not result in an increase in the principal amount of the
Indebtedness so refinanced, renewed, or extended, (c) such refinancings,
renewals, or extensions do not result in an increase in the interest rate with
respect to the Indebtedness so refinanced, renewed, or extended, (d) such
refinancings, renewals, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, nor are they on terms or conditions that, taken as a whole, are
materially more burdensome or restrictive to Parent or any of its Subsidiaries,
(e) if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include subordination
terms and conditions that are at least as favorable to the Lender Group as those
that were applicable to the refinanced, renewed, or extended Indebtedness, and
(f) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.

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     “Remedial Action” means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to Hazardous Materials authorized by Environmental Laws.
     “Replacement Lender” has the meaning specified therefor in Section 14.2(a).
     “Report” has the meaning specified therefor in Section 15.17.
     “Required Availability” means that the sum of (a) Excess Availability, plus
(b) Qualified Cash exceeds $35,000,000.
     “Required Lenders” means, at any time, Lenders whose aggregate Pro Rata
Shares (calculated under clause (d) of the definition of Pro Rata Shares) exceed
50.1%.
     “Reserve Percentage” means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as “eurocurrency liabilities”) of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
     “Revolver Commitment” means, with respect to each Lender, its Revolver
Commitment, and, with respect to all Lenders, their Revolver Commitments, in
each case as such Dollar amounts are set forth beside such Lender’s name under
the applicable heading on Schedule C-1 or in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder, as such amounts may be
reduced or increased from time to time pursuant to assignments made in
accordance with the provisions of Section 13.1.
     “Revolver Usage” means, as of any date of determination, the sum of (a) the
amount of outstanding Advances, plus (b) the amount of the Letter of Credit
Usage.
     “Risk Participation Liability” means, as to each Letter of Credit, all
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrowers,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
     “SEC” means the United States Securities and Exchange Commission and any
successor thereto.
     “Securities Account” means a securities account (as that term is defined in
the Code).
     “Security Agreement” means a security agreement, in form and substance
satisfactory to Agent, executed and delivered by Obligors to Agent.
     “Series B Preferred Stock” means the shares of Series B Preferred Stock
issued by Parent subsequent to the Closing Date, containing dividend, mandatory
and optional redemption provisions, and other material terms that are consistent
with the terms disclosed to and accepted by Agent on or before the Closing Date.
     “Settlement” has the meaning specified therefor in Section 2.3(e)(i).

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     “Settlement Date” has the meaning specified therefor in Section 2.3(e)(i).
     “Solvent” means, with respect to any Person on a particular date, that, at
fair valuations, the sum of such Person’s assets is greater than all of such
Person’s debts.
     “S&P” has the meaning specified therefor in the definition of Cash
Equivalents.
     “Stock” means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
“equity security” (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
     “Subsidiary” of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
     “Swing Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender under Section 2.3(b).
     “Swing Loan” has the meaning specified therefor in Section 2.3(b).
     “Tax Clearance Waiting Period” has the meaning specified therefor in
Section 2.13(b)(ii).
     “Tax Credit” has the meaning specified therefor in Section 15.11(g).
     “Taxes” has the meaning specified therefor in Section 15.11(a).
     “Total Commitment” means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, their Total Commitments, in each
case as such Dollar amounts are set forth beside such Lender’s name under the
applicable heading on Schedule C-1 attached hereto or on the signature page of
the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder, as such amounts may be reduced or increased from time to time
pursuant to assignments made in accordance with the provisions of Section 13.1.
     “Trademark Security Agreement” has the meaning specified therefor in the
Security Agreement.
     “Treaty” has the meaning specified therefor in Section 15.11(h).
     “Treaty Lender” has the meaning specified therefor in Section 15.11(h).
     “Treaty State” has the meaning specified therefor in Section 15.11(h).
     “UK Real Property Collateral” means that certain real property commonly
known as Brixham Road, Paignton, Devon TQ4 7BE United Kingdom.
     “Underlying Issuer” means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrowers.
     “Underlying Letter of Credit” means a letter of credit that has been issued
by an Underlying Issuer.
     “United States” means the United States of America.

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     “Voidable Transfer” has the meaning specified therefor in Section 16.6.
     “Wells Fargo” means Wells Fargo Bank, National Association, a national
banking association.
     “WFF” means Wells Fargo Foothill, Inc., a California corporation.

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Schedule 3.1
     The obligation of each Lender to make its initial extension of credit
provided for in the Agreement is subject to the fulfillment, to the satisfaction
of Agent and each Lender (the making of such initial extension of credit by any
Lender being conclusively deemed to be its satisfaction or waiver of the
following), of each of the following conditions precedent:
     (a) the Closing Date shall occur on or before August 2, 2006;
     (b) Agent shall have received a letter duly executed by each Borrower and
each Guarantor authorizing Agent to file appropriate financing statements in
such office or offices as may be necessary or, in the opinion of Agent,
desirable to perfect the security interests to be created by the Loan Documents;
     (c) Agent shall have received evidence that appropriate financing
statements have been duly filed in such office or offices as may be necessary
or, in the opinion of Agent, desirable to perfect the Agent’s Liens in and to
the Collateral, and Agent shall have received searches reflecting the filing of
all such financing statements;
     (d) Agent shall have received each of the following documents, in form and
substance satisfactory to Agent, duly executed, and each such document shall be
in full force and effect:
          (i) the Cash Management Agreements,
          (ii) the Control Agreements,
          (iii) the Copyright Security Agreement,
          (iv) a disbursement letter executed and delivered by Borrowers to
Agent regarding the extensions of credit to be made on the Closing Date, the
form and substance of which is satisfactory to Agent,
          (v) the Fee Letter,
          (vi) the Foreign Security Documents,
          (vii) the Guaranties,
          (viii) the Intercompany Subordination Agreement,
          (ix) the Patent Security Agreement,
          (x) the Security Agreement,
          (xi) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock powers
with respect thereto endorsed in blank, and
          (xii) the Trademark Security Agreement;
     (e) Agent shall have received a certificate from the Secretary of each
Borrower (i) attesting to the resolutions of such Borrower’s Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which such Borrower is a party, (ii) authorizing
specific officers of such Borrower to execute the same, and (iii) attesting to
the incumbency and signatures of such specific officers of such Borrower;

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     (f) Agent shall have received copies of each Borrower’s Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
     (g) Agent shall have received a certificate of status with respect to each
Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Borrower, which certificate shall indicate that such Borrower is in good
standing in such jurisdiction;
     (h) Agent shall have received certificates of status with respect to each
Borrower, each dated within 30 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
     (i) Agent shall have received a certificate from the Secretary of each
Guarantor (i) attesting to the resolutions of such Guarantor’s Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which such Guarantor is a party, (ii) authorizing specific officers
of such Guarantor to execute the same and (iii) attesting to the incumbency and
signatures of such specific officers of Guarantor;
     (j) Agent shall have received copies of each Guarantor’s Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Guarantor;
     (k) Agent shall have received a certificate of status with respect to each
Guarantor, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of such
Guarantor, which certificate shall indicate that such Guarantor is in good
standing in such jurisdiction;
     (l) Agent shall have received certificates of status with respect to each
Guarantor, each dated within 30 days of the Closing Date, such certificates to
be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Guarantor is in good standing in such
jurisdictions;
     (m) Agent shall have received a certificate of insurance, together with the
endorsements thereto, as are required by Section 5.8, the form and substance of
which shall be satisfactory to Agent;
     (n) Agent shall have received a certificate from an officer of Parent
attesting that there is no (i) litigation, investigation or proceeding (judicial
or administrative) pending or, to the best knowledge of Parent, threatened,
against any Obligor, or any of their respective Subsidiaries by any Governmental
Authority arising out of the transactions contemplated by or effected in
connection with the Loan Documents, (ii) injunction, writ or restraining order
restraining or prohibiting the transactions contemplated by the consummation of
the financing arrangements contemplated under the Loan Documents, or (iii) suit,
action, investigation proceeding (judicial or administrative) or ERISA Event
pending or, to the best knowledge of Parent, threatened against any Obligor or
any of their respective Subsidiaries which could reasonably be expected to cause
a Material Adverse Change;
     (o) Agent shall have received satisfactory evidence (including a
certificate of an officer of Parent) that all tax returns required to be filed
by Obligors have been timely filed and all taxes upon each Obligor or any of its
properties, assets, income, and franchises (including real property taxes, sales
taxes, and payroll taxes) have been paid prior to delinquency, except such taxes
that are the subject of a Permitted Protest;

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     (p) Agent shall have received an opinion of Obligors’ counsel in form and
substance satisfactory to Agent;
     (q) Borrowers shall have the Required Availability after giving effect to
the initial extensions of credit hereunder and the payment of all fees and
expenses required to be paid by Borrowers on the Closing Date under this
Agreement or the other Loan Documents;
     (r) Agent shall have completed its business, legal, and collateral due
diligence, including (i) a collateral audit and review of Parent’s and its
Subsidiaries’ books and records and verification of Parent’s and Borrowers’
representations and warranties to the Lender Group, the results of which shall
be satisfactory to Agent, and (ii) an inspection of each of the locations where
Parent’s and its Subsidiaries’ Inventory is located, the results of which shall
be satisfactory to Agent;
     (s) Agent shall have received completed reference checks (including
compliance with Section 326 of the USA Patriot Act) with respect to Obligors’
senior management, the results of which are satisfactory to Agent in its sole
discretion;
     (t) Agent shall have received a set of Projections of the Parent, on a
quarter by quarter basis, through December 31, 2007, in form and substance
(including as to scope and underlying assumptions) satisfactory to Agent;
     (u) Borrowers shall have paid all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
     (v) [Intentionally Omitted];
     (w) Parent and each of its Subsidiaries shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Obligors of the Loan Documents or
with the consummation of the transactions contemplated thereby; and
     (x) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Agent.

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Schedule 5.2
     Provide Agent (and if so requested by Agent, with copies for each Lender)
with each of the documents set forth below at the following times in form
satisfactory to Agent:

     
Weekly
  (a) an Account roll-forward with supporting details supplied from sales
journals, collection journals, credit registers and any other records,
 
   
 
  (b) notice of all claims, offsets, or disputes asserted by Account Debtors
with respect to Parent’s and its Subsidiaries’ Accounts,
 
   
 
  (c) a detailed report regarding Parent’s and its Subsidiaries’ cash and Cash
Equivalents, including an indication of which amounts constitute Qualified Cash,
and
 
   
 
  (d) copies of invoices together with corresponding shipping and delivery
documents, and credit memos together with corresponding supporting
documentation, with respect to invoices and credit memos in excess of an amount
determined in the sole discretion of Agent, from time to time.
 
   
Monthly (no later than the 10th day of each month)
  (e) a Borrowing Base Certificate, together with a detailed calculation of
Borrowers’ average Excess Availability for the month most recently ended,
 
   
 
  (f) a detailed aging, by total, of Parent’s and its Subsidiaries’ Accounts,
together with a reconciliation and supporting documentation for any reconciling
items noted (delivered electronically in an acceptable format, if Borrowers have
implemented electronic reporting),
 
   
 
  (g) a detailed calculation of those Accounts that are not eligible for the
Borrowing Base, if Borrowers have not implemented electronic reporting,
 
   
 
  (h) a summary aging, by vendor, of Active Obligors’ accounts payable and any
book overdrafts (delivered electronically in an acceptable format, if Borrowers
have implemented electronic reporting) and an aging, by vendor, of any held
checks, and
 
   
 
  (i) a monthly Account roll-forward, in a format acceptable to Agent in its
discretion, tied to the beginning and ending account receivable balances of
Borrowers’ general ledgers.
 
   
Monthly (no later than the 30th day of each month)
  (j) a reconciliation of Accounts and trade accounts payable of Obligors’
general ledger accounts to their monthly financial statements including any book
reserves related to each category, and (k) a report regarding Parent’s and its
Subsidiaries’ accrued, but unpaid, ad valorem taxes.
 
   
 
  (k) a report regarding Parent’s and its Subsidiaries’ accrued, but unpaid, ad
valorem taxes.
 
   
Quarterly
  (l) a detailed report regarding Parent’s and its Subsidiaries’ Permitted
Dispositions including a detailed list of the assets sold or disposed of since
the Closing Date and the consideration received in connection therewith.
 
   
Annually
  (m) a detailed list of Active Obligors’ customers, including contract
expiration dates, together with address and contact information.
 
   
Upon request by
Agent
  (n) such other reports as to the Collateral or the financial condition of
Parent and its

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  Subsidiaries, as Agent may reasonably request.

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Schedule 5.3
     Deliver to Agent, with copies to each Lender, each of the financial
statements, reports, or other items set forth set forth below at the following
times in form satisfactory to Agent:

     
as soon as available, but in any event within 45 days after the end of each
month during each of Parent’s fiscal years
  (a) an unaudited consolidated and consolidating balance sheet, income
statement, and statement of cash flow covering Parent’s and its Subsidiaries’
operations during such period, and
 
   
 
  (b) a Compliance Certificate.
 
   
as soon as available, but in any event within 90 days after the end of each of
Parent’s fiscal years
  (c) consolidated and consolidating financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications (including any (A) “going concern” or like qualification or
exception, (B) qualification or exception as to the scope of such audit, or
(C) qualification which relates to the treatment or classification of any item
and which, as a condition to the removal of such qualification, would require an
adjustment to such item, the effect of which would be to cause any noncompliance
with the provisions of Section 6.16), by such accountants to have been prepared
in accordance with GAAP (such audited financial statements to include a balance
sheet, income statement, and statement of cash flow and, if prepared, such
accountants’ letter to management), and
 
   
 
  (d) a Compliance Certificate.
 
   
as soon as available, but in any event within 30 days prior to the start of each
of Parent’s fiscal years,
  (e) copies of Parent’s Projections, in form and substance (including as to
scope and underlying assumptions) satisfactory to Agent, in its Permitted
Discretion, for the forthcoming 2 years, year by year, and for the forthcoming
fiscal year, quarter by quarter, certified by the chief financial officer of
Parent as being such officer’s good faith estimate of the financial performance
of Parent during the period covered thereby.
 
   
if and when filed by any Borrower,
  (f) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K
current reports,
 
   
 
  (g) any other filings made by any Borrower with the SEC,
and
 
   
 
  (h) any other information that is provided by Parent to its shareholders
generally.
 
   
promptly, but in any event within 5 days after an Active Obligor has knowledge
of any event or condition that constitutes a Default or an Event of Default,
  (i) notice of such event or condition and a statement of the curative action
that Parent and its Subsidiaries proposes to take with respect thereto.
 
   
promptly after the commencement thereof, but in any event within 5 days after
the service of
  (j) notice of all actions, suits, or proceedings brought by or against Parent
or any Subsidiary of Parent before any Governmental Authority which reasonably
could be expected to result in a Material Adverse Change.

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process with respect thereto on Parent or any Subsidiary of a Parent,
   
 
   
upon the request of Agent,
  (k) any other information reasonably requested relating to the financial
condition of Parent or its Subsidiaries.

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Schedule 5.20
     The continuing obligation of the Lender Group (or any member thereof) to
make any Advances hereunder at any time (or to extend any other credit
hereunder) shall be subject to the fulfillment, to the satisfaction of Agent (or
waiver thereby), of each of the post-closing covenants set forth below. The
failure by Borrowers to satisfy any of the post-closing covenants set forth
below within such covenant’s prescribed time period shall, as set forth below,
constitute an Event of Default or result in the implementation by Agent (in its
Permitted Discretion) of a reserve against Availability.
     (a) Within 10 Business Days of the Closing Date, Borrowers shall deliver to
Agent the Stock certificates (to the extent such Stock is certificated)
representing the Pledged Interests (as defined in the Security Agreement) for
each of the companies set forth on Schedule 5 to the Security Agreement,
together with Stock powers, in form and substance satisfactory to Agent,
endorsed in blank. The failure to timely deliver such materials shall constitute
an Event of Default;
     (b) Within 10 days of the Closing Date, Borrowers shall deliver to Agent
the Cash Management Agreements and Control Agreements over (i) Borrowers’ two
Collections accounts at Mid-Peninsula Bank (bearing numbers DDA 1101107413 and
DDA 0107946801) and (ii) Bookham UK’s Collections account at Barclay’s Bank
(bearing number 67486544), and within 30 days of the Closing Date, Borrowers
shall deliver to Agent the Cash Management Agreements and Control Agreements
over such other Deposit Accounts and Securities Accounts set forth on
Schedule 4.17 so that Borrowers are in compliance with Section 6.12. The failure
to timely deliver such agreements shall constitute an Event of Default;
     (c) Within 30 days of the Closing Date, Borrowers shall have used their
best efforts to deliver a Collateral Access Agreement with respect to Obligors’
leasehold property located in (x) Santa Rosa, California, USA, (y) San Jose,
California, USA, and (z) Caswell, Northhamptonshire, United Kingdom. The failure
to timely deliver such agreements shall result in the continuation of a 3 month
rent reserve against Availability until delivered;
     (d) Within 10 days of the Closing Date, Borrowers shall have delivered a
copy of the deed of charge over credit balances dated October 10, 2005, between
Bookham UK and Barclay’s Bank PLC (“Barclay’s”). The failure to timely deliver
such agreements shall constitute an Event of Default;
     (e) Within 15 days of the Closing Date, Borrowers shall either (y) deliver
satisfactory evidence to Agent, in its sole discretion, that Barclay’s has no
other security interest or Lien on any asset of any Obligor other than a single
account identified to Agent, and which account is neither a Cash Management
Account into which Collections of Accounts are received nor an account in which
Qualified Cash is held (the “Restricted Account”), or (z) have (i) transferred
all of the funds currently held at Barclay’s (other than funds held in the
Restricted Account) to another financial institution satisfactory to Agent,
(ii) delivered, in connection therewith, Cash Management and Control Agreements
with respect to such new accounts so that Borrowers are in compliance with
Section 6.12, and (iii) provided satisfactory evidence that the accounts
currently held at Barclay’s have been closed. The failure to timely comply with
the forgoing shall constitute an Event of Default; and
     (f) Within 10 days of the Closing Date, Bookham UK shall either (x) deliver
to Agent a form 403a in respect of the account assignment dated July 27, 1996,
between Bookham UK and ING Lease (UK) Limited, or (y) otherwise demonstrate to
Agent’s satisfaction that failure to do so is immaterial. The failure to timely
comply with the foregoing shall constitute an Event of Default.